Bangladesh : Growth and Export Competitiveness

Abstract

Bangladesh's growth over the past two decades or more, in terms of developing-country standards, has been notable. Such record of progress is one guide to the country's potential to grow, and to score well in world markets. To this end, i.e., to make the most of its export opportunities on a changing international playing field, Bangladesh needs to follow a strategic game plan, invest in infrastructure, technology and skills, streamline policies, and improve quality and safety standards. This report describes actions that can untie the hands of the country's exporters, and put solid progress within their grasp. The concrete recommendations made in the report for improving export competitiveness, could serve as a critical basis for making the needed revisions in the two pivotal trade policy instruments of the Government --Import Policy Order 2003-06, and Export Policy Order 2003-06 -- in light of the current global trading environment. The report looks at the sources of competitive disadvantage, and stipulates macroeconomic stability is, and must remain the strategic foundation for all of Bangladesh's competitive prospects. On economic governance, the results of this study's breakthrough use of a powerful analytical tool -- integrated value-chain analyses (IVCA) -- pinpoint the price exacted by obstacles to export growth, confirming entrepreneurs' point of view on corruption, namely bribes, duty exemptions on imports, and in addition, the rising costs of bribes. Also addressed is infrastructure, stating that to improve the climate for both domestic and foreign investors, policymakers must first acknowledge the damage that flawed governance - corruption, burdensome regulation, and breakdowns in law and order -- is doing to the country's growth in general, and its export performance in particular. Beyond this recognition, the authorities need to understand the price the country is paying for severe infrastructure bottlenecks in the delivery of power, gas, and telecommunications to all enterprises and - especially for exporters -- in the malfunctioning of the country's land and sea ports. Within each of the export areas examined under the study, industry-specific barriers to competitive success loom large. Specifically, recommendations suggest that to bring high payoffs in export competitiveness, reform should be a priority in Customs as well as the Duty Exemption and Drawback Office (DEDO); implementation of a strong program to match infrastructure services to the needs of a growing, outward-looking economy, namely, to remedy the transportation infrastructure, and trade logistics (Ports, Highways, and railways, etc.).