Export Import Condition of Bangladesh

Introduction

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$1671 billion in 1990 to US$3173 billion in 1995 and then

almost doubled them again from US$3173 billion in 1995 to US$5523 billion in

1999During the 1990s the United States has been the largest trading partner for

Bangladesh with its exports to the United States reaching 357 percent in 1998-99 This

percentage consisted mainly of Ready-Made Garments (RMG) Germany is the second-

largest export market with the proportion of goods reaching 104 percent and the United

Kingdom is in third place at 83 percent Other export destinations are France Italy the

Netherlands Belgium and Japan

Trade (expressed in billions of US$)Bangladesh

Exports Imports

1975 327 1321

1980 793 2599

1985 999 2772

1990 1671 3598

1995 3173 6497

1998 3831 7042

1999 383 704

SOURCE International Monetary Fund International Financial Statistics Yearbook 1999

Comparative Performance of Bangladeshrsquos Exports

The performance of Bangladeshrsquos export sector in recent years is quite impressive

especially in the 1990s when we compare it with that of world and SAARC countries

The average annual growth rate of Bangladesh export (1191) is higher than those of

the world (948) and SAARC countries (1069) during 1990-2003 Because of the

lower export performance in the 1980s annual average growth rate of this sector during

1980-2003 is not as impressive compared to other Asian countries and the world though

this sector shows competitiveness compared to other SAARC countries (IMF various

years) Over the period of 1980-2003 Bangladeshrsquos exports as a percentage of the

worldrsquos exports remain around 011 to 012 with the exception of 1984 when it was

014 and 1990-1994 when the ratio was around 009 Bangladeshrsquos exports as a

percentage of SAARC countriesrsquo exports show slightly increased trend especially in 2000

and 2001

For these two years Bangladeshrsquos exports are 11 and 12 of the SAARC countriesrsquo

exports respectively Bangladeshrsquos share of SAARC countryrsquosrsquo exports was the lowest

772 in 1983 Bangladeshrsquos exports share in the Asian developing countries however

shows a decreasing trend in the 1990s compared to the1980s though the ratio is slightly

higher in 1998 and 1999 compared to immediate earlier years The ratio dropped to

059 in 2003 from 146 in 1980 though it was 075 in 2001 (IMF various years)

Export Shares to GDP

The contribution of the export sector to Bangladeshrsquos GDP has been gradually increasing

over the years While export share in GDP was 452 in 1980 this share has reached to

1345 in 1999 reflecting 19756 increase in GDP contribution in nineteen years

(World Bank 2004) This ratio further increased in 2000 2001 and 2002 The ratio was

1538 in 2001 The trade openness (tradeGDP ratio) was around 14 to 16 till 1989

After that the ratio increased to 28 in 1995 In 2001 the ratio has increased to 3688

which implies that trade has been liberalized in Bangladesh to a great extent since 1980

Over the years trade deficits ranged from 223 to 737 of GDP (World Bank 2004)

Export Earnings and Export Growth

The export sector performed rather well throughout the 1990s This sector achieved a

growth rate of 3704 in the FY 1994-95 During the twelve years 1991-92 to 2002-

2003 Bangladesh experienced negative export growth (-744) only in FY 2001-2002

The terrorist incident of September 11 2001 in USA and subsequent events may be

blamed for this unexpected suffering of the export sector in the particular fiscal year

However the export sector achieved a 939 growth rate an increase of US$ 56235

million during 2002-2003 with total export earnings amounting to US$ 654844 million

compared to US$ 598609 million in 2001-2002 Charts 1 and 2 provide comparative

year-wise export earnings and export growth rates for twelve years

Exports Performance Compared to Imports

The export earnings also continuously increased over the years with increased import

payments Though import payments are always higher than the export earnings in

absolute terms the percentage of Bangladeshrsquos export to imports is improving gradually

and in recent years has been quite impressive In FY 1983-84 the value of Bangladeshrsquos

exports was US$ 811 million and the corresponding figure for Bangladeshrsquos imports was

US$ 2073 million that represents exportimport ratio of 3912 The export-import ratio

increased to 7009 and 6780 respectively in FY2001-02 and FY 2002-03 (EPB

A Review of Trade Balance

During the last decade Bangladeshi exports shifted from the sale of agricultural products

and raw and processed natural resources to labor-intensive manufactured goods

(including clothing footwear and textiles) but the country unlike neighboring India

could not catch up with the exporters of skill-intensive products The problem of balance

of trade in Bangladesh is well known ever since the independence of the country export

earnings have persistently fallen behind import payments Consequently every year the

country incurs a huge trade deficit

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$5523 billion worth of products while it

imported US$8381 billion worth of products leaving a large trade shortfall of US$2858

billion

Bangladesh Trade Balance and Export-Import Price Indices

Year Value (Tk Million) Price Indices (198485 = 100)Exportsa Importsa Trade Balancea Exportsb Importsb

