The United Kingdom's (UK) export market is crucial for developing and small island developing states (SIDS) including Bangladesh. And among them, some of the countries' export is significantly dependent on the UK market. According to ITC Trade Map, during 2012-2016, their average export share to this market was: Belize (24 per cent), Mauritius (15 per cent), Sri Lanka (10 per cent), St Lucia (10 per cent), Bangladesh (9 per cent), and Fiji (8 per cent). All these countries are still enjoying Duty-Free, Quota-Free (DFQF) market access to the UK in terms of exporting their goods under the European Union (EU)'s Everything But Arms (EBA) scheme.
So, considering the Brexit, it was a matter of grave concern for the least developed countries (LDCs) including Bangladesh as to what would happen to their existing DFQF facilities to the UK market, when the latter will finally leave the EU. But in the June of 2017, it came as good news for these countries when the government of UK made a pledge to allow market access to the UK market for the world's poorest countries--around 48 in number, across the globe. Indeed this decision will have a positive impact on the overall economies of Bangladesh as well as 47 other LDCs, particularly for their exports.
UK'S ECONOMY AFTER BREXIT REFERENDUM: The UK is currently the 6th largest economy in the world with a GDP size of US$ 2.565 trillion, while according to Global competitiveness report, 2017-18, it ranked 8th among the top 10 most competitive economies. However, in November 2017, the economy of the UK is left behind by France making the UK go one notch down to the 6th position from its previously held 5th position. And, in response to this, Centre for economics and business research (Cebr), UK has claimed that Brexit's effects on Britain's economy will be less than feared and the economy will recover its previous position over the next couple of years.
According to the official national statistics (ONS), UK GDP was 1.7 per cent higher in July to September 2017 compared with the same quarter a year before, and in the case of consumer price index (CPI), whilst the rate of unemployment has continued to plummet, standing at a 42 year low of 4.3 per cent. Moreover, sterling climbed half a per cent against the euro and USD on January 22, 2018 nearing $1.40 and reaching its highest level since June 2016's vote for Brexit, as reported by the Reuters. So, it is apparent that the economy of the UK has not yet experienced an immediate shock that was feared following the Brexit referendum.
BANGLADESH AND UK BILATERAL TRADE SCENARIO: The UK is the 3rd largest export destination for Bangladesh just next to the US and Germany and it is also the 3rd largest export destination for Bangladeshi RMG, in particular.
In FY 2016-17, Bangladesh's total export to the UK valued at US$ 3.57 billion which comprises 10.25 per cent of its national export. However, in FY 2016-17, its export to the UK market experienced a decrease of 6.31 per cent as compared to the FY 2015-16. The reason for this could be the sudden fall of British currency against the US dollar and Euro following the Brexit referendum. However, in FY-2016-17, of the total exports, 5 major export items to the UK from Bangladesh was knitwear, wovenwear, fish, other made textile articles etc that made up 98.02 per cent share of the total national export. And of the total export, it was 92.64 per cent for readymade garments (knitwear, HS 61 and wovenwear, HS 62).
However, optimistically, in the first 6 months (July to December) of the FY 2017-18, Bangladesh's export to the UK increased around 19 per cent to US$1981.66 million from US$1665.81 million in the same period of FY 2016-17. This signals that Bangladesh's export to the UK market is going to recover.
In so far as the import from the UK is concerned, Bangladesh imported worth of US$ 279.75 million in 2016 which was US$ 287.42 million in the previous year, indicating a 3 per cent decline of import. In 2016, the predominant import items included: cotton, machinery, mechanical appliances, nuclear reactors boilers, electrical machinery and equipment and parts thereof, sound recorders and reproducers, iron and steel, and optical, photographic, cinematographic, medical or surgical equipment.
WHAT BANGLADESH NEEDS TO DO TO BOOST TRADE WITH UK: The UK undoubtedly is one of the major players in Bangladesh's export market. But Bangladesh has great potential to grab higher market share in the UK market and for this to happen, the following steps are necessary:
n There is an urgency of taking initiatives both by the government and private sector to establish significant share of Bangladesh's emerging and potential export items in this market including frozen fish, leather and footwear, agricultural products, ICT products, light engineering, jute goods, ocean-going ships or small vessels and so on;
n Taking advantage of China's gradual exit from RMG export coupled with UK's ever-changing mindset towards more eco-friendly lifestyles, Bangladeshi RMG products have a huge potential to grab a major share of the UK's RMG market due to its mounting 'Go Green' production approach. It is worth mentioning here that from the calculation of ITC trade map data 2016, Bangladesh supplied around 12.25 per cent of the UK's total RMG demand, whereas, for China, it was around 38.68 per cent. In this regard, to gain a strong foothold in the UK RMG market, emphasis should be given on product diversification, creating own brand, along with the production of high value-added products, while keeping track of the latest fashion trends in the market.
WHY FUTURE BILATERAL TRADE AGREEMENT BETWEEN BANGLADESH AND THE UK: Bangladesh is going to emerge as the 5th Asian tiger economies after Hong Kong, Singapore, South Korea and Taiwan. Over the past decade, the economy of Bangladesh has been maintaining an average annual growth of more than 6 per cent. As per the prediction of the World Bank report (Global economic prospect, January 2017), Bangladesh will grow at an average rate of 6.7 per cent a year over FY2018-2020.
It is well known that export is one of the key driving forces behind Bangladesh's current economic growth. It has already started to both expand its export base and diversify the product range in order to sustain the ever-increasing economic growth and also to reduce existing export vulnerability with regard to few products and few markets. Bangladesh has also an abundant supply of workforce most of whom are young and dynamic, indicating that the country is in an advantageous position to offer quality goods and services at cheaper prices.
Brexit means UK's increased engagement with the world, particularly with the Commonwealth countries. So, in this sense, when Bangladesh will graduate to a middle-income country by 2024, the UK and Bangladesh can have a bilateral trade agreement (FTA or PTA, whatever is possible). Certainly, the agreement will enable Bangladesh to import heavy machinery, equipment and other cutting-edge technologies, cotton, medical or surgical and other consumer goods with zero or reduced tariff rate, while the UK will be able to source quality products at competitive prices with zero or reduced tariff from Bangladesh. And most importantly, a bilateral trade agreement between the two countries not only facilitates the economy of Bangladesh to be adjusted with its transition of the middle-income country but also help sustain and strengthen the historical trade relationship between the two countries. The government of both countries should right now start thinking about signing bilateral trade agreement so as to derive more trade benefits in the foreseeable future.
Md. Sajib Hossain and Rashedul Kabir, Senior Assistant Secretary, Research, and Development cell, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). firstname.lastname@example.org; email@example.com
© 2017 - All Rights with The Financial Express