Trend and Patterns of Export & Import

with special reference to Bangladesh

Submitted by

Md. Tahmidul Haq Ansari

abir_ansari@yahoo.com

Md. Tahmidul Haq Ansari

Trend and Patterns of Export & Import with special reference to Bangladesh
A fundamental shift is occurring in the world economy. We are moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to crossborder trade and investment; by distance, time zone, and language; and by national differences in government regulation, culture, and business systems. And we are moving towards a world in which barriers to cross-border trade and investment are declining, perceived distance is shrinking due to advances in communication; material culture is starting to look similar all over the world, and national economies are merging into an independent, integrated global economic system. The process by which this is occurring is commonly referred to as globalization. A major portion of globalization is played by Export and Import.

The great promise of exporting is that large revenue and profit opportunities are to be found in foreign markets for most firms in most industries. The international market is normally so much larger than the firms domestic market that exporting is nearly always a way to increase the revenue and profit base of a company. By expanding the size of the market, exporting can enable a firm to achieve economies of scale, thereby lowering its unit costs. Firms that do not export often lose out on significant opportunity for growth and cost reduction. Similarly Importing also pays an important role for a business and so for a countrys economy. Import allows us to acquire low cost resources which may not be possible in all domestic market. Same time through importing a country can have products outside its production line. If a country cannot meet its domestic demand through domestic production then it can import from other countries.

Export and import is a vital part of the economy Bangladesh. Over the years we see there is a tremendous increase in the export of ready-made-garments and knitwear, which garnered maximum foreign exchange for the country. Cheap labor and low conversion costs are the major factors behind the growth of Bangladeshs garment industry. Over more than 3 million Bangladeshis (90% women) are employed in this industry. A number of export processing zones have been set up by the government to enhance economic growth by attracting foreign investment.

Md. Tahmidul Haq Ansari

The main objectives of this paper are to discuss the theoretical aspect and Bangladeshi aspect of trend and pattern of export and import with special reference with Bangladesh.

International business is the performance of business activities across national boundaries. Every nation in the world participates in international business to some extent. Large companies as well as smaller firms sell their products throughout the world. A firm that decides to enter international trade must select as approach. It can be done in a number of ways; some require relatively low level of commitment, while others require much higher levels. Approaches to international business include exporting, licensing, joint ventures, trading companies, countertrading, direct ownership and multinational corporations. Most common and popular approach to international trade is Export and Import.

The simplest way to enter international business is Exporting, which means goods or service sold to foreign countries. Export selling may be achieved by using international marketing middleman (indirect exporting) or by a companys own overseas branch or sales representative or by a companys agents abroad (direct exporting). In terms of the balance of payments, goods are classified as visible, while such services as banking, insurance, and tourism are treated as invisibles.

Import simple represent purchase of goods and services from another country. No nation has every raw material or resources; no nation can produce everything it needs. Most nations specialize in producing particular good and services, other goods and services which it cannot produce efficiently are imported.

A country with a surplus of some product may decide to sell this surplus to other nations. Such sales will enable the country to purchase other products that it may not have the ability to produce. Thus scarcity of resources is perhaps the major reason why nations trade with each other. When a country can produce one product more efficiently and at a lower cost than other products, in comparison to other nations then we say that the country has Comparative Advantage.

Several International Organizations exist to facilitate export and import or in other words world trade. These organizations are, GATT, EU, NAFTA, OPEC, IMF, World Bank, EFTA and so on. Also Economic Communities are there to facilitate the movement of products among member nations through the creation of common economic policies. 3 Md. Tahmidul Haq Ansari

After liberation Bangladesh was known as a bottomless basket. For a long time our country was dependent on foreign aid. Getting foreign aid was the main credit for the governments. Only export items were jute and manpower.

At that time our country was faced a continuous serious of natural disasters and international economic crises, which made this war savage country highly dependent on aids for a long time. There was a drought on 1972 and 1973 after that a massive flood hit at 1974. Because of these reasons production of food grain was hampered badly. At 1973 increased price of oil not only affected Bangladesh but also the entire world. Again an oil price crisis was emerged on 1979. At that time use of synthetic product was increasing, as a result our jute industry faced a serious challenge. Back then, international trade was conservative. So at 1970s Bangladesh was fully dependent on foreign aid.