197374 2983 7320 -4337 468 490197475 3136 10842 -7706 579 642197576 5552 14703 -9151 507 582197677 6670 13993 -7323 561 577197778 7178 18216 -11038 644 591197879 9632 22073 -12441 804 687197980 10997 30525 -19528 970 874198081 11484 37288 -25804 800 1026198182 12387 38729 -26342 687 1071198283 18016 45265 -27249 699 1015198384 20136 50874 -30738 825 1001198485 26225 68263 -42038 1000 1000198586 27396 62929 -35533 725 889198687 33682 68496 -34814 752 811198788 41161 91588 -50427 880 825198889 42686 95075 -52389 851 877198990 41515 113305 -71790 879 930199091 60272 111877 -51605 937 969199192 74198 132756 -58558 923 942199293 88215 138198 -49983 986 973199394 98739 137540 -38801 1041 1000199495 136970 218564 -81594 1110 1089199596 144521 254646 -110125 1185 1169199697 171554 290187 -118633 1241 1204199798 229408 318916 -89508 1289 1245199899 245620 341016 -95396 1292 1309199900c 289383 422755 -133372 1299 1426

Sources a BBS Foreign Trade Statistics (various issues)

b Bangladesh Economic Survey (various issues)

c Bangladesh Economic Survey 2001

Exports of Bangladesh to Industrial and Developing Countries

While developing countries were the major destinations during the 1970s and early

1980s this direction reversed from the middle of 1980s and the trend continued

throughout the 1990s and thereafter Now industrial countries are the main destinations of

Bangladeshrsquos exports The industrial countries used to represent 414 share of

Bangladesh exports in 1978 and developing countries used to represent 458 In 2002

these figures stood at 883 and 117 respectively for industrial and developing

countries Among the developing countries the Asian countries import more than others

from Bangladesh

It is also observed that the annual growth rate of Bangladeshrsquos exports to the world is

positive since the 1990s it is found very impressive in 1990 and 1994 being 281 and

163 respectively However the corresponding figures are better for industrial

countries 406 and 187 The export growth rate to developing countries in 1998 and

2002 are negative -159 and ndash29 respectively though these rates were positive in

1990 and 1994

Trade Policy Reforms

During the past three decades Bangladesh carried out extensive trade policy reforms In

particular the country has been pursuing a liberal trade policy since the beginning of the

1990s which is consistent with the trends in the global market economy Uruguay Round

Accord and agreement with the World Trade Organization The government formulated a

five-year export policy along with a more liberal five-year import policy in 199798 with

the objective of attaining a favorable trade balance and gradual improvement in the

foreign exchange reserve situation (GOB 2002) The governments in 1990s really wanted

to promote rapid export growth by reducing and eliminating the anti-export bias prevalent

in the economy Keeping this goal in mind the government has been pursuing a limited

protective policy only in consideration of several important issues like public health

security and religious restrictions Also the government has been adopting more liberal

import and export policies and programs including reduction and harmonization in tariff

rates and elimination of many quantitative restrictions on imports (GOB 2002 CSB

Export Products of Bangladesh

Fruits Leather Garments Tea

Vegitable Jute Products ICT Products Potteries

Handicrafts Woven Garments Knitwear

Ceramics Products

Frozen Fish Food Products Bicycle

Growth of Exports

Bangladeshrsquos total exports got a significant boost with an annual trend growth rate of

1424 percent during 198586 to 199900 compared to an annual trend growth rate of

below 10 percent (in nominal US dollar terms) over the earlier period of 197273 through

198485 Such a pattern of export growth over time largely reflects the effects of progress

in Bangladeshrsquos policy reforms over the period Export products during the earlier period

(eg 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 (198586 to 199900) 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 1611 percent for the whole period However its

growth remained uneven a spectacularly high rate of 31 percent during the period till

198485 along with a sharp drop to about 84 percent during 198586 to 199900 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 falls in the category of an exceptional export product since it had a significant growth

of 13 percent during the early period up to 198485 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 countryrsquos war of Independence it lost the momentum in its race

with India and Sri Lanka in the late 1980s and early 1990s

Leather and leather products

Bangladeshrsquos exports of hides skins and leather and leather products have increased

since the early 1970s The product group included in the traditional export category had

a trend growth rate of about 9 percent during the entire period which was close to the

average growth for all exports Its growth rate was more than 13 percent during the first

period but the rate slowed to 5 percent during the second period

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 198485 and

from a sizeable base at a moderate but fairly high rate of 2037 percent during the later

period

Knitwear products newly entered the export market with some significance only in

198990 and since then its export grew very rapidly ndash 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 Bangladeshrsquos 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

