Colorful cotton fabrics are left out to drying having just been dyed in their different colors, in Narshindi a district in central Bangladesh. The material will later be used to make dresses or women’s clothes. Photo: VCG

Bangladesh's export sectors have been witnessing an unprecedented time due to the Covid-19 pandemic. The novel coronavirus has swept through the entire landscape of global economy including Bangladesh.

Export has been a lifeline for the local economy and indispensable to maintaining micro and macro-economic stability. Hence a major setback is really alarming.

In spite of such a situation, the country's Export Promotion Bureau (EPB) proposed a $37.44 billion export target for fiscal year (FY) 2020-21, in the hope of 13 per cent growth. The EPB has also projected an additional $7.6 billion in earnings from export of services.

More than 82 per cent of the proposed export earnings are expected to come from the ready-made garments (RMG) sector. According to the EPB, the proposed export target is 13 per cent higher than $33 billion which has been earned last fiscal. The initial target for the outgoing fiscal was $45.50 billion.

EPB officials said global demand for products during the pandemic has been taken into consideration during setting out the target. The $33 billion earnings during the last fiscal have also been the base of the new target.

Merchandise export earnings during the last fiscal witnessed negative growth except last July and December as the situation was getting bad due to the pandemic.

The overall export earnings during the July-May period fell by 17.99 per cent to $30.95 billion against $37.75 billion in the corresponding period of '19 fiscal.

Bangladesh fetched $34.13 billion from RMG export in FY '19 marking 11.49 per cent growth over that in FY '18. The compound annual growth rate of apparel export in the past five years has been 6.86 per cent.

Out of $6.6 billion lost export, $1.0 billion was lost in the first half of 2019 and the remaining $ 5.6 billion was lost in the last half. The RMG sector lost 4.8 billion worth of export just in three months from April to June 2020, showing the severity of Covid's impact on the industry.

In order to boost export earnings, the central bank allowed banks to export goods under open account credit terms instead of traditional letters of credit or L/Cs with foreign payment guarantees.

Under the new guideline, Bangladesh Bank says, exporters will be able to export without L/Cs.

The authorised dealer banks may allow exporters to ship goods on sales contracts under open account credit terms within the statutory period, if not extended otherwise, from the date of shipment.

The policy is expected to help ease the export process and reduce the risks of payment realisation. 

It may be mentioned here that the country's export trade is dictated by overseas importers and export is executed under sales contracts without payment guarantees. Under the guideline, payment undertaker/insurer will arrange export payment in case of default by importers.

The central bank believes that the policy will also help exporters access the appropriate finances up to the value addition portion. The back to back payment will be settled on receipt of final payment on maturity.

The country's business circle welcomed the BB's new method, saying that it will facilitate the export activities of Bangladesh. They expect that both exporters and importers will be benefited from the new guideline,

Of late, the government is reported to have formulated rules to provide 23 types of required services from a central authority for the country's eight export processing zones under (Bangladesh Export Processing Zones Authority) BEPZA.

The services to be provided are related to visa, work permit, company registration, trade licence, tax related registration, certificates related to environment, explosive, fire fighting and release of export-import goods, containers and cargo, tax and duty, narcotic licence, utilities including gas and electricity connections, banking and transportation.

The services would be provided within a certain time -one day to highest 30 days. According to the rules, a central one stop service (OSS) authority would be formed that would formulate standard operating procedures. The proposed authority would render required services to regional OSS centres and focal points, define their activities and monitor them, it said.

The move is expected to help provide all the investment-related services under one umbrella not only related to BEPZA but also others like customs, National Board of Revenue (NBR) and environment. It would help simplify doing business procedures, reduce cost of doing business and also attract investments in the country.

Analysts say the commerce ministry should conduct a study to explore product-wise demands that are increasing in the traditional markets. Entrepreneurs need also to increase their networking with the buyers so that they can increase their orders in the country and with those who are currently sourcing from other competitor countries. The government should offer incentives to help increase orders in non-traditional markets.

There are, in fact, better opportunities in the comparatively new markets. But for lack of proper knowledge and efforts - both from the local businesses and the government - those have so far remained unexplored. It has been found that the importers of African, Russian and some other countries are eager to import items like RMG, leather products and jute goods from Bangladesh.

According to a World Bank (WB) report, Bangladesh should deepen reforms to improve the capabilities of its firms to participate in global value chains, which will require making it much easier for exporters to import what they need, gradually reducing tariff, while improving trade logistics.

With support from the government, local firms can improve their productivity and competitiveness by investing more in training their workers and managers, innovating to introduce new products and processes, the report added.

To realise absolute competitiveness potential, the country needs to start by focusing on improving its trade policy regime and the business environment, and address the acute shortage of industrial land. With the right set of policies and an enabling environment, there is no reason to believe why Bangladesh cannot become the next Asian export powerhouse.

Bangladesh needs to continue to grow its exports by improving the mix and quality of its apparel products, as well as diversify into new labour and skill intensive industries, such as footwear, light engineering and electronics.