How can Bangladesh tackle deglobalisation?
Deglobalisation is a term used to describe how the interconnectedness of the world economy is weakening due to factors such as trade barriers, a rise in nationalism, wars, and disruptive occurrences such as the pandemic.
Bangladesh relies heavily on apparel exports, making up 84 percent of total export earnings, and bolstering foreign reserves. For a nation dependent on imports, this is essential. Current geopolitics also emphasises the risks associated with limited exports or import destinations.
In terms of export performance and as reported by the Export Promotion Bureau in 2022-23, Bangladesh's dependence on certain export destinations become very evident. During this period, Bangladesh exported $9.7 billion worth of goods to the US, which is more than 17 percent of total exports. In the total export to the US, more than $8.4 billion was woven clothes and knitwear.
The export destinations following the US are Germany, with nearly 13 percent of total exports and the United Kingdom with more than 9 percent of total exports. So, approximately 40 percent of the country's exports depend on only three countries. What is even more worrying is the share of woven clothes and knitwear in the exports to the UK and Germany is quite like the US's share. Hence, Bangladesh has an extremely concentrated export basket and export destinations.
During the Covid-19 pandemic, global exports shrank by almost 9 percent while exports from Bangladesh shrank by more than 16 percent. Bangladesh and the Philippines were the two countries with over 30 percent export concentration and these two countries reported the sharpest declines in their exports during the period.
India, Indonesia and Vietnam, the countries with the lowest export concentration, reported the lowest decline in exports for the same period. Vietnam, in fact, reported growth in its exports.
Another important aspect we need to consider when discussing deglobalisation is our imports.
Bangladesh is very dependent on imports to sustain the production of export items. If we investigate the ratio of domestic value-added embodied in foreign exports to foreign value-added embodied in exports, Bangladesh is in a much worse position than comparable economies such as India, Indonesia, the Philippines, Cambodia and Vietnam. Now if we see the magnitude of dependence on foreign value-added share of total gross exports, the textiles and apparel industries are the most dependent, which is again, alarming to say the least.
With the understanding of our vulnerability, the question now is what the solution is. At a time of global uncertainty and subsequent deglobalisation, looking into the long term, we need an internal backbone to support the economy.
The most logical choice would be the IT sector. The IT boom is a major reason for the massive development success of India, and Bangladesh is not at all lacking in the base skill set and resources required to boost up this sector to the same level that India has done.
We have already made great strides in the sector and now we just need to keep on developing and promoting the IT sector such that its contribution to the economy in terms of international trade is significantly enhanced. The cost of doing business with India in the IT sector is already relatively expensive and, in this regard, Bangladesh could easily become the next IT hub of choice.
Furthermore, Bangladesh is already a very promising start-up hub. Looking into the region, Dhaka has more startups than in cities such as Hanoi, Singapore, Bangkok, Colombo and Manila. We need to nurture them and create an environment for them to grow and our startups have the potential to disrupt more industries.
To support them, efforts to expedite digitalisation are necessary. Actions should be taken to increase the ease of doing business and the use of internet and devices, and support technological advancements through local research and development.
The author is an economic analyst