Exports may face a blow for Brexit: DCCI

Bangladesh's exports to the UK may greatly be affected due to a possible suspension of duty benefits by the British government following Brexit, said a leading chamber.

In a statement yesterday, Dhaka Chamber of Commerce and Industry said it feels anxiety that the jolt from Brexit may affect Bangladesh, undermining the export growth potential under the generalised system of preferences.

Brexit will also have a negative impact on remittance earnings and spill a catastrophic impact on the bilateral trade and investment relationship, said the chamber.

The DCCI expressed concern that Brexit will adversely upset the global financial and capital market because of a depreciating pound sterling against major dominating currencies.

Meanwhile, the pound sterling fell by 10 percent against the dollar and 3 percent against the euro, according to the statement by DCCI. The slump in purchasing power of EU zone customers and a devaluation of the pound and euro will adversely hit exports and earnings of Bangladesh. The EU accounts for 55 percent and UK 12 percent of garment exports of Bangladesh.

The plunge will also downsize remittance and foreign direct investment in Bangladesh. In addition, the $50 billion garment export target by 2021 may not be possible.

DCCI requests the government to immediately take into account the possible consequences and precautionary measures to deal with the change by initiating bilateral discussions with foreign offices in the UK to find alternative ways.

The chamber also suggested the government form a national committee comprising trade bodies, experts, international trade law practitioners, economists, researchers, and representatives from concerned ministries and agencies to observe and report findings on post-Brexit global economic order.  

Industry insiders said an immediate impact of Brexit is that Bangladeshi exporters to the UK will get less value in currency exchange.

“Yes, as a short term impact of Brexit, our exporters to the UK will get less value in currency exchange as the pound devalued a bit. But, I hope in long term, our exports will grow to the UK if the British government does not suspend the duty benefit,” said Commerce Minister Tofail Ahmed.

“Firstly, the UK economy will face the negative impact stemming from Brexit. Their economy will not grow like before. It will also have a negative impact on businesses,” said Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh.

“Since Bangladesh is a major trading partner for the UK, our businesses will also feel the negative impact,” Mansur said. As for example, the exchange rate of the pound sterling fell immediately after Brexit, which is why exporters will get less value, he added.

Faruque Hassan, vice-president of Bangladesh Garment Manufacturers and Exporters Association, said, “We have a target to grow apparel exports to the UK by 12 percent to 15 percent year-on-year. I hope it will cross the $5 billion mark in the next five years.”

“Firstly, I think the UK will continue the duty benefit for the least developed countries as it is one of the major campaigners for duty-free benefit for LDCs to facilitate business growth in the poorer nations.”

Still, if the 12.5 percent duty-benefit is cut, Bangladeshi exporters will lose competitiveness, Hassan said.

In this case, competing countries like India, Vietnam, Cambodia and Pakistan will grab a bigger market share in the UK.

If the cost of import in the UK increases, the international retailers who operate in England will put pressure on the Bangladeshi exporters to further cut prices of goods, he added.