Virtual Dialogue on Challenges and way forward on export diversification of Bangladesh upon LDC graduation

Long term, low cost and easy access to finance and adequate policy support including fiscal and non-fiscal incentives to the non-RMG potential export oriented sectors, equal treatment, policy reforms, skill development are necessary to enhance their export diversification after LDC graduation, experts told in a virtual dialogue on “Challenges and way forward on export diversification of Bangladesh upon LDC graduation” organized by Dhaka Chamber of Commerce & Industry (DCCI) on July 7 2021.

DCCI President Rizwan Rahman in his opening remarks said that after graduation from LDC, Bangladesh will be deprived of many international support measures and will face different duty and non-duty tariff related challenges. Bangladesh includes 1750 goods in its export basket of which 81% constitutes from RMG sector. Moreover, to compete in the international export market after graduation, our small and medium scale industries like jute, agro processing, leather goods, footwear, pharmaceuticals, Light engineering, ICT including RMG and other emerging sector will have to face various competitions. Besides, Bangladesh will face a challenge of competing in the international market, maintaining products’ quality, adopting changed consumer behavior, cost of research and innovation. He thus stressed on formulating strategic recommendations identifying potential export sector other than RMG. We have five years more as a breathing time and by this time we need to make our industries ready to face the challenges of post-LDC period, Rizwan Rahman said.

Vice Chairman & CEO of Export Promotion Bureau (EPB) A.H.M. Ahsan joined the dialogue as the chief guest. In his speech the EPB Vice Chairman said LDC graduation is a pride for Bangladesh as well as it will create some challenges for us. But Government is taking necessary strategies for smooth and sustainable LDC graduation. Not only products diversification, we have to focus on geographical diversification as well, he said. He meant to expedite our export market to Latin America, Africa, Asian and Middle Eastern countries other than EU and USA. Service sector contribute about 60 percent to our GDP so we have to give emphasis on this sector. Last year 81 percent export earnings came from RMG sector alone. After LDC we cannot rely only on one specific sector. We have to follow RMG success model to other promising sector and also nourish those sector in this breathing space. He also said that it is high time we need work on how to reduce cost of production, develop skills, enhancing marketing policy, product promotion. A study can be done to chalk out whether PTA and FTA are more beneficial or not apart from revenue perspective.

Prof. Dr. Mustafizur Rahman, Distinguished Fellow, Centre for Policy Dialogue (CPD) said RMG is a success model to us. But now it is the high time to give focus on other potential non-RMG sectors like agriculture, pharmaceuticals, light engineering, ICT, leather goods and jute sector. At present 70% of our export are under preferential market access. After LDC graduation compliance will be a major issue. We have enforce domestic regulations WTO compliant. In that case industry readiness is more important. Our labour may be cheap but we do not export labour so we have make our labours productive, he emphasized. He also reiterated innovative finance. Pharmaceutical industry has a USD 3 billion local market in Bangladesh, so it is a large sector. API park was supposed to be completed by 2012 but still it is far away. He also urged for service sector export competitiveness. He said we have to strengthen BSTI for international standard testing and accreditation. Mutual recognition agreement or comprehensive economic partnership with potential partners can be benefited, he termed. Moreover, in the next Ministerial Conference Bangladesh will have a chance to discuss increasing breathing space under a package format, he added. Finally he suggested to increase legal capacity as after the graduation commercial disputes will increase a lot.

Md. Saiful Islam, President, Leather goods and Footwear Manufacturers & Exporters Association of Bangladesh said LDC graduation will enhance our negotiating power. After 2026 we may not get low cost fund from the development partners in that case cost of fund for private sector may increase. He said after the graduation to meet up the possible erosion, both private sector and public sector must have to work jointly like a partner. To gain at least 70% productivity, we need to analyze skill gap and create skilled labour force. We have to go for energy saving, raw materials saving and cost saving mechanism. He also urged for policy support to strengthen backward linkage industry. But climate change and its impact on Bangladesh can be a tool for negotiating as we are the worst affected country in the world. We need to identify the benefits of signing FTA and PTA irrespective of only revenue generation perspective because signing PTA and FTA may have multiple positive impact on overall gain. But for that a study can be done, he said.

