Diversification of Trading Partners of Bangladesh: Recent Developments

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Over the past few years, Bangladesh has made a deliberate effort to expand its trading relationships, signifying a noteworthy change in its economic dynamics. In order to mitigate risks and unlock new opportunities for growth, the country has acknowledged the significance of broadening its horizons beyond its traditional key markets. Bangladesh’s diversification strategy is evident in its proactive engagement with emerging economies and regions, while maintaining strong partnerships with established trading partners.

This approach demonstrates a sophisticated grasp of the changing dynamics of global trade and the importance of accessing a variety of markets to ensure long-term economic growth. It is worth noting that Bangladesh has been increasingly involved in trade with neighboring countries and regional blocs. Strengthened trade connections with nations in South Asia, Southeast Asia, and other regions have paved the way for expanded market opportunities and nurtured mutually advantageous economic partnerships. In addition, the country’s enthusiastic involvement in regional forums and trade agreements demonstrates its dedication to promoting regional integration and economic cooperation.

Bangladesh’s current phase of transformation is marked by its proactive approach to diversifying trading partners, demonstrating the importance of strategic foresight in a rapidly interconnected global economy. This article explores the recent developments in Bangladesh’s trade diversification, analyzing the important initiatives, partnerships, and implications for its economic future.

Dynamics of Bangladesh’s Changing Trade Partnership

Bangladesh’s trade dynamics and trade partnerships are undergoing a significant transformation, reflecting the current global trends and the nation’s proactive approach to diversifying its economic base. Bangladesh is expanding its economic horizons beyond the Ready-Made Garments (RMG) sector, signaling a strategic shift towards reducing reliance and strengthening economic resilience. There is a promising diversification of export products as emerging sectors like pharmaceuticals, shipbuilding, plastics, light engineering, leather goods, furniture, and ICT-enabled services gain traction.

Table-1: Ranking of Regions by Increase in Export Value (2012-2023)

Rank Region Increase in Exports (USD million)
1 EU Countries 12,495
2 American Region (Mainly USA) 6,098
3 Asian Region 4,186
4 BIMSTEC 1,693
5 SAARC 1,672
6 Oceania Region 1,026
7 ASEAN Countries 540
8 OIC Countries 923
9 Middle East 587
10 East and Other European Region 365
11 D-8 Countries 255
12 African Region 172

Source: https://epb.gov.bd/site/view/epb_export_data/2011-2012/July-June https://epb.gov.bd/site/view/epb_export_data/2022-2023

As part of its efforts to diversify, Bangladesh is actively exploring new trade partnerships and expanding into previously unexplored markets. Although traditional export destinations such as the USA, Germany, the UK, Spain, France, Italy, the Netherlands, Canada, and Belgium continue to be crucial, the country is also making impressive progress in expanding its presence in emerging markets in Asia, specifically South Korea, China, and India. In addition, Bangladesh is strategically shifting its trade focus towards Central Asia, the Middle East, and Africa, aiming to expand its exports in these regions.

The government plays a crucial role in this evolution, offering policy support, incentives, and fostering favorable trade agreements to create a conducive environment for exporters. Nevertheless, the persistence of regulatory barriers, infrastructure constraints, and global market dynamics continues to pose significant challenges. It is crucial to overcome these hurdles through coordinated efforts between the government, private sector, and relevant stakeholders. Bangladesh’s strategic emphasis on non-traditional sectors and emerging markets, along with ongoing efforts to tackle these challenges, is crucial for achieving sustainable export growth and strengthening its position in the global trade landscape.

Bangladesh’s Expanding Trade Horizons: A Decade of Diversification

In the last ten years, Bangladesh has experienced a notable shift in its trade dynamics, with a considerable expansion of export destinations. This change in direction demonstrates the nation’s strategic endeavors to diversify its economic foundation and decrease reliance on conventional markets. From 2012 to 2023, the data reveals significant shifts in export numbers across different regions, demonstrating Bangladesh’s proactive stance in seeking out new markets and sectors. In 2012, Bangladesh’s exports were primarily focused on a small number of key markets. In recent years, the exports from European Union (EU) countries have seen a significant surge. In 2023, the total exports reached an impressive $25,235 million, nearly doubling from the previous figure of $12,740 million. This represents a remarkable 98% increase. The significant increase in trade emphasizes the ongoing significance of the EU as a valuable trading partner, while also showcasing Bangladesh’s impressive capacity to grow its market presence in this particular region. The American region has experienced a substantial increase, with exports more than doubling from $6,436 million in 2012 to $12,534 million in 2023, indicating a remarkable 94% growth. Bangladesh’s impressive growth in the North and South American markets highlights its ability to diversify and strengthen its trade portfolio.

