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Bangladesh: Manufacturing Industry Remains a Driver of Economy

Key Information
CapitalDhaka
Population158.8 million
Area148,460 sq km
CurrencyBangladeshi Taka (1 BDT = 0.0127 USD as of 21 July 2016)
Official languageBangla
Form of governmentRepublic

 

Major merchandise exports (% of total, 2015)Major merchandise imports (% of total, 2015)
Readymade garments (69.3%)Textiles (10.0%)
Jute products (2.4%)Petroleum products (8.3%)
Fish & prawns (1.5%)Iron & steel (7.4%)
Top three export markets (% of total, 2015)Top three import markets (% of total, 2015)
US (13.9%)China (22.4%)
Germany (12.9%)India (14.1%)
UK (8.9%)Singapore (5.2%)

Source: Economist Intelligence Unit (www.eiu.com)

 

Political Highlights

Bangladesh’s two main parties – the Awami League (AL) and the Bangladesh Nationalist Party (BNP) – dominate local politics. The secular, centre-left AL, which has been in power since 2009. An officially secular but Muslim-majority country, Bangladesh has seen a rise of violent attacks. In June, more than 8,500 people were detained by police as part of a crackdown on extremism. Tension between secularists and conservative Muslims will continue to pose threats to social stability.

Bangladesh is a lower middle income country as classified by the World Bank. Although the poverty ratio had fallen significantly from 48.9% in 2000 to 31.5% in 2010, given the country’s large population, 50 million people are still living below the poverty line. The government’s priority is to promote economic development. The AL will maintain its broadly business-friendly policies, in order to promote private-sector participation in the economy. While the population growth rate has declined, the labor force is growing rapidly. More and better jobs would be needed to match the growing number of job-seekers. Following the collapse of a garment factory in 2013 which has focused international attention, the government will also need to improve factory safety standards and address problems such as weak infrastructure.

 

Economic Trend

Economic Indicators2013201420152016^2017^
Nominal GDP (USD bn)150.0172.9195.1224.5249.8
Real GDP growth (%)6.06.16.66.56.4
GDP per capita (USD)9581,0891,212*1,3721,503
Inflation (%)7.57.06.25.75.8
Budget balance (% of GDP)-3.8-3.6-5.0-5.2-5.2
Current account balance (% of GDP)1.40.41.41.41.2
Government debt (% of GDP)28.127.326.726.627.5
External debt (% of GDP)22.420.218.6*17.717.2

*Estimates  ^Forecasts
Fiscal years ends on 30 June
Source: Economist Intelligence Unit (www.eiu.com)

 

Almost half of Bangladeshis are employed in the agriculture sector with rice as the dominant food crop. But garment manufacturing is the backbone of Bangladesh’s economy, generating approximately 70% of the country’s export revenues. Plentiful supply of labor force helps attract foreign direct investment in the sector. Today, Bangladesh is the world’s second-largest apparel exporter behind China. Remittances from overseas workers, which accounted for more than 10% of GDP, have also contributed to the economy. In recent years, Bangladesh has consistently maintained economic growth of over 6%, making it one of the world’s fastest-growing economies. In FY 2016, real GDP growth is estimated at 6.5%, bolstered by robust growth in private consumption and investment.

Domestic demand will be determined by manufacturing growth and the fortunes of the crucial garment sector, as well as by the agricultural sector and workers’ remittances. With continued economic recovery in its major markets, the US and the euro area, garment exports is expected to gain traction in the coming years. However, Bangladesh is not part of the Trans-Pacific Partnership, a deal which aims to cut tariffs and set common standards in trade for 12 Pacific rim countries (including the US) but is yet to be ratified by lawmakers in each country. Bangladesh is set to lose its competitive edge in global garment business if it is does not join the trade initiative in the future. At present, Bangladesh pays about 15% duty on its garment exports to the US, whereas Vietnam pays 8.38%. The deal will make Vietnam’s garment exports to the American market completely duty-free.

Chart: Hong Kong Total Exports to Bangladesh
Chart: Hong Kong Total Exports to Bangladesh

Hong Kong-Bangladesh Trade

Total exports from Hong Kong to Bangladesh increased by 8.3% from HK$10,625 million in 2014 to HK$11,502 million in 2015. The top three export categories to Bangladesh were: (1) textiles (+6.3%), (2) telecommunications, audio & video equipment (+6.5%), and (3) clothing & clothing accessories (+11.1%), which represented 66.2% of total exports to Bangladesh.

ECIC Underwriting Experience

ECIC basically imposes no restrictions on covering Bangladeshi buyers. For 2015, the number and amount of credit limit applications on Bangladesh increased by 79.2% and 44.2% respectively, and insured business rose by 59.5%. In 2015, insured products were solely textiles and clothing. The Corporation’s underwriting experience on Bangladesh has been satisfactory, with no claim payment or payment difficulty case reported during July 2015 to June 2016.

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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