INTERNATIONAL TRADE OF BANGLADESH & ITS IMPACT ON ECONOMY

MBBAINTERNATIONAL TRADE OF BANGLADESH & ITS IMPACT ON ECONOMY

Chapter: 1

1.1 BACKGROUND OF THE STUDYTrade is an integral part of the total developmental effort and national growth of all economies including Bangladesh. 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. Bangladeshs import needs are substantial; hence the need to rapidly increase exports is immediate. In order to finance the imports and also to reduce the countrys 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 under developed technology and a low capital base. In the process, we examine Bangladeshs export and import performance compared to various countries, regions and the world over the years. We also discuss the sources of Bangladeshs imports and directions of Bangladeshs exports and the dynamic changes over the years, and highlight the trends of export and import shares to GDP and trade balance positions. 1.2 OBJECTIVES OF THE STUDY This paper has been prepared from the corner of two objectives are as follows:

1.2.1 Primary objective To give a concrete idea about the export and import activities of Bangladesh through presenting different products. To know the overall performance of export and import and their balance as well as to find the positive or negative impact on our economy.

1.2.2 Secondary Objective

To know the various terms of export and import. To know the present, past and potential or future trading of Bangladesh. To know the balance of trade of Bangladesh. To know the challenges facing Bangladesh in exporting and importing products and services at present and recent.

It is known to all that, importing more goods and services than exporting for an economy have continuous bad effect on its real growth. On the other hand, study of export and Import of international business provides a greater learning opportunity about varieties terms, policies, rules of export and import, products, opportunities as well as the paths for business expansion throughout the world for maximizing profit. We strongly hope that our paper will provide lot accurate and useful information that will help those who want to get an idea on export and import condition of Bangladesh.

1.3 SPECIFIC PURPOSE OF THE STUDY

In this Term Paper, we have discussed the composition, performance, growth, impact and trends of foreign trade of Bangladesh. This paper has been made to show the main purpose that is as follows:

To fulfill partial requirements of course completion of the International Business. To obtain a strong knowledge that will help to work on business at international level in future.

1.4 RATIONALE & SIGNIFICANCE OF THE STUDY

There are many factors that discourage local companies from going international and taking their goods across the world. But the benefits of international trading far outweigh its disadvantages. The global village is growing even closer, and this has made exporting a big business that grows exponentially every year, and benefits from improved logistics and communication channels. Business can gain some long lasting benefits from international trade. Importing and exporting goods can help to broaden our horizons in the following ways:Trading our products internationally can give us an advantage over competition. If the domestic market is already flooded with similar products, then overseas markets may just be the answer to better profitability. This holds especially true for products that arent widely available overseas. As the international market for our good gets bigger, sales increase, giving us an advantage over others in our industry.Companies engaging in international trade experience improved efficiency brought on by the presence of economies of scale in production. This can bring about significant trade gains due to the reallocation of resources that can raise productive efficiency.Simply put, more output can be created at lower costs bringing about major savings. International trade can give us the opportunity to understand the varied market trends that can affect our business. It is common business saying that 95% of a companys prospective market is situated out of the country. And it just wont be wise to forego such a huge potential for business, leads, profits and thus business growth. So, the function of international trade is to capitalize on profitable opportunities for owners, which is the single most significant directive for corporations and many other businesses. For business concerns that offer season specific services or products, expanding operations to overseas is a perfectly viable way of staying busy and making money all year around. And staying in business all year round is a great way of outmaneuvering competitors. International trade can introduce a company to whole new foreign markets. Spreading risk in foreign markets and companies means that organization wont only be subjected to the tribulations of the Bangladesh economy. This diversification can shield their businesses from the investment risk of putting all their eggs in one basket. Similarly, international traders are also ideally poised to take advantage of the higher than usual potential for growth of some foreign economies. It is important to do our research right to find the right emerging markets for our kind of businesses. Of course, it is also important to balance these advantages against the likelihood for high costs and abrupt changes that are the special risks of investing internationally. International trade holds many benefits for those who are willing to put in the extra effort. As websites such as Export promotion Bureau Bangladesh make it obvious, importing organizations are eager to make their infrastructures available to new trading partners on a global scale, which is a sure sign that the time is ripe to explore new opportunities.1.5 FUTURE SCOPE OF THE STUDY It is very known that, international Business is considered as a big path for bringing a revolutionary change in a countries economy as well as world. It may have some scope in variety of ways for various users, persons or groups. The study is specifically focused on the exporting and importing different products and its effect on the economy. This report will render a close past theoretical look at the export and import that have been changed over time and may be used as historical data to decide for making future action. The study will also help to know the reasons behind of growth of export in different sector and also together increasing import of Bangladesh. The study will help to know the reasons of imbalance trading and its effect on economy at the time. The study will help us to gather knowledge about the kinds of products & services are exported or imported from different countries. It will assist to know the major products of exporting and importing are performed by bangladesh.1.6 METHODOLOGY OF THE STUDY

1.6.1 Data Collection

This research is basically descriptive in nature and from the secondary sources. Keeping the background and the specific objectives in mind, related available information have been collected through mainly secondary sources during the process which is utilized for finding useful information on trading of Bangladesh.

1.6.2 Sources of primary data: Not available in this term paper.

1.6.3 Sources of Secondary Data

Official websites of Central bank of Bangladesh. Official websites of commerce ministry as well as concerned websites of government and its agencies. ( see references) Financial Journals. Bangladesh Business Portals. Varieties Financial and Economic Magazines. Others websites related with finance trading, economics and banking industry of international and domestic level. ( See references)

1.7 LIMITATIONS OF THE STUDYThe paper has focused mainly on limited items of exported and imported products of Bangladesh. Some limiting factors were faced while conducting process for preparing the report. These factors are as follows: Particularly as we full time job holder so, time was really critical factor for us to accomplish this report. We could not gather whole information of trading of given products equally standard from the prospect of export and import. We have found it so critical to summarize information from different sources because of some lack of understanding to this process though tried best with our level. We have found some data and information (year of 2011 as well as 2012) to the different websites dissimilar from commerce ministry of Bangladesh government which has led us to be confused on some particular term of trading of Bangladesh internationally. However, we have included data, information, table and all graphical presentation from the most reliable sources like websites of Bangladesh government, World Bank, WTO, IMF, DCCI, EPB and so on.

