an investigation of the international trade condition of bangladesh

An investigation of the international trade condition of Bangladesh 1

Executive Summary

Despite structural limitations in the Bangladesh economy, the export sector performed well

throughout the 1990s. The export growth rate of Bangladesh was higher than that of the

world and the SAARC countries. However, the balance of trade of Bangladesh was always in

deficit and the trade deficit with India is huge. The export share of primary commodities has

decreased while that of manufactured commodities has increased over the years. The growth

rate of manufactured commodities is better than that of primary commodities. The import

share of principal primary commodities has declined while that of principal industrial and

capital goods has slightly increased over the past years. The striking features of Bangladesh‟s

exports are commodity and market concentration. To overcome the problem, there is no

alternative but to diversify exports and improve quality. To improve the country‟s overall

trade balance, especially trade balance with India, some policy recommendations are offered

in this paper.

In our report we have mainly described the international trade condition i.e; export import

condition of Bangladesh. Export Import is must necessary for a country for development. But

if export is more than import then it will be beneficial for a country. Government is sincerely

committed to fostering a gradual development of free market economy in the light of GATT

agreement. In the interest of export promotion & investment in the country it is necessary to

have a long term, stable, facultative & liberal Import Export Policy. With this and in view the

present democratic government has taken steps to extend the duration of the Import Export

Policy from two years to five years.


Chapter- 01

Introduction

1.1 Origin of the Report

1.2 Purpose of the Report

1.3 Scope of the Report

1.4 Background of the Report

1.5 Methodology

1.6 Report Preview

1.7 Limitations


Introduction

Trade is an integral part of the total developmental effort and national growth of all

economies including Bangladesh. It particularly plays a central role in the development plan

of Bangladesh where foreign exchange scarcity constitutes a critical bottleneck. Export trade

can largely meet „foreign exchange gap‟, and export growth would increase the import

capacity of the country that, in turn, would increase industrialization, as well as overall

economic activities.

Bangladesh launched a deep and wide-ranging trade reform strategy in the early 1990s. This

included substantial reduction and rationalization of tariffs, removal of quantitative

restrictions, move from multiple to a unified exchange rate system, convertible current

account and an overall outward orientation of trade policy regime. As a result, the country‟s

trade integration, measured by the trade-GDP ratio rose. Despite apprehensions that

Bangladesh might lose out to exporters from China and India following the phase-out of the

MFA quotas, its share in global apparel and textile exports has remained stable and export

volumes have continued their robust growth. The country‟s main markets are the EU and the

United States and its imports are dominated in general by machinery and textiles, with China

and India being the most important sources of imports. Bangladesh also has substantial

unrecorded trade with its neighbor India. Labor exports are also important, with remittance

inflows at about 9% of GDP.


1.1 Origin of the Report

In the class, our “Managerial Communications” course teacher Arafat Rahman, Assistant

Professor, Institute of Business Administration, assigned us to make a report on “An

investigation of the international trade condition of Bangladesh.”


1.2 Purpose of the report

To meet the challenges of the competitive world we should have to gather more knowledge

about our course. Firstly the purpose of the term paper is to meet up the course requirement

of “Managerial Communications”. With the advantages of new millennium as a student of

MBA program, to understand the international trade i.e; export and import condition of our

country is a vital factor for achieve proper knowledge about it. So, identifying objectives is

very much important. Our objectives of preparing this report are:

To know about the international trade condition of Bangladesh.

To understand the performance of major sectors of international trade.

To identify the actual and potential obstacles of this sector.

To identify the opportunities of international trade regarding Bangladesh.


1.3 Scope of the Report

Studying “Managerial Communications” is a very large scale task. Here in this report we

have emphasized on how to write a business report in proper way and side by side investigate

the international trade condition of Bangladesh. As a student of MBA program we should to

know it which will help us in our future corporate life and business career.


1.4 Background of the Report

This is a report of WMBA program of IBA, Jahangirnagar University on “An investigation

of the international trade condition of Bangladesh.” From the very past, there have been

conducting many study on international trade. Actually the study on international trade i.e; to

find out export import condition is time specific. In our report we have included the most

present data and compare this with some past data.


1.5 Methodology of the Report

Design the report plan

As a course requirement we were assigned to make the report. Being assigned we thought

how could we make an effective report. We plan the way in which we can get practical,

authentic, reliable information. We also plan the way of interpreting this information in a

meaningful way to make the report effective and efficient.

Collection of data

To collect the data we checked various journals, books, magazines and a lot of report

published by various organizations and we have taken interview of different peoples of

different vocations. We also visit a few websites regarding this subject matter.

