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Export, Import, Remittance and FDI: Recent Trends

The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its current monthly issue of the Bangladesh Economic Update reveals that the recent underperformances in external sector is due to falling investment demand-induced decreased import, declining remittance, lack of diversity in export, and unsatisfactory inflow of foreign direct investment (FDI), causing the continuation of declining growth in gross domestic product (GDP).

Calling for a thorough rexamination of the current trade and industrial policies to address the structural bottlenecks, the Unnayan Onneshan (UO) urges for adoption of a new policy regime, aimed at exapnasion of productive capacities of the country that enhances utilisation of productive resources through enhanced entrepreneurial capabilities and increased production linkages.

The UO finds that continuity of contractionary monetary policy, coupled with inadequate supply of infrastructure, has depressed investment demand and led to dcerease in imports of capital machinery and industrial raw materials in the last two fiscal years, resulting in declining growth in the manufacturing sector of the economy.

In FY 2012-13, import payments were USD 34084 million which decreased by 4.03 percent as compared to USD 35516 million with a growth rate of 5.52 percent in FY 2011-12. As regards the manufacturing sector, the organisation observes that the manufacturing sector has been undergoing a declining rate of growth since the FY2010-2011. While in FY2010-2011, the rate of growth in manufacturing sector was 9.45 percent, the rate decreased to 9.37 percent and 9.34 percent in FY2011-2012 and 2012-2013 respectively

Pointing out decline of inflow of remittance by 6.93 percent during the period of July-February of current fiscal year from the corresponding period of last fiscal year, the think-tank evinces that total inflow of remittance during July-February of FY 2013-14 came down to USD 9206.55 million from USD 9891.95 million during the corresponding period of FY 2012-13.

“This declining trend in the inflow of remittance may exert adverse impact on rural economy causning increase in the incidence of poverty since remittance is one of the most significant soruces of income in rural households and in 2010, 17.28 percent of total income of rural households came from remittance”, opines the Unnayan Onneshan.

Referring to waned rate of growth in the inflow of remittance the UO observes that inflow of remittance is increasing at a decreasing rate since FY 2007-08 primarility because of the decrease in the labour migrations to different destinations and decline in labour demand by the Middle East countries. The rate of growth in the inflow of remittance decreased by 7.02 percent in the period of July-February of current fiscal year from 17.44 percent in the the ecorresponding period of the previous fiscal year.

Observing the dominance of a single product in the country’s export basket, the UO notes that the single-commodity excport concentration reprsents structural weaknesses of the economy and put a risk on the country’s growth path.

The export of readymade garments reached USD 12233.23 million comprising 81.7 percent of total export receipts during July-February of current fiscal year compared to USD 10225.68 million comprising 80.2 percent of total export receipts duing the corresponding period of the last fiscal year.

Meanwhile, exports of raw jute and jute goods, frozen food and leather fetched USD 527.38 million, USD 354.88 million and USD 321.01 million respecively during July-February of FY 2013-2014, whereas these earned USD 609.81 million, USD 259.52 million and USD 210.3 million during the corresponding period of FY 2012-2013.

In FY 2012-13, exports from readymate garments, leather and jute products increased by 10, 22 and 21 percent reaspectively, whereas the growth of these products was 15, 11 and -1 percent respectively in FY2011-2012. Meanwhile, exports of raw jute and fish and shrimp decreased by 4 and 25 percent respectively between FY 2011-12 and FY 2012-13.

The flow of FDI of Bangladesh has increased by an irregular trend over the last fifteen years. Despite the amount of FDI has increased, it is still lower compared to other Asian countries, says the think-tank.

In FY 2011-12, inflow of FDI increased to USD 1194.88 million which is 53.38 percent higher than that of the previous fiscal year. During the same period, major competitive countries like India, Indonesia, Vietnam and Pakistan, however, received FDI inflow of USD 32000, USD 19000, USD 7000 and USD 1300 million respectively.

“These inadequate inflows of FDI in Bangladesh in comparison with other countries of same economic characteristics can largely be ascribed to the lack of infrastructural facilities and recent political instabilities and uncertainties in the country”, adds the Unnayan Onneshan.

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