All other labour-intensive sectors did not grow as fast as garment due to lower benefits, bangladesh has comparative advantage in many other labour-intensive sectors, but the sectors were weighed down by tariff and non-tariff barriers, said Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh (PRI).
He said garment’s success came from creating a free trade channel for exports, which is required for every sector. His comments came at a conference styled “Bangladesh-Leveraging Growth Opportunities in the Neighbourhood” at the auditorium of the PRI. The think-tank and the World Bank jointly organised the conference. Sanjay Kathuria, lead economist of the WB’s Dhaka office, echoed the same, saying it is not a surprise seeing the low diversification in Bangladesh’s export basket given garment-centric tariff regime.
“Time has come to give the same tariff benefits to the other sectors too,” he added. Sattar said the government has been giving benefits to the garment sector for long by way of tariffs on imports and subsidies on exports. Tariffs restrict imports and raise the price of domestic import substitutes. So, protection clearly hurts consumers and also makes domestic sales more profitable than exports, he said. “Trade protection for infant industries should be limited to a certain timescale — it should not be for perpetuity.”
Rationalising the protection structure as well as sufficiently incentivising exports have become a national imperative, Sattar said as he presented a paper styled “Bangladesh’s Trade Regime – The Way Forward”. Tariff is not the only impediment to trade facilitation, said Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry. “Overall, there is a lot of obstacles to increasing exports,” she added. Wahiduddin Mahmud, a noted economist, said while he is not against removing protection, sudden withdrawal may create problems.
He also recommended developing a tax system for five years, which would be of great help to entrepreneurs. It is a structural problem of the Bangladesh economy that its exports are extensively dependent on the garment sector, said Salman F Rahman, the prime minister’s adviser for private industry and investment. “We have to diversify our export basket. So, we have focused on this issue in the forthcoming budget,” he said, adding that the government will provide the same benefits and incentives that are currently being provided to the apparel sector to other sectors as well.
Leather and leather goods, furniture and many other sectors will get exactly the same facilities as they have huge potential, Rahman said. The government is also developing a business-friendly environment with a view to accelerating trade and investment, he added. The South Asian intra-regional trade is only 5 percent compared to 26 percent in ASEAN and 60 percent in the EU, Kathuria said.
Bangladesh could have grown 1-2 percentage points more had South Asia been a more economically integrated region, he said. The country needs deep engagement with regional and global markets to move to higher income brackets, as it will have access to deep and elastic markets, technology, foreign direct investment and intra-firm trade, he added.