Chapter >2: Literature Review 2.1 World Trade organization in International TradingInternational trade has truly expanded to encompass most of the world over the past century. The countries of the world have seen that everyone can benefit from specializing in the production of a certain good or set of goods and by having skilled workers that provide services to others. This trade off in strengths and weaknesses help get some commodities to locations that would otherwise be unable to attain goods or services that they need. The world of trading between countries is ever changing with the advancement in technology that becomes available to countries. The importing and exporting of goods across the globe is regulated by the World Trade Organization (WTO). This, like many other organizations have multiple benefits and drawbacks for the parties involved beyond practical application of rules and policies. One major benefit of the WTO is that they allow for trading on neutral ground allowing neither of the parties involved to obtain an unfair advantage during the trade agreement process. Any disputes that arise between two or more trading parties are also handled by the WTO which is also a benefit of having the organization in place. The organization itself acts as a mediator or referee of sorts when it comes to the process of trade between nations across the globe. This type of organization also has drawbacks when it comes to certain real world application in certain aspect. Nothing is perfect but again some of its approaches to policy are only really beneficial in theory. It seems as if the WTO organizations method of operation is business focused with little care as to the effects its agreements have on the populous of the countries involved.Four key points defined in the international trade simulation are the Production possibility frontier. Opportunity cost. Absolute advantage. Comparative advantage. The production possibilities frontier is a curve that measures the maximum combination of two products from a given number of available resources and current technology. If a company was in business producing laptop computers and HD television sets the resources are the workers, conveyer machinery, and other materials for production. The production possibilities frontier would depict a specified quantity produced if all resources were used to produce only laptop computers on one end of the frontier and the specified quantity produced if all resources were used to produce only HD television sets on the other side of the frontier. Associated points and quantities would be plotted accordingly as the total quantity of one product varies to produce the other. All combinations plotted on the frontier are attainable maximizing the resources available. As more of one product is manufactured less of the other product is produced. The opportunity cost of production is the highest valued alternative that must be forgone to engage in the production of another product. The opportunity cost of laptop computers to HD television sets would be the number of laptop computers that can be produced by not producing HD television sets. In some instances an individual, firm, or company can produce more of a good or service than their competitors using the same goods and services, which is known as absolute advantage. To maximize profits and production, countries should specialize in the production and export of commodities that it can produce at a lower opportunity cost than other countries, which is called comparative advantage. This includes importing commodities produced at a lower opportunity cost in other countries, which would increase overall GDP for all countries involved. In maximizing comparative advantage the opportunity cost concept can be an accurate approach because comparative advantage changes with the increase or decrease in technology or skill in labor because of this continual measure of the countries abilities should be maintained. Over time a nations workforce will change, and thus the goods and services that a nation produces and exports will change. Nations that train their workers for future roles can minimize the difficulty of making a transition to a new, dominant market.The simulation focused on trade policy and the terms of trade. The terms of trade can influence the ratio comparing export prices to import prices, the terms of trade as it is related to current accounts and the balance of payments. If a country's exports prices rise by a rate greater than that of its total imports, then the terms of trade have improved. Increasing the terms of trade begets an increased demand for a country's exports, thus, resulting in rising revenues from their total exports, which in turn increases demand for the country's currency, which increases is value via law of supply and demand. (Van Bergen). If the price of exports rises by rate smaller than that of its imports, the currency's value will decrease in relation to its trading partners. Throughout the simulation one had to negotiate the terms and evaluate the impact these terms were going to have the on the GDP, but it also would have affected the value of the currency. Terms of trade however depend on many factors during negotiation, primarily the stability of both the government and the economy. Political and economic stability also play important factors. Foreign investment seeks out countries with a strong economy and a stable government in which to invest their capital. It is making the safe bet to place their capital in a stable environment than an unstable one. If a country is perceived to become or be unstable, these investments are pulled out, thus reducing that economys access to capital, making funds scarce and devaluing their currency (Van Bergen). However if the investment is strong, then the currency becomes strong as more countries demand access to it via investment. One of the decision factors whether to open a Free Trade agreement was based on the factor of countries stability. With one country, maintaining a robust economy paired with a stable democratic government and the other an unstable agrarian economy with a loosely organized and frequently shifting political environment. It was a safe decision on the behalf of Roadmap to select the stable country to open a free trade agreement as this would create a safer bet to withhold as much impact on both the home country and Roadmap currency. The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. The WTO has many trade topics, such as tariffs. Customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally produced goods over similar goods, which are imported, and they raise revenues for governments. The WTO allows countries to negotiate trade on neutral ground; they help lower trade barriers and open markets for trade. Communication is difficult between countries; the WTO also solves this by interpreting contracts so both parties understand, and have a successful relationship. The WTO has helped increase trade and will continue to do so in the future. The simulation of the country of Roadmap tested the knowledge we have attained pertaining to international trade. This demonstrated how even one decision can change the face of trade between two countries and how each country can benefit from exchanging goods with one another to help fill in where one country may be weak. We learned how tariffs can affect imports, exports, and the balance of trade. This simulation shows the direct link between an international trade decisions by a country and how it will affect its outcome financially as well as any future interaction with that country. The result of this simulation is that there is always going to be change when dealing with trade issues with other countries. There will be up and down times that each country will face when attempting to trade a good or service with another country. The World Trade Organization has been implemented to help countries grow their economies by importing and exporting of goods. The bottom line in making any decision when deciding what to trade with another country is to compare how the items being traded are equaling out to one another. This is comparative advantage and must be monitored continuously over time due to changes in the availability of goods, commodities, and the workers a country may have available. 2.2 Definition of Export and ImportThe idea of trade between nations has been around for centuries. It began with trade routes for silk, spices, and other commodities. It later began to include seafaring trading such as cocoa from Central and South America being sent to Europe. Today the world of trade includes anything that a person can conceive: grains, cotton, tobacco, spices, services, components for making a good, and the list go on. The individual countries must weigh every option and angle that is present when entering into a trade deal with other countries. Bangladesh economy has passed through a heightened pace of global integration in the 1990s. The degree of openness of the Bangladesh economy is now higher than many developing countries though international trade of Bangladesh is extremely small relative to the size of its population."Foreign demands for goods are produced by home country". In national accounts "exports" consist of transactions in goods and services (sales, barter, gifts or grants) from residents to non-residents. A general delimitation of exports in national accounts is given below: An export of a good occurs when there is a change of ownership from a resident to a non-resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place. Export of services consists of all services rendered by residents to non-residents. In national accounts any direct purchases by non-residents in the economic territory of a country are recorded as exports of services; therefore all expenditure by foreign tourists in the economic territory of a country is considered as part of the exports of services of that country. Also international flows of illegal services must be included. National accountants often need to make adjustments to the basic trade data in order to comply with national accounts concepts; the concepts for basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts: Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means. Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities. "Imports" consist of transactions in goods and services (sales, barter, gifts or grants) from non-residents residents to residents. A general delimitation of imports in national accounts is given below: An import of a good occurs when there is a change of ownership from a non-resident to a resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place. Imports of services consist of all services rendered by non-residents to residents. In national accounts any direct purchases by residents outside the economic territory of a country are recorded as imports of services; therefore all expenditure by tourists in the economic territory of another country are considered as part of the imports of services. Also international flows of illegal services must be included. Basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts: Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means. Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities. Like many other third-world countries, Bangladesh relies quite heavily on exports to provide for the needs of its densely populated nation. The same products sold locally will generally fetch a much lower price than they would on the international market. This means that it is far more profitable for the country to engage in exportation than it is to engage in local trade. While this may mean that a large percentage of the countrys GDP is sent off abroad as Bangladesh exports instead of being enjoyed by the countrys own people, it also allows for a steady influx of foreign currency. Currently Bangladeshs main export items are garments, jute and jute-related goods, leather, frozen fish and seafood. Just three years ago the country made over $2,000 billion from export trade. The majority of the countrys trade is conducted with the USA but a small portion of exports also sees its way to Germany, the UK, France and Italy. However these figures should not mislead you into thinking that the country is well-off. As one of the poorest and most densely populated countries in the world, the majority of these profits will generally make their way into the pockets of a few wealthy while the rest will be thinly spread out amongst those involved in the production of these goods. To add to this, the countrys economy depends on an erratic monsoon cycle as well as drought and flooding which makes regular harvesting difficult. Besides these Bangladesh exports, the country is also engaged in the production of rice, tea, sugar wheat, ship scrap metal, textiles, fertilizer, pharmaceuticals, ceramic tableware and newsprint. Though yields can at times be quite high, the country still faces widespread poverty and it is struggling to free itself from this. Some progress has been made, but there are still many people living below the breadline in Bangladesh.2.3 How to Measure the Effects of Export and Import on the Economy According to the expenditures method of calculating gross domestic product, an economys annual GDP is the sum total of C + I + G + (X M), where C, I and G represent consumer spending, capital investment and government spending, respectively. While all those terms are important in the context of an economy, lets look closer at the term (X M), which represents exports minus imports, or net exports. If exports exceed imports, the net exports figure would be positive, indicating that the nation has a trade surplus. If exports are less than imports, the net exports figure would be negative, and the nation has a trade deficit. Positive net exports contribute to economic growth, something that is intuitively easy to understand. More exports mean more output from factories and industrial facilities, as well as a greater number of people employed to keep these factories running. The receipt of export proceeds also represents an inflow of funds into the country, which stimulates consumer spending and contributes to economic growth. Conversely, imports are considered to be a drag on