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Bangladeshi international trade is extremely small relative to the size of its population, although it experienced accelerated growth during the last decade. It is not very diversified and depends on the fluctuations of the international market. The Bangladeshi government struggles to attract export-oriented industries, removing red tape and introducing various financial and tax initiatives. Between 1990 and 1995 Bangladesh doubled its exports from US$1.671 billion in 1990 to US$3.173 billion in 1995 and then almost doubled them again from US$3.173 billion in 1995 to US$5.523 billion in 1999.During the 1990s, the United States has been the largest trading partner for Bangladesh, with its exports to the United States reaching 35.7 percent in 1998-99. This percentage consisted mainly of Ready-Made Garments (RMG). Germany is the secondlargest export market, with the proportion of goods reaching 10.4 percent; and the United Kingdom is in third place at 8.3 percent. Other export destinations are France, Italy, the Netherlands, Belgium, and Japan. Trade (expressed in billions of US$): Bangladesh 1975 1980 1985 1990 1995 1998 1999 Exports Imports
Bangladesh has a long history of maintaining a negative trade balance, importing more goods than it exports. In the 1970s and 1980s it imported goods and services twice and sometimes 3 times as much as it exported. Even during the relatively successful 1999 financial year, the country exported just US$5.523 billion worth of products while it imported US$8.381 billion worth of products, leaving a large trade shortfall of US$2.858 billion.
Bangladesh: Trade Balance and Export-Import Price Indices Year 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00c Exports 2,983 3,136 5,552 6,670 7,178 9,632 10,997 11,484 12,387 18,016 20,136 26,225 27,396 33,682 41,161 42,686 41,515 60,272 74,198 88,215 98,739 136,970 144,521 171,554 229,408 245,620 289,383
a
Value (Tk. Million) Importsa Trade Balancea 7,320 -4,337 10,842 -7,706 14,703 -9,151 13,993 -7,323 18,216 -11,038 22,073 -12,441 30,525 -19,528 37,288 -25,804 38,729 -26,342 45,265 -27,249 50,874 -30,738 68,263 -42,038 62,929 -35,533 68,496 -34,814 91,588 -50,427 95,075 -52,389 113,305 -71,790 111,877 -51,605 132,756 -58,558 138,198 -49,983 137,540 -38,801 218,564 -81,594 254,646 -110,125 290,187 -118,633 318,916 -89,508 341,016 -95,396 422,755 -133,372
Price Indices (1984/85 = 100) Exportsb Importsb 46.8 49.0 57.9 64.2 50.7 58.2 56.1 57.7 64.4 59.1 80.4 68.7 97.0 87.4 80.0 102.6 68.7 107.1 69.9 101.5 82.5 100.1 100.0 100.0 72.5 88.9 75.2 81.1 88.0 82.5 85.1 87.7 87.9 93.0 93.7 96.9 92.3 94.2 98.6 97.3 104.1 100.0 111.0 108.9 118.5 116.9 124.1 120.4 128.9 124.5 129.2 130.9 129.9 142.6
Sources: a. BBS, Foreign Trade Statistics (various issues) b. Bangladesh Economic Survey (various issues) c. Bangladesh Economic Survey, 2001
Garments
Vegitable
Jute Products
ICT Products
Potteries
Handicrafts
Woven Garments
Knitwear
Ceramics Products
Frozen Fish
Food Products
Bicycle
Growth of Exports:
Bangladeshs total exports got a significant boost with an annual trend growth rate of 14.24 percent during 1985/86 to 1999/00, compared to an annual trend growth rate of below 10 percent (in nominal US dollar terms) over the earlier period of 1972/73 through 1984/85. Such a pattern of export growth over time largely reflects the effects of progress in Bangladeshs policy reforms over the period. Export products during the earlier period (e.g. jute and jute goods) did have a significant effect in limiting the overall export growth, especially starting with the mid-1980s. The export upturn in the latter period also reflects the fact that the export setback in jute and jute goods was more than recouped by remarkable growth in the export of a new product group, ready-made garments.
Jute goods:
Among jute and jute goods, only jute goods had a statistically significant low annual trend growth rate of more than 6 percent during the early period and around 1 percent for the entire period. In the latter period, (1985/86 to 1999/00), it had no significant growth trend. Raw jute exports, on the other hand, had statistically significant negative growth trends for the whole period as well as for the second period. The reasons for the decline were the growth of jute manufacturing industry in the country and falling demand for raw jute in developed countries due to extensive use of synthetic fibers (Hessian, 1996).
Frozen food:
Frozen food (mainly frozen shrimps) was one of the major product groups, which had a highly satisfactory trend growth rate of 16.11 percent for the whole period. However, its growth remained uneven, a spectacularly high rate of 31 percent during the period till 1984/85 along with a sharp drop to about 8.4 percent during 1985/86 to 1999/00. The drop in the growth rate in the later period may be attributed to a fall in demand in the EU markets in the late 1980s and early 1990s, which recovered only during the second half of the 1990s. The dwindling growth of frozen foods in the later period may also be attributed to supply constraints.
