Earnings from the country's exports suffered a big setback in the just-concluded fiscal year (FY17). Export earnings registered a modest 1.72 per cent growth in the past fiscal year which was the lowest annual growth in the last one decade. Even during the global recession, which originated from financial crisis in 2007-08, the country's export didn't experience such a low growth. The lowest growth in that period was 4.17 per cent in FY10 which jumped to a record 41.39 per cent in FY11.
The latest figure, though provisional, released by the Export Promotion Bureau (EPB) shows that value of exports stood at $34.83 billion in FY17. The Seventh Five Year Plan (7FYP) has projected $37.50 billion export earnings for this fiscal year. Thus, actual export is far behind the projected amount. The target of export earnings in FY16, the first year of the 7FYP, was achieved as the actual earnings were $34.24 billion against the projected target of $33.78 billion.
Nevertheless, the overall export performance during the period of the Sixth Five Year Plan (2010-2015) failed to match the projected average growth of 17.5 per cent. The actual annual average growth of export during the period was 14 per cent.
Against this backdrop, achieving the ambitious target of exports in the 7FYP becomes more challenging. The medium-term planning document sets $54 billion export earnings by the end of FY20, also the terminal year of the plan period.
Having three years in hand, it appears that a huge jump in export growth is required in the next three years to reach even closer to the projected figure. Reality indicates that posting a growth close to double digit is also very challenging. It requires both a favourable external atmosphere and positive internal effort.
The current setback in exports may reduce the actual growth of the Gross Domestic Product (GDP) in FY17. The Bangladesh Bureau of Statistics (BBS) projected 7.24 per cent growth for the past fiscal year. The growth rate was been projected on the presumption that besides the internal real sector, the external front would also perform better.
In reality, performance of the external sector in the past fiscal year was disappointing due to setback in export earnings and debacle in remittance. Remittance inflow dropped by 14.48 per cent in the past fiscal year and stood at $14.93 billion while the 7FYP projected a target of $19.07 billion for FY17. The 7FYP also set the target to increase the annual remittance inflow to $25.4 billion in FY20. The current trend, however, makes it clear that the target will not be achieved.
Setback in exports is mainly due to stagnation in the export earnings of the ready-made garments (RMG). Provisional data show that earnings from RMG, both woven and knit, reached $28.14 billion in the past fiscal year which was $28.09 billion in FY16. As RMG contributes 80 per cent of the total export, it is the prime mover of the total merchandise trade.
Less than one per cent growth of RMG export earnings in the past fiscal year is also a reflection of slowdown in global demand and stiff competition among the major suppliers. The slowdown is also reflected in the export trend of the major exporting countries. The example of the US market may be relevant here. During January-May period of the current calendar year, clothing export from China, Bangladesh, Indonesia, India and Cambodia to the US market dropped by 2.90 per cent, 5.47 per cent, 4.26 per cent, 1.75 per cent and 5.53 per cent respectively. These are all major clothing import sources of the US. Vietnam was the only country among the top 10 clothing importers of the US that registered a robust 7.0 per cent growth during the period under review.
The traditional approach of export enhancement now works little to compete with others. Concentrating on lower segment of clothing may assist to maintain the regular flow of export but may not be helpful to enhance it. Moreover, Bangladesh's RMG manufacturers and exporters are yet to develop a Bangladesh brand which is critical for market diversification. Though, inflated with decades-long fiscal incentives and policy supports, they are not adequately investing on brand creation, fashion innovation and factory betterment.
As global trade grew by only 1.3 per cent in the past calendar year (2016), it cast shadow on Bangladesh's exports to some extent. Recovery is expected in the current year as the World Trade Organisation (WTO) has projected 2.4 per cent growth in trade volume. But the first half of 2017 didn't experience the expected recovery, according to the proxy indicator. The World Trade Outlook Indicator in May reflected strong gains in export orders, container shipping and air freight.
Another area of concern is in growing Non-Tariff Measures (NTMs) across the world for better product standards. The stringent and complex requirements of product standards make it difficult for exporters of developing countries to explore many potential markets. Bangladesh is facing a series of NTMs in India as well as in many other countries. Tough compliance of NTMs sometimes discourages the exporters to move ahead.
Thus, the latest setback in the country's merchandise export actually calls for review of the export strategy as well as overall trade policy. The policymakers should be cautious in fuelling hype on '$50 billion' export target. Instead, they should put more effort on analysing the real cost and benefit of exports -- to what extent the current trend of export is creating jobs and to what extent environment is paying the price.
In fact, the latest setback in exports may also be an eye-opener. China, the world's leading exporter, has now started concentrating at home where consumer demand is growing when its export market is slowing down. In a similar vein, Bangladeshi manufactures may try to take some initiatives to expand the base in domestic market.