the economy, as can be gauged from the GDP equation. Imports represent an outflow of funds from a country, since they are payments made by local companies (the importers) to overseas entities (the exporters).However, imports per se are not necessarily detrimental to economic performance, and in fact, are a vital component of the economy. A high level of imports indicates robust domestic demand and a growing economy. Its even better if these imports are mainly of productive assets like machinery and equipment, since they will improve productivity over the long run. A healthy economy, then, is one where both exports and imports are growing, since this typically indicates economic strength and a sustainable trade surplus or deficit. If exports are growing nicely but imports have declined significantly, it may indicate that the rest of the world is in better shape than the domestic economy. Conversely, if exports fall sharply but imports surge, this may indicate that the domestic economy is faring better than overseas markets. The U.S. trade deficit, for instance, tends to worsen when the economy is growing strongly. The countrys chronic trade deficit has not impeded it from continuing to be one of the most productive nations in the world. But a rising level of imports and a growing trade deficit do have a negative effect on a key economic variable the level of the domestic currency versus foreign currencies, or the exchange rate. 2.4 Effect of Exchange Rates The inter-relationship between nations imports and exports, and its exchange rate, is a complicated one because of the feedback loop between them. The exchange rate has an effect on the trade surplus (or deficit), which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper. Lets use an example to illustrate this concept.Consider an electronic component priced at $10 in the U.S. that will be exported to Bangladesh. Assume the exchange rate is 50 Taka to the U.S. dollar. Ignoring shipping and other transaction costs such as import duties for the moment, the $10 item would cost the Bangladeshi importer 500 Taka. Now, if the dollar strengthens against the Bangladeshi Taka to a level of 55, assuming that the U.S. exporter leaves the $10 price for the component unchanged, its price would increase to 550 Taka ($10 x 55) for the Bangladeshi importer. This may force the Bangladeshi importer to look for cheaper components from other locations. The 10% appreciation in the dollar versus the Taka has thus diminished the U.S. exporters competitiveness in the Bangladeshi market. At the same time, consider a garment exporter in Bangladesh whose primary market is the U.S. A shirt that the exporter sells for $10 in the U.S. market would fetch her 500 Taka when the export proceeds are received (again ignoring shipping and other costs), assuming an exchange rate of 50 Taka to the dollar. But if the Taka weakens to 55 versus the dollar, to receive the same amount of Taka (500), the exporter can now sell the shirt for $9.09. The 10% depreciation in the Taka versus the dollar has therefore improved the Bangladeshi exporters competitiveness in the U.S. market. To summarize, a 10% appreciation of the dollar versus the Taka has rendered U.S. exports of electronic components uncompetitive, but has made imported Bangladeshi shirts cheaper for U.S. consumers. The flip side of the coin is that a 10% depreciation of the Taka has improved the competitiveness of Bangladeshi garment exports, but has made imports of electronic components more expensive for Bangladeshi buyers. Multiply the above simplistic scenario by millions of transactions, and we may get an idea of the extent to which currency moves can affect imports and exports. Countries occasionally try to resolve their economic problems by resorting to methods that artificially depress their currencies in an effort to gain an advantage in international trade. One such technique is competitive devaluation, which refers to the strategic and large-scale depreciation of a domestic currency to boost export volumes. Another method is to suppress the domestic currency and keep it at an abnormally low level. This is the route preferred by China, which held its Yuan steady for a full decade from 1994 to 2004, and subsequently allowed it to appreciate only gradually against the U.S. dollar, despite having the worlds biggest trade surpluses and foreign exchange reserves for years. 2.5 Effect of Inflation and Interest RatesInflation and interest rates affect imports and exports primarily through their influence on the exchange rate. Higher inflation typically leads to higher interest rates, but does this lead to a stronger currency or a weaker currency? The evidence is somewhat mixed in this regard. Conventional currency theory holds that a currency with a higher inflation rate (and consequently a higher interest rate) will depreciate against a currency with lower inflation and a lower interest rate. According to the theory of uncovered interest rate parity, the difference in interest rates between two countries equals the expected change in their exchange rate. So if the interest rate differential between two nations is 2%, the currency of the higher-interest-rate nation would be expected to depreciate 2% against the currency of the lower-interest-rate nation. In reality, however, the low-interest-rate environment that has been the norm around most of the world since the 2008-09 global credit crisis has resulted in investors and speculators chasing the better yields offered by currencies with higher interest rates. This has had the effect of strengthening currencies that offer higher interest rates. Of course, since such hot money investors have to be confident that currency depreciation will not offset higher yields; this strategy is generally restricted to stable currencies of nations with strong economic fundamentals. As discussed earlier, a stronger domestic currency can have an adverse effect on exports and on the trade balance. Higher inflation can also affect exports by having a direct impact on input costs such as materials and labor. These higher costs can have a substantial impact on the competitiveness of exports in the international trade environment. 2.6 Economic Reports of Trade BalanceA nations merchandise trade balance report is the best source of information to track its imports and exports. This report is released monthly by most major nations. The U.S. and Canada trade balance reports are generally released within the first 10 days of the month, with a one-month lag, by the Commerce Department and Statistics Canada, respectively. These reports contain a wealth of information, including details on the biggest trading partners, the largest product categories for imports and exports, trends over time, etc.2.7 Breaking down the Balance Of Trade The balance of trade is the difference between a nations export and its imports. A crucial point to note is that both goods and services are counted for exports and imports, as a result of which a nation has a balance of trade for goods (also known as the merchandise trade balance) and a balance of trade for services. The net or overall figure forms the balance of trade or trade balance, a major contributor to a country's economic well-being. A nation has a trade surplus if its exports are greater than its imports; if imports are greater than exports, the nation has a trade deficit.2.8 Trade Data Census Basis and BOP Basis While data on a nations exports and imports of physical goods can be collated from customs documents such as export declarations and import manifests, this is not possible for trade in intangible services. The latter is therefore compiled based on the flow of funds, the foundation on which balance of payments (BOP) trade statistics are based. Therefore, data on merchandise trade is available based on both custom-based trade statistics and BOP, while data on services is only available on a BOP basis.For example, in the U.S., statistics on exports and imports are compiled by the Commerce Departments Bureau of Economic Analysis (BEA) and released in a monthly report. The BEA collates information on exports from exporters electronic export information (EEI) that have been submitted to the U.S. Automated Export System (AES). Exporters submit this export information to the U.S. Census and also to U.S. Customs and Border Protection. Similarly, import data is compiled from documents collected by the U.S. Customs and Border Protection pertaining to goods that have arrived in the U.S. from foreign countries. The BEA adjusts the goods total on a census basis to bring the data in line with the concepts used to prepare national and international accounts. The BOP-basis data derived in this manner enables goods trade numbers to be summed with services trade figures to arrive at a more accurate picture of overall U.S. trade, goods and services. 2.9 Distinguishing Between a Service Export and Import Statistics for trade in services are derived from the BEAs estimates of service transactions between foreign countries and the U.S., based on periodic surveys and partial information from monthly reports. The BEA provides export and import data on services in a number of categories travel, passenger fares, royalties and license fees, transfers under U.S. military sales contracts (only for exports), and direct defense expenditures (only for imports). While the distinction between an export and import of a physical good is readily apparent, it is not as clear for a service. Here, the flow of funds determines whether a service transaction qualifies as an export or an import, depending on whether it is a debit transaction that results in a payment or outflow of funds, or a credit transaction that results in a receipt or inflow of funds. So, for instance, fares received by U.S. carriers from foreign residents for travel between the U.S. and foreign countries, or between two points overseas, would show up on the export side of the trade balance for services. Likewise, fares paid by U.S. residents to foreign carriers would show up on the import side of the trade balance for services. 2.10 Factors That Affect Trade BalanceNumerous factors affect a countrys trade balance. These include:Trade policies: Nations that are insular and have restrictive trade policies such as high import tariffs and duties may have larger trade deficits than countries that have open trade policies, since they may be shut out of export markets because of these impediments to free trade.Exchange rates: A domestic currency that has appreciated significantly may pose a challenge to the cost-competitiveness of exporters, who may find themselves priced out of export markets. This may pressure a nations trade balance.Foreign currency reserves: To compete effectively in extremely competitive international markets, a nation has to have access to imported machinery that enhances productivity, which may be difficult if forex reserves are inadequate.Inflation: If inflation is running rampant in a country, the price to produce a unit of a product may be higher than the price in a lower-inflation country. This would affect exports, affecting the trade balance.2.11 Use Trade Balance as an Economic IndicatorThe utility of trade balance data as an economic indicator depends on the nation. The biggest impact is generally seen in nations with limited foreign exchange reserves, where the release of trade data can trigger large swings in their currencies. The trade data is usually the largest component of the current account, which is closely monitored by investors and market professionals for indications of the economy's health. The current account deficit as a percentage of GDP, in particular, is tracked for signs that the deficit is becoming unmanageable and could be a precursor to a devaluation of the currency. However, a temporary trade deficit may be viewed as a necessary evil, since it may suggest that the economy is growing strongly and needs imports to maintain the growth momentum. Trade data is also parsed to see which trading partners are contributing to the overall surplus or deficit. In June 2013, for example, the U.S. had a trade deficit of $26.6 billion with China, bringing its year-to-date deficit with the Asian giant to $147.7 billion. In contrast, the trade deficit with Canada the biggest trade partner of the U.S., accounting for 16.8% of total trade in the first half of 2013 was only $1.6 billion, for a YTD deficit of $15.5 billion. Chinas enormous trade surplus with the U.S. may lead to renewed calls for the nation to revalue its Yuan, which critics opine is being held artificially low to stimulate exports U.S. trade data occasionally affects the greenback, which in turn has an impact on commodity prices because of the negative correlation between the two (stronger dollar causes weaker commodity prices and vice versa). These moves often result in volatility in Canadas TSX Composite index, which has a heavy weighting in commodities. In general, market watchers appear more concerned with trade deficits than trade surpluses. This may be because chronic deficits often trigger steep currency devaluation, leading to severe repercussions for the local economy as the higher interest rates that are used to prop up the currency take their toll. In summer of 2013, the currencies of India and Indonesia slumped 14% in just over two months as investors focused on nations with large trade and current account deficits. While Indias foreign currency reserves grew in leaps and bounds after the economic reforms of the 1990s, rising gold imports in 2013 led to widening trade deficits, causing the Indian government to take measures to restrict gold imports.2.12 The Bottom LineThe balance of trade is a key indicator of a nations health. Trade balance data is available on a census / customs basis and BOP-basis for goods, and only on a BOP-basis for services. In general, investors and market professionals appear more concerned with trade deficits than trade surpluses, since chronic deficits may be a precursor to currency devaluation.2.13 Conclusion Imports and exports exert a major influence on the consumer and the economy directly, as well as through their impact on the domestic currency level, which is one of the biggest determinants of a nations economic performance.