Annual Growth Trends of Exports by Commodity GroupsCommodity Group 197273 ndash 199900 197273 ndash 198485 198586 ndash 199900

Raw Jute -175 071 -213Jute Manufactures 122 649 101Frozen Foods 1611 3058 84Tea 175 1323 -095Leather 886 132 488Readymade Garments 5710 9491 2037Others 1902 2318 2439Total Exports 1091 86 1424

Composition of Exports 1999-00

Woven Garments

Kintwear

Frozen Food

Jute and Jute goods

others

Growth in Exports Millions

1990-91 1991-92 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00

Source Authorrsquos estimation based on Bangladesh Bank data

Trend of growth in export of Bangladesh among 1980-90 to 1990-99sDuring 1990s Bangladeshrsquos total exports in Current US $ value grew at an annual

compound rate of 144 per cent In fact Bangladesh experienced double digit export

growth in most of the years during the 1990sThe Gap between Export and Import

widened from-US$1791 million in 199091 to -$2814 million in 199000although the

share of export earnings in import payments steadily rose from 31 per cent in 198081 to

67 per cent in 199900The openness of the economy as measured by total external trade

as a proportion of GDP went up from around 22 percent in 199091 to nearly 30 percent

in 199000 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 198081 199091 199900 Annual compound

Growth rate

Annual

compound

Growth rate

Export(millions $) 710 1718 5752 92 144

Import(millions $) 2282 3510 8566 44 104

Trade Deficit

(million $)

1572 1792 2814 13 51

Export as of

import

311 489 671

Export as GDP 5 73 121

import As of GDP 16 15 179

Openness of the

economy

21 223 30

Source Export Promotion Bureau and World Bank

Changes in Composition of Exports and Imports

Exports of traditional goods (composed of jute jute goods tea and leather) constituted

most of Bangladeshrsquos total exports around 97 percent in 197273 These exports

precipitously fell to less than 10 percent in 199900 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 197273 to a meager 1 percent in 199900

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 27 percent to 03 percent

during the period Tearsquos relative export share did increase in some of the years in the

1980s but it declined sharply in later years Leatherrsquos share in total exports showed a

significant increase from 46 percent in 197273 to more than 10 percent in the late 1980s

but declined to a level of 34 percent in 199900

On the other hand nontraditional exports (ie exports of goods other than traditional

ones) dramatically grew in importance from 3 percent of total exports in 197273 to more

than 90 percent in 199900 Among the nontraditional exports RMG including knitwear

rose to 54 percent during 199900 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 foodrsquos 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 18 percent in 197273 to 31 percent in

199900

Composition of Exports by Commodity Groups

( of Total Export Earnings) Year Raw Jute Jute Goods Frozen

FoodsTea Leather Readymade

GarmentsOthers

198889 756 1892 1099 310 1065 3663 1213198990 818 1869 905 259 1174 3997 978199091 607 1041 826 252 782 4283 2210199192 429 1471 640 162 725 5336 1237199293 314 1226 693 173 625 5205 1762199394 226 1121 834 150 666 5097 1906199495 208 921 863 095 583 5298 2032199596 232 849 810 086 545 5023 2455199697 263 720 728 087 441 5062 2699199798 209 543 576 091 367 5497 2717199899 135 571 515 073 316 5607 2784199900 125 462 598 031 339 5360 3084

Source Authorrsquos calculation based on Bangladesh Bank data

Some Graphical Statistics over Last Two Decades

Figure 412 shows thatDuring 1983-84 to 1989-90 the average trade deficit was 73 of GDP This deficit decreased to 67 on average in the last five years

Figure 421 shows thatThe growth in exports has fluctuated considerably from an average low of 7 in 1981-1985 period to an average high of in excess of 17 in 1991-1995 and 2006-2008 periods

Figure 422 shows that

The share of primary commodities to total exports decreased from 175 in 1980-81 to

7 in 2007-08On the other hand the share of manufactured goods to total exports

increased from 44 in 1980- 81 to 93 in 2007-08

Figure 444 shows that1048707 there has a dramatic increase in the number of expatriate workers since 2005 rising

from about 250 lakh to 875 lakh

1048707 However the impact of the global financial crisis may lead to a decline over the

coming months

Trend of Export Earnings

At present Bangladesh faces growing economic competition from India Pakistan and

Indonesia countries which could offer better infrastructure and larger and growing

domestic markets The exports of Bangladesh have been experiencing a steady rise since

the late 80s of which apparels constitute approximately 75 of the total exports Other

items include frozen foods jute amp jute products leather amp leather products handicrafts

vegetables chemical products etc Major export markets for Bangladeshi exporters are