Analyze the data

The most important task was to analyze and construe the collected primary and secondary

data. We analyze those data from many angles and in different aspect.

Tabulate the data

After analyze the data we present the information in different segment according to their

category, in compact way. We highlight different important thing, which we find during our

survey.

Submit to the proper authority

After doing all of these we submit the report to the authority who assigned us to prepare the

report.


1.6 Report Preview

Our reported topic is “An investigation of the international trade condition of Bangladesh.”

We have divided the total body of the report in three part. At first we include the international

trend and Bangladeshi trade growth. After that we have focused on export and import

condition of our country. Here both of the parts we have included the major commodities and

major partners, commodity wise export and import condition and their growth structure.


1.7 Limitations of the Report

Though we have tried our level best to prepare this report but we have some limitations in

preparing this report such as-

.

The main constraint of the study is inadequate access to actual international trade

related information, which has hampered the scope of analysis required for the study.

We have no logistic support to prepare this report.

Shortage of time to prepare this report.


Chapter- 02

International Trade Condition of Bangladesh

2.1 Trends in international trade

2.2 Trade growth of Bangladesh

2.3 Export condition of Bangladesh

2.3.1 Export

2.3.2 Export partners of Bangladesh 2.3.3 Export products of Bangladesh

2.3.4 Commodity wise export condition (Yearly

2.3.5 Major items of export goods

2.3.6.Export Earnings and Export Growth of Bangladesh

2.4 Import condition of Bangladesh

2.4.1 Import 2.4.2 Import partners of Bangladesh 2.4.3 Import Commodities of Bangladesh 2.4.5 Commodity wise import condition (Yearly)

2.5 Balance of trade of Bangladesh


2.1 Trends in international trade

An economy opened to foreign goods and competition through trade liberalization benefits

from that inflow and stimulus in increased investment activity, stronger export and overall

economic growth, and greater efficiency in resource use. With sound fiscal/monetary and

exchange rate policy trade liberalization should lead to the balanced growth of exports and

imports that is desirable for economic growth without destabilizing external accounts.

Overall, Bangladesh is reaping many of those gains, but at the micro-level, some firms claim

to be victims of liberalization. In reality, most of these are inefficient firms that have failed

to improve their competitiveness despite long periods of high protection. They find

themselves under pressure, losing or even leaving markets, and shedding labor as the

progressive removal of trade barriers establishes a more neutral incentive regime. Such

displacements are a function of inefficiency, not a basis for retreating from trade reform. As

other activities become more profitable, new enterprises expand and generate new jobs, with

the pace depending on how conducive the business environment is in facilitating supply

response. Only widespread production and job displacements would indicate adverse

consequences of trade reform and would show up in poor sectorial and aggregate economic

performances. Bangladesh has not experienced such setbacks.


2.2 Trade growth of Bangladesh

Initially known as East Pakistan, Bangladesh is a poor country featuring negative trade

balance since its independence in 1971. The country‟s economy experienced vast

improvement in the 1990s. However, foreign trade in South Asian region still is an area of

concern.

A developing country, Bangladesh was the world’s 48th largest economy as of 2008, as

graded by the International Monetary Fund. At US$1,500, the per capita income of the

country is much lower than its neighbors India and Pakistan. During the first decade of the

21st century, Bangladesh‟s economy grew at a rate of 6%-7% annually.

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 Bangladesh‟s 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.


2.3 Export condition of Bangladesh

2.3.1 Export

Export means goods sent to a foreign country to be sold. Export is any goods and service sold

to a foreign country. Exporter refers to a merchant who other purchase goods on product in

his home country for sale abroad or who acts as an agent for home producers arranging for

the dispatch of their produce to an importer in a foreign country for sale there for the best

price the importer can get. Exporting is selling domestic made goods in another country.

2.3.2 Export partners of Bangladesh

The following were Bangladesh‟s export partners as of 2010

United States 24%

Germany 15%

United Kingdom 10%

France 7.40%

The Netherlands 5.50%

Italy 4.50%

Spain 4.20%

24%

15% 10%

7.40%

5.50%

4.50% 4.20%

United States

Germany

United Kingdom

France

The Netherlands

Italy

Spain

Figure: Export Partner of Bangladesh


2.3.3 Export products of Bangladesh

Fruits

Leather

Garments Tea

Vegitable

Jute Products

ICT Products Potteries

Handicrafts

Woven Garments

Knitwear Ceramics Products

Frozen Fish

Food Products

Bicycle


2.3.4 Commodity wise export condition (Yearly)

During the year 2010-2011 the traditional items i.e. jute manufactures (Tk. 4776.9 crore), raw

jute (Tk. 1977.0 crore) and tea-all sorts (Tk. 19.2 crore), fetched Tk. 6773.1 crore (5.4 %) and

the non-traditional items fetched Tk. 118232.6 crore (94.6 %) of the total exports of Tk.