Chapter: 3: An Overview Of Bilateral Trade Among SARCC NationsThe trade is called the exchange of goods between two countries. Bilateral trade agreements give preference to certain countries in commercial relationships, facilitating trade and investment between the home country and the foreign country by reducing or eliminating tariffs, import quotas, export restraints and other trade barriers. Bilateral trade agreements can also help minimize trade deficits.3.1 Bangladesh in Regional and Bilateral Trade1.Asia Pacific Trade Agreement (APTA)

2.BIMSTEC Trade Negotiating Committee (TNC) meeting

3SAARC Preferential Trading Arrangement (SAPTA)

4AARC Preferential Trading Arrangement (SAPTA)

5The Agreement on South Asian Free Trade Area (SAFTA)

6SAARC Framework Agreement on Trade in Services (SAFAS)

7Bilateral FTA with India, Pakistan and Sri Lanka

8Standing Committee for Economic and Trade Cooperation (COMCEC)

9Standing Committee for Economic and Trade Cooperation (COMCEC)

10Trade Preferential System Among the OIC Members (TPS-OIC)

11Preferential Trade Agreement (PTA) among D-8 Countries (D-8)

12Bangladesh Foreign Trade Institute (BFTI)

13International Trade Centre (ITC)

14International Trade Centre (ITC)

15United Nations Conference on Trade and Development (UNCTAD)

16

United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)

17Canadian International Development Agency (CIDA)

18European Commission (EC)

[The tables have been given below to show the position of Bangladesh in export and import among its partners from SAARC countries that include historical data from 1998 to 2011. (Not found data of 2012 and 2013)]

3.2. Bangladesh-Bhutan Bilateral Trade

Value in Million Taka (Value in Million US $)

YearExportImportTrade Ratio

1999-0040.50 (0.80)220.60 (4.38)1 : 5.47

2000-01 63.64 (1.18)305.10 (5.65)1: 4.79

2001-0291.37 (1.57)225.00 (3.92)1: 2.50

2002-0391.17 (1.57)18.90 (2.74)1: 1.74

2003-04172.54 (2.93)330.20 (3.35)1: 1.14

2004-05287.95 (4.65)528.30 (8.60)1:1.84

2005-06101.74 (1.52)784.00 (11.68)1: 7.68

2006-0796.60 (1.40)689.30 (9.98)1: 7.39

2007-0892.61 (1.35)942.50 (13.73)1:10.18

2008-0942.09 (0.61)836.50 (12.12)1:19.87

2009-10154.96 (2.24)8289 (11.98)1: 5.35

2010-11222.48 (3.12)1325.5 (18.58)1: 5.95

Major Export Items:

Knitwear, Melamine, Woven Garments, Biscuits, Jute Manufacture, Footwear etc.

Major Import Item:

Live animals, Vegetables Products, Mineral Products, Prepared food stuffs,, beverages, Plastic and articles thereof, Boilers Machinery and mechanical appliances etc.

Source:

Export Statistics, EPB and Bangladesh Bank & Import Statistics, Bangladesh Bank

3.3 Bangladesh-India Trade

Value in Million Taka (Value in Million US $)

YearExportImportTrade Ratio

1998-992870.14(59.74) 59350.90(1234.93)1: 13

1999-00 3264.11(64.88)41889.00(832.62)1: 19

2000-013329.49(62.28) 63887.20(1183.39)1: 17

2001-022865.96(50.28)58109.82(1019.47)1: 20

2002-034868.23(84.08)78453.50(1352.64)1: 16

2003-045261.57(89.27)94438.20(1602.27)1: 18

2004-058869.13 (144.19)124646.30 (2042.06)1: 14

2005-0616262.13(241.96)125330.00(1864.74)1: 8

2006-0719969.98(289.43)156636.00(2268.11)1: 8

2007-0824564.29(358.08)232138.60(3383.94)1:9

2008-0918391.95 (274.26)186093.00 (2863.19)1:10

2009-1021074 (304.62)159586 (3202.8)1:10.5

2010-1136040 (512.51)320659 (4560)1:8.9

3.4 Major Export Items in 2008-09 (In million US $):

Chemical fertilizer, Pharmaceutical products and other chemical products (72.89), Raw jute (29.36), Frozen Food (35.47), Agri-products (11.31), Jute goods (48.76), Woven garments and Knitwear (10.34) etc.

3.5 Major Import Items in 2007-08 (In million US $):

All types of cotton, cotton yarn/thread and cotton fabrics (611.08); Cereals (813.93); Mineral fuels, mineral oils and products of their distillation, bituminous substances and mineral waxes (164.30); Boilers, machinery and mechanical appliances, parts thereof (147.75); Vehicles other than railway or tramway-rolling stock and parts and accessories thereof (147.01); Iron and Steel (106.50); Residues and waste from the food industries, prepared animal fodder (121.03), Edible vegetables and certain roots and tubers (130.00); Plastic and rubber (74.97); Man-made staple fibers (59.43); Organic Chemicals (85.38); Electrical machinery and equipment (62.27); Aluminums and article thereof (39.15); Paper & paper board (27.90 etc.

Source: Bangladesh Bank

3.6 Bangladesh - Maldives Trade

Value in Million Taka

YearExportImportTrade Ratio

2004-05 0.480

2005-06 0.020

2006-07 0.270

2007-08 0.080

2008-09 0.140

2009-10 0.740.861:1.16

2010-110.931.441:1.55

3.7 Bangladesh - Nepal Trade

Value in Million Taka (Value in Million US $)

YearExportImportTrade Ratio

2000-01108.38(2.01)352.20(6.53)1: 3.24

2001-2002168.04(2.92)191.80(3.34)1: 1.14

2002-03190.91(3.29)320.90(5.54)1: 1.68

2003-04150.36(2.55)242.80(4.12)1: 1.61

2004-05290.81(4.74)105.20(1.71)1: 0.36

2005-06305.00(4.55)180.60(2.69)1: 0.59

2006-0758.592 (0.848)411.7 (5.96)1:7.02

2007-08460.16 (6.70)3632.8 (52.95)1:7.90

2008-09604.06 (8.78)4728.5 (68.73)1:7.82

2009-10556.8 (8.78)2984.3 (43.13)1:4.91

2010-11773 (10.84)3455.8 (48.46)1: 4.47

Major export items from Bangladesh to Nepal in 2004-05 (Value in million Tk)

Pharmaceutical Products (0.23), Fertilizer (1.33), Textile and Textile article (2.40), Electrical machinery and equipment (0.53) etc.

Major import items into Bangladesh in 2004-05 (Value in million Tk)

Edible Vegetable and certain roots and tubers (0.92), Residues and waste from food industries (0.21), Cereals (0.32) etc.

Information Source: EPB & Bangladesh Bank.

3.8 Bangladesh - Pakistan Bilateral Trade

Value in Million Taka (Value in Million US $)

YearExportImportTrade Ratio

1996-971659.20(38.97)2872.40 (67.26)1: 1.72

1997-982026.67(44.67)3638.34(80.03)1: 1.79

1998-991829.47(38.13)3979.00(82.79)1: 2.17

1999-001597.34(31.75)4212.10 (83.72)1 : 2.64

2000-011715.00(32.08) 5142.38(95.30) 1: 2.97

2001-021642.50(28.60)3866.00(67.32)1: 2.35

2002-031857.00(31.51)5331.70(92.08)1: 2.92

2003-042659.68(45.11) 6637.80(112.62) 1: 2.49

2004-053942.35(64.09)8578.00(139.46)1: 2.21

2005-062880.71(57.74)10072.90(149.87)1:2.60

2006-074243.05(61.06) 12983.80(188.00)1: 3.08

2007-084871.27(71.01) 16393.50(238.97)1: 3.36

2008-095243.25(76.21) 19840.00(280.37)1: 3.67

2009-105373.14 (77.67)22393.56 (323.7)1:4.16

2010-116103.07 (86.79)4765.17 (669.3)1:7.71

3.9 Major export items (Value in million US$) (2008-09)

Raw jute (45.81); Tea (9.16); Chemical Products (2.88); Agree-products (3.16), Jute goods (3.18) etc.

3.10 Major import items (Value in million US$) (2007-08)

Cotton (129.73); Cereals (8.95); Sugar and sugar confectionery (31.89) Manmade filament (4.49), Manmade staple fibers (11.42) ,Special woven (5.35), Knitted or crocheted fabrics (2.54); Machinery and mechanical appliances (8.74), Chemical products (11.87) etc.

3.11 Bangladesh - Srilanka Trade

Value in Million Taka (Value in Million US $)

YearExportImportTrade Ratio

1999-00238.76(4.77)420.20(8.35)1 : 1.75

2000-01141.37(2.62)431.00(7.98) 1: 3.04

2001-02118.88 (2.07)352.60(6.10)1:2.94

2002-03217.49(3.76)462.30(7.98)1: 2.12

2003-04610.42(10.35)578.87(9.82)1: 0.94

2004-05683.11(11.11)631.60(10.29)1:0.93

2005-06888.81(13.25)728.30(10.86)1: 0.82

2006-071023.47(14.82)1131.10(16.37)1: 1.10

2007-081325.35(19.32)1047.20(15.26)1: 0.78

2008-091283.56(18.67)1276.70(18.57)1: 0.99

2009-101642.33(23.74)1574.8(22.76)1: 0.95

2009-101642.33(23.74)1574.8(22.76)1: 0.95

2010-112476.5 (34.73)1966.4 (27.57)1: 0.79

3.12 Major export items in 2008-09 (value in million US$):

Chemical products (7.63), Jute goods (1.12), Agri-products (0.66), Knitwear (3.02), Woven garments (1.02) etc.

