ASSIGNMENT ON

EXPORT AND ECONOMIC GROWTH OF

BANGLADESH

MD. FOYSAL AHMED

BSS (HON’S), MSS IN ECONOMICS
JKKNIU

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 TABLE OF CONTENTS
NO NAME OF THE HEADINGS PAGE

01 Introduction, Literature review 03

02 Major Export Item of Bangladesh 04

03 Growth, Bangladesh GDP Growth Rate 06

04 Methodology 08

05 Regression Analysis 09

06 Regression result 10

07 Interpretation, Expected Result , 11

Conclusion

08 References 12

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Abstract
The relationship between exports and growth is an important one in economics,
particularly for developing nations that seek to improve the livelihoods of their
citizens through economic reform. Export sector has been the major driving force of
our economy. Initially this sector was not as significant as it is now. Due to insurgence
in RMG and other manufacturing industries it is the main driving force of our
economy. In this paper we will look into the details of export scenario and how it has
been affecting our economic growth. This paper analyzes the theories behind the role
that exports play in growth, for economic data from 1991-2012 of Bangladesh. The
data show a mostly positive relationship between exports and growth.

Introduction

Exporting has been appoint of thorough analysis and debate for many economists
during the twentieth and twenty-first centuries because of its inherent impact on a
nation’s economic growth. Countries like India, Pakistan and Korea have all increased
their levels of GDP after introducing export-supporting policies and the same can be
said for Bangladesh. In over three decades of its existence, Bangladesh has witnessed
substantial growth in its exports of goods and services. Over this period economic
growth has accelerated with GDP initially recording an average growth rate of below 3
percent in early seventies and about 5 percent during the nineties. In recent years,
Bangladesh has experienced not only substantial increase in the volume of exports but
also important changes in the composition of exports away from traditional items such
as jute and jute products, and towards new manufactured products such as ready-made
garments.

Literature Review:
There has been a substantial empirical literature on the effects of exports on growth.
Among the early studies, Michaely (1977), Balassa (1978), Chow (1987), Darrat
(1987) have provided evidence in support of export-led growth hypothesis for various
developing countries. Bangladesh is the country of negative Balance of Payment
(BOP). Export plays an important role in the BOP of the country. Increased export can
reduce the negative sign from the BOP. The amount of export of Bangladesh is less
than the amount of import. As a result we get a negative BOP.

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Major Export Items of Bangladesh

As indicated earlier, RMG products comprise more than three- quarters of the total
export of the country ; knitwear is the largest export category with 40.0 percent share
of the total export earnings (2009- 10) followed by woven garments with 37.1 percent
share (see Figure below). Although many categories of other goods are exported
from the country, none of them earn a substantial amount. The third most important
export item is jute and jute goods. Export of this sector contributed 4.5 percent of the
total export revenue followed by home textiles that accounted for 3.3 percent. Frozen
food (principally shrimp) contributed 2.8percent, leather and leather products 2.8
percent, and engineering products 1.9 percent. However, none of these sectors have
shown sufficient and sustained dynamism to reduce the importance of the RMG
sector in the export trade of the country , which in fact has increased over time
especially after the recession that badly mauled most of these other sectors. Jute
and jute goods exports have surged during the last two years as did home textiles, but
it is too early to say if the higher growth would be sustained, although the prospects
seem bright. Bangladesh has not yet succeeded in diversifying the sources of its
export revenue; on the contrary it has become even more concentrated with
overwhelming dependence on RMG products. However, it should be mentioned that
the number of products under the RMG rubric has multiplied over time.

Figure:Composition of Export of bangladesh FY2009-10

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Export concentration is sometimes quantitatively expressed by Herfindahl- Hirschman
Index, which is given by the formula:
𝑥
HHI=∑ i( 𝑖 )2
𝑥
Where xi= export receipts from the i-th product and x=total export receipts. If exports
are so extremely concentrated that all export receipts come from only one product,
then HHI=1. If on the other hand export receipts are equally distributed among all
1
products, HHI= , where n is the number of products exported.
𝑛

If a large number of products are exported, the value of HHI will tend to be small:

1
lim =0
𝑛→∞ 𝑛

Hence, the realized value of HHI will be in the range (0, 1)

Export receipts recorded at the 2- digit HS code level yield a value of HHI=0.347 for
Bangladesh. A uniform distribution of export revenue would have yielded a value
HHI=0.010, whereas i f all export receipts were derived from only the top- 5 products
(HS 3, 57, 61, 62 and 63), the value of the index would have been HHI=0. 411. Thus,
the realized value of the index 0.347 would appear to be fairly high signifying a high
degree of export concentration.
Bangladesh has secured an important place in the world apparel market. The major
competitors of Bangladeshi exporters in the EU and the US market are China, Turkey,
Vietnam, India, Indonesia, Mexico, Honduras, Cambodia, Pakistan and Sri Lanka.