The government of Bangladesh undertook significant steps during the 1980s. Consequently there was a tremendous increase in the export of ready-made-garments and knitwear, which garnered maximum foreign exchange for the country. Cheap labor and low conversion costs are the major factors behind the growth of Bangladeshs garment industry. Over 3 million Bangladeshis (90% women) are employed in this industry. Bangladesh shares excellent trade relations with the US, showing noteworthy trade surplus with the latter. The country is an active partner of the Asia Pacific Trade Agreement and the World Trade Organization. A number of export processing zones have been set up by the government to enhance economic growth by attracting foreign investment. This was our turning point. Form here we became more dependent on international trade. This made the difference between Bangladesh of that time and present time. On 1983-84 percentage of export income in our GDP was 4.1%, now it is about 18%. So there is no doubt that international trade plays a vital part in our GDP and so in our development.

18%

4.1%
1983-84 2011

Export Earnings share in GDP 4 Md. Tahmidul Haq Ansari

Following graph makes it more vivid how Bangladesh developed in international trade through 1972-73 and 2009-10.

(Source: Ministry of Commerce website) Comparative picture of import (Billion US $) of Bangladesh is presented below:
25 20 15 10 5 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

(Source: Ministry of Commerce website) Bangladeshs major export items are Readymade garments, frozen foods (shrimps), leather, leather products, jute, jute products, tea, ceramic, textile fabrics, home textile, chemical product, light engineering products including bi-cycle and also ship building.

Major trading Partners are USA, EU countries, China, India, Pakistan, Japan, South Korea, Canada, Australia, Malaysia, Hong Kong, Taiwan, Thailand, Indonesia, Saudi Arabia and UAE. 5 Md. Tahmidul Haq Ansari

Our major imports are Oil, edible oil, petroleum product, wheat, seeds, fertilizer, yarn, capital goods, machinery, and power generating machinery, scientific & medical equipment, iron & steel, motor vehicles, raw cotton, chemicals.

In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones. The primary objectives of an EPZ are to provide special areas where potential investors would find a congenial investment climate, free from cumbersome procedures. In first five months (January May) of current year USA has imported products from Bangladesh worth 216.51 million dollars. This is 33% more than the year of 2010. On 2010 (from January May), Bangladesh earned 162.61 million dollars from export to USA.

In our last financial year (2010-11) we have earned 2 thousand 292 cror and 43 lakh USD through export. Target for current years (2011-12) export earning has been set to 2 thousand 636 cror 30 lakh and 40 thousand USD. This is 15% more than previous years earning. Success of year 2010-11 was lade by Neat garments, woven garments, home textile, footwear, raw jute, jute products, robber, lather, ship building and plastic products. But 17 Bangladeshi foreign mission could not achieve their targeted export revenue. This may be caused by word recession or lake of professionalism. In 2011-12 targeted export for 44 missions is set to 2 thousand 570 cror 29 lakh and 30 thousand USD. Outside this mission targeted export for some countries is set to 66 cror 1 lakh and 10 thousand USD.

In the financial year of 2010-11 import of four daily items are increased tremendously. These items are rice, wheat, sweet and eatable oil. According to the statistics of Bangladesh Bank, last year LC opened for importing rice was 107 cror 40 lakh USD which was 18 cror 60 lakh USD in the year of 2009-10. Data from the central bank also suggest that LC opened for sweet and eatable oil was 112 cror and 152 cror USD respectively in last year. At 2009-10 this amount was about 78 cror 30 lakh and 105 cror and 80 lakh for sweet and eatable oil respectively. In this regard it must be said that opening of LC does not represent actual picture of import or export. After opening LC how much product comes in with regard to that LC within a specific time is considered as actual import. But the ratio of opening LC gives us the tendency of importing of a country.

Md. Tahmidul Haq Ansari

At the end of financial years (2010-11) last 11 months (July May) our trade deficit was 710 cror and 30 lakh USD. This deficit is more that 38% of its last financial year (2009-10), which was 515 cror and 20 lakh. As a result trade deficit of Bangladesh has crossed the mark of 700 cror USD for the first of history. This is due to excess importing. This creates pressure of trade balance.

Trade Deficit (Million dollars)

2010-11 (July-May) -732.8

2005-06

2004-05

2006-07

2007-08

2008-09

-330

-288.9 -345.8 -417 -533 -515.2

(Source: The Daily Prothom Alo, August 17, 2011. Page no. 15) In brief, for last few years Bangladesh has been showing a tremendous success in export. Last year (2010-11) we have earned $ 2.29 million form export and this earning is 41.5% more than the year of 2009-10. Along with many difficulties and barriers we have achieved this growth in export sector. But, when the sun shining on the export sector, darkness is casting it shadow on import side. Because of excess import (mainly daily consumed products) our trade deficit has crossed the mark of $70 million for the first time of the history of Bangladesh.

In a nutshell, conclusion can be drawn that if we could maintain the current trend in export sector then very soon we can be a country of middle wage earners.

Md. Tahmidul Haq Ansari

2009-10