BD falls 25 notches in ECI in a decade

[Black_cats]

BD falls 25 notches in ECI in a decade
Poor export diversification
Yasir Wardad | Published: March 25, 2019 09:23:20 | Updated: March 25, 2019 13:47:01

Bangladesh has backtracked 25 positions in the global Economic Complexity Index (ECI) in a decade, which reflects its poor progress in economic diversification in terms of exports.

The country was ranked 123rd among 129 states in the ECI 2017, whereas it was 98th in the ECI 2008.

Bangladesh's position witnessed a gradual fall, as it gained -1.71442 points in 2017, which was -0.936713 in 2008.

The latest report of the ECI was published this month.

The ECI measures knowledge intensity of an economy by considering the knowledge intensity of the products it exports.

The index was developed in 1980s by Cesar A Hidalgo, from MIT Media Lab, and Ricardo Hausmann, from Harvard University.

The ECI has been validated as a relevant economic measure by showing its ability to predict future economic growth and to explain international variations in income inequality.

Countries like India, Vietnam, Pakistan, Ethiopia and Zambia, however, are ahead of Bangladesh in the ranking.

Japan has been able to keep the number one position in the ECI for the last two decades, as it gained the top 2.30938 points in the ranking.

Switzerland and Germany have been ranked second and third respectively.

Executive Director of Economic Research Group (ERG) Dr Sajjad Zohir said: "Bangladesh made shipment of products worth US$ 39.4 billion and was the 54th largest export economy in the world in financial year (FY) 2017-18. But, only one product - ready-made garment (RMG) - comprises more than 82 per cent of its income."

He said the index might consider diversification of export basket.

The ECI is based on qualitative performances of an exportable item, like - its production aspects, technology and resources in manufacturing stage.

The more complex and diversified an exportable product is in its production stage, the more point it will gain, Dr Zohir also said.

"But the backward linkages of the country's RMG sector are not reflected in the index."

"However, Bangladesh should take lesson from the ranking that it is not resilient to external shocks in terms of export, as it depends on one product only for its export economy," he added.

Centre for Policy Dialogue (CPD) Research Director Dr Khandoker Golam Moazzem said the country's key export-earning sector - RMG - is also not so diversified.

Knit T-shirts, non-knit suits, knit sweaters, non-knit shirts, and trousers and shorts of men and boys are some key earning RMG products.

He opined that the government's policy on RMG export is very much highlighted, but policies on the non-RMG sectors are not so emphasised.

"We have only 100 categories of products, which can be mentioned as export earning segments."

The country should set a target to make at least 10 non-RMG sectors able to fetch one billion dollar each in the next ten years, Dr Moazzem further said.

"Non-RMG items, like - footwear, jute products, light engineering products, fresh produce, fishes, processed foods and others, have great potentials, which we are yet to tap."

Bangladesh needs to enact sector-based policies to ensure its export diversification, which is also unavoidable to attract more investment in future, he added.

However, exports earning of the country's few key non-RMG sectors, like - jute and shrimp, witnessed a 25 per cent and 11 per cent decline respectively in the first eight months of the current financial year (FY 19) over that of FY 18.

Only the leather and leather products (including footwear) sector is likely to fetch one billion dollar in this FY after RMG.

tonmoy.wardad@gmail.com

https://thefinancialexpress.com.bd/trade/bd-falls-25-notches-in-eci-in-a-decade-1553484200

 

[Skies]

Executive Director of Economic Research Group (ERG) Dr Sajjad Zohir said: "Bangladesh made shipment of products worth US$ 39.4 billion and was the 54th largest export economy in the world in financial year (FY) 2017-18. But, only one product - ready-made garment (RMG) - comprises more than 82 per cent of its income."

Is this because of a reason (e.g. no policy and strategy) or limitation (e.g. no scope) of Bangladesh?

Need to think.

How much BD can diversify in future?

Which export industries will grow after garment industry?

