Tariff structure major obstacle to export diversification: Experts

The tariff regime should be made by keeping the issue of competition in the global market in mind, experts have said. In their view, the protective strategy has been hampering the non-garments sectors of the country.

At a roundtable discussion on the "8th Five Year Plan (July 2020- June 2025)" organised by The Institute of Chartered Accountants of Bangladesh (ICAB) on Wednesday, they said that though businesses in the non-garments were doing well in the domestic market, this did not reflect the ground reality.

Policy Research Institute (PRI) Chairman Dr Zaidi Sattar said, "Everyone says we are only focusing on garments - but how do we diversify? The non-garments sectors are not doing well owing to the existing tariff structure. Because of the protective tariff structure, the domestic market is more profitable than exports for the non-garments sectors. This is tariff-induced profitability, not real profitability.

"Tariff strategy and export diversity are not separate. Therefore, to increase export diversity, the tariff strategy should be adapted for doing business in the global market," he added.

Sattar said high growth strategies are coming from the UN Growth Commission. It has been mentioned that the growth of the developing countries will be at a rapid rate of 7% to 9%, which can be done by leveraging global markets. Bangladesh is doing this, he noted.

He said the higher growth of Bangladesh's gross domestic product came from the manufacturing sector. Currently, 55% of the manufacturing sector is export-oriented. Export- and manufacturing-led growth will serve as drivers for Bangladesh to meet its GDP growth targets, but it will require some adjustments. 

Suggesting that GDP growth in the 8th Five Year Plan should be based on exports and production, Sattar highlighted the fact that exports of ready-made garments were projected to increase from $42 billion to $100 billion dollars by 2030. 

He said it would be possible to meet the projection if importance was given, but the goal of diversifying exports in the eighth Five-Year Plan must be achieved.

ICAB President Shahadat Hossain, in his welcome speech, said "When we graduate from least developed country status, we will have to face tough competition in the international market. For this, you have to work with plans and strategies in advance."

The 8th Five-Year Plan's main task is to begin the implementation of "Vision 2041" in a way that brings Bangladesh closer to the goals of attaining upper middle income country status and major sustainable development goals (SDG) strategies, and eliminating extreme poverty by the fiscal year 2031.

GDP growth is projected at 8.51% in 2025. To meet the target, the government has chalked out domestic and foreign investments of Tk64.96 trillion over the next five years. Of this, public investment will be 25.3% and private investment will be 74.7%. 

In addition, the employment target is 1.13 crore, inflation 4.60%, poverty reduction 15.60% and revenue mobilisation 12.3%.

In his keynote presentation, ICAB Chief Executive Officer Shubhashish Bose mentioned four challenges in implementing the plan, including Covid-19, LDC graduation, implementation of the SDGs and climate change vulnerability. 

Besides, the Russia-Ukraine war, devaluation of currency, fuel price hike and supply chain disruptions were also major obstacles, he said.

Bose said in the current context, only five months of import expenditure cannot be met with reserves. Again, exporters are becoming defaulters by taking loans from the Export Development Fund. These were matters of concern.

Addressing the discussion, Atiur Rahman, former governor of the Bangladesh Bank, said, "The Bangladesh Bank and the government are working to curb trade and current account deficits. Foreign exchange reserves may also improve. But we need to pay special attention to the agriculture sector, which saved us during the crisis."

Dr M Masrur Reaz, chairman of Policy Exchange of Bangladesh, said while India and China have given a lot of effort to small businesses, Bangladesh is still lagging behind. 

He said emphasis should be given here to generating employment. 

Shamsul Alam, state minister of planning, said, "IMF and World Bank loans are being sought, which I am in favour of. Borrowing is needed to meet the dollar crisis. This loan is being taken to set up productive sectors and for infrastructure. Many people say that the per capita debt burden is increasing and loans cannot be taken. But this per capita loan is not taken by the individual, but by the state. The state will repay it."