Export basket: the weight of the garment is only growing

Despite policymakers’ emphasis on reducing reliance on a single product for exports over the years, the share of ready-to-wear garments has gradually increased, jeopardizing the external sales, jobs and the economy as a whole.

The apparel sector accounted for 68 percent of national exports in fiscal year 1996-97 and 82 percent of the $52 billion in export earnings in the last fiscal year, according to data from the Trade Promotion Bureau. exports.

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A lack of focus on prioritizing potential products away from non-clothing items, political discrimination and insufficient funds are the main factors that have discouraged new exporters, analysts said.

“The risk of overreliance on a single export product is even greater in the current uncertainty of the global economy,” said Rizwanul Islam, former special adviser for the employment sector at the International Labor Office. work in Geneva.

A lack of focus on prioritizing potential products away from non-apparel items, political discrimination and insufficient funds are major factors that have discouraged new exporters, analysts say

“We have seen how the global economy and garment workers have suffered in the first year of the coronavirus pandemic. The global economy is at risk of falling into recession again, if not already, and the future is uncertain to say the least.”

The ratio of exports to GDP has increased for a few years: from about 10% in 1996 to 20% in 2012 before falling to 10.7% in 2021, according to Rizwanul.

“This means that the contribution of exports to GDP has declined significantly. What is worrying is that this happened during a period of accelerating GDP growth,” he said.

“We are impressed by the growth in exports or export earnings, but ignore the fact that they are not driving growth as much as they did in the late 1990s and the first decade after 2000. .”

During the global recession of 2008-2009, the apparel industry emerged largely unscathed. But questions remain over whether he would be able to do the same this time around as a global recession looms amid Ukraine’s ongoing war, lingering energy crisis and rising inflation. .

Rizwanul pointed to stagnant job growth in the garment industry, the biggest employer among industries in Bangladesh.

As the garment industry needs to maintain its competitiveness in the export market, it focuses more on increasing labor productivity rather than reaping the benefits of cheap labor.

The result is – over the past decade labor productivity has become a more important source of output growth relative to employment growth, whereas the reverse was the case from 2005-06 to 2010, Rizwanul said.

“Job growth has stagnated and I doubt any additional jobs have been generated in the industry over the past 10 or so years.”

Md Saiful Islam, President of the Metropolitan Chamber of Commerce and Industry, called on the government to establish a risk fund or an export protection scheme to give a boost to export diversification.

His argument is that the country’s exporters want to invest in traditional products to avoid risk. There is therefore hardly any room for innovation, which is essential for the diversification of exports.

“Without funds under guarantee schemes, a potential sector could sink, like the shipbuilding industry,” said Islam, who is also engaged in the shipbuilding industry.

According to Saiful, the government has enough policies for product diversification but policy effectiveness is scarce.

There is a lack of initiative for policy implementation, he said, adding that a small export basket poses huge risks.

“The private sector would not accept the risk of export diversification until they get funds with political support,” the MCCI chief said.

Ferdaus Ara Begum, managing director of Business Initiative Leading Development (BUILD), a think tank, says some sectors have increased their export volume.

“However, they have not been able to compete with the apparel sector when it comes to capturing export market share.”

Ferdaus names three sectors: plastics, leather and light engineering.

Despite the pandemic, she said, the volume of light engineering exports increased by around 40%.

She admits, however, that many other potential sectors have never been thought of or investigated by entrepreneurs.

The BUILD, a public-private dialogue platform, found 25-30 types of policy differences between apparel and other sectors that prevent exploring the potential of the global market.

One of the policy inconsistencies is that other sectors do not get the bonded warehouse facilities like that of the garment industry.

After much persuasion from the business community, the government extended bonded warehouses to the leather industry. Under this facility, export-oriented industries can import raw materials duty-free.

Also, unlike the garment industry, other export-oriented industries cannot outsource their work.

On numerous occasions, authorities have imposed burdens on makers of diversified products instead of expanding support, Ferdaus said.

Masrur Reaz, chairman of the Policy Exchange of Bangladesh, another private sector think tank, says Bangladesh has spent 40 years making a single product globally competitive.

Bangladesh started working with 25-30 non-clothing products simultaneously but the efforts did not bring any good, according to the former World Bank Group economist.

This prompted Reaz to suggest prioritizing two or three products to help them gain a foothold in the global market.

He also pointed to the country’s inability to attract a significant level of foreign direct investment as it deprives Bangladesh of utilizing technological advancements.

Another area of ​​concern is poor logistics.

“Some countries like Vietnam, India, Indonesia and Thailand are trying to increase their competitiveness by making the most of technological advancements. But we haven’t been able to do that yet,” Reaz added. .