Topic: Recent International Trade scenario of Bangladesh
Mr. Shantanu Kumar Roy
Foreign exchange policy department.
Bangladesh Bank, Sylhet.
Department of Business Administration
Metropolitan University, Sylhet.
Mir Md. Nazmul Haydar
MBA 22nd Batch
ID No: 111-126-025
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It particularly plays a central role in the development plan of Bangladesh where foreign exchange scarcity constitutes a critical bottleneck. Export trade can largely meet ‘foreign exchange gap’, and export growth would increase the import capacity of the country that, in turn, would increase industrialization, as well as overall economic activities.
Bangladesh’s import needs are substantial; hence the need to rapidly increase exports is immediate. In order to finance the imports and also to reduce the country’s dependence on foreign aid, the Government of Bangladesh has been trying to enhance foreign exchange earnings through planned and increased exports. However, the global trade scenario has exposed structural limitations of the Bangladesh economy, posing a variety of challenges for the country that has underdeveloped technology and a low capital base.
In this paper we discuss the composition, performance and trends of foreign trade of Bangladesh. In the process, we examine Bangladesh’s export and import performance compared to those of various countries, regions and the world over the years. We also discuss the sources of Bangladesh’s imports and directions of Bangladesh’s exports and the dynamic changes over the years, and highlight the trends of export and import shares to GDP and trade balance positions with different countries, regions as well as the world. Trade policy reforms of Bangladesh and major issues, challenges and policy options are also discussed briefly.
According to Bangladesh Bank (BB) at present our overall Balance of Payment (BOP) is negative US$502 million. Though the Workers' remittances increased to $9613 million, negative Trade balance of -$6430 million and negative Services balance of -$1993 million led to this scenario. BB is concerned about the matter and taking necessary steps to solve the liquidity problem and reduce the pressure on BOP. In this context, BB is encouraging our private firms to finance from foreign investments. Some of the firms such us Apex and Pran have already got green signal from BB. We know international borrowing rates are more competitive than local banks' rates. Currently London Inter-bank exchange rate is less than 0.5 per cent. Our firms can finance with foreign currency loans at a rate of London Inter-Bank Offer Rate (LIBOR) plus 4.0 to 5.0 per cent. In spite of foreign currency risk this type of loan financing would yield around 5.0 per cent of savings as our local banks charge 15 to 18 per cent per annum. On the other hand, in April 2011 net Foreign Direct Investment (FDI) stood at $631 million. Let us have a closer look at the countries providing us FDI. According to BB, FDI inflows for the period January- June, 2008 from major countries were: Egypt ($116.41 million) , U K ($ 77.97 million), UAE ($72.27 million), Switzerland ($61.11 million), Singapore ($28.77 million), USA ($23.78 million), South Korea ($23.50 million), Hong Kong (US$ 18.69 million), Netherlands (US$ 16.56...