Topic: Recent International Trade scenario of BangladeshBOP

Submitted To:Mr. Shantanu Kumar RoyJoint DirectorForeign exchange policy department.Bangladesh Bank, Sylhet.LecturerDepartment of Business AdministrationMetropolitan University, Sylhet.

Submitted By:Mir Md. Nazmul HaydarMBA 22nd BatchID No: 111-126-025

Metropolitan University

Content

|Sl No. |Title |Page no. | |1 |Introduction |1-3 | |2 |Composition and Performance of Exports of Bangladesh |3 | | |Export Earnings and Export Growth | | |3 |Export Earnings and Export Growth by Commodities |3 | |4 |Exports of Primary and Manufacturing Commodities |4 | |5 |Export Value, Volume and Unit Price Index |4-5 | |6 |Exports Performance Compared to Imports |5 | |7 |Composition and Performance of Imports of Bangladesh |5-6 | | |Import Composition and Growth | | |8 |Import Shares of Consumer and Capital Goods |6...

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Balance of Payment (BOP) of a country is defined as, "Systematic record of all economic transactions between the residents of a foreign country" Thus balance of payments includes all visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency.[1]

Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.[2] These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BOP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.

When all components of the BOP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down central bank reserves or by receiving loans from other countries.

While the overall BOP accounts will always balance when all types of payments are included, imbalances are possible on individual elements of the BOP, such as the current account, the capital account excluding the central bank's reserve account, or the sum of the two. Imbalances in the latter sum can result in surplus countries accumulating wealth, while deficit nations become increasingly indebted. The term "balance of payments" often refers to this sum: a country's balance of payments is said to be in surplus (equivalently, the balance of payments is positive) by a specific amount if sources of funds (such as export goods sold and bonds sold) exceed uses of funds (such as paying for imported goods and paying for foreign bonds purchased) by that amount. There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter.

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Under a fixed exchange rate system, the central bank accommodates those flows by buying up any net inflow of funds into the country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's currency and other currencies. Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit. Alternatives to a fixed exchange rate system include a managed float where some changes of exchange rates are allowed, or at the other extreme a purely floating exchange rate (also known as a purely flexible exchange rate). With a pure float the central bank does not intervene at all to protect or devalue its currency, allowing the rate to be set by the market, and the central bank's foreign exchange reserves do not change.

Historically there have been different approaches to the question of how or even whether to eliminate current account or trade imbalances. With record trade imbalances held up as one of the contributing factors to the financial crisis of 2007–2010, plans to address global imbalances have been high on the agenda of policy makers since 2009.

The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers. It is called the current account as it covers transactions in the "here and now" – those that don't give rise to future claims.[3]

The Capital Account records the net change in ownership of foreign assets. It includes the reserve account (the foreign exchange market operations of a nation's central bank), along with loans and investments between the country and the rest of world (but not the future regular repayments/dividends that the loans and investments yield; those are earnings and will be recorded in the current account). The term "capital account" is also used in the narrower sense that excludes central bank foreign exchange market operations: Sometimes the reserve account is classified as "below the line" and so not reported as part of the capital account.[4]

Expressed with the broader meaning for the capital account, the BOP identity assumes that any current account surplus will be balanced by a capital account deficit of equal size – or alternatively a current account deficit will be balanced by a corresponding capital account surplus:

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The balancing item, which may be positive or negative, is simply an amount that accounts for any statistical errors and assures that the current and capital accounts sum to zero. By the principles of double entry accounting, an entry in the current account gives rise to an entry in the capital account, and in aggregate the two accounts automatically balance. A balance isn't always reflected in reported figures for the current and capital accounts, which might, for example, report a surplus for both accounts, but when this happens it always means something has been missed – most commonly, the operations of the country's central bank – and what has been missed is recorded in the statistical discrepancy term (the balancing item).[4]

An actual balance sheet will typically have numerous sub headings under the principal divisions. For example, entries under Current account might include:

Trade – buying and selling of goods and services o Exports – a credit entry

o Imports – a debit entry

Trade balance – the sum of Exports and Imports

Factor income – repayments and dividends from loans and investments

o Factor earnings – a credit entry

o Factor payments – a debit entry

Factor income balance – the sum of earnings and payments.

