Trade confidence jumps
Bangladesh has topped an HSBC survey of global businesses that have a positive outlook on the country's trade prospects for the second half of 2015, thanks to lower logistics costs and higher profit margins.
More than two thirds of the 6,300 small, medium and large global companies surveyed expect trade volumes of Bangladesh to increase over the next six months, up from less than half six months ago, according to the UK-based bank's Trade Confidence Survey.
Bangladesh's trade confidence score rose to 131 points, up 23 points in the second half of 2015 compared to the first half of the year, despite the weaker global outlook.
In fact, Bangladesh is now the highest scoring country in its sample of 25 countries, according to the survey released Tuesday.
“The favourable current backdrop of strong domestic growth and supportive macroeconomic policy has given Bangladesh a good opportunity to implement some much-needed reforms,” HSBC said.
“This impetus towards reform should improve Bangladesh's attractiveness to foreign investors.”
The score is constructed as an average of seven sub-indices measuring respondents' viewpoints on different aspects of the outlook for trade over the next six months.
London-based TNS, the world leader in market research, information and business analysis, carried out the survey for HSBC. It is the largest trade confidence survey globally.
A score above the 100 threshold indicates that sentiment is positive regarding the outlook for the next six months, whilst a score below 100 indicates a downturn in confidence.
HSBC said it expects exports to average 10.6 percent growth from 2017-20, helped by infrastructure development, currency competitiveness in Europe and trade liberalisation.
Thirty-seven percent of the respondents considered Europe as the most promising region for business for Bangladesh, nearly twice as many as six months ago.
However, nearly 40 percent of respondents cited unfavourable changes to government regulation as a possible barrier to growing their international business over the next six months.
“A third also raised concerns about higher interest rates, likely reflecting both global uncertainties over the timing of upcoming tightening in the US and also domestic concerns over possible food price pressures,” said the report.
More positively though, the report said, almost a third of the respondents expect higher profit margins, up from a quarter six months ago, while more respondents also think exchange rate movements will be favourable for international business, and expect lower costs for logistics, and raw materials.
On the long-term outlook on Bangladesh, the survey expects nearly 7 percent GDP growth in 2015-16.
“Expansionary fiscal policy (and the particular focus on transport and energy infrastructure), improving business sentiment, reasonable growth in overseas remittances and continued trade liberalisation should help activity maintain solid momentum in coming years,” it said.
Referring to the clothing and apparel industry that is Bangladesh's biggest foreign currency earning sector, HSBC said it expects the sector to contribute three quarters of the increase in exports from 2021-30, while the textiles and wood manufacturers will contribute another 15 percent.
Although textiles and garments accounts for more than 80 percent of its exports, the future is not just in clothing for Bangladesh, it said.
“Exports of raw materials, transport equipment, mineral fuels, machinery and chemicals are set to grow at a double digit pace from 2016-20; the only one growing slower is likely to be agriculture, which largely reflects the economy upgrading.”
As Bangladesh's economy is gradually upgrading, industrial machinery exports are expected to grow by 12 percent from 2021-30.
“Upgrading the skills of the workforce and also the use of technology should help Bangladesh gradually move into higher value sectors,” it said.
The US, Germany and the UK are Bangladesh's three largest export destinations, and it will remain unchanged out to 2030. China and India, which were Bangladesh's two largest import partners in 2014, will continue to hold their positions in 2030, according to the report.
Public investment into transport and energy infrastructure has risen notably in recent years and this should help attract more foreign investment, encouraging more export diversification, it said.
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