Figure: Share of Bangladesh in EU global RMG import

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Bangladesh is the third largest supplier of Knitwear to the world market with 3.8
percent global market share in 2008, where China is the top supplier with 33.8 percent
market share. Turkey stands second with 4.4 percent share of the world market for
knitwear. In the woven garment market Bangladesh is again the third largest supplier
in the world with 3.3 percent share of the global trade in 2008. China is the largest
supplier with a market share of 29.3 percent followed by India (3.3 percent).The world
markets for knitwear and woven are almost equal in size and both are growing
steadily. Bangladesh has gradually increased its share of the world apparel market
from 2.6 percent in 2000 to 3.4 percent in 2009.

Growth
Growth means ‘something grown and growing’. It is ‘a process of becoming larger or
longer or more numerous or more important.’ The word ‘growth’ has some synonyms,
such as, development, growing, increase, increment, etc. Economic growth means the
economic development of a country, measurable by any indicator like GDP, prevailed
in an economy, and commonly expressed in statistical and mathematical numbers.
There are two common and popular measures for the estimate of economic growth
rate, as Gross Domestic Product (GDP) and Gross National Product (GNP). ‘The
growth of Gross Domestic Product is usually a good indication of economic growth’.

Bangladesh GDP Growth Rate

The Gross Domestic Product (GDP) in Bangladesh expanded 6.30 percent in 2012
from the previous year. GDP Growth Rate in Bangladesh is reported by the
Bangladesh Bank. Historically, from 1994 until 2012, Bangladesh GDP Growth Rate
averaged 5.58 Percent reaching an all time high of 6.70 Percent in June of 2011 and a
record low of 4.08 Percent in June of 1994. Bangladesh is considered as a developing
economy. Yet, almost one-third of Bangladesh’s 150m people live in extreme poverty.
In the last decade, the country has recorded GDP growth rates above 5 percent due to
development of microcredit and garment industry. Although three fifths of
Bangladeshis are employed in the agriculture sector, three quarters of exports revenues
come from producing ready-made garments. The biggest obstacles to sustainable
development in Bangladesh are overpopulation, poor infrastructure, corruption,
political instability and a slow implementation of economic reforms. This page
includes a chart with historical data for Bangladesh GDP Growth Rate. Growth trend
of GDP shows that there is the sign of economic development in Bangladesh. Whether
this trend is slow or fast, can be realized by analyzing the growth rates of Real GDP
and Real Per Capita Income assorted in different years in the following table:

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Table: Growth Trend of Real Gross Domestic Product (GDP) in Bangladesh during
1975-2000 (at 1984/85 prices)

(In millions of Tk.)

Year Real GDP Growth Rate (%)

1985-86 424590 4.3
1986-87 442340 4.2
1987-88 455130 2.9
1988-89 466610 2.5
1989-90 497530 6.6
1990-91 514440 3.4
1991-92 536190 4.2
1992-93 560230 4.5
1993-94 583840 4.2
1994-95 609790 4.4
1995-96 642440 5.3
1996-97 680210 5.9
1997-98 718670 5.7
1998-1999 756120 5.2
1999-2000 801710 6.0
Source: Government of Bangladesh, Ministry of Finance, Economic Survey of Bangladesh 2000,
(Bengali), pp. 184-185.

Export and Import plays an important role in GDP growth rate. The following table
shows the export and import of Bangladesh from 2001-1012.