125005.7 crore. Among the non-traditional items, readymade garments have emerged

individually as the most important sector. Readymade garments accounted for Tk. 96439.8

crore (77.1 %) in 2010-2011 as compared to Tk. 67246.9 crore (77.1 %) in 2009-2010.

Commodity classification of export earnings for the current year revealed increases over the

previous year under : readymade garments including hosiery (Tk. 29192.9 crore), fish

shrimps and prawns (Tk. 938.4 crore), jute manufactures (Tk. 1122.4 crore), leather and

leather manufactures (Tk. 937.2 crore), raw jute (Tk. 647.0 crore) and on the other hand tea

(Tk. 17.8 crore), furnace oil, naphtha & bitumen (Tk. 286.4 crore) , fertilizers (Tk. 55.7 crore)

and handicraft (Tk. 81.3 crore) are decreased.

Table below shows the comparative position of export receipts from major commodities

during the last three years.

(Taka in Crores)

Commodity group 2010-2011 2009-2010 2008-2009 Changes

(1)-(2)

Changes

(1)-(3) Amount % of

total

Amount % of

total

Amount % of

total

1 2 3

Readymade garments 96439.8 77.10 67246.9 77.10 67257.1 79.70 29192.9 29182.7

Jute manufactures 4776.9 3.80 3654.5 4.20 2390.7 2.80 1122.4 2386.2

Fish, shrimps and

prawns

4149.0 3.30 3210.6 3.70 3123.2 3.70 938.4 1025.8

Leather and leather

manufactures

3367.4 2.70 2430.2 2.80 1962.3 2.30 937.2 1405.1

Furnace oil, naphtha

and bitumen

706.9 0.60 993.3 1.10 660.5 0.80 -286.4 46.4

Raw jute 1977.0 1.60 1330.0 1.50 930.8 1.10 647 1046.2

Handicraft 32.7 0.00 114.0 0.10 61.0 0.10 -81.3 -28.3

Tea 19.2 0.00 37.0 0.00 82.4 0.10 -17.8 -63.2

Fertilizer 181.2 0.10 236.9 0.30 711.3 0.80 -55.7 -530.1

Others 13355.6 10.80 8015.7 9.20 7244.5 8.60 5339.9 6111.1

A. Sub-total 125005.7 100.00 87269.1 100.00 84423.8 100.00 37736.6 40581.9

B. Exports of EPZ 20001.9 0.00 14879.1 0.00 13074.3 0.00 5122.8 6927.6

Grand total:(A+B) 145007.6 0.00 102148.2 0.00 97498.1 0.00 42859.4 47509.5

Source : Statistics Department, Bangladesh Bank.


Commodity wise export condition of Bangladesh as on 2010-2011

2.3.5 Major items of export goods

According to the data of Bangladesh Bank of 2011 top five major items of export goods are

given below:

Sl Sectors Export %

01. Readymade garments 77.10 %

02. Jute manufactures 3.80 %

03. Fish, shrimps and prawns 3.30%

04. Leather and leather manufactures 2.70%

05. Furnace oil, naphtha and bitumen 0.60%

Source: Statistics Department, Bangladesh Bank.

77.10%

3.80%

3.30%

2.70%

0.60% 1.60%

0% 0%

0.10%

10.80% Readymade garments

Jute manufactures

Fish, shrimps and prawns

Leather and leather manufactures

Furnace oil, naphtha and bitumen

Raw jute

Handicraft

Tea

Fertilizer

Others

Figure: Commodity wise export condition of Bangladesh


2.3.6 Export Earnings and Export Growth of Bangladesh

The export sector performed rather well throughout the 1990s. This sector achieved a growth

rate of 37.04% in the FY 1994-95. During the twelve years, 1991-92 to 2002-2003,

Bangladesh experienced negative export growth (-7.44%) only in FY 2001- 2002. The

terrorist incident of September 11, 2001 in USA and subsequent events may be blamed for

this unexpected suffering of the export sector in the particular fiscal year. However, the

export sector achieved an increase of US$ 42859.4 million, from FY 200910 to 2010-11, with

total export earnings amounting to US$ 145007.6 million in FY 2010-2011. This increasing

rate was more in FY 2008-09 to FY 2009-10.


2.4 Import condition of Bangladesh

2.4.1 Import

Import means brought goods into a country from abroad for sale. On the other hand import

means goods and services purchase from other countries involving the use of foreign

exchange. Importing is purchasing goods made on another country.