Especially in older balance sheets, a common division was between visible and invisible entries. Visible trade recorded imports and exports of physical goods (entries for trade in physical goods excluding services is now often called the merchandise balance). Invisible trade would record international buying and selling of services, and sometimes would be grouped with transfer and factor income as invisible earnings.[2]

The term "balance of payments surplus" (or deficit – a deficit is simply a negative surplus) refers to the sum of the surpluses in the current account and the narrowly defined capital account (excluding changes in central bank reserves). Denoting the balance of payments surplus as BOP surplus, the relevant identity is

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Table-1

Balance of payments [Monthly Data](In million US$)

Items

2012-13

July-Jan

2013-14RJuly-Dec

2013-14P

July-Jan

% Changes4 over 2

1 2 3 4 5  Trade balance -4289 -2436 -2787   Export f.o.b.(including EPZ) 14957 14511 17227 15.18    Of which : Readymade garments 12040 11932 14173 17.72   Import f.o.b (including EPZ) 19246 16947 20014 3.99  Services -1938 -1899 -2244   Credit 1618 1676 1935 19.59   Debit 3556 3575 4179 17.52  Primary income -1391 -1106 -1272   Credit 83 109 128 54.22   Debit 1474 1215 1400 -5.02    Of which: Official interest payments 263 210 262  Secondary income 9064 7136 8423   Official transfers 45 16 22   Private transfers 9019 7120 8401 -6.85    Of which : Workers' remittances(current a/c portion) 8637 6727 7965 -7.78

  Current Account Balance 1446 1695 2120  Capital account 332 216 288   Capital transfers 332 216 288  Financial account 2229 259 -174

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   Foreign direct investment (net) 938 840 980 4.48   Portfolio investment (net) 179 274 337    Of which : Workers' remittances(financial a/c portion) 66 52 52

   Other investment (net) 1112 -855 -1491    Medium and long-term (MLT) loans 1177 1077 1259 6.97    MLT amortization payments 614 488 686 11.73    Other long term loans (net) -2 56 61    Other short term loans (net) 334 -265 -450    Trade credit (net) 133 -1126 -1570    DMBs and NBDCs (net) 84 -109 -105     Assets -25 145 438     Liabilities 59 36 333  Errors and omissions -1079 310 526  Overall Balance 2928 2480 2760  Reserve Assets -2928 -2480 -2760   Bangladesh Bank (net) -2928 -2480 -2760    Assets* 2549 2631 2660    Liabilities -379 151 -100  Memorandum Items : Gross reserves (before valuation adjustments)

12913 17926 17975

  Valuation Adjustment During the Period 164 149 144  Gross reserves (after valuation adjustments) 13077 18075 18119

  In months of imports of goods and services 4.01 5.3 5.2

* Note: Exports and Imports both are compiled on the basis of shipment dataR:Revised, P : Provisional

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Table-2

Export shipments reported by EPB [Monthly]

(In million US$)

Items

2012-13RJuly-Jan

2013-

14RP

July-Dec

2013-14PJuly-Jan

% Changes

4 over

21 2 3 4 5  1. Raw jute & Jute goods

591.88

416.46

466.17

-21.24

  2.Readymade garments

12039.55

11932.2

14173.23

17.72

  3.Frozen food

332.46

377.42

418.74

25.95

  4. Leather

198.96

239.45

289.25

45.38

  5. Others

1991.16

1720.28

2092.19 5.07

  Total1 (As recorded by EPB)

15154.01

14685.81

17439.58

15.08

   Of which EPZ's export2

2123.17

2116.85

2509.37

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  Exports shown in BOP (Adjusted)

14957.01

14510.71

17226.58

15.17

Source: Export Promotion Bureau,    R:Revised, P : Provisional1/Data compiled by EPB based on custom returns including export from EPZ.2/Data collected from BEPZA (Export Shipment).

Table -3

Export receipts recorded by BB [Monthly]

(In million US$)

Items

2012-13RJuly-Jan

2013-

14RP

July-Dec

2013-14PJuly-Jan

% Changes

4 over

21 2 3 4 5  1. Raw jute & Jute goods

536.68

405.24

462.82

-13.76

  2.Readymade garment

8911.67

9059.38

10653.68

19.55

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s  3.Frozen food

230.22

290.83

327.39

42.21

  4. Leather 185.8 229.3 273.3

347.11

  5. Others

1279.22

1122.37

1315.06 2.8

  Total (excluding EPZ)3

11143.59

11107.12

13032.28

16.95

   6. Export by EPZ enterprises

2123.17

2116.85

2509.37

18.19

  Grand Total (including EPZ)

13266.76

13223.97

15541.65

17.15

Source: Bangladesh Bank,    1/Data compiled by EPB based on custom returns including export from EPZ.2/Data collected from BEPZA (Export Shipment).3/Data compiled by Bangladesh Bank based on exchange control returns. R:Revised, P : Provisional

Table-4

Commodity wise export shipments (Monthly Data)(In million US$)

