Bangladesh adjusting its policies to needs of growing economy

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By: Ashis Biswas

Having achieved middle income country status, Bangladesh currently faces complex issues of economic adjustments relating to its export sector. Ironically, the progress made by Bangladesh has been taken note by its allies as also by international organisations. The UN recently confirmed that Bangladesh has in concrete terms made its long awaited transition already, years ahead of the scheduled date in 2026! There has been some welcome reaction from unexpected quarters including Indian garments exporters and a few Pakistan –based observers, for contrasting reasons.

Among Pakistani garments manufacturers, it used to be the standard argument that Bangladesh as an aspiring least developed country (LDC) enjoyed special concessions from the EU, China and other major importing countries , which gave a built-in advantage for Dhaka when it came to winning export orders in the garments sector. The so-called ‘economic miracle’ was therefore partially subsidised by world Trade authorities. In recent times, it made more sense for Pakistani industrialists to outsource part of their export orders to their Bangladeshi counterparts or to set up new units in Pakistan’s former Eastern province. Higher productivity, lower labour costs and a steadier power supply were attractive incentives.

As for Indian garment makers, the substantial tariff duty relief given to Bangladeshi products by Delhi made it tough to compete with Dhaka even in India’s domestic markets, especially for the inexpensive varieties enjoying bulk sales. They made several approaches to the Government to address their needs. GOI some time ago pressed Bangladesh authorities to reduce their tariff on Indian imports, in a bid to ensure measure of parity. Currently, there is new hope that with Bangladesh moving up several steps on the economic development ladder, the playing field will be more level.

However, such optimism needs to be tempered with caution. Present indications suggest that having graduated from an LDC status to a higher level, Bangladesh is not about to abandon its hard-won identity as an emerging export powerhouse in South Asia anytime soon. If anything, its attraction among major international investors has increased much to the surprise of its regional neighbours.

Reportedly, at least 40 Japanese-owned industrial units from mainland China and around 20 South Korean enterprises mostly based in Myanmar, have either/or are in the process of shifted/relocating their operations to Bangladesh. And not all are garment producing units either. The reasons: the prospect of reduced overhead costs, a trained workforce, good connectivity, a friendly government and political stability. It needs adding that Bangladesh currently competes with Cambodia and Viet Nam as the new favoured destination in Asia for international investment.

Its new status as a middle income country as stated earlier ,will make it necessary for Dhaka to ensure some major economic adjustments that involve some cost and structural overhauling. Observers feel this could for a time slow down in the country’s spectacular performance in the production of relatively low cost garments.

Major Western importers of Bangladeshi garments in the EU or US/Canada will now be more insistent on ensuring that child labour and working conditions get better. The Garments Producers’ body BGMEA, economists and Dhaka-based policymakers have already begun addressing problems the garments trade may have to face from around 2030 or so, as the special relief provided earlier for LDCs come to an end.

Working conditions in most of Bangladeshi garment producing factories – estimates range from 4500 to 5000 of them – are far from comfortable, in terms of space per worker, drinking water facilities/fire prevention methods and so on. The high decibel noise generated is another concern. There have occurred several massive accidents claiming hundreds of lives, leading to inquiries and suspension of overseas orders from time to time.

Yet, the importance of garments exports to Bangladesh economy cannot be over emphasized, nor its larger socio-economic impact denied. Of the nearly 30,00,000 people working in the industry (including children in places, according to some allegations) well over 80% are women/young girls. This directly contributes to women empowerment and gender equity. At present the sector produces around 7% of the total world production and earns over 44% of the aggregate annual export earnings of over $34 billion. The Government had a target of increasing its total exports up to $50 billion in a few years by strengthening the garments sector. There were plans to diversify production by introducing greater variety and higher end stuff.

However, the ongoing Covid 19 pandemic and the accompanying shutdowns have put paid to such plans for the time being. (IPA Service)

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