Tea:
Tea falls in the category of an exceptional export product since it had a significant growth of 13 percent during the early period up to 1984/85. However, its growth was so low and erratic subsequently that it showed a negative growth trend during the later period. While Bangladesh successfully recouped the loss of tea export earnings caused by the dislocation during the countrys war of Independence, it lost the momentum in its race with India and Sri Lanka in the late 1980s and early 1990s.
Readymade garments:
Starting from a virtually zero base during the late 1970s, readymade garments exports grew at a very rapid rate of about 95 percent during the early period up to 1984/85, and, from a sizeable base, at a moderate but fairly high rate of 20.37 percent during the later period.
Knitwear products newly entered the export market with some significance only in 1989/90 and since then its export grew very rapidly at a much faster rate than other readymade garments. The very fast growth of the RMG product group as a major export earner (in gross terms) was the most remarkable development for Bangladesh, and without this phenomenal growth, Bangladeshs total exports which had a setback in the traditionally important exports of jute and jute goods, could not have grown at double digit in the late 1980s and 1990s.
G w in E o ro th xp rts M illio
n s
70 00 60 00
Million $
50 00 40 00 30 00 20 00 10 00 0 1 9 -9 90 1 1 9 -9 91 2 1 9 -9 93 4 1 9 -9 94 5 1 9 -9 95 6
y ears
1 9 -9 96 7
1 9 -9 97 8
1 9 -9 98 9
1 9 -0 99 0
in 1990/00 with the share of export in GDP rising from 7 per cent to 12 percent during the same period. Trend of growth in export among 1980-90 to 1990-00
Description 1980/81 1990/91 1999/00 Annual compound Growth rate % 1980s Export(millions $) Import(millions $) Trade Deficit (million $) Export as % of import Export as % GDP import As of GDP Openness of the economy % 710 2282 1572 31.1 5 16 21 1718 3510 1792 48.9 7.3 15 22.3 5752 8566 2814 67.1 12.1 17.9 30 9.2 4.4 1.3 Annual compound Growth rate % 1990s 14.4 10.4 5.1
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Exports of traditional goods (composed of jute, jute goods, tea and leather), constituted most of Bangladeshs total exports, around 97 percent in 1972/73. These exports precipitously fell to less than 10 percent in 1999/00. At present the dominance of raw jute and jute goods in the export trade of Bangladesh has weakened considerably, and some non-traditional items have made inroads. For example, the share of raw jute in export earnings has declined from about 38 percent in 1972/73 to a meager 1 percent in 1999/00. Over the same period, the share of jute goods declined from 52 percent to less than 5 percent. Another traditional exports item, tea, declined from 2.7 percent to 0.3 percent during the period. Teas relative export share did increase in some of the years in the 1980s but it declined sharply in later years. Leathers share in total exports showed a significant increase from 4.6 percent in 1972/73 to more than 10 percent in the late 1980s but declined to a level of 3.4 percent in 1999/00. On the other hand, nontraditional exports (i.e., exports of goods other than traditional ones) dramatically grew in importance from 3 percent of total exports in 1972/73 to more than 90 percent in 1999/00. Among the nontraditional exports, RMG including knitwear rose to 54 percent during 1999/00 from an insignificant level in the early 1980s. The share of frozen food increased from less than 1 percent to 6 percent during the years. Frozen foods share in total exports was higher in the 1980s but its later decline reflected a deceleration in its growth performance in recent years. Residual export category showed a big jump in export importance from 1.8 percent in 1972/73 to 31 percent in 1999/00.
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Figure 4.1.2 shows that: During 1983-84 to 1989-90, the average trade deficit was 7.3% of GDP. This deficit decreased to 6.7% on average in the last five years.
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Figure 4.2.1 shows that: The growth in exports has fluctuated considerably from an average low of 7% in 19811985 period to an average high of in excess of 17% in 1991-1995 and 2006-2008 periods.
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The share of primary commodities to total exports decreased from 17.5% in 1980-81 to 7% in 2007-08.On the other hand, the share of manufactured goods to total exports increased from 44% in 1980- 81 to 93% in 2007-08.
Figure 4.4.4 shows that: there has a dramatic increase in the number of expatriate workers since 2005, rising from about 2.50 lakh to 8.75 lakh. However, the impact of the global financial crisis may lead to a decline over the coming months.