 

[bluesky]

Many countries of the world started with the easy-to-do production of RMG. Japan, Korea, China, and many others. While they were progressing in the export of RMG they also initiated other manufacturing sectors. Today, China has diverted itself from RMG and is manufacturing all kinds of engineering items such as mechanical, electrical and electronics goods. But, BD remains with its basket of almost a single item. i.e, RMG.

For one, BD entrepreneurs may lack knowledge in engineering goods, but, I have reasons to believe that the GoB does not also have a sound policy to encourage to develop this sector. Could it be because the country's importers of these goods from China are the BAL cronies who work behind the screen to discourage anything like building this sector domestically? Import by them is a staggering $15 billion from China alone!!

So, the country is now walking on a thin sheet of ice that may easily break if it does not take the current opportunity (it has the export and remittance money $50 billion a year) to diversify. This is what I have been saying all along with the displeasure of many from BD.

 

[bluesky]

Is this because of a reason (e.g. no policy and strategy) or limitation (e.g. no scope) of Bangladesh?

Need to think. How much BD can diversify in future? Which export industries will grow after the garments industry?

Actually, a country does not necessarily have to export every item. Think of the cement industry. It is very large but is feeding the local construction demands instead of exports. Similar things can happen also to other manufacturing industries to be built. If one visits a market, he will see almost all the industrial goods are imported, either from China, india, Malaysia, Singapore or Pakistan.

To build these factories will cause less dependency on the import from these countries. The more important point is it will cause the employment of our people and raise the industrial sector's contribution to the GDP.

 

[Bilal9]

Which export industries will grow after garment industry?

Leather and non-leather footwear, pharma, ceramic crockeries, porcelain sanitaryware, shipbuilding, light engineering products, appliances, automotive, cellphones/electronic products..... I could go on and on. The growth for these is already in motion.

These report writers are not very bright. They don't have current data for sure. Thumbs down on the report as far as accuracy.

Don't buy it.....

But yes, we need to do more to diversify exports than we are doing today. Part of it needs to come from policy and tax incentives provided by 'Gormint'.

 

[Skies]

Leather and non-leather footwear, pharma, ceramic crockeries, porcelain sanitaryware, shipbuilding, light engineering products, appliances, automotive, cellphones/electronic products.....

Most of these industries are already existed here for long time, but they will do not have big share in the international market. If it was the case, then we already would see by now.

Only the garment is special case because of
1. low labor cost.
2. Very high supply of labor because of large population
3. Very high demand in the developed countries.

All the countries already make most of these you mentioned locally and China is there for another 10 to 15 years at least. And by that time, all the less developed countries will make these locally. And the developed countries will not buy automotive and electronic products from BD.

So no big opportunity in capturing international market soon.

What BD can do is to reduce the import by making locally like India does. But for scope of exporting in high volume for the above mentioned items is very limited.


Plus, if you look at the quote below, India already in the international market with following items. So BD has even less chance in the international market. For example, Indian is in the Auto mobile business for about 40+ years. So for any industry for BD to get big international share has to be mature enough, but by that time the prospective countries will be making themselves.

"The following export product groups represent the highest dollar value in Indian global shipments during 2018. Also shown is the percentage share each export category represents in terms of overall exports from India.

1. Mineral fuels including oil: US$48.3 billion (14.9% of total exports)
2. Gems, precious metals: $40.1 billion (12.4%)
3. Machinery including computers: $20.4 billion (6.3%)
4. Vehicles: $18.2 billion (5.6%)
5. Organic chemicals: $17.7 billion (5.5%)
6. Pharmaceuticals: $14.3 billion (4.4%)
7. Electrical machinery, equipment: $11.8 billion (3.6%)
8. Iron, steel: $10 billion (3.1%)
9. Cotton: $8.1 billion (2.5%)
10. Clothing, accessories (not knit or crochet): $8.1 billion (2.5%)

India’s top 10 exports accounted for just over three-fifths (61%) of the overall value of its global shipments."
​

And what will happen if Latin Americans and Africans start making garment products...just thinking