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Footwear projected to gain apparel industry status

PICT0877Speakers at a seminar projected on Monday the footwear industry to attain the status the readymade garment (RMG) industry has gained as its export has been growing on an average by 25 per cent over the last 20 years.

They criticised the present tariff regime which, they said, is not only anti-export but also discourages manufacturing of intermediate goods. They identified foreign direct investment (FDI) as a critical issue for export diversification.

They stressed on liberalisation of tariff regime on non-RMG products having small export share which will ultimately encourage the exporters to expand export markets.

Their observations came at a dissemination seminar on ‘Reducing Vulnerability: The Export Diversification Challenges in Bangladesh’.

The International Growth Centre (IGC) and the Brac Institute of Governance and Development (BIGD) of Brac University jointly organised the seminar in collaboration with UKaid at Brac Centre Inn in the city. IGC Bangladesh country director Sultan Hafeez Rahman chaired the programme.

In his keynote presentation based on an ongoing research, Policy Research Institute Chairman Zaidi Sattar said tariff regime is not friendly in Bangladesh, specially for non-RMG products which are exported also like footwear industry.

“Someone exporting his product will have high protective tariff which increases the product price in the domestic market,” said Mr Sattar.

Citing example of the footwear industry, he said footwear is going to be the next RMG as its export is growing by 25 per cent on an average over the last 20 years. This is likely to become number two export sector in terms of earnings very soon.

“There is a protective tariff of 125 per cent on shoes so that the domestic market is very profitable. I won’t be surprised if the footwear producers, who also export, expand their programmes in domestic market as it is growing profitable,” he added.

Mr Sattar pleaded for reducing the present protective tariff of 125 per cent to 25 per cent so that the footwear producers will look for expanding their markets and have a better incentive.

“Something messy is going on with this protective measure. We have to look at an effective protection tariff,” he commented.

Mr Sattar cited the example of Thailand as a successful example for export diversification as it has moved from nature- based industry to labour-intensive industries like clothing and electronics. On the other hand, China has integrated itself in the global production chain.

He emphasised that the FDI is critical for export diversification as it is related to technology, management, market access and knowledge.

“If Bangladesh has a poor FDI, export diversification will face a major challenge. The country needs FDI to exploit global value chain to produce parts and final products,” Mr Sattar observed.

He noted export vulnerability will increase if Bangladesh concentrates on RMG only which constitutes 80 per cent of the total export and will reach 85 per cent very soon. He also predicted the RMG export volume will reach US$ 50 billion 2020.

In his comment on the keynote paper, former adviser to the caretaker government ABM Mirza Azizul Islam said the present policy regime not only creates anti-export bias but also anti-production bias of intermediate goods in the country. Because intermediate products do not receive any protection while many minor products get high protection.

Mr Islam observed although tariff cannot be uniform in any country, too many differentiations create incentives for corruption and dishonest collusion between importers and customs officials.

Differing with Mr Sattar’s views, Mr Islam said Bangladesh is not a price taker in RMG sector in international market. So there is not question of vulnerability as long as price shock is concerned as Bangladesh exports low-end products.

“If we think about export diversification, we have to consider both price and income elasticity of demand,” he said.

Mr Islam suggested going for intermediate goods as intra-regional trade has been concentrated on these goods. He also recommended for targeted FDI investors to boost the export basket.

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Source: Financial Express

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