Items 2012-13R

2013-14RJuly-Dec

2013-14P

July-Jan%

Changes

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July-Jan 4 over 21 2 3 4 5  A. Frozen food 332.46 377.42 418.74 25.95    1. Fish 36.27 24.68 30.40 -16.18    2. Shrimps 277.66 331.39 364.31 31.21    3. Others 18.53 21.35 24.03 29.68  B. Agricultural products 296.23 265.13 312.05 5.34    1. Vegetables 56.24 66.19 75.47 34.19    2. Tobacco 44.55 35.27 44.14 -0.92    3. Cut flower 27.14 21.11 23.90 -11.94    4. Fruits 41.43 9.60 9.92 -76.06    5. Others 126.87 132.96 158.62 25.03  C. Manufactured products 14525.32 14043.26 16708.79 15.03

    1. Petrolium bi-products 185.81 77.86 102.28 -44.95

    2. Chemical products 56.21 48.28 58.63 4.31    3. Plastic products 48.91 38.22 45.83 -6.3    4. Leather 198.96 239.45 289.25 45.38    5. Cotton & cotton products 70.45 57.83 70.15 -0.43

    6. Raw jute 136.34 59.05 68.80 -49.54    10. Jute goods 455.54 357.41 397.37 -12.77    11. Specialised textiles 70.72 58.42 68.77 -2.76    12. Knitwear 5920.85 5948.69 6994.52 18.13    13. Woven garments 6118.70 5983.51 7178.71 17.32    14. Home textile 443.01 350.20 442.42 -0.13    15. Footwear 254.38 285.96 338.85 33.21    16. Engineering products 213.65 176.07 207.10 -3.07

    17. Ships, boats & floating structures 1.14 0.06 0.06 -94.74

    18. Others 350.65 362.25 446.05 27.21  Total (A+B+C) 15154.01 14685.81 17439.58 15.08    Of which exports from EPZ 2123.17 2116.85 2509.37 18.19

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Note: Compiled by Statistics Department of Bangladesh Bank using the data of Export Promotion Bureau

Table-5

Summarized import statistics recorded by customs [Monthly]

(In million US$)

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Items

2012-13RJuly-Jan

2013-

14RP

July-Dec

2013-14PJuly-Jan

% Changes

4 over

21 2 3 4 5  1. Food grains

276.7

457.7

567.6

105.13

  2. Edible oil

1831.2

1367.2

1541.8 -15.8

  3. Petroleum products

1685.8

1381.8 1661 -1.47

  4. Raw cotton and yarn

2099.6

1877.1

2233.7 6.39

  5. Textile and articles thereof

2830.7 2551 3014

.5 6.49

  6. Capital machinery

1352.5

1176.1 1392 2.92

  7. Others

9989.6

8725.4

10257.3 2.68

  Sub Total

20066.1

17536.3

20667.9 3

  8. Import by EPZ enterprises1

1306.9

1284.9

1559.4 19.32

  Gran 2137 1882 2222 4

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d Total ( c & f )

3 1.2 7.3

Source: National board of Revenue, Ministry of finance,  P : Provisional

Table-6

Commodity-wise import statistics recorded by customs[Monthly]

(In million US$)

Items

2012-

13RJuly-Jan

2013-

14RP

July-Dec

2013-

14PJuly-Jan

% Changes

4 over

21 2 3 4 5  A. Food Grains

276.7

457.7

567.6

105.13

    1. Rice 12 46.1 58.5 387.5

    2. Wheat

264.7

411.6

509.1

92.33

  B. Consumer goods

2735.6

2120.1

2420.5

-11.52

    1. Milk & cream

132.7

102.7

137.1 3.32

    2. Spices 42.8 59.3 65.4 52.8

    3. Edible oil

1831.2

1367.2

1541.8 -15.8

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    4. Pulses (all sorts)

217.6

165.4

186.2

-14.43

    5. Sugar

511.3

425.5 490 -4.17

  C.Intermediate Goods

12211.5

10693.4

12669.6 3.75

    1. Clinker

310.9

266.8

319.9 2.89

    2. Crude petroleum

58.1 1.5 1.5-97.42

    3. POL 1627.7

1380.3

1659.5 1.95

    4.Oil seeds

197.6

187.6

215.8 9.21

    5. Chemicals

807.1 762 905 12.1

3    6. Pharmaceutical products

125.3

116.1

134.1 7.02

    7. Fertilizer

934.9

583.6

680.2

-27.24

    8. Dyeing and tanning materials

254.6

242.9

287.5

12.92

    9. Plastics and rubber articles thereof

877.6

882.9

1030.1

17.38

    10. Raw cotton

1196.4

1096.3

1295.7 8.3

    11. 903. 780. 938 3.85

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Yarn 2 8    12. Textile and articles thereof

