Difficult times are ahead for developing countries like Bangladesh in areas of foreign assistance. Drastic cut in foreign aid is in the offing with the Donald Trump administration planning a huge slash in its overseas development budget. Trump's tightening of the American purse will have its indirect fallout on the World Bank and other aid-giving agencies too. Europe, still reeling under economic woes, will not be generous as aid-givers as it had been in the past. Even Britain is not expected to be a major player in this regard after Brexit is completed as the country itself is set to face its after-shocks. On the other hand, Bangladesh will have to be ready to lose duty-relief for its exports as it prepares for achieving its middle-income status.
It is against this spectre that Bangladesh has to redraw its strategies to boost its exports as this sector alone has the potential to meet one of the emerging challenges. Export products have to be competitive both in prices and quality to make a breakthrough in world market. Realising this, Prime Minister Sheikh Hasina has time and again reminded all stakeholders to expand the country's export markets with diversified quality products in the world. The list of export items of the country is not that much long as it is heavily dependent on readymade garment (RMG). That is why Bangladesh has to diversify its products and expand its market for boosting export earnings alongside learning how to add value to products and increase the RMG share. Bangladesh's products enjoy a duty-free facility in the European markets, but not in the US. The country exports products worth $3.0 billion to the US and pay $850 million in taxes.
Recent reforms in the country's RMG sector hold out great promise for boosting apparel exports to the tune of $50 billion a year in 2021. The government has taken a series of initiatives to improve working conditions in the sector. Under the initiative, 3,869 factories have been inspected. Among those, faults have been found in only 39 factories and they were shut down, and the remaining factories are being renovated to improve their safety. But, huge funds are needed for overhauling these factories. Various brands and buyers can now come forward to assist the factory owners, and the government has already assured to provide its support.
The BGMEA, the government, domestic and international organisations and development partners -- all together are now working towards building a safe and sustainable RMG sector. Although the country stands in second position in the RMG export market, its share in global context is only 5.1 per cent. Exporters will have to work on how to increase the country's share in the world market. There must be short-, medium- and long-term plans in this regard.
The government has already assured the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) of providing necessary cooperation in achieving its $50 billion target. Two Economic Zones -- one in Dhaka and another in Chittagong - have been earmarked for the BGMEA. Steps are also underway to ensure legal rights of workers and workers' welfare-oriented programmes like formation of Labour Welfare Foundation and Welfare Fund for the workers in the export-oriented industries. Besides, the government has also strengthened the Department of Inspection of Factories and Establishment for improving the environment of factories and ensuring their safety. Measures have also been taken to strengthen the Minimum Wage Commission, apart from granting right to do union at EPZs, amendment of labour laws and issuance of labour rules for protecting workers' rights.
The country's policymakers now need to be aware of the fact that Bangladesh's exports will fall between 5.5 per cent and 7.0 per cent if it loses duty-free market access upon its graduation from the grouping of the least-developed countries. A leading think-tank Centre for Policy Dialogue (CPD) has made it known that both product and market diversification will be critical to Bangladesh's smooth graduation. Exports will fall 6.5 per cent to 7.0 per cent if only Bangladesh graduates from the LDC status and loses duty benefits while the other countries retain their existing preferential treatment.
Towfiqul Islam Khan, research fellow of the CPD, estimated that the fall in exports would stand at 5.5 per cent if all LDCs lose the duty-free market access together. Even if Bangladesh graduates from the LDCs, the country will still retain all the privileges it enjoys under the current arrangement until 2027 to facilitate a smooth transition. The cost of losing LDC-specific international support can be offset by sound preparation, the CPD said.
The commerce ministry has a stellar role to play in holding a meeting of different chamber leaders, foreign trade experts and economists to assess the emerging scenario correctly and drawing up realistic plans to meet the challenges. The country's private sector is resilient and innovative enough to help it cross all the hurdles it might encounter after attaining the middle-income status. Gradual reduction of Bangladesh's reliance on duty-free access is now the need of the hour.