Diversifying export products, destinations  

Shahiduzzaman Khan     | Published: September 01, 2018 22:12:43

Bangladesh has set an ambitious target to achieve $50 billion apparel export a year by June, 2021. In order to achieve such a target, the country needs to raise its apparel export from $30.61 billion to $50 billion in three years.

 According to a media report, apparel sector has to achieve a growth of more than 60 per cent during the stipulated time. This demonstrates that the sector needs to achieve 17 per cent growth a year on an average.

Besides meeting normal demand of regular markets, the readymade garment (RMG) sector has to pay attention to the non-traditional markets in equal terms even though the contribution of such markets in the export basket is still not that much encouraging.

The country's apparel exports mainly depend on the European Union (EU), the United States (US), and Canada, as they are the main buyers of  its products. With the passage of time, new competitors are entering into the market. As such, diversification of new export destinations is very much crucial.

However, the country's exports are facing strong competition from other countries. Major importing nations are resorting to protectionism. Bangladesh has already been excluded from getting the United States' generalised system of preference (GSP) in spite of the fact that many developing countries are enjoying such benefit. The EU often threatens Bangladesh to suspend trade preferences.

For that matter, the country has to look forward to exploring new markets. As the demand of apparel products is rising, Bangladesh needs to expedite its diversification process. Market growth appears to be much stronger in the non-traditional nations than the traditional ones.

Besides traditional markets like the EU, the US, and Canada, other countries are defined as non-traditional ones. These include India, China, Russia, Japan, South Africa, Turkey, Brazil, Chile, Mexico, South Korea, Malaysia, Australia etc. The government is reportedly giving some incentives to the exporters of non-traditional markets.

Over 73 per cent of the country's apparel sector income, according to reports, comes from the shipment of only five items -- shirt, t-shirt, trouser, jacket and sweater. Bangladesh exports more than 30 types of garment products. It earned $ 30.61 billion during fiscal year 2017-18 from export of knit and woven items.

Out of the earnings, only five items contributed $ 22.39 billion, according to data of the Export Promotion Bureau and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

There is no denying that the authorities are failing to take effective steps for product diversification as per market demands due to poor infrastructure and entrepreneurs' unwillingness to take risk. Such dependency on a few items is likely to put the overall export earnings at risk.

Latest trend suggests that more value addition is taking place in trousers segment, especially in denim. Businesses have made significant investments in denim making, especially in washing and dyeing plants. Earlier only five-pocket denim was produced, but knitted and other value-added denim are being exported in recent years.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) claims that the value addition in RMG sector is really taking place. The growth and increasing export earnings also reveals that diversification in garment products is also gaining ground slowly.

After the opening of the Japanese market, diversified and value added items are being manufactured in the country as its buyers are very quality conscious. However, there is a need for diversifying the apparel produces without overlooking the basic items, for which Bangladesh has established its expertise and markets, analysts say.

RMG export to the non-traditional markets has, of late, registered a slight rise. Among the non-traditional markets, Japan and India have contributed the highest to the country's total exports earnings. Garment exports to non-traditional markets have seen a nearly 10 per cent rise during the last fiscal.

A modest export growth to non-traditional markets is being seen as a good sign for Bangladesh as it will pave the way to reduce higher dependency on traditional market and help the country diversify export destinations. Currently, the government is providing a 3.0 per cent cash incentive against export proceeds for garment exporters in non-traditional market.

There are, however, many challenges in the way of taking more market share in the non-traditional export destinations. These include non-tariff barriers and product variations.

In tapping the opportunity of non-traditional export markets, the government has to come up with new ideas to explore potential exports items. It needs to identify the products for the Asian market, as the dress pattern of this region is different from the European countries as well as in the American region.

Furthermore, concerted efforts need to be made diligently for eliminating the barriers to attract substantial amounts of foreign direct investment (FDI) so that Bangladesh can be turned into a middle income country at the earliest.

As has been said, the government provides cash subsidy for a number of products. It has also given a number of incentives for encouraging  exports to the new markets. Yet, such measures have not been able to make any meaningful progress. Poor product campaign left a number of exportable quality products almost unknown to the outside world.

An action plan is thus critically important for increasing the competitiveness of the local products and exploring the untapped markets for such products across the world. Such a plan has to be drawn, taking the country's present energy situation and infrastructural deficit into account.

Apart from apparel items, some potential products are known to have already been identified to help expand the country's export basket. Such products and services include, among others, printing and packaging, furniture, electronics, shipbuilding, plastic and light engineering.

Opportunities in the comparatively new markets merit special attention, from the perspectives of diversification of both export products and market destinations. Those have so far remained unexplored in the absence of proper knowledge and efforts by both local businesses, in concert with those of the government. The importers in emerging Africa economies, Russia and some other countries are reported to be eager to take items like RMG, leather products and jute goods from Bangladesh.

In this context, the government's policy supports do need to embrace measures like opening of new missions, sectors branding of local products and provision of incentives to radically change the export scenario.



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