The FINANCIAL — International and regional trade, especially with South Asian and East Asian neighbors is critical for Bangladesh to create more and better jobs for the 2 million youths entering the labor force every year, says a new ‘Diagnostic Trade Integration Study’ launched today by the World Bank. The diagnostic provides a roadmap for strengthening Bangladesh’s trade competitiveness and developing a policy regime that takes full advantage of international markets.
Bangladesh’s exports have doubled their world market share between 1995 and 2012, largely due to the strong export performance in the ready-made garments sector. Since 2009, Bangladesh has become the world’s second largest exporter of garments, after China. There is, however, ample room to expand the RMG sector and to diversify to other exports: if Bangladesh were to capture 20 percent of China’s current garment exports, the country’s total exports would more than double, increasing by US$29 billion. The benefits in terms of job creation would be enormous—5.4 million jobs and 13.5 million indirect jobs could be added to the economy.
“To accelerate GDP growth, Bangladesh needs higher volumes of exports to larger and richer markets, beyond its relatively smaller domestic market,” said Johannes Zutt, Country Director, World Bank Bangladesh. “Bangladeshi firms have succeeded in garments, and they can also succeed in other industries with demonstrative competiveness such as jute-based industries, footwear, information and communications technology, shipbuilding, pharmaceuticals, light industry such as bicycles and others.”
According to the report, foreign direct investment can bring much-needed technology to Bangladesh to help develop its nascent industries in pharmaceuticals, bicycles, and shipbuilding. Bangladesh’s strategic location presents an important opportunity to tap into neighboring large economies such as China and India, as well as other Asian countries like Japan and South Korea.
But to attract investors, Bangladesh will first have to eliminate bottlenecks to doing business. These include addressing the need for serviced land and reliable power supply; easing congestion in Chittagong port, the Dhaka-Chittagong road and rail corridor; streamlining customs clearances at land and sea borders; and facilitating access to finance.
“A trade policy regime that is more neutral between exports and production for the domestic market, would support the development of new export sectors and small and medium firms,” said Sanjay Kathuria, Lead Economist, Trade and Competitiveness Global Practice, World Bank, and co-author of the report.
A key recommendation from the report is the creation of an inter-ministerial committee that would help Bangladeshi exporters to succeed in an increasingly competitive global environment.
In addition to exploiting regional and global markets and building a wider export base, the report underscores the importance for Bangladesh in improving its worker and consumer welfare, strengthening institutional capacity and sustaining sound economic fundamentals.