3.13 Major import items in 2008-09 (value in million US$) :

Chemicals Products (5.09), Plastic and plastic products (0.53), Rubber and rubber products (0.59), Cotton (2.83), Man-made filament (1.23), Transport equipment, electric and machinery equipment etc.

Sources: Export Statistics, EPB &Bangladesh Bank, Import Statistics, Bangladesh Bank

3.14 Growth of Bilateral Trade

Bangladesh registered a ten percent rise in its exports to India, a latest report shows. Exports to the largest neighbor India were $302 million in 2009-10 when better trade ties were discussed at the level of the prime ministers in January. Exports to other neighbors barely account for 2.7 percent of the total, touching $431 million, New Age newspaper said quoting the government's Export Promotion Bureau's Evaluation Survey. Remaining almost static over the year, exports to Pakistan were worth $78 million. Exports to Nepal increased by 9 percent to $8.8 million, to Bhutan by 72 percent to $2.2 million, to Myanmar by 9 percent to $10 million and to Sri Lanka by 26 percent to $24 million. Exports to the Maldives increased almost five folds to $0.7 million but exports to Afghanistan declined by 37 percent to $3.7 million.

Chapter 4: All about ExportsExports measure the amount of goods or services that domestic producers provide to foreign consumers by. It is a good that is sent to another country for sale. In the past, export of commercial quantities of goods normally required involvement of the customs authorities in both the country of export and the country of import. More recently, with the advent of small trades over the internet such as through Amazon and e-Bay, exports have largely bypassed the involvement of Customs in many countries due to the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export.4.1 Bangladesh ExportsExports in Bangladesh increased to 2590.20 USD Million in September of 2013 from 2013.40 USD Million in August of 2013. Exports in Bangladesh are reported by the Bangladesh Bank. From 1995 until 2013, Bangladesh Exports averaged 3238.0 USD Million reaching an all time high of 15565.2 USD Million in June of 2009 and a record low of 1024.0 USD Million in October of 2009. Bangladesh exports mainly readymade garments including knit wear and hosiery (75% of exports revenue). Others include: Shrimps, jute goods (including Carpet), leather goods and tea. Bangladesh main exports partners are United States (23% of total), Germany, United Kingdom, France, Japan and India.

Figure: 14.2 Major Product - Wise Export of Bangladesh

Amounts in Million US$

Products2009-102010-11 (July-April)

Raw Jute196357

Agri-Products 242334

Frozen Foods 445625

Leather 226298

Jute Goods 592758

Chemicals 103105

Specialized Textiles 186165

Home Textiles 402789

Footwear 204298

Knitwear 64839482

Woven Garments 60138432

Others 11131281

Total1620522924

Table No : 1

4.3 Exported Products by Category SlCategory

1Agar Products/Agar Wood

2Agricultural Equipments

3Animal Casing

4Agricultural Equipments-1

5Aluminums Products

6Artificial Flowers

7Audio & Video (CD, VCD, DVD, VCR, Paper, Magazine)

8Automobile Products

9Ball Pen

10Bamboo Products

11Basket Ware

12Batik Items

13Battery (Auto)

14Battery Dry cells

15Beach Chair

16Bees Wax

17Betel Leaves & Nut

18Bi-Cycle

19Biscuits

20Blade

21Blazer And Coats

22Blouses, Ladies Shirts & Fashion

23Books & Periodicals

24Brass Products

25Bricks

26Broom Sticks

27Cables

28Candles

29Cane Products

30Canned Fruits

31Canned Fruits

32Canvas Shoes

33Carbon Rod

34Carpet Backing Cloth

35Carpet

36Carton

37Cement Exporters

38Cement

39Ceramic Products

40Chemical Products

41Computer Paper

42Condensed Milk

43Copper Wire

44Cotton Waste

45Cosmetics

46Cotton Bags

47Crabs

48Crushed Bone

49Cut Flower

50Data Entry

51Dehydrated

52Door Shutter

53Dry Fish

54Dry Foods

55Electrical Products

56Espadrilles

57Embroidery

58Fan

59Feathers

60Fertilizer

61Fish Maws

62Fish Meals

63Fishing Net

64Flush Door

65Food Products

66Footwear & Leather Goods

67Footwear

68Fresh Fish

69Fresh Fruits & Vegetables

70Fruit Juices

71Furniture

72G I Pipe

73Galantine

74Gift Items

75Glass Products

76Gloves

77Grey Fabrics

78Hand Bags

79Hand Made Paper

80Handicrafts

81Handloom Products

82Hanger

83Herbal Medicine

84Hessian Cloth

85Home Textiles-Specialized Textiles Exporter

86Honey

87Hooves

88Human Hair

89Jam & Jelly

90Jamdani Sharee

91Jewelers

92Jute Backing Cloth

93Jute Braid

94Jute Goods

95Jute Mat

96Jute Shoes

97Jute Yarn & Twine

98Jute Shopping Bag

99Kitchen Ware

100Knitwear

101Leather (Crust & Finished)

102Leather Garments

103Leather Products

104Light Engineering Products

105Home Textiles-Specialized Textiles Exporter

106List Of Firms Approved By EU

107List Of Knitwear Exporters

108List Of Oil Cake Manufacturers

109List Of Readymade Garments Exporters

110List Of Tea Exporters

111List Of The Members Firm Of Bffea_Usa

112Luggage, Toys & Fashion Products

113Marine Fish

114Matches

115Meat & Meat Products

116Medical Equipment

117Melamine Products

118Metal Products

119Molasses

120Mosquito Net

121Ms Pipe

122Mushrooms

123Muslin

124Nakshi Katha

125Naphtha

126Newspaper

127Newsprint

128Oil

129Orchid-Plants

130Paper Board

131Particle Board

132Pharmaceuticals

133Pink Pearl

134Plastic Products

135Plastic Sheets

136Plywood

137Poly Bags

138Potato Flakes

139Potato

140Pottery

141Poultry Feed

142Poultry

143Printing Materials

144Processed Fruits

145PVC Cables

146PVC Pipes-PVC Products

147Quilt

148Raw Cotton

149Raw Jute

150Readymade Garments-1

151Readymade Garments-2

152Readymade Garments-3

153Readymade Garments-4

154Refr Actory Bricks

155Refrigerator

156Rice

157Rubber

158Sanitary Ware

159Seed

160Sewing Thread

161Shark Fins

162Shark Meat

163Shell Products

164Shopping Bags

165Shrimps

166Silk Fabrics

167Silk Sharee

168Soap (Toilet)

169Socks, Vest, Rompers, Stuffed Toys, Quilts

170Soft Drinks

171Software & It Service

172Spices

173Sports Shoes

174Stationary Products

175Sugar

176Tapestry

177Tarpaulins

178Tea

179Telecommunication

180Television

181Tent

182Terry Towel

183Textile Fabrics

184Tiles

185Timber

186Tissue Paper

187Tobacco

188Tooth Brush

189Transformer

190Travel Bags

191Twill

192Tyre

193Umbrella

194Ups

195Watch

196Wooden Products

197Yarn

4.4 Trend-in-Export-Trade and Product-Wise Structural Change over 4 Decades4.4.1 Export from Bangladesh 1972-73 to 2008-2009

Trend-in-Export-Trade (In product & market)

1972-73 2008-2009 Growth

No. of Product 25 173 592%

No. of Market 68 197190%

Total Export 348 15565 4373%

Table : 2

4.4.2 Export by Major Products of the year 1992-93

4.4.3 Export by Major Products of the year 2002-03

4.4.4 Export By Major Products ( Upper one)

4.4.5 Major Importing Countries of Bangladesh Exportable During 1990-91-up

4.4.6 Major Importing Countries of Bangladesh Exportable During 2008-09

4.5 Market share of major export products (2006-2007)

01.Woven Garments38.25%

02.Knitwear37.39%

03. Frozen Food 4.23%

04. Jute Goods2.63%

05. Leather2.18%

06. Raw Jute 1.21%

07. Chemical Products 1.77%

08. Tea0.06%

09. Other12.28%

4.6 Regional Market Share (2006-2007)

01.European Union (E-U) 52.26%

02. American Region 32.74%

03. Asian Region 8.52%

04. Middle East Region 2.75%

05. African Region 0.64%

06. Oceania Region 0.25%

07. East European Region 0.35%

08. Other2.19%

4.7: Year of 2009-1001.Woven Garments37.11%

02.Knitwear40.01%

03. Frozen Food 2.73%

04. Jute Goods4.86%

05. Leather1.40%

06. Agri Products1.50%

07. Eng.Products 1.92%

08. Footwear1.26%

09. Other9.21%

Figure : 2 & 3 Below ( Next page)

01.European Union (E-U) 52.3%

02. American Region 33.3%

03. Asian Region 8.8%

04. Middle East Region 2.5%

05. African Region 0.6%

06. Oceania Region 0.3%

07. East European Region 0.3%

08. Other1.8%

Table : 3

4.8 Export Chart Data at a Glance

Chart: 14.9 Bangladesh exports to several countries of the world Name of the Countries

Ecuador, France, Germany, Ghana, Hungary, India, Australia Afghanistan, Thailand, Syria, Singapore, Russia, Sudan, Togo, Taiwan, UAE. Nepal & Malaysia.Mexico, Indonesia, Japan, Jordan, Mozambique, Korea, Lebanon Brazil, Tanzania, South Africa, Spain, Sweden, Philippines, New Zealand, Cambodia, Kosovo, Bhutan, & UK. Myanmar, Canada, Colombia, Norway, Djibouti, Iran, Netherlands, USA, Venezuela, Zimbabwe, Ukraine, Georgia, Pakistan, Sri-Lanka, Vietnam, Kenya, Yemen & Hong Kong.