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Methodology
In our research we will describe the relationship between export and economic
growth or the impact of export on economic growth of Bangladesh. We will apply the
OLS (Ordinary Least Square) method as the main methodology by using SPSS
software. For this research we will use mainly secondary data. Such as data from
Economic Review, BBS, Statistical pocket Book, Internet, Journal of BB, Newspaper
etc. We will use also the various theoretical, mathematical, graphical and statistical
data and diagram to show the relationship between export and economic growth of
Bangladesh. We will use following equations to show the impact of export on
economic growth.
GDP is the abbreviation of the economic term ‘Gross Domestic Product.’ ‘GDP is
defined as the total value of all goods and services produced within that territory
during a specified period (most commonly, per year).’ Another definition is that ‘the
GDP is the market value of all the goods and services produced by labor and property
located in the region, usually a country.’ GDP can be estimated by two following
ways---

GDP= C+I+G+ (X−M)

Where, C= consumption

I= investment

G= government expenditures

X= exports

M= imports

GDP=GNP−‘The net inflow of labor and property incomes from abroad.’

There are two types-----Nominal GDP and Real GDP. Nominal GDP, also called
‘money GDP’, is calculated on the basis of the current price or today’s price, by which
comparison between GDPs of different years may be incorrect because of the impact
of inflation. Real GDP, also called ‘Constant Price GDP’, is estimated ‘by converting
current information into’ a standard price of a specific year or years, for example,
1985 taka, which can be more reliable than the first one and is more acceptable to the
economists.

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Regression Analysis
The regression model of export and economic growth as follows:
Y= 𝛼+𝛽1 X+Ui
Where,
Y=GDP Growth (dependent variable)
X=Export (independent variable)
Ui=Error term

Following table shows the data of “Export of Goods and Services as

percentage (%) of GDP”
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Export
as( %)
of 14 15 14 14 15 17 19 20 20 19 18 23
GDP

Following table shows Economic growth from 1999 to 2011 of Bangladesh

in percentage (%)

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Regression Result: For regression model we will use only data from 2000
to 2011 of both GDP growth and export.

Variables Entered/Removed

Model Variables Entered Variables Removed Method

1 Xa . Enter

a. All requested variables entered.

b. Dependent Variable: Y

Model Summary

Std. Error of the

Model R R Square Adjusted R Square Estimate

1 .552a .304 .235 .59812

a. Predictors: (Constant), X

ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 1.565 1 1.565 4.375 .063

Residual 3.577 10 .358

Total 5.142 11

a. Predictors: (Constant), X

b. Dependent Variable: Y

Coefficients

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 3.419 1.069 3.200 .009

X .127 .061 .552 2.092 .063

a. Dependent Variable: Y

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Interpretation

From our regression analysis we can say that our t=3.20 for level
of significance .09% and t=2.092 for level of significance 6.3%
that indicates the result of the regression analysis is satisfied.

Expected Results

If export increases economic growth also accelerated and ultimately the

GNP and GDP increases.
We can show the expected result by using hypothesis. The hypothesis of the analysis
is given below-

Let us consider that,

The Null Hypothesis (Ho) = Export increases the Economic Growth.

The Alternative Hypothesis (H1) = Export does not increase the Economic
Growth.
From the above analysis we can say that export increases economic growth. So our
Null Hypothesis (Ho) accepted and Alternative Hypothesis (H1) rejected.

Conclusion
The objective of our study was to show “Export and Economic Growth of
Bangladesh”. From our study and regression model analysis we know that export and
economic growth has positive relationship. Export can increase economic growth. If
export increases then net export increases and net export is one of the component of
GDP. So if net export increases then GDP also increases.

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References:

1. DhritiPandhi (June 2007), “The Relationship between Exports and Growth

in Select African Nations”
2. UmmeHumayaraManni,MunshiNaserIbneAfzal(Year-2012,Volume-1,Issue-
2),“Journal of Business,Economics& Finance”.
3. Haydory Akbar Ahmed,Md. Gazi Salah Uddin, “Export, Imports, Remittance
and Growth in Bangladesh: An Empirical Analysis”.
4. Adil Khan Miankhel,ShandreMuganThangavelu,KaliappaKalirajan,
“Foreign Direct Investment, Exports, and Economic Growth in Selected
Emerging Countries: Multivariate VAR Analysis”.
5. Khawaja Abdullah Al Mamun,Hiranya K Nath,“Export-led Growth in
Bangladesh: A Time Series Analysis”
6. M. A. Taslim and M. S. Haque “Export Performance of Bangladesh Global
Recession and After”
7. Asian Development Bank
8. Bangladesh Bank.
9. Centre For Policy Dialogue
10.Commerce Ministry
11.Export Commission Bureau
12.World Bank
13.BBS (Bangladesh Bureau of Statistics).

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