2830.7

2551

3014.5 6.49

    13. Staple fibre

468.2

458.9

544.8

16.36

    14. Iron, steel & other base metals

1619.2

1382.7

1643 1.47

  D. Capital Goods

4490.6

3998.2

4747.1 5.71

   Capital machinery

1352.5

1176.1

1392 2.92

   Others 3138.1

2822.1

3355.1 6.92

  E. Others n.i.e.

1658.6

1551.8

1822.5 9.88

  Grand Total

21373

18821.2

22227.3 4

  Of which: EPZ

1306.9

1284.9

1559.4

19.32

Source: Statistics Department, Bangladesh Bank,  P : Provisiona

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Table-7

Bangladesh Services and income account [Monthly](In million US$)

Items

2012-13RJuly-Jan

2013-14RPJuly-Dec

2013-14P

July-Jan

% Changes4 over 2

1 2 3 4 5

  Services (Net) -1937.8 -1898.9 -

2244.2   Receipts 1618.2 1676.3 1934.9    Transportation 250.0 251.7 290.6 16.24    Travel 60.6 70.6 83.9 38.45    Telecommunications, computer and information services 206.5 205.9 238.6 15.54

    Other business services 180.9 193.6 225.5 24.65    Government services 817.2 866.8 998.3 22.16    Others n.i.e. 103.0 87.7 98.0 -4.85   Payments 3556.0 3575.2 4179.1    Transportation 2620.6 2728.7 3140.0 19.82    Travel 214.4 216.8 247.9 15.63     Of which : Health related services 0.6 0.8 1.2     Education related services 71.4 66.3 79.5    Telecommunications, computer and information services 18.3 13.4 15.5 -15.30

    Other business services 198.6 184.5 238.2 19.94    Government services 241.9 161.0 184.0 -23.94    Others n.i.e. 262.2 270.8 353.5 34.82

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  Primary Income (Net) -1390.4 -1106.0 -

1272.4   Receipts 83.1 108.8 127.5 53.43    Investment Income 70.6 97.0 113.5     Direct investment 0.0 0.6 1.3       Of which interest 0.0 0.0 0.0     Portfolio investment 0.0 0.0 0.0       Of which interest 0.0 0.0 0.0     Other investment 70.6 96.4 112.2        of which interest 4.0 3.6 4.0    Others n.i.e. 12.5 11.8 14.0   Payments 1473.5 1214.8 1399.9 -5.00    Investment Income 1113.4 892.3 1025.5     Direct investment 845.9 670.7 748.2       Of which interest 0.0 0.0 0.0     Portfolio investment 59.2 66.8 79.5       Of which interest 1.7 2.7 3.2     Other investment 208.3 154.8 197.8        Of which interest 207.5 154.7 197.7    Reinvested Earnings 358.6 321.2 372.9    Others n.i.e. 1.5 1.3 1.5

Source: Statistics Department Bangladesh Bank,    R:Revised, P : Provisional

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Table-8

Summarized import payments statistics[Monthly]

(In million US$)

Items

2012-13RJuly-Jan

2013-

14RP

July-Dec

2013-14PJuly-Jan

% Changes4

over 2

1 2 3 4 5  1. Food grains

451.3

703.4

808.1 79.06

  2. Edible oil

801.5

863.4

1033.1 28.9

  3. Petroleum products

2849.8

2167.8

2652.1 -6.94

  4. Raw cotton and yarn

1935.9

1828.4

2155.9 11.36

  5. Textile and articles thereof

1821 1764.1

2112.9 16.03

  6. 1087 1057 1263 16.23

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Capital machinery

.4 .1 .9

  7. Others

9488.9

9826.2

11567.6 21.91

  Sub Total

18435.8

18210.4

21593.6 17.13

  8. Import by EPZ enterprises1

1386.5

1241.4

1502.8 8.39

  Grand Total ( c & f )

19822.3

19451.8

23096.4 16.52

Source: Statistics Department, Bangladesh Bank ,  P : Provisional1/Compiled on the basis of import data received from BEPZA.

ConclusionLast but not the least, Errors and Omissions are also considered in Balance of Payments. In Bangladesh errors and omissions are the difference between the current account and capital & financial account. If we will success to minimize the errors and omissions account then the overall balance will be increased. New items such as handicraft and cottage goods should be implemented to export. It will be a good source of foreign revenue. Bangladesh have also an opportunity to implement the beach of Cox’s Bazaar to catch the eye of foreigners, it will also a good source of revenue. At Present Bangladesh has to provide necessary incentives to the FDI that will increase the capital account and thus overall balance. Also Bangladesh has to search new country to export labor.

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As we know the remittance is the highest source of Current transfer of Bangladesh which plays an important role in increasing the overall balance.

Website:

http:// www.bangladesh-bank.org/

http://mpra.ub.uni-muenchen.de/26134/

http://www.nationsencyclopedia.com/Asia-andOceania/Bangladesh-BALANCE-OFPAYMENTS.html#b#ixzz1rKmZjtKn

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