4. 10 : A brief overview of a Single Major Exported product-RMG1950 was the beginning of R.M.G in the Western World. In order to control the level of imported RMG products from developing countries into developed countries, the Multi Fiber Agreement (MFA) was made in 1974. The MFA agreement imposed an export rate 6 percent increase every year from a developing country to a developed country. In the early 1980s Bangladesh started receiving investment in the RMG sector. Some Bangladeshis received free training from the Korean Company Daewoo. After these workers came back to Bangladesh, many of them broke ties with the factory they were working for and started their own factories. But most of the RMG entrepreneurs are the genuine patriot and started from grass root level who contributing in boosting of country economy.Although Bangladesh is not developed in industry, it has been enriched in Garment industries in the recent past years. In the field of Industrialization garment industry is a promising step. It has given the opportunity of employment to millions of unemployed, especially innumerable uneducated women of the country. It is making significant contribution in the field of our export income. History of our cloth Industry: Once the cloth of Bangladesh achieved worldwide fame. Muslim and Jamdani cloth or our country was used as the luxurious garments of the royal figures in Europe and other countries. The ready-made Garment (RMG) sector has started its journey in the late 1970s in Bangladesh. However, Bangladesh experienced a real momentum in RMG sector between the mid-1980s and mid-1990s (Robbani 2000). The first garment factory in Bangladesh (the then East Pakistan) was established in 1960 at Dhaka (Islam 1984). Bangladesh started exporting garments in 1976. The first joint venture garment factory in Bangladesh was Desh garment in association with Daewoo, a South Korean company (Rock, 2001). Bangladesh Garment Manufacturers and Exporters Association (BGMEA) were formed in 1982 to protect the interests of the manufacturers and the exporters of RMG sector. Imposing of Quota restrictions on Bangladeshi products by UK, France, Canada and USA in 1985 was a critical challenge towards the growth of this sector (Uddin, 2006). Following the General Agreement on Tariff and Trade (GATT) introduction of the Multi-fibre Arrangement (MFA) allowed the use of quota restriction (Siddiqi, 2005), which facilitated the growth and expansion of garment industry. Over the years, RMG sector has experienced a remarkable export growth. RMG share is the total export increased from 12.44 percent in 1984-1985 to 60.64 percent in 1992-1993 (Siddiqi 2005). At present, RMG sector is the single largest source of earning foreign exchange in Bangladesh. Table 1 shows the trends and exports of major export products of Bangladesh RMG sector has faced some challenges such as cleaning all internal inefficiencies, managing port effectively, building backward and forward linkages, diversifying product lines and searching for new markets due to the phasing out of MFA in 2005 (Robbani 2000). One of the weaknesses of the RMG sector in Bangladesh is its heavy dependence on imported raw materials due to inefficient backward linkage (Siddiqi 2005). The component of backward linkage includes weaving the fabric, spinning the yarn, and dyeing, printing and finishing operation (Siddiqi 2005). The development of backward linkage has been getting high priority in the post-MFA regime for achieving self-sufficiency in the area of input production for reducing cost and lead-time. Developing backward linkage refers the control over the supply of inputs of RMG industry like fabric, yarn and processing facilities (Siddiqi 2005). The ratio of gross export earnings from woven wear and knitwear has increased from 100:34 in FY1997 to 100:98 in FY2007, which ensures the structural change in export earnings (Rahman, Bhattacharya, and Moazzem 2008). Interestingly, the total export of RMG sector in Bangladesh has increased after the MFA phase out, as shown in Table 2. Bangladesh, despite being a least developed economy, has a proven record in export competitiveness. Here is a summary of the facts. From 2003 to 2007 Bangladesh achieved annual export value growth of 19.6%, a testimony to its export competitiveness. Whilst not wishing to be complacent, and being mindful of difficult global trade conditions in 2008-2010, these positive trade differentials are likely to be with Bangladesh well into the future. From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles and clothing industry is Bangladeshs biggest export earner with value of over $ 16 billion of exports in 2009-10. Our factories design and produce for the worlds leading brands and retailers. This rapidly growing sector of the Bangladeshi economy offers a unique competitive edge that supports profitable expansion into new strategic markets.The ready-made garment (RMG) sector has experienced an exponential growth since the 1980s. The sector contributes significantly to the GDP. It also provides employment to around 4.2 million Bangladeshis, mainly women from low income families which affect their social status. Manufacturing output has seen steady growth, recently in double figures. Bangladesh provides significant benefits to exporters. Bangladesh offers a most liberal FDI regime in South Asia, with no prior approval requirements or limits on equity participation and repatriation of profits and income in most sectors. Bangladesh enjoys tariff-free access to the EU, Canada, Australia and Japan. Bangladesh is the top manufactured products exporter to the least developed countries as well as to Europe, with more than 50% market share.4.11 Key Statistics of RMG ProductsRMG EXPORTS AND IT'S SHARE IN TOTAL EXPORT OF BANGLADESH

YearExport Of RMG(In Million Us$)Total Export Of Bangladesh (In Million Us$)% Of RMG's To Total Export

1983-8431.57811.003.89

1984-85116.2934.4312.44

1985-86131.48819.2116.05

1986-87298.671076.6127.74

1987-88433.921231.235.24

1988-89471.091291.5636.47

1989-90624.161923.7032.45

1990-91866.821717.5550.47

1991-921182.571993.9059.31

1992-931445.022382.8960.64

1993-941555.792533.9061.40

1994-952228.353472.5664.17

1995-962547.133882.4265.61

1996-973001.254418.2867.93

1997-983781.945161.2073.28

1998-994019.985312.8675.67

1999-004349.415752.2075.61

2000-014859.836467.3075.14

2001-024583.755986.0976.57

2002-034912.096548.4475.01

2003-045686.097602.9974.79

2004-056417.678654.5274.15

2005-067900.8010526.1675.06

2006-079211.2312177.8675.64

2007-0810699.8014110.8075.83

2008-0912347.7715565.1979.33

2009-1012496.7216204.6577.12

2010-11 (July-Sep)3971.525029.0578.97

Data Source Export Promotion Bureau Compiled by BGMEA

Table: 44.12 Main Apparel Items Exported From Bangladesh (m US$)YearShirtTrouserJacketT-shirtSweater

2005-061,056.692,165.25389.521,781.511,044.01

2006-07943.442,201.321,005.062,208.901,248.09

2007-08915.62,512.741,181.522,765.561,474.09

2008-091000.163,007.291,299.743,065.861,858.62

2009-10993.413035.351350.433145.521795.39

Table: 5 Source: Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

4.13 Sector Highlights Cost and quality of products that are produced on time, reliably and very competitively with a highly skilled labor force. A unique regional location for expansion into key Eastern and other markets. Favored trading status with the EU and the USA. Clusters of companies providing a local supplier base with real depth in skilled labor, training and technical development facilities. The growing demands for yarn in the local market, comparatively low cost of doing business, lucrative incentive packages and a favorable investment policy regime are important reasons for investment in this sustainable sector.4.14 RMG and Backward LinkagesThe phenomenal growth in the readymade garment (RMG) sector in the last decade created many new factories and employment opportunities. Having enjoyed more than 70% of total investments in the manufacturing sector during the first half of the 1990s, RMG and knitwear now account for about 4,825 factories and a workforce of 3.1 m -80% of which are women. This sector now employs over 50% of the industrial workforce and accounts for 79% of the total export earnings of the country. The growing trend in the textile and the garments sector means that Bangladesh is perfectly positioned to appeal to foreign investors.4.15 Size of Bangladesh Textile IndustrySub-sectorNo. of unitesInstalled machine capacityProduction capacity (m)Manpower