Mohammed Mahbubur Rahman Patwari, Managing Director, Sonali Aansh Industries Limited said at present from jute sector Bangladesh earns USD 1 billion but considering global climate change and sustainable development commitment, USD 5 to 10 billion can be earned from this sector alone. Previously jute was used only as raw materials but now it is used for various products. Jute is the 2nd largest natural fiber in the world, he also said. He stressed on value addition in this sector to be competitive after graduation. He also cited a few challenges like demurrage charge during testing, VAT refund during outsourcing materials and having no access to export diversification fund (EDF). He also termed lengthy dispute resolution a big challenge. He said government should give same facilities to all export oriented industries like RMG so that in the transition period these sectors can make them competitive. He emphasized on local market penetration, cost competitiveness and duty benefits at the time of import of capital machineries.

Dr. F. H. Ansarey, Managing Director and CEO, ACI Mobility, Plastic and Agribusinesses said Bangladesh import almost all agricultural products. Last year the sector experienced 19 % growth despite pandemic. He said in Bangladesh 70 percent of total cultivable land are used for rice production where 40 percent labour force are engaged. For export diversification in the agriculture sector we have to increase technology adaptation, enhancing private sector research and innovation, follow good agricultural practices, post harvest capacity development and positive country branding. For branding he suggested that if internationally renowned companies come to Bangladesh and make joint ventures with Bangladeshi farms it will increase our image in the international market, he said. He also suggested to bargain for giving preferential treatment to Bangladesh even after 2026 as rural women are mostly engaged in the agriculture sector.

Syed Almas Kabir, President, Bangladesh Association of Software & Information Services (BASIS) said our export of ICT sector is of about 1 billion dollar. But due to lack of payment mechanism like digital wallet or paypal all are not reported in time. Bangladesh is now the 2nd largest outsourcing destination in the world, he informed. He sought cash incentives for the ICT exporters. He hoped that after graduation Bangladesh will no longer be known as a country of cheap labour rather we will have negotiating ability. He also termed that access to finance is the biggest challenge in the ICT sector. 4 out of 28 high-tech parks are being prepared, he said. Bangladesh Bank should give credit guaranty scheme to the ICT entrepreneurs, he told. He also urged for import and export policy consistency, policy reforms, data security and data privacy, skill development, training and IP protection.

Md. Abdur Razzaque, President, Bangladesh Engineering Industry Owners Association said light engineering is a cross cutting sector. Investment in the light engineering sector is below expected level. It should have a separate Industrial park to make it compliant. He suggested to create a low cost fund for ensuring non-traditional access to finance to grow this sector. Still the sector is enjoying 10 years of tax holiday support however he stressed on introducing real venture capital. He also urged for adequate and uniform policy reforms and policy consistency. The light engineering sector of Bangladesh is currently using second generation conventional technology which must to be modernized, he added. He also urged for arranging training by the foreign trainers to develop local skills.

Naimul Huda, General Manager, Incepta Pharmaceuticals Ltd. said 80% drugs exported from Bangladesh are off patent and 20% are patented. So, after the LDC graduation, we have to be compliant with the global standard though the patent facility will be availed up to 2033. Moreover, our drug regulators have lack of skilled manpower. Citing example of India, he said that they have become cost competitive because they have created their own API production base. He thus stressed on completing the proposed API park as soon as possible for ensuring basic material production. No pharmaceutical company in the world invented Covid 19 vaccine, rather it is researchers who actually did. He therefore emphasized on technology transfer scheme adoption through collaboration and extensive research & innovation.

Published on: 2021-07-07

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