Export Performance, diversification and employment: case of Bangladesh rmg sector

1. MahfuzKabir, PhD Research Fellow Bangladesh Institute of International and Strategic Studies E-mail: mahfuzkabir@yahoo.com 10 August 2010 Export Performance, diversification and employment: case of Bangladesh rmg sector

2. Trade-GDP Ratio Data Source: WDI (online)

3. External Balance on Goods and Services (% of GDP) Data Source: WDI (online)

4. Trend of Exports and Its Annual Growth (%) Data Source: WDI (online)

5. Projection of Bangladesh’s Exports (million US$) Note: Numbers in parentheses indicate growth rates. * grt10 implies average growth of 10 years.

6. Export Performance (2008-09), % Data Source: EPB

7. Export of RMG (2009-10), % Data Source: EPB

8. Export performance in RMG for July-June 2009-2010 (million US$) Source: EPB

9. Composition of exports: traditional and non-traditional exports as % of total exports Source: ESCAP (2004), Export Diversification and Economic Growth: The Experience of Selected Least Developed Countries, Development Papers 24, New York; United Nations.

10. Diversification Index (DIV) ‘Diversification’ refers to the spreading of operations over dissimilar economic activities and takes place in order to mitigate the effect of cyclical instability, to come closer to a full utilization of resources, and to expand the export share. It is measured through the number of export categories in which the country is active. It is specified as follows: W = 2Σisi - 1 ; i = 1, 2, ..., n A result close to one indicates that the country is completely specialized in its exports, while if W is, say, equal to four this would imply that the country is equally active in four export industries.

11. Export Diversification Data Source: UNCTAD (2009)

12. Composite Index of Concentration in Merchandise Goods CR=Concentration Ratio; HHI=Herfindahl-Hirschmann Index; HTI=Hall-Tideman Index ; RI = Rosenbluth Index; CCI = Comprehensive Concentration Index; HKI = Hannah and Kay Index; ENT = Entropy Measure; DivI = Diversification Index; Source: Chris Meilak (2008), Measuring Export Concentration: The Implications for Small States, Bank of Valletta Review, 37, p.43

13. Price elasticity of RMG Products A. Panagariya, S. Shah, and D. Mishra (2001), Demand Elasticities in International Trade: Are They Really Low?” Journal of Development Economics, Vol.64, pp. 313-342. A. Razzaque (2004), The Small Country Assumption, Econometric Estimates and Policy Making: A Reassessment with Bangladesh’s RMG Exports to the European Union, Bangladesh Development Studies, Vol 30 (1&2), pp. 1-33.

14. Some important phases of the Bangladesh RMG industry

15. Trend of RMG Export

16. Product Diversification • RMG depends on a limited number of export products • The country lags behind major competitors such as China and Viet Nam in terms of product diversification • Apparel exports from Bangladesh are also below the world average unit value, which reflects the dominance of low quality apparel exports from the country • With reference point or world average relative unit value 1, Bangladesh exports at 0.8, China at 1.2, India at 1.4 and Italy at 2.5

17. Growth Pattern of Woven and Knitwear Categories Data Source: EPB

18. Textile and garment exports to the US from Bangladesh (US$), 2005 A: More than $100 million B: $50 million to $100 million C: $10 million to less than $50 million D: Less than $10 million

19. Product Diversification: US Market • Bangladesh exported a total of 99 types of products in the textile and garment category to the US in 2005, but most of the category’s contribution was minimal • For India and China, the number of textile and garment product categories exported in the same year to the United States was 161 and 167 respectively • Category 340 (cotton non-knit shirts, man and boy) was the highest contributor to the export earnings of Bangladesh from the United States, amounting to $332 million in 2005

20. Product Diversification: US Market • The export earnings of only eight categories crossed the $100 million export benchmark in the same year for the country • A total of 16 categories of exports crossed the $50 million benchmark and 31 categories crossed the $10 million export benchmark • The market of India seems to be more diversified compared with that of Bangladesh, and the market of China is significantly more diversified compared with that of Bangladesh or India • Exports of Bangladesh are concentrated mainly in cotton or man-made fibre-related products • Export of China and India is diversified in all the fibre groups

21. Product Diversification: EU Market • Top five product groups contributed 76% of the total garment export earnings of Bangladesh from the EU in 1996, and that share increased to 82% in 2005 • The corresponding changes for India and China were from shares of 62% and 34% in 1996 to 54% and 45% in 2005 respectively

22. Product Diversification: EU Market • The product-mix of garment products exported from Bangladesh to the EU has changed significantly during the period 1996-2005 • Share of shirts in total garment exports from Bangladesh to the EU has decreased, whereas the shares for overcoats, jackets, sweaters, suits and some other garment products have increased in recent years • Indication of some product diversification

23. Country Diversification • Diversification makes countries less vulnerable to trade shocks by stabilizing their export revenues • It also has spillover effects in the economy ― it creates learning opportunities that lead to new forms of comparative advantage • Diversification • increasing the number of trade partners (breadth) • exporting new products to old markets (depth)

24. Diversification (cont’d) • While deepening relationships with existing markets is key for export growth, geographical diversification is found to be of great significance for low income countries such as Bangladesh • East Asian Tigers achieved well over 300% gains in this area between 1974 and 2003 • Opportunities for many countries to further exploit geographical diversification are enormous (Besedeš and Prusa, 2007*) * T. Besedeš and T.J. Prusa (2007), The Role of Extensive and Intensive Margins and Export Growth, Working Paper 13628, Massachusetts: NBER.

25. Diversification (cont’d) • Bangladesh’s RMG is over-dependent on a limited number of markets in North America and Europe • Exports to the rest of the world are negligible and increasing at a very slow pace * More than 70 countries

26. Compliance and Decent Work • RMG industry is in an open playing field • The grounds of competitiveness in the global markets are no longer limited to technical and economic standards (product quality, in-time delivery, price, etc.) but include labour and environmental standards • Social, human and institutional factors • “Decent work”

27. Decent Work to promote opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and human dignity • Promotion of employment • Promotion and safeguarding of fundamental rights at work • Social protection • Promotion of social dialogue to forge fair compromises and consensus

28. Compliance • Social Compliance Forum (SCF) • Taskforce on Labour Welfare in RMG • Compliance Monitoring Cell • Taskforce on Occupational Safety in RMG • Taskforce on Labour Welfare in RMG • Crash Programme On fire Safety Taken By BGMEA

29. Labour standards • Wages and Benefits • Festival allowance • Provident fund • Welfare • Toilets and washing facilities • First aid boxes • Maternity benefits • Day care centre • Protective clothing • Rest room and canteen facilities

30. Labour standards • Working hours, leaves and holidays • 8-hour work and overtime • casual leave • medical leave • festival holiday • earned leave

31. Thank You for Kind Attention