 Table 2: Bangladesh Export Destination (July-June) (in million USD)

Region 2012 2023 Percentage Change in Positive %
African Region 227 399 75
American Region 6436 12534 94
ASEAN Countries 383 923 141
Asian Region 2579 6765 162
BIMSTEC 676 2369 249
D-8 Countries 821 1076 31
East and Other European Region 697 1062 52
EU Countries 12740 25235 98
Middle East 470 1057 124
Oceania Region 381 1407 268
OIC Countries 1309 2232 70
SAARC 690 2362 242

Source: https://epb.gov.bd/site/view/epb_export_data/2011-2012/July-June https://epb.gov.bd/site/view/epb_export_data/2022-2023

It is worth noting the significant rise in exports to the ASEAN countries, which saw a staggering 141% growth, increasing from $383 million to $923 million. In the Asian region, which includes significant economies such as China and India, exports experienced a substantial increase from $2,579 million to $6,765 million, representing a remarkable 162% growth. This expansion demonstrates Bangladesh’s strategic commitment to capitalizing on the flourishing economies of Asia. Bangladesh’s involvement with regional blocs has also increased. The exports to BIMSTEC countries have witnessed a remarkable surge, soaring from $676 million in 2012 to an impressive $2,369 million in 2023. This represents an astounding 249% increase. The SAARC region, a vital trading bloc, has witnessed a significant increase in exports, with a growth rate of 242%, from $690 million to $2,362 million. These figures demonstrate Bangladesh’s strong dedication to fostering regional integration and cultivating mutually advantageous economic partnerships.

Bangladeshi exports are finding great potential in the markets of the Middle East and Africa. The Middle East experienced a significant boost in exports, with a remarkable 124% growth from $470 million to $1,057 million. Similarly, the African region witnessed a substantial 75% rise, as exports increased from $227 million to $399 million. Bangladesh’s move to explore non-traditional markets reflects a strategic approach to reduce the risks of depending too heavily on a limited number of markets. Additionally, various other regions have played a role in this process of diversification. The Oceania region has witnessed a remarkable surge in exports, with a staggering increase from $381 million to $1,407 million, marking a remarkable 268% rise. The exports to the East and other European regions experienced a significant growth of 52%, reaching a total value of $1,062 million from $697 million. The exports of the Organization of Islamic Cooperation (OIC) countries experienced a significant growth of 70%, reaching $2,232 million from $1,309 million. In addition, the D-8 countries have experienced a more modest increase of 31%, indicating a positive trend towards diversification. Exports have grown from $821 million to $1,076 million.

The Bangladeshi government’s supportive policies, including trade agreements, incentives for exporters, and infrastructure development, have played a crucial role in facilitating this comprehensive diversification strategy. The efforts made have truly fostered an environment that is favorable for businesses to explore fresh opportunities and venture into global markets.

Strategies for Trade Diversification in Bangladesh: A Way Forward

It is crucial for Bangladesh to priorities tariff rationalization in order to address the export disincentives caused by current policies. Lowering tariffs has the potential to boost domestic manufacturing and improve export competitiveness. In order to promote diversification beyond the RMG sector, it is crucial to guarantee equal access to policy incentives for all export sectors, including bonded warehouse facilities.

Investing in capacity building to meet international quality and safety standards is essential for the growth of non-RMG exports. It is crucial for the government to provide assistance to businesses in obtaining the necessary certifications and ensure that testing and certification facilities are easily accessible. Improving the effectiveness of institutions responsible for quality control and compliance will significantly boost export competitiveness.

Foreign Direct Investment (FDI) Promotion: It is crucial for Bangladesh to priorities attracting FDI in order to facilitate the transfer of knowledge and technology, adopt better management practices, and integrate into global value chains. Enhancing the investment climate, streamlining investment procedures, and promoting sustainable investment practices will contribute to the success of export diversification efforts.

Improving Infrastructure Development and Logistics Efficiency: It is crucial to tackle the inefficiencies in infrastructure and logistics in order to lower the business costs in Bangladesh. Investing in inland road transport, customs procedures, port facilities, and trade logistics is crucial for enhancing competitiveness and mitigating the impact of the withdrawal of LDC trade preferences. Implementing a sensible exchange rate management strategy can greatly improve export competitiveness, especially for sectors other than RMG. Ensuring a competitive and stable exchange rate is crucial for offering competitively priced exports in global markets, which is advantageous for industries that rely on price competitiveness.

It is crucial for Bangladesh to develop a targeted action plan with specific timelines to tackle the obstacles that are impeding export growth. By implementing a focused strategy informed by research such as the Diagnostic Trade Integration Study, we can effectively address productivity and competitiveness challenges in critical export industries, resulting in enhanced export outcomes. Through the implementation of these strategies, Bangladesh has the potential to broaden its export base, decrease reliance on the RMG sector, and enhance its standing in the global trade arena. This will pave the way for sustainable economic growth and fortify the country against external uncertainties.

To summaries, over the past decade, Bangladesh has experienced a remarkable shift in its export landscape. The country has strategically diversified its trade destinations and taken a proactive approach to entering new markets and sectors. Bangladesh’s commitment to reducing reliance on traditional markets and building a more resilient economic foundation is evident in the impressive growth of exports to regions such as Oceania, BIMSTEC, and SAARC, as well as significant increases in the American, Asian, and EU markets. The Bangladeshi government has played a crucial role in facilitating diversification through its supportive policies. These policies include trade agreements, incentives for exporters, and infrastructure development. The implementation of these measures has fostered a conducive environment for businesses to explore new opportunities and venture into international markets. In order to maintain and expand this growth, it is crucial to keep tackling obstacles like regulatory barriers, infrastructure limitations, and the requirement for quality certifications. In order to maintain the ongoing success of its export diversification efforts, Bangladesh needs to focus on a number of strategic actions. It is crucial to priorities certain measures in order to drive economic growth. Through the implementation of a focused action plan, complete with clear timelines, Bangladesh has the potential to improve its export outcomes and foster long-term economic growth.

– S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

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