Obstacles to Attaining Target Levels of Export Earnings in Bangladesh

By Tajul Islam

With a inhabitants of round 165 million, Bangladesh, located in southern Asia, historically depended closely on agriculture for its financial sustenance. Nevertheless, a promising shift has been noticed because the Prepared-made Garment (RMG) sector emerges because the nation’s major international foreign money earner. Using roughly 4.2 million people, this sector considerably bolsters the GDP. Fueled by a dynamic, urbanizing workforce, predominantly constituted of ladies, Bangladesh’s RMG business assumes a central place in its financial framework.

Bangladesh is at present going through new challenges in exporting its merchandise. Regardless of the implementation of a better wage construction for garment staff final December, garment merchants are more and more nervous. Overseas consumers are hesitant to just accept the costs of products adjusted to the brand new wage ratio, sparking considerations inside the business. This example highlights the pressing necessity for implementing efficient methods to bridge the hole between labor prices and market calls for. It’s essential to make sure the long-term sustainability of Bangladesh’s essential readymade garment export sector.

Bangladesh is confronting challenges in assembly its export targets for the Monetary Yr (FY) 2023-2024. However, regardless of the difficult atmosphere, the nation is making strides in the direction of attaining its export objectives. The Ministry of Commerce has set an export goal of US$ 72 billion for FY 2023-2024, with product exports aiming for US$ 62 billion and providers exports concentrating on US$ 10 billion.

Within the preliminary seven months spanning from June 2023 to January 2024, the nation’s exports amassed a complete of US$ 33.26 billion, reflecting a 8.03% shortfall in comparison with the meant goal of US$ 36.16 billion. Notably impacted was the garment business sector, which represents a good portion of the nation’s export income, experiencing notable declines significantly within the months of October, November, and December. Surpassing the unique export objective now poses a formidable problem in mild of this downturn.

Within the Monetary Yr 2022-2023, the export goal stood at US$ 64.55 billion, a milestone efficiently reached with items amounting to US$ 55.55 billion and providers contributing US$ 5 billion. The expansion charges for items and providers have been recorded at 6.67% and 1.12% respectively, showcasing regular progress in each sectors.

Amidst the continued international financial downturn, the repercussions of the Israel-Palestine battle and the latest assaults on vessels within the Pink Sea by Yemen’s Houthi rebels have compounded challenges. Additional complicating issues, 4 of the world’s 5 largest container delivery firms have suspended operations within the Pink Sea post-mid-December, exacerbating logistical disruptions. Moreover, the exports have been impacted by the Russia-Ukraine conflict.

Md Zakaria Touhid, Supervisor of Merchandising & Advertising at Z, X, Y Worldwide in Dhaka, Bangladesh, highlighted the repercussions of the Pink Sea disaster, stating, “Because of the disaster within the Pink Sea, main delivery strains are redirecting their vessels to Africa’s Uttamasha Intrepid Sea. Though some main delivery strains nonetheless traverse the Pink Sea, smaller and medium-sized delivery firms are more and more choosing various routes. Moreover, the surge in piracy, compounded by the presence of Haitian insurgents, intensifies the dangers related to maritime transport. Consequently, ship constitution and insurance coverage premiums are on the rise as a consequence of heightened dangers. The ramifications prolong past the area, affecting nations akin to the USA, 27 EU nations, Turkey, Morocco, and Egypt.”

Mr. Touhid has raised critical considerations in regards to the erosion of Bangladesh’s competitiveness within the international market, pushed by rising manufacturing bills akin to wages, utilities, and uncooked supplies. Ought to these prices surpass productiveness positive factors or market costs, it may pose formidable challenges. Furthermore, inflation and foreign money fluctuations, typically linked to a greenback disaster, may additional hinder Bangladeshi exports by rising their costs for international consumers. The persistent gasoline disaster exacerbates these difficulties, disrupting industrial manufacturing and well timed manufacturing, thereby inflating manufacturing prices and adversely impacting exports.

Regardless of challenges, concerted efforts are being made to bolster exports of different key merchandise akin to house textiles, leather-based, footwear, jute and jute merchandise, frozen and reside fish, shrimp, and agriculture. This diversification goals to assist in attaining export targets. Anticipation is excessive for a turnaround in exports, with merchants eyeing 2024 as a pivotal 12 months. Regardless of hurdles, the Prepared-made Garment (RMG) business, the nation’s main export sector, stays resilient. Initiatives such because the minimal wage declaration and the dedication to transitioning to inexperienced industrialization underscore ongoing efforts inside the business.

The Bangladesh Garment Producers and Exporters Affiliation (BGMEA) anticipate a good turnaround within the Prepared-made Garment (RMG) business from the latter a part of this 12 months. With international financial circumstances displaying indicators of enchancment, coupled with anticipated changes in rates of interest by entities just like the U.S. Federal Reserve and main European banks, there’s optimism for a constructive shift within the worldwide financial panorama. Nevertheless, attaining this enchancment requires enhanced collaboration between the federal government and native businessmen, together with a strategic deal with enhancing Bangladesh’s garment exports to key markets. This entails revisiting commerce insurance policies, fostering preferential commerce agreements, and prioritizing initiatives to spice up productiveness. Moreover, there’s a urgent have to put money into know-how and innovation, diversify export locations, and improve each employee effectivity and welfare requirements. Such concerted efforts are pivotal for making certain the sustained progress and competitiveness of Bangladesh’s RMG sector within the international market.

Additionally revealed on Medium.