Textile spinning3417.20 ml. spld0.18 ml. rotor1,600 kg400,000

Textile weaving40025,000 SL/SLL1,600 mtr80,000

Specialized textile and power loom1,06523,000 SL/SLL400 mtr43,000

Handloom (GF/F)148,342498,000 handloom837 mtr1,020,000

Knitting, knit dyeing (GF):

(a) Export-oriented80012,000 knit/Dy/M3,600 mtr300,000

(b) Local market2,0005,000 knit/M500 mtr24,000

Dyeing and finishing (FF):

(a) Semi-mechanized180-120 mtr10,000

(b) Mechanized130-1,600 mtr23,000

Export oriented RMG4,500-475 doz2,000,000

Source: Director's Report 2009, Bangladesh Textile Mills Association4.16 Favored Trading StatusBilateral agreements with 28 countries and Generalized System of Preferences (GSP) of the EU are key reasons for Bangladesh RMG products having access to global markets. The current cycle of GSP applied from 1 January 2009 to 31 December 2011. Bangladesh is now a significant RMG supplier to North America and Europe. Bangladesh has also taken a better position in the USA market through competition. Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently Canada has also provided tariff-free access for all the items from Bangladesh. Meantime, the Bangladesh RMG industry has become very competitive as a global standard RMG source. Marketing investments have been made in trading partner economies; end users can often differentiate products with confidence. Historically the Bangladesh RMG industry has depended largely on imported yarns and fabrics and produced only 10% of the export-quality cloth used by the garments industry. The need for establishment of backward-linkage industry has become an immediate concern to the government and the exporters and there are enormous opportunities to set up a composite textiles industry combining textile, yarn and garments.

4.17 Export earning hits record $3b in July

The countrys single month export earnings hit a record $3 billion in July, the first month of the financial year 2013-14, riding on the performance of readymade garment sector that defied factory disasters, Export Promotion Bureau officials said. Provisional data from the EPB, which was sent to the commerce ministry for approval on Sunday, showed that the export earnings totaled $3,024.29 million in July, growing by an impressive 24 per cent compared with the same period last fiscal year.The export earnings figure of July in financial year 2012-13 was $2.4 billion with 4.26 per cent growth. The EPB vice-chairman Shuvashish Bose told New Age on Tuesday that export crossed $3 billion because of impressive performance by the readymade garment sector. Even after the tragic incidents at Tazreen Fashions and Rana Plaza, the export earnings of July proved that Bangladesh has not lost its competitiveness in the RMG sector, he said. Export earnings growth has been on an upward trend in the last three months with the earning standing at $2.53 billion in May and 2.69 in June, the two months of the previous FY 2012-13.EPB officials could not immediately give the data on RMG export earnings but said that the export growth of the sector was double digit and higher than that of the earnings of June of FY 2012-13. The total export earnings from RMG sector in June was over $2.1 billion. The countrys export in the just concluded FY 2012-2013 was $27.01 billion, growing by 11.18 per cent from the previous FY, whereas the government set the export earnings target for the current FY 2013-14 at $30.50 billion with a growth of 12.84 per cent.The total RMG export in FY 2012-13 grew by 2.73 per cent to $21.51 billion in the FY 13 from $19.08 billion in the FY 12. Garment industry people and many of the experts, however, were shaky about achieving the target for FY 2013-14 against the backdrop of Rana Plaza collapse that killed more than 1,100 garment workers in April. The Rana Plaza incident and the Tzaneen Fashions fire that killed 113 workers in November, 2012 created an international outcry over the factory safety standard in the country. Bangladesh Garment Manufacturers and Exporters Association leaders earlier said that the international buyers were putting less order in Bangladesh following the Rana Plaza incident while the impact of the building collapse would be seen in the export figure in September-October.[Note: we could not find the data of the month of September-October in the website of EPB.]4.18 Present Challenges in RMG SectorGarment industry in Bangladesh is facing multi-dimensional problems such as acute power crisis followed by non tariff restriction, chronic labor unrest, lack of infrastructural facilities, inadequate supply of material and accessories, inability or lack of efforts to diversify the products and markets, irregularities relating to customs, bond, and shipping (Uddin and Jahed 2007). These major problems disrupt the production and increase the cost of production significantly. Weak and inadequate infrastructures such as poor energy supply, poor port facilities are the common challenges facing by the RMG sector in Bangladesh (Rahman and Anwar 2007). Another problem is port congestion. RMG sector often faces huge losses due to the inefficiency of Bangladesh port. To remain competitive in the world market one of the important strategies is product and market diversification (Rahman and Anwar 2007). Moreover, natural calamity often affected garment industry. For instance, due to the flood in 1998, garment order of Tk 1,000 (US$ 15,000 million) crore could not be exported on time. More than 3 lakh workers were victim of the flood (Quddus and Rashid 1999). There are some other disadvantages that affect the competitiveness of RMG sector. Hartals (Strike due to political reason) and inadequacy of infrastructural facilities undermine Bangladeshs position in the international market (Abdullah 2005a). Furthermore, the productivity of Bangladeshi workers is one-fourth of that of Chinese. The main reason is low literacy rate. Only 25 unions are active among 200 unions registered in the garment sector. Local experts report that only 20 percent of workers receive the minimum legal wage for all hours including overtime (Clark and Kanter 2010/2011). Empirical studies have proved that any expenses for improving working condition are offset by the productivity gains in the case of RMG sector (Berik and Rodgers 2008). RMG exports are also influenced by external factors. For instance, after the terrorist attract on September 11, 2001, export to the United states declined by 2.34 percent in 2003 and 13.04 percent in the middle of 2004 (Abdin 2008). The post-MFA trade environment has created a dual challenge to Bangladesh: firstly, Bangladesh has needed to access raw materials at a competitive price and also RMG sector is now competing with hitherto restricted countries in a quota-free environment (Bhattacharya and Rahman 2001). Handling charge for a 20-feet container in Chittagong port was $640 compared with $220 in Colombo and $360 in Bangkok (World Bank 1999). Inefficiencies of Chittagong port are costing the economy as much as $600 million annually (World Bank 1999). From opening of letters of credit to the clearance of goods from customs involves several complicated and time-consuming steps (World Bank 1999). The hidden costs (bribe) paid by importers per delivery ranged from Tk.4700 to Tk.36800 (about US$100 to $735) (CPD Survey 1997). These inefficiencies and corruption adversely affect competitiveness of Bangladeshi garment in the world market (Robbani 2000). Bangladesh must address a number of challenges if it is to continue current strong development in garment exports, according to a new report from The World Bank. Shortcoming in trade logistics, skill shortage and the requirement to fulfill with government labor standards could all hamper future development in garment exports from the Asian country, says the report, 'Consolidating and Accelerating Exports in Bangladesh. It suggests that better export diversification beyond clothing is needed garments account for more than 75% of Bangladeshs exports but adds that, still in the garment industry, export increase is not to be taken from established. Bangladesh is deeply dependent on exports make driving in the manufacturing division, to afford high efficiency and high-income jobs all envisioned in the countrys Sixth Five-Year preparation. Lead country economist at The World Bank, Sanjay Kathuria said:While Chinas wage growth presents main opportunities for countries with less costly labor, Bangladesh will need to beat significant bottlenecks to make sure that its exports keep on to grow at the pace seen over FY05-10, when dollar exports almost doubled, The World Bank said the sooner export increase would be critical to Bangladesh achieving the rank of growth required to reach its ambitious goal of appropriate a middle-income country by 2021.

The garments sector of Bangladesh has grown-up remarkably and captured a rising share of the world market. The World Bank said. But development in exports cannot be taken for granted. Second only to China, Bangladeshs garment exporting sector will need to participate with the impact of an already huge base and major market share in key markets. Exports can grow quickly, the report suggests, but only if critical bottlenecks are addressed the first of which is the provision of successful trade logistics. Improvements in this region would give the country a competitive frame, ensuring that exports and imported input goods are shipped on time, economically and reliably. Better connections, enhanced customs dealings, better air shipment ability and better rail services could reduce lead times to complete an order by up to 21 days, the report estimates, still if raw materials are sourced from out of the country. In the meantime, it warns that Bangladeshs skills gap is increasingly visible in all manufacturing sectors, and maybe more so in the garment sector, where it reports a high refusal rate for final goods.

Finally, the details highlight the importance of industry complying with the Bangladeshi governments labor and building standard an ever further main issue as the country attempts to move into higher-value garment exports. Investigate the need for the government to work closely & directly with industry to make sure standards are correctly implemented, The World Bank said firms might also require support to rearrange factories out of residential areas and into purpose-built facilities with safer working environment. The RMG sector has economic contribution as well as social contribution in Bangladesh. It has created employment opportunities for about five million people including young, poor and illiterate women. However, recently the RMG sector is going through severe disturbances. The clashes between garment workers and law enforcers create serious crisis in this industry (Islam and Ahmad 2010). In January 11, 2010, the garment workers created violence for getting the facilities such as lunch bills and encashment of casual leaves. Forty workers were injured, production of 30 garment factories were halted. The garment workers had created another aggression on April 28, 2010 for increasing their monthly wage rate from US$ 25 to US$ 70. During that incidence, more than 22 RMG factories were affected and 30 peoples were injured (Islam and Ahmad 2010). The wage rate (0.25 US$ hour) is the lowest in Bangladesh compare with other countries like China (0.35), Vietnam (0.40), Pakistan (0.40) and India (0.60). Overtime allowance is also inadequate in the garment sector in Bangladesh. Another major worker disputes had taken place on May 25, 2010 for low house rent allowance. Thirty peoples were wounded, a police station was burned down and many roads were blocked for several hours.

