Published in Bangladesh Post on Wednesday, 2 May 2018
Challenges ahead to meet $60bn export target
Belal Muntasir and Saifur Rahman
Bangladesh expects its export earnings to reach $60 billion in 2021, the year it will celebrate golden jubilee of independence.
Of the amount, $50 billion will be fetched from export of ready-made garments (RMG) and the rest $10 billion will come from other sectors.
Although the country’s export earnings trebled over the past 11 years to reach $34.85 billion in the last fiscal 2016-17, the current growth rate is not so sufficient to achieve the $60 billion target by 2021, believes analysts.
The export was worth $10.52 million in 2005-06 fiscal.
Here exporters are facing minimum 5 challenges, including low production Capability, scarcity of Gas and electricity, high interest rate on bank loan, slow implementation of infrastructural development and lack of proper adjustment of the country’s policy with the changes in international business and economic outlook for achieving expected growth rate and the target of $60 billion earning, Exporters Association of Bangladesh (EAB) said.
Professor Mustafizur Rahman, Distinguished Fellow at Centre for Policy Dialogue (CPD), told Bangladesh post that recent years’ growth rate of exports indicates that there is the possibility of missing target of $60 billion by 2021.
Minimum 20 percent growth rate is needed every year from now on if the country wants to reach he target, he added.
According to Export Promotion Bureau (EPB), the current fiscal saw 6.33 percent growth to $27.45 billion exports earning in the July-March period, which is expected to beat the export target of the whole fiscal $37.50 billion.
Data shows that during the period exports saw 37 percent growth in 2006-07 fiscal while 15.87 percent in 2007-08, 10.31 percent in 2008-09, 4.11 percent in 2009-10,41.49 percent in 2010-11, 5.99 percent in 2011-12, 11.22 percent in 2012-13, 11.69 percent in 2013-14,3.39 percent in 2014-15, 9.72 percent in 2015-16 and only 1.72 percent in 2016-17 fiscal.
Analysts said the current fiscal and the last one have witnessed very poor growth rates, indicating a slim chance for the government to get nearer the target.
Now, it is time to concentrate on tackling the challenges, they said.
Entrepreneurs consider the ‘low production capability’ of goods as the most vital challenge to attaining high growth rates.
Besides, producing the goods at competitive prices is another factor.
Abdus Salam Murshedy, president of Exporters Association of Bangladesh (EAB), told Bangladesh Post that currently, production of high quantity goods at competitive prices is a bit challenging. This is because of high cost of production, he said.
He also attributed higher wages of workers, escalating price of gas and electricity and transportation problems to higher cost of production.
Scarcity of Gas and electricity is a barrier to production.
Many industries, mills and factories have to wait a long time to start production due to scarcity of Gas and electricity.
Sometimes, maintaining product quality is difficult due to low voltage or load shedding of electricity and low pressure of gas. This has also an impact on exports, Salam Murshedy Said.
EAB president has urged the government not to increase price of gas and electricity in the upcoming budget to help boost exports.
Traders said higher bank interest rate becomes a new challenge for the exporters in recent times as the banks have been facing liquidity crisis.
Sometimes, bank loans are not being available after the monetary policy declared by the Bangladesh Bank where Advance Deposit Ratio (ADR) was reduced by 2 percent for general banking and 1 percent for Islami banking.
Bangladesh bank instructed the banks to reconcile with ratio by June 18. This is why many banks are not interested to disburse more loan currently, as they are already in excess of the level, said analysts.
“The loan is given in case of well reputed company, but the interest rate is high, like 13 percent currently, which is very challenging for the export trade,” said Salam Murshedy.
However, they expect the problem of bank loan will go soon.
Entrepreneurs said new investment is not being made in full-swing for slow implementation of infrastructural development.
EAB President said if the government can complete the ongoing 100 economic zones in two years with gas, electricity and other facilities, the vision-2021 will be fulfilled.
Besides, 10-15 economic zones needed for Priority based sector so that the sectors can gear up, he added.
The business leaders said the government has to adjust the countries policy with international changes.
If any changes occur in international level like fall in oil price, devaluation of currency in global market the competing countries, even India, readjust their policies. But here in Bangladesh it seldom happens, Salam Murshedy Said.
Distinguished Fellow at CPD Prof. Mustafizur Rahman suggested three more measures to achieve the export target of $60 billion by 2021. These include production of goods at competitive prices, reduction of ‘lead time’ (total time between the initiation and execution required to manufacture an item) and diversification of export products.