By Ashis Biswas
Bangladesh is learning that even achieving economic progress comes with a price tag. . Its march from ‘developing’ to a middle income category by 2024willend the zero tariff and other concessions it currently enjoys from advanced countries on its exports. According to Bangladesh media estimates, the country’s readymade garments (RMG) export earnings from the European Union (EU) could drop by more than $3.8billion annually, following a reset in the present trade arrangements.
Foreign sales of RMGs constitute a major part of Bangladesh’s overall earnings. There is naturally some concern among Government circles as well as garments manufacturers regarding the future. Planners as well as policymakers are bracing themselves for tough trade negotiations with EU authorities in the months ahead.
If the EU curtails the gamut of lower or nil tariff facilities given to Bangladeshi items as a developing country as before, its decision will have a regional fallout, say observers. Similar advantages Bangladeshi manufacturers enjoy in other countries as well may come under fresh scrutiny. This applies specially to countries such as India, where Bangladeshi economic competition with local garments/textile industries is a sensitive issue.
There could be an immediate demand in neighbouring West Bengal which has a relatively smaller presence as a producer of textile items, to the centre to scrap the present duty-free access allowed for Bangladeshi items. The clamour will be louder from South India and other states where the industry’s footprint is stronger. Especially after the introduction of the new GST regime, Indian textile and related items have become more costly than goods produced in Bangladesh. A further handicap is that Bangladesh sources raw materials like cotton etc from China at low rates, which hurts Indian SME units on particular.
The Confederation of Indian Textile Industries (CITI) has protested to the centre about this. Earlier this year, Union Minister for Textiles, Ms Smriti Irani, appealed to Bangladesh to extend zero tariff facility to Indian items. In return, she proposed, India would supply cotton at very low prices to Bangladesh.
External Affairs Ministry sources said more Bangladeshi items had been allowed duty free access in recent years mainly to ensure that the trade gap between the two countries narrowed. Bangladesh had been pressing consistently for this. Now that the country will be on a relatively stronger economic footing, it could be an appropriate time to take note of the problems faced by India’s domestic textile sector and adopt necessary measures. While major producing units in South India and elsewhere would benefit from any relief majorly, Bengal too, would not lag behind. Despite its comparatively small size and largely informal character, West Bengal still reports an annual wage bill of Rs 720 crore in this sector, according to industry sources.
In recent years Bangladesh’s economy has performed remarkably well, despite the economic turndown in other major countries, including India in its immediate neighbourhood. The rate of annual GDP growth in Bangladesh was consistently higher than that of India. In addition its overall economy remained more resilient in comparison with its other South Asia neighbours. The annual remittances from abroad declined for a while, affected by the worldwide economic lockdown in the post Covid pandemic situation, but later recovered.
Currently Bangladesh earns around $ 37.9 billion in exports (2019figure), which is almost twice the amount it had earned about a decade ago. The RMG sector is a major contributor to such income. The improved performance of the Bangladesh economy has earned the country praise from international agencies like the World Bank. Its per capita GDP income recently exceeded recent that of India for the first time. Also, the Bangladeshi taka achieved a near parity with the Indian rupee in recent times, unlike the Pakistani rupee which continues to decline in value.
No wonder any possibility of the country’s garments exports taking a major hit sends alarm bells ringing in Dhaka. (IPA Service)