North America (33) and EU (52) while other regions constitute the rest In Fiscal

Year 2006-07 total exports earnings of Bangladesh exceeded US$ 12 billion The trend

of Bangladeshi exports from FY 1972-72 to 2006-07 iis shown below

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 ndash exports and imports of goods and services currently account for

about a-third of the countryrsquos 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 countryrsquos 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

Bangladeshrsquos 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 Bangladeshrsquos export sector posted robust

growth rates of 179 and 127 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 Bangladeshrsquos export success to the

lsquocompetitivenessrsquo of the countryrsquos 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

Bangladesh maintains export trends

YEAR EXPORT IN (MILLION US$)

Export (M US$)

CURRENT CUMULATIVE

1983-84 016 016

1984-85 445 461

1985-86 759 1221

1986-87 1527 2747

1987-88 1393 4140

1988-89 1608 5748

1989-90 3421 9169

1990-91 4799 13967

1991-92 7699 21667

1992-93 12705 34371

1993-94 14560 48932

1994-95 22826 71758

1995-96 33702 105460

1996-97 46277 151736

1997-98 63605 215341

1998-99 71169 286510

1999-00 89082 375592

2000-01 106787 482379

2001-02 107703 590081

2002-03 120022 710103

2003-04 135391 845494

2004-05 154868 1000362

2005-06 183618 1183980

2006-07 206367 206367

2007-08 242958 1633304

2008-09 258170 1891474

2009-10 282254 2173728

2010-11 (January 2011)

194001 2367728

Growth (2009-10) 933

References Bakht Z (2001) ldquoTrade Liberalisation Exports and Growth of Manufacturing Industries

in Bangladeshrdquo in M M Huq and Love (eds) Strategies for Industrialisation The Case of Bangladesh University Press Ltd Dhaka

Rab A (1997) ldquoExport Trends and Policies in Bangladesh Some Lessons of Past Performance for Future Policiesrdquo 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) ldquoThe Determinants of Change in Trade Balance Some Estimates for Bangladesh 195960 ndash 197475rdquo Bangladesh Development Studies vol 7 pp 71 ndash 84

Ahmed S and Sattar Z (2004) ldquoTrade Liberalization Growth and Poverty Reduction The Case of Bangladeshrdquo 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 wwwbanglaembassycombhFDI20in

20Bangladeshhtm 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 Bangladeshrsquos Development 1996

Centre for Policy DialogueUniversity Press Limited Dhaka CSB (2003) Country Study of Bangladesh A Paper Presented at the Country Studies

Workshop on lsquoTrade Cooperation and Economic Policy Reform in South Asiarsquo Bangladesh Institute of Development Studies Dhaka Bangladesh March 30

EPB (Export Promotion Bureau) (2004) Bangladesh Export Statistics 2002-2003 Export Promotion Bureau Dhaka Bangladesh wwwepbbdcomExportStathtml

GOB (2002) lsquoForeign Trade Exchange Rate Management and External Sectorrsquo 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 10907

World Bank (1999) World Development Indicators Database World Bank Washington D C

Bangladesh International trade Information about International trade in Bangladesh httpwwwnationsencyclopediacomeconomiesAsia-and-the-PacificBangladesh-INTERNATIONAL-TRADEhtmlixzz1GOf4e1tc

Bangladesh Export Promotion Bureau

Growth of Exports

Bangladeshrsquos total exports got a significant boost with an annual trend growth rate of 1424 percent during 198586 to 199900 compared to an annual trend growth rate of below 10 percent (in nominal US dollar terms) over the earlier period of 197273 through 198485 Such a pattern of export growth over time largely reflects the effects of progress in Bangladeshrsquos policy reforms over the period Export products during the earlier period (eg 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 (198586 to 199900) 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 1611 percent for the whole period However its growth remained uneven a spectacularly high rate of 31 percent during the period till 198485 along with a sharp drop to about 84 percent during 198586 to 199900 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

Exports of traditional goods (composed of jute jute goods tea and leather) constituted most of Bangladeshrsquos total exports around 97 percent in 197273 These exports precipitously fell to less than 10 percent in 199900 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 197273 to a meager 1 percent in 199900 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 27 percent to 03 percent during the period Tearsquos relative export share did increase in some of the years in the 1980s but it declined sharply in later years Leatherrsquos share in total exports showed a significant increase from 46 percent in 197273 to more than 10 percent in the late 1980s but declined to a level of 34 percent in 199900

On the other hand nontraditional exports (ie exports of goods other than traditional ones) dramatically grew in importance from 3 percent of total exports in 197273 to more than 90 percent in 199900 Among the nontraditional exports RMG including knitwear rose to 54 percent during 199900 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 foodrsquos 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 18 percent in 197273 to 31 percent in 199900