Too much reliance on one export item is a major risk: ADB

Bangladesh's earnings from exports, excluding apparel, grew at a compound annual rate of 7.6 percent over the past three decades or so whereas garments witnessed 14.6 percent growth, which highlights a lack of product diversity, according to a new study yesterday.

Earnings from garment shipments were nearly equal to that from the rest of the exports in the late 80s.

However, garment exports surged from $1 billion in the early 1990s to $47 billion in 2023 while earnings from the export of the rest of the products rose from $1 billion to just over $8 billion.

For Bangladesh, export concentration has emerged as a major and longstanding challenge, as the success in garment exports did not come about in other sectors, said Asian Development Bank (ADB) in the June issue of its South Asia Working Paper Series.

This overwhelming dependence on one category of exports means that Bangladesh's export basket is one of the least diversified in the world, it said.

Around 99 percent of the growth in export earnings was generated from the same types of products.

New products, which are components for export diversification, accounted for less than 5 percent.

In striking contrast, for all comparator countries, new products accounted for a much higher proportion of their earnings growth, such as almost 78 percent for Malaysia, about 42 percent for Vietnam and 32 percent for China.

When compared with the achievements of non-least developed countries, Bangladesh's export success does not leave room for complacency.

Most Southeast Asian countries exhibited a much stronger export performance than Bangladesh.

Given the size of Bangladesh's population of 170 million, the current annual export earnings of $55 billion is small compared to that of most countries of comparable size.

The 91 million people-strong Vietnam economy, for instance, makes exports of more than $360 billion.

Indonesia, with a population of 218 million, attained $240 billion in exports. Thailand has a population of 72 million and its export earnings stand at around $323 billion.

Much smaller countries in Southeast Asia, such as Malaysia and Singapore, are also extremely successful exporters.

Products which make up notable portions of Bangladesh total exports are knitwear garments (44.6 percent), woven garments (37.2 percent), home textile (3.3 percent), footwear (2.3 percent), jute products (1.9 percent), and fish (1 percent).

Taken together, the top 20 products account for up to 80 percent of Bangladesh's total exports or more, compared with 37 percent to 59 percent for countries like China, India, Malaysia and Vietnam respectively.

However, the top 100 exports of Bangladesh make up more than 90 percent of its total exports, as against 69 percent for China, 73 percent for India and 84 percent for both Malaysia and Vietnam.

The dominance of garments in the top 100 indicates a very high degree of export concentration, even within the clothing export sector, the study also said.

Recent estimates indicate that Bangladesh has been unable to fully capitalise on its export potential, despite its geographic proximity to India and China, the world's two-largest economies.

Bangladesh's exports to India are around $6 billion below the projected level while exports to China fall short by around $2 billion.

Moreover, Bangladesh also exports significantly less than projected to other South Asian countries and to Southeast Asia.

The collective gap in exports to South Asian countries amounts to around $7 billion while to Southeast Asia $1.6 billion.

Hence, there exists untapped export potential of around 25 percent of Bangladesh's total exports to these regions.

Bangladesh also suffers from a lack of export market diversification. More than four-fifths of its exports are destined for North American and European Union markets.

Since 2000, however, the share of the top-15 markets in the country's total exports has declined from close to 90 percent to just above 82 percent.