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 Bangladeshs
exports are commodity and market concentration. To overcome the problem, there is no
alternative but to diversify exports and improve quality. To improve the countrys 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-
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 countrys
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 countrys 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-
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 countrys 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 worlds 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, Bangladeshs 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 Bangladeshs 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 Bangladeshs 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 Bangladeshs 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 countrys 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-
Major findings, conclusion and recommendation

3.1 Major Findings
3.2 Conclusion
3.3 Recommendations


3.1 Major Findings

The past decades boom in exports particularly the apparel sector is very significant to
countrys 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
Bangladeshs 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 Bangladeshs export success to the competitiveness of
the countrys 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 countrys 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-
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, 2
nd
edition,
2006.

Lesikar, R.V.and Flatley, M.F, Basic Business Communication, Sultan Chand &
Sons, 9
th
edition, 2002

Dr. Urmila Rai & S.M. Rai, Business Communication, Himalaya Publishing House,
India, 4
th
edition, 1997, p-02

M, Omar Ali, Business Communication- Theory & Application, 2
nd
edition, 2003, p-
04.

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

R.W. Griffin, Management, AITBS Publishers, India, 5
th
edition, p-543.

R.C. Sharma and Others, Business Correspondence & Report Writing, Tata McGraw
Hill Publishing Co. Ltd, India, 2
nd
edition, 1996, p-93

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