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Dr Khondaker Golam Moazzem on apparel export

Countries like Vietnam and Pakistan are doing much better in the USA and Europe respectively.

Published in The Financial Express on Sunday, 20 September 2015.

Erosion in export receipts stirs up worries

Jasim Uddin Haroon

Continuous erosion in export receipts in recent months has stirred up worries among economists.

They attribute the slow growth in export revenue to fall of Euro and appreciation of local currency Taka against US dollar.

Many economists have also listed the volatile political environment in January-March period of 2015 among the factors affecting the growth in export earnings.

They said if the current trend in export persists, it would be difficult to achieve the $50 billion export target by the year 2021.

However, economists felt that an appropriate mechanism should be devised immediately to depreciate the Bangladesh currency and help boost exports.

Although Bangladesh switched over to floating exchange rate in 2003, it maintains a ‘managed’ exchange rate as the central bank often intervenes in the forex market to help stabilise the local currency against the greenback.

In July-August period of the current fiscal year, Bangladesh fetched export receipts worth US$5.38 billion, more than 15 per cent less than the target. But it was 4.71 per cent higher than that of the same period in the past fiscal year.

The country’s export sector also grew much slower in the past financial year. It fetched $33.2 billion, 3.78 per cent more than the earning of fiscal year 2013-14. However, the earning was 6.0 per cent less than the target.

The exports used to grow at 12-14 per cent previously. In 2013-14, it grew by 11.65 per cent.

Dr Zahid Hussain, lead economist at the World Bank’s Dhaka office said Bangladesh’s export earning sector has been losing its competitiveness in Europe following fall in its currency Euro.

Euro has weakened by nearly 1.0 per cent in June last due to Greek economic crisis.

Dr Hussain said many big buyers of garments in January-March period cancelled their orders over the political crisis at that time. “We came to know that many have diverted their sourcing from Bangladesh to other countries.”

He argued that problems in local garment manufacturing and the compliance issues which came to limelight after the country’s biggest industrial disaster at Rana Plaza should be addressed to boost exports.

Currently, two groups representing the USA and Europe- Alliance and Accord–have been working on the compliance issues.

Dr Ahsan H Mansur, executive director at the Policy Research Institute (PRI) said the real effective exchange rate (REER) of taka has appreciated for mainly two reasons: local currency is higher in nominal terms and the rate of inflation remains higher than that in the trading partners.

“The appreciation of real effective exchange rate has been working against the export surge,” Dr Mansur said.

The REER was recorded at around 19 per cent in the fiscal year 2013-14 which is now believed to be around 25 per cent.

Dr Khandker Moazzem, additional director at the Centre for Policy Dialogue, said countries like Vietnam and Pakistan are doing much better in the USA and Europe respectively. “I think this is one of the reasons for bad time for Bangladesh’s export.”

Dr Moazzem also said the demand side of clothing, the key export sector of the country, has shrunk in recent times.

Dr Nazneen Ahmed, senior research fellow at the state-owned Bangladesh Institute of Development Studies (BIDS) said Bangladesh’s currency remains appreciated although many competing countries had adjusted it with Euro.

Ms Ahmed, however, said many big local garment manufacturers are now expanding their plants to go for big jumps and high-end products.

“It is a transitional period and I think it is a reason for slow growth of exports,” Ms Ahmed added.


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