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Conclusion:
Bangladesh economy has passed through a heightened pace of global integration in the 1990s. The degree of openness of the Bangladesh economy is now higher than many developing countries exports and imports of goods and services currently account for about a-third of the countrys GDP. Thus, by definition, the state of the global economy is likely to have a stronger impact on the Bangladesh economy now than at any time in the past. The impact of the state of the global economy would continue to be increasingly felt in terms of the countrys macroeconomic performance, GDP growth rate, external sector performance, foreign exchange reserves, and health of the financial institutions. This is perhaps one of the most important legacies that the Bangladesh economy has inherited through its developmental practice and reforms of the 1990s. Bangladeshs export sector registered double-digit real growth rate throughout the 1990s. As a matter of fact, real export sector growth rate was almost three times the real GDP growth rate during this period. Even during FY 1990 and FY 1991, a period which coincided with the last major global recession, Bangladeshs export sector posted robust growth rates of 17.9% and 12.7% respectively. The structure of export was different, though, at the time. Raw jute, jute goods and leather were some of the major export commodities in the early 1990s, their combined share being equal to the share of RMG in total exports of Bangladesh. A relatively diversified base and market provided some sort of a cushion against sudden fluctuations of the global market. Exporters and trade experts attribute Bangladeshs export success to the
competitiveness of the countrys readymade garment sector and availability of cheap labor, although exports of frozen food, leather and jute fell. Garment manufacturers produced lower-end products whose demand did not fall significantly in global markets. Remaining competitive in these days of difficulties since the quota system was withdrawn and the ongoing lingering economic slide worldwide is rewarding for Bangladesh.
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Bangladesh maintains export trends YEAR EXPORT IN (MILLION US$) Export (M US$) CURRENT CUMULATIVE 0.16 0.16 4.45 4.61 7.59 12.21 15.27 27.47 13.93 41.40 16.08 57.48 34.21 91.69 47.99 139.67 76.99 216.67 127.05 343.71 145.60 489.32 228.26 717.58 337.02 1054.60 462.77 1517.36 636.05 2153.41 711.69 2865.10 890.82 3755.92 1067.87 4823.79 1077.03 5900.81 1200.22 7101.03 1353.91 1548.68 1836.18 2063.67 2429.58 2581.70 2822.54 1940.01 Growth (2009-10) 8454.94 10003.62 11839.80 2063.67 16333.04 18914.74 21737.28 23677.28 9.33%
1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (January, 2011)
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.References: Bakht, Z. (2001): Trade Liberalisation, Exports and Growth of Manufacturing Industries in Bangladesh in M. M. Huq and Love (eds.) Strategies for Industrialisation: The Case of Bangladesh, University Press Ltd., Dhaka. Rab, A. (1997): Export Trends and Policies in Bangladesh: Some Lessons of Past Performance for Future Policies, paper presented to a Workshop organized by the Institutional Support to the Ministry of Finance Project (ISMOF) supported by the Asian Development Bank, March, Dhaka. Rahman, S. H. (1979): The Determinants of Change in Trade Balance: Some Estimates for Bangladesh, 1959/60 1974/75, Bangladesh Development Studies, vol. 7, pp. 71 84. Ahmed, S. and Sattar, Z. (2004). Trade Liberalization, Growth and Poverty Reduction: The Case of Bangladesh, Working Paper, World Bank, South Asian Region. May 01, 2004. The paper was also presented in the ABCDE Bangalore Conference in May, 2003. Bangladesh Bank. (2002-2003). Annual Report 2002-2003, Dhaka, Bangladesh. Bangladesh Bank. (2007). Quoted in www.banglaembassy.com.bh/FDI%20in %20Bangladesh.htm. Downloaded on 31 October 2007. BBS. (2000). Statistical Pocketbook of Bangladesh, Bangladesh Bureau of Statistics, Dhaka, Bangladesh. CPD. (1997). Growth or Stagnation? A Review of Bangladeshs Development 1996, Centre for Policy Dialogue/University Press Limited, Dhaka. CSB. (2003). Country Study of Bangladesh, A Paper Presented at the Country Studies Workshop on Trade Cooperation and Economic Policy Reform in South Asia, Bangladesh Institute of Development Studies, Dhaka, Bangladesh, March 30. EPB (Export Promotion Bureau). (2004). Bangladesh Export Statistics 2002-2003. Export Promotion Bureau, Dhaka, Bangladesh. www.epbbd.com/ExportStat.html GOB. (2002). Foreign Trade, Exchange Rate Management and External Sector, Bangladesh Economic Review, Finance Division, Ministry of Finance, the Government of Bangladesh, Dhaka. GOB. (2003). Export Policy 2003-2006, Ministry of Commerce, Government of Bangladesh, December, 2003. GOB. (2006). Trade Policy Review by Bangladesh, World Trade Organization, Report No. 06-3754. downloaded on 10/9/07. World Bank. (1999). World Development Indicators Database, World Bank, Washington, D. C. World Bank. (2000). World Development Indicators Database, World Bank, Washington, D. C. Bangladesh International trade, Information about International trade in Bangladesh http://www.nationsencyclopedia.com/economies/Asia-and-thePacific/Bangladesh-INTERNATIONAL-TRADE.html#ixzz1GOf4e1tc Bangladesh Export Promotion Bureau
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