No prior notice from India, says commerce minister on the onion debacle
When misfortune strikes, it comes in waves, it is often said. And this perfectly sums up Tipu Munshi’s brief tenure as the commerce minister thus far.
Sworn in at the beginning of January last year, he was flying under the radar until September, when export data for the month of August was released. Export receipts came crashing down and is yet to pick up from there.
A week later came the news of India slapping a high minimum export price for onion, Bangladesh’s major source for the key cooking ingredient. And then on September 29 the country was hit with the news that India will put an indefinite ban on onion exports, sending the tuber’s price on the other side of the border spiralling to as high as Tk 280 a kg.
These two events define Tipu Munshi’s time as the commerce minister. Was he just unlucky? Or, did he lack the foresight to avoid them? He, however, maintains that the events were out of his hands.
“India did not give us any prior notice that they would stop exports,” Munshi told The Daily Star at his office in the secretariat last week.
Had the neighbouring country not taken the drastic step, he insists, that the onion price in Bangladesh would have stayed the same -- which would have given him a better first-year report card.
“Of the everyday commodities, only onion prices have increased -- and it is because of India. We have 80 per cent dependency on exports for onion.”
And yet, alternative arrangements did not come fast enough, fanning the onion prices further.
“Since our local production is not sufficient and India cut off supply all on a sudden, it took us some time to look for alternative markets and strike a deal. We had to bring onion by sea from Egypt, Turkey, China, which took us up to 45 days.”
Onion prices now hover around Tk 100, which is still higher than its normal price of Tk 40, before India put export restrictions.
“But, freshly harvested local onions are coming to the market and we are also importing from other countries, so the prices have come down a bit. We are hopeful that the prices will come down further in the days ahead.”
Probed about the recent media reports that the neighbouring country has offered onion to Bangladesh, Munshi acknowledged the development.
“India have imported onion from Turkey but they no longer want to use it. They are thinking of reselling it and have intimated us whether we want to take them or not. But this is not possible at the government level.”
Instead, the government has informed the business community via the country’s apex trade body that they can import that batch of onion from India if they like.
Asked what steps he is taking to prevent such a frenetic scenario in future, he said all hands are on deck in boosting local production of onion.
“Perhaps it will take us about two years. We are hopeful that if our farmers get the right price they will be able to cover the 25 per cent shortfall that we have now. Efforts are on way on that front.”
Another tricky situation lies ahead of him: the Muslim holy month of Ramadan, when the commodity prices invariably spiral despite the government’s best intentions. Ramadan is scheduled to begin on April 23 this year.
Munshi is defiant that such a situation will not arise this time as he is taking enough preparations.
“We are fully prepared to face Ramadan.”
Other than heightened market monitoring, the government will sell 5-6 commodities that see escalating prices during Ramadan -- such as onion, oil, chickpea and sugar -- via the Trading Corporation of Bangladesh.
“We will supply those products five times more than what we did before,” he said, adding that the plan is to do it all round the year in that scale, but the government is starting with Ramadan.
Asked if the government would be shutting out the private sector players from commodity trade, he said: “TCB won’t be controlling more than 15 per cent of the market. The rest is still open for private sector players -- let them handle it.”
Previously, TCB’s share was 3-4 per cent.
“And all standards say, if the supply can be raised by even 10 per cent by intervention, then the price will come down and stabilise.”
And beyond Ramadan, he plans to assess the market all year round and plan accordingly to check sudden commodity price hikes.
Other than keeping an eye on the goings-on in the local market, the commerce minister Munshi also has to expand Bangladeshi manufacturers and growers’ market abroad.
But Bangladeshi exporters are not faring well.
Export earnings fell 5.84 per cent year-on-year to $19.3 billion in the first six months of the fiscal year -- mainly because of lower shipment of apparel items.
The receipts between July and December were also 12.77 per cent lower than the half-yearly target of $22.12 billion, according to data from the Export Promotion Bureau.
“Basically our export is garment, which accounts for 84 per cent of the shipments. And there is a downward tendency in the international garment market. Hopefully, it will pick up in this quarter.”
Asked why he is so confident about exports picking up this quarter, he said: “Export of our value-added items has declined, which is why exports fell. But we got news that new value-added work orders are being placed to Bangladesh again.”
Besides, the government is working towards breaking into new markets.
“Now 15 per cent of our exports go to new markets. If we could send 10 per cent more then we could have overcome this current unstable situation,” he said, adding that the new markets in sight are Brazil, Eurasian and ASEAN CIS countries, and Russia.
The Russian market is shut out at present for problems surrounding settlement of financial transactions.
“Bangladesh Bank is trying to find a workaround. Our new ambassador is going to take care of these things. A delegation of businesspeople will go to Russia. Considering all these things, we are very hopeful that this market will be in our hands.”
And the government is also thinking of giving incentives to garment exporters -- to boost export earnings figures.
Garment exporters have sought Tk 5 extra for each dollar of their retained export earnings -- a demand that has been met with contempt by various quarters.
But Munshi, who is in garment trade, can see where the apparel exporters are coming from.
“Whether garment exporters are given more incentives or not is the finance ministry’s decision. But I, as the commerce minister and a businessman, think the government should save this trade, as it covers 84 per cent of exports.”
The government has a target to hit $60 billion in exports by 2021, which will not be possible if the current downward trend continues.
“So sometimes we have to help.”
In 1984-85, when Munshi started out in garment business, there was a project called XPL under which the government gave extra for every dollar.
“Had we not gotten that facility, our garment sector would not have come to this stage today. I started with 95 workers and because I got a helping hand then, today I have 6,000 workers. This is the position of everyone. The time has now come again for the government to consider some form of support to cross these problems.”
The garment exporters’ demand will cost the government Tk 3,900 crore.
“This is not too big an amount but can save this sector of 45 lakh workers.”
The decision lies with the prime minister and the finance minister.
“But I think it will be given -- this is just my personal feeling.”
Finance Minister AHM Mustafa Kamal has dispatched finance ministry officials to Vietnam, Sri Lanka, Thailand and India -- all Bangladesh’s competitors in global apparel trade -- to probe whether the governments are providing such facilities to their garment exporters to give them a leg up.
“If they are, we will too,” Kamal told The Daily Star on December 29 last year.
Bangladesh is on course to becoming a developing country in 2024; after a three-year grace period all the duty benefits that the nation currently enjoys as a least-developed country will be gone.
As the commerce minister until 2024, one of Munshi’s major tasks is to sign bilateral and free trade agreements (FTAs) for a soft landing for Bangladesh.
“Now is the right time to start work to face that crisis.”
But before signing any FTAs the government must do its assessment on whether it will be beneficial for the country.
“But we must do FTA. With some countries the immediate impact might not be too good but the long-term impact is good. We have to consider all these things on a case-to-case basis.”
The countries being considered for trade agreements are Bhutan, Sri Lanka, Indonesia, Nepal and Thailand, Munshi said, adding that negotiations with Indonesia are going on in full swing.
“For now, we are working with these countries, and we are hopeful that by June we will sign FTAs with at least 2-3 countries.”