2.4.2 Import partners of Bangladesh

The following were Bangladesh‟s export partners as of 2010

China 15.8 %

India 15.7%

Kuwait 8.1%

Singapore 7.6%

Japan 4.4%

15.80%

15.70%

8.10%

7.60%

4.40%

China

India

Kuwait

Singapore

Japan

Figure: Import Partner of Bangladesh


2.4.3 Import Commodities of Bangladesh

Here are the major import commodities of Bangladesh:

Machinery and equipment

Chemicals

Iron and steel

Textiles

Foodstuffs

Petroleum products

Cement

2.4.5 Commodity wise import condition (Yearly)

(In million US$)

Items 2010-2011 2009-2010 % Changes

3 over 2

1 2 3 4

A. Food Grains 882.4 239.2 -72.89

2. Wheat 643.2 1829.8 184.48

1. Milk & cream 96.4 62.3 -35.37

3. Oil seeds 158.8 865.3 444.9

5. Pulses (all sorts) 233.6 413.4 76.97

B. Intermediate Goods 10282.7 313.6 -96.95

2. Crude petroleum 584.1 1996.8 241.86

4. Chemicals 960.2 79.7 -91.7

6. Fertilizer 955.1 258.7 -72.91

8. Plastics and rubber articles thereof 840.1 1290.6 53.62

10. Yarn 792 2099.4 165.08

12. Staple fibre 112.4 1502 1236.3

C. Capital Goods 6194 1419.5 -77.08

Other capital goods 3272.5 2016.5 -38.38

Total (A+B+C) 21205.4 1301.7 -93.86

Grand Total (A+B+C+D) 22507.1 Source: National board of Revenue, Ministry of finance, P : Provisional


2.5 Balance of trade of Bangladesh

Foreign trade plays a vital role in achieving rapid economic development of a country. Since

Bangladesh is a developing country, foreign trade can be considered of pivotal importance.

But unfortunately, trade balance of this country is still very unfavorable. Each year

Bangladesh has to spend a huge amount of money for importing consumer goods and

materials which is not a positive sign for our country. Bangladesh also spends much more for

importing industrial raw materials, but it is a positive signal for our economy as it shows

enhanced production of the economy. The country‟s requirement of petroleum products is

entirely met by import.

During the last decade, Bangladeshi exports shifted from the sale of agricultural products and

raw and processed natural resources to labor-intensive manufactured goods (including

clothing, footwear, and textiles), but the country, unlike neighboring India, could not catch up

with the exporters of skill-intensive products. The problem of balance of trade in Bangladesh

is well known: ever since the independence of the country, export earnings have persistently

fallen behind import payments. Consequently, every year the country incurs a huge trade

deficit.

Bangladesh has a long history of maintaining a negative trade balance, importing more goods

than it exports. In the 1970s and 1980s it imported goods and services twice and sometimes 3

times as much as it exported. Even during the relatively successful 1999 financial year, the

country exported just US$5.523 billion worth of products while it imported US$8.381 billion

worth of products, leaving a large trade shortfall of US$2.858 billion.

Table: Cost of export, import, and trade balance. (Taka in core)

Fiscal Year Total export Total Import Trade Balacne

2007-2008 98160.0 133794.3 -35634.3

2008-2009 106999.7 139588.5 -32588.8

2009-2010 112305.1 148550.8 -36245.7

2010-2011 145007.6 171053.6 -26046.0

Source: Bangladesh Bank


During FY 2007-2008 the total export was BDT 98160.0 core (taka) and the total import was

133794.3 crore Taka while the trade deficit was 35634.3 core. In the FY 2008-2009 the total

export was BDT 106999.7 crore and the total import cost was BDT 139588.5 core whereas

the trade deficit stood at BDT 32588.8 core.

During the period of FY 2009-2010, the value of total export was112305.1 crore taka and the

total import was BDT 148550.8 crore where the trade deficit was BDT 36245.7 crore in the

mentioned period.

During the period of FY 2010-2011, the value of total export was145007.6 crore taka and the

total import was BDT 171053.6 crore where the trade deficit was BDT 26046.0 crore in the

mentioned period.

It is quite evident that both the export and import is on rising trend in each fiscal year. But

increasing rate of import cost is much higher than the export earnings and consequently

causing a huge trade deficit every year.


Chapter- 03

Major findings, conclusion and recommendation

3.1 Major Findings

3.2 Conclusion

3.3 Recommendations


3.1 Major Findings

The past decade‟s boom in exports –particularly the apparel sector is very significant to

country‟s economic growth, but the recent GDP growth has not led to significant

improvements in the living standards of most people and the social factors are still

challenging. Despite impressive economic growth and some reforms over the two decades

Bangladesh‟s business environment is still challenging. The key issues are:

Poor quality infrastructure particularly road networks and electricity supply.

