International trade of Bangladesh has passed another year of buoyancy against the backdrop of global slowdown as well as some internal shocks. Sluggish global demand was particularly a matter of concern for external trade.
Overall export earnings in 12 months (January-December, 2016) registered a modest 8.0 per cent growth over the previous year. Total export earnings stood at around $35 billion in 2016 compared to $32.3 billion in 2015. On the other hand, import registered around 6.9 per cent growth in 11 months (January-November) of 2016 over the same period of 2015. Import payments (C&F price) stood at $40.75 billion in 11 months of 2016 (December data not available so far). Total value of merchandise trade may be estimated at $78 billion (after adding the December figure) in the last calendar year which was 74.40 billion in 2015. Thus, the trend in external trade is moving upward and it is expected to do so in the near future provided that there is no serious disruption in external or internal situation.
It is relevant to note that Bangladesh is the leading manufacturing exporter among the Least Developed Countries (LDCs), according to the World Trade Statistical Review 2016 released by World Trade Organisation (WTO). The country's manufacturing exports stood at $32.3 billion in 2015, followed by $12 billion by Cambodia and $2.3 billion by Madagascar, the report mentioned. In 2015, LDCs' total export earnings posted 25 per cent growth over the previous year. Bangladesh also topped the list of LDCs' in import of manufactured products in 2015.
COPING WITH EXTERNAL SHOCKS: The major shock last year was terrorist attack at a cafe in Gulshan area of the capital city. The terrorist attack came as a big blow to business and economy. It became very challenging for the government as well as businessmen to keep business confidence high after the incident. Earlier in February, the cyber heist of $101 million foreign exchange reserve from the Bangladesh Bank account, kept with New York Federal Reserve, wobbled the country's financial sector and gave a wrong message to foreign investors and trading partners. The situation, however, calmed down within a short period of time and foreign buyers were somewhat assured by government efforts.
Thus, two major external shocks were subdued successfully. But labour unrest in some of the readymade garments (RMG) factories in Savar area at the beginning of December caused much unease in the export-oriented sector. However, the owners with the help of law enforcing agencies were able to repress the legitimate demands of the workers.
Interestingly, some of the leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) attributed the decline in apparel exports to the latest labour unrest. Export earnings of woven garment declined by 9.36 per cent in July-December period of 2016 (also first half of current fiscal year or FY17) while export of knit garment increased by 2.45 per cent in the same period.
Blaming the labour unrest of a few days for the decline in six months' export is indeed a mockery. Most of the output of December was not delivered in the same month and receipts against the December consignment will be realised by January or maybe February. In fact, BGMEA leaders are now trying to project decline in export as a crisis of the sector, as they always used to do. They are also demanding some incentives from the government.
GLOBAL ENVIRONMENT: The global situation was not very buoyant last year. The World Trade Organisation (WTO) in its September-2016 projection mentioned that world trade volume would grow by 1.7 per cent in the 2016 which was the slowest since the global financial crisis. It also mentioned that trade growth was weak than expected in 2016 due to falling import demand and slowing GDP growth in several major developing economies as well as in North America.
Nevertheless, in line with the WTO projection, Bangladesh's external trade situation last year is not disappointing as overall external trade grew by around 5 per cent while it marginally declined in 2015. Thus, trade growth actually rebound last year mainly due to increase in import.
Export earnings, as per the data of Export Promotion Bureau (EPB), registered 6.5 per cent growth in 2015 over 2014 while it stood at 8.0 per cent in 2016 over 2015. Import payments declined by 4.5 per cent in 2015 which increased by 6.8 per cent in 2015 (11 months). The rebound of import, however, raises some concerns. The sudden surge in opening letters of credit for capital machineries indicates that there could be some sort of capital flight.
OUTLOOK FOR 2017: For the new year, WTO projected a growth rate of global trade between 1.8 and 3.1 per cent. The multilateral body is expecting that global trade will get some boost in 2017 as global demand will increase.
The demand from the country's exporters, especially from those of the garment sector to depreciate the value of local currency against the US dollar to boost export may intensify in 2017. But one has to keep in mind that export value is actually built-in with the fluctuation of exchange rates. Again, the country's exporters are actually price-takers, not price-setters. So, depreciation of Bangladeshi taka may yield benefits to exporters in the short-run. Last year, relatively flat US dollar value showed higher value of Bangladeshi taka.
As these things happened in an environment of lower global demand, the exporters of the country deserve some credit for their performance. The performance will hopefully continue this year if they put more thrust on market exploration and productivity.