Worker unrest took place on June 21, 2010 for implementing minimum wages of US$ 70 a month. In that clash, two hundred peoples were injured and thirty factories were ransacked (Islam and Ahmad 2010). The garment workers had violated at Dhaka on June 30, 2010 for protecting the closure of factories, and more than 40 people were injured. The workers have been engaged in street protest, picketing, or blocked of a manager's office or a factory for expressing their dissatisfaction about their wages and other job related issues. One of the reasons for this unrest in the garment industry is legal and institutional failures to ensure labor rights (Islam and Ahmed 2010). Most of the garment factories in Bangladesh do not follow the labor law and ILO conventions (Islam and Ahmed 2010). The Labor Act 2006 (called Labor code) clearly mentions that the wage of a worker must be paid within seven workings days [Section 123 (1)]. Majority factories do not provide appointment letters/contract letters, identity cards and employee handbooks. Health safety and security condition in this sector are also insufficient. The workers do not have a clear idea about their rights and labor laws (Islam and Ahmed 2010).There are some important causes that reduce productivity in the garment sector. Issues like unresolved labor conflict and poor teamwork result in firms ineffectiveness, low motivation, boredom for specialized work, rapid technological change and high cost that reduced innovation (Abdullah 2005b). The most common reasons of labor unrest in the garment sector are wage rate and unpaid wage. Some garment owners do not pay salaries and overtime allowance to the workers on time. However, owners claim that more than 90 percent factories pay workers wages within 1st and 2nd week of the month (Rahman, Bhattacharya 2008). Political unrest at the national level often influences violence at the RMG sector. Sometimes women workers work until 3 oclock in the morning for meeting their shipment deadlines (Jamaly and Wickramnanyam 1996). In most of the factories in the RMG sector, daily working hour is 8.28 hours (excluding overtime working hours) (Bhattacharya 2008). Women generally choose to work in the RMG sector due to their poor economic condition with little or no control over their income. In fact, women face discriminations at work in terms of wage differentials and gender differences. They are working in poor condition and feel insecurity. The women workers are living under the poverty line because of their low wage. They cannot maintain their basic cost of living so that they try to increase their income by working overtime. Until 2010, the minimum wage of US$ 43 per month has not yet implemented. Still they are living below poverty line (Clark and Kanter 2010/2011). Participants were asked to share their opinions about the causes of recent unrest in the garment sector. Most of the participants believe that influence of external factors is the major reason for current unrest in the garment sector (F1:1; F1: 3; F1:6; F3:1; F2:4). For example, some garments where payment are quite high also experience labor unrest (F1:1; F1: 3; & F1:6). Participants reported that there are some external groups always try to create rumor about unfair management practices so that workers become restless and create dispute against the garment management. Dispute in a garment factory also have influence on the workers of another garment factory to create further disputes (F3:1 & F1:1). Apart from the external influences, there are antitrust relationships exists between workers and management. The workers believe that they are always exploited by the Management. Labor unions are promoting these views (F2:4). Poor relationship among workers and the front line managers (FLMs)/supervisors are reasons of labor unrest in garment industry (F2:3). FLMs or the supervisors poor behavior makes the workers stubborn and reluctant to work, and it often creates disputes among the workers in garment factory (F1:1&2). Moreover, if management does not solve workers problem quickly, it also creates disputes (F3:7). A participant reported that strict supervisors sometimes get support from top management due to their high achievement (F2:7). Prompt and participative management approaches to complain are effective remedy to resolve workers disputes.

4.19 New Challenges Five deadly incidents from November 2012 through May 2013 brought worker safety and labor violations in Bangladesh to world attention putting pressure on big global clothing brands such as Primark, Loblaw, Joe Fresh, Gap, Wal-Mart, Nike, Tchibo, Calvin Klein and Tommy Hilfiger, and retailers to respond by using their economic weight to enact change No factory owner has ever been prosecuted over the deaths of workers. Other major fires 1990 and 2012, resulting in hundreds of accidental deaths, include those at that's It Sportswear Limited and the fire at Tazreen Fashions Ltd. Spectrum Sweater Industries, Phoenix Garments, Smart Export Garments, Garib and Garib, Matrix Sweater, KTS Composite Textile Mills and Sun Knitting. major foreign buyers looking for outsourcing demand compliance-related norms and standards regarding a safe and healthy work environment which includes fire-fighting equipment, evacuation protocols and mechanisms and appropriate installation of machines in the whole supply-chain. RMG insiders in Bangladesh complain about the pressure to comply and argue that RMG factory owners are hampered by a shortage of space in their rental units. Scott Nova of the Worker Rights Consortium, a rights advocacy group, claimed that auditors, some of whom were paid by the factories they inspect, sometimes investigated workers right issues such as hours or child labor but did not properly inspect factories structural soundness or fire safety violations. Nova argued that the cost of compliance to safety standards in all 5,000 clothing factories in Bangladesh is about $3 billion (2013). In 2000 garment entrepreneurs had a reputation for shirking custom duties, evading corporate taxes, remaining absent in capital markets, avoiding social projects such as education, healthcare, and disaster relief but, argued authors Quddus and Salim, these entrepreneurs took the risks needed to build the industry. Bangladesh successfully competes in the manufacturing industry by maintaining "lowest labor costs in the world." Garment workers' minimum wage was set at roughly $37 a month in 2012 but since 2010 Bangladesh's double-digit inflation with no corresponding rise in minimum wage and labor rights, has led to protests. A fire broke out on 24 November 2012, in the Tazreen Fashion factory in Dhaka killing 117 people and injuring 200. According to the New York Times, Wal-Mart played a significant role in blocking reforms to have retailers pay more for apparel in order to help Bangladesh factories improve safety standards. Wal-Mart director of ethical sourcing, Sridevi Kalavakolanu, asserted that the company would not agree to pay the higher cost, as such improvements in electrical and fire safety in the 4,500 factories would be a "very extensive and costly modification" and that "it is not financially feasible for the brands to make such investments." On April 24 1137 textile workers factories making clothes for Western brands, were killed when a garment factory collapsed. The Savar building collapse was in the Rana Plaza complex, in Savar, an industrial corner 20 miles northwest of Dhaka, the capital of Bangladesh. It was the "world's deadliest industrial accident since the Bhopal disaster in India in 1984. While some 2,500 were rescued from the rubble including many who were injured, the total number of those missing remained unknown weeks later. Bangladesh's Commerce Ministry, fearing the loss of contracts that represent 60 per cent of textile industry exports On May 9, 2013 eight people were killed when a fire broke out at a textile factory in an eleven-story building in the Mirpur industrial district owned by Tung Hai Group, a large garment exporter. 4.20 Effects of RMG exported Products on Bangladeshs EconomyGarment sector is the largest employer of women in Bangladesh. The garment sector has provided employment opportunities to women from the rural areas that previously did not have any opportunity to be part of the formal workforce. This has given women the chance to be financially independent and have a voice in the family because now they contribute financially. However, the women workers are facing many problems. Most women come from low income families. Low wage of women workers and their compliance have enabled the industry to compete with the world market. Women are paid far less than men mainly due to their lack education. Women are reluctant to unionize because factory owners threaten to fire them. Even though trade unionization is banned inside the Export processing Zones (EPZ), the working environment is better than that of the majority of garment factories that operate outside the EPZs. But, pressure from buyers to abide by labor codes has enabled factories to maintain satisfactory working conditions. In recent times, garment workers have protested against their low wages. The firsts protests broke out in 2006, and since then, there have been periodic protests by the workers. This has forced the government to increase minimum wages of worker. Bangladesh textile sector actually grew tremendously after 2004 and reached an export turnover of US$10.7 billion in FY 2007. Bangladesh's export trade is dominated by the RMG industry. The sector currently employs 2.5 million people about 40% of total manufacturing (85% of these employees are women) and accounts for 76% of the country's export earnings and 10% of its GDP. Bangladesh was the sixth largest exporter of apparel in the world after china, the EU, Hong Kong, Turkey and India in 2006. In 2006 Bangladesh's share in the world apparel exports was 2.8%. The US was the largest single market with US$3.23 billion in exports, a 30% share in 2007.Today, the US remains the largest market for Bangladesh's woven garments taking US$2.42 billion, a 47% share of Bangladesh's total woven exports. The European Union remains the largest regional destination - Bangladesh exported US$5.36 billion in apparel; 50% of th