The economy is not diversified and is highly dependent on the agricultural sector.

Services and apparel only make up a small percentage of the economy. High cost of

finance and limited access to long term finance options.

Largely unskilled labor force: limited spending on education has led to a decline in

attendance and in the quality of education.

Political instability and safety risks, political, ethnic threaten to undermine stability.

Slow pace of reform due to government bureaucracy and lack of alignment of policies

at the various levels of government.

High levels of corruption even within the judiciary undermines investor confidence.

USA is the largest market of exportable goods of Bangladesh.

China is the highest rank in import.

RMG, Frozen Foods, Jute goods, Leather, Raw Jute etc export more from Bangladesh

every year.

Petroleum goods, Wheat etc import more every year.


3.2 Conclusion

Today the world is globalized. Here every developed, underdeveloped and developing

country wants to compete with the other country to develop their own and international trade

is the only way to develop the host country. A country is not fulfilling to produce all the

necessary commodities for survival so it needs import goods from other countries. Moreover

the host country is expert in producing some goods such as technical accessories, mechanical

substance, power device etc. the country export these goods to others countries and earn huge

foreign currency. Thus the import and export process are running among all over the world.

In this perspective Bangladesh produce a huge amount of food crops and export to other

countries and earn a lot of foreign currency. Bangladesh also imports many necessary goods

and luxury commodities from other country.

Exporters and trade experts attribute Bangladesh‟s export success to the „competitiveness‟ of

the country‟s readymade garment sector and availability of cheap labor, although exports of

frozen food, leather and jute fell. Garment manufacturers produced lower-end products

whose demand did not fall significantly in global markets. Remaining competitive in these

days of difficulties since the quota system was withdrawn and the ongoing lingering

economic slide worldwide is rewarding for Bangladesh.


3.3 Recommendations

According to the Michael Porter definition of competitiveness Bangladesh is still under the

factor driven economy. Bangladesh should go for the comprehensive and realistic policy to

become a more competitive trading country such as-

Broaden the country‟s sources of economic activity, including by diversifying exports

particularly the agricultural commodities, to reduce external vulnerabilities and

promote growth.

The government should provide supportive conditions that would facilitate the

expansion and diversification of exports.

The government should continue to support the growth of domestic demand and

private-sector led investment through a reduction in government activity, which

crowds out private investment.

Significantly higher FDI inflows would be needed to support a higher growth

environment in Bangladesh to compensate for domestic resource constraints and to

enable Bangladesh to benefit from associated knowledge and technological spillover

effects. The current ban on FDI inflows into the RMG sector also needs to be

removed in order to bolster Bangladesh's prospect for the post-ATC quota era.

Surrounded by increasingly competitive countries, Bangladesh must avoid

discriminating against foreign investment or ownership. In this context, the

investment environment would become more attractive by reducing restrictions on

foreign ownership both in manufacturing and service sector.

Improving governance is crucial in every sector and to achieve for that requires a

clear long-term vision as well as pragmatism in exploiting opportunities to strengthen

the overall framework of public accountability.


Chapter- 04 Bibliography

4. Bibliography


4. Bibliography

BBS. (2008). Statistical Pocketbook of Bangladesh, Bangladesh Bureau of Statistics,

Dhaka, Bangladesh.

Bangladesh Bank. (2009-2010). Annual Report 2009-2010, Dhaka, Bangladesh.

GOB. (2003). Export Policy 2003-2006, Ministry of Commerce, Government of

Bangladesh, December, 2003.

Rahman, M.M, Business Communication, CBO Publications (pvt) Ltd, 2nd

edition,

2006.

Lesikar, R.V.and Flatley, M.F, Basic Business Communication, Sultan Chand &

Sons, 9th

edition, 2002

Dr. Urmila Rai & S.M. Rai, Business Communication, Himalaya Publishing House,

India, 4th

edition, 1997, p-02

M, Omar Ali, Business Communication- Theory & Application, 2nd

edition, 2003, p-

04.

C.L Bovee & Others, Management, McGraw Hill Inc. Int. edition, p-536.

R.W. Griffin, Management, AITBS Publishers, India, 5th

edition, p-543.

R.C. Sharma and Others, Business Correspondence & Report Writing, Tata McGraw

Hill Publishing Co. Ltd, India, 2nd

edition, 1996, p-93

an investigation of the international trade condition of bangladesh

Documents