Policy Research Institute - PRI Bangladesh

The Policy Research Institute of Bangladesh (PRI) is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of the Bangladesh economy, its key policy challenges, domestically, and in a rapidly integrating global marketplace.

Diversify exports, trade partners for better growth: PRI

News Published: Sunday, Jun 01, 2014

Diversify exports, trade partners for better growth: PRI

Published: 12:00 am Thursday, April 24, 2014


Star Business Report

Bangladesh needs to exploit the opportunities created by cross-border production networks to produce and export intermediate goods that could be assembled elsewhere, policy analysts said yesterday.
“Around 98 percent of Bangladesh's exports are final consumer products with little or no intermediate goods. Trade and domestic policies have an anti-intermediate goods bias,” said Zaidi Sattar, chairman of Policy Research Institute of Bangladesh (PRI).
This needs to change as trade in intermediate goods is the fastest component of global trade, Sattar added.  
He spoke at a seminar on trade and investment for higher economic growth, organised by PRI at its office in Dhaka.
“All policies leading to anti-export biases need to be corrected with a view to make export driven growth strategy work better with a much broader export base.”
The National Board of Revenue must adopt a strategy to lower average nominal protection rates (NPRs) by 2-3 percentage points every year until 2021, largely by reducing NPR on import-substitute consumer goods, he said.
The NPR is the percentage tariff imposed on a product as it enters the country.
Bangladesh is giving protection to finish goods, but protection is essential for intermediate goods, he said. A high level of protection for a long period creates inefficiency and undermines competitiveness over the long-term, he said.
Bangladesh needs a liberalised investment policy, which offers scope for international firms to have unlimited stake in local firms, he said. “Trade openness not only stimulates market competition but also creates access to global markets.”
Joint ventures with established players within the global value chain will allow the diffusion of technology, which ultimately boosts the export potential of the local firm, he added.
Despite Bangladesh exports worth $27 billion being sent to over 150 nations in 2012-13, 80 percent of exports went to the US and Canada in North America, the 27 member countries of the European Union, and Japan, he said.
Next significant markets include BRICS (Brazil, Russia, India, China and South Africa), Australia, and South Korea, which would be foremost in the list of fastest growing RMG markets for Bangladesh that has a market size of $23 trillion, he said.
Target these markets for future growth and employment creation, he said.
“The spectacular success of the RMG industry has not been replicated. A major reason for this is the existence of anti-export biases in non-RMG export production.”
“To replicate the RMG success in other labour-intensive production, the facility of duty-free imported inputs must be provided even to firms that export part of their total production,” he said.

The policy to provide duty-free inputs for exports is not a privilege but a requirement for all production in order to be on a level playing field with global competitors, he said.
Export success needs a policy environment with no anti-export bias, he said.
Ahsan H Mansur, executive director of PRI, said investment in infrastructure will help create immediate domestic demand and at the same time, lay the foundation for catalysing higher private sector investment.
The government has rightly adopted a number of high-profile projects for implementation on a priority basis; the project list needs to be expanded, prioritised and implemented, he said.
Alleviate land constraint for industrialisation by establishing a series of Special Economic Zones (SEZs) in various parts of Bangladesh through public private partnerships, he suggested.
Establishing SEZs will bring foreign investment that could help link Bangladesh to the global value chain and in the process, diversify its export base, said  Khurshid Alam, operations director of PRI.  
Zakir Ahmed Khan, director of PRI, said Bangladesh's growth has to be led by exports. The country should diversify its export basket, he said.
“There is a need for a comprehensive trade policy and it has to be open,” said Selim Raihan, who teaches economics at Dhaka University.
The country should enhance the supply capacity of non-garment products, he said. “We should invest in infrastructure to increase competitiveness in global markets.”