The International Finance Corporation has identified three sectors — leather and footwear, plastics, and light engineering — as highly potential areas for export diversification beyond the readymade garments.
The identification considered not only the contribution to increasing export income but also the potential to meet the economic goals such as creating employment opportunities for the large number of young entering the job market every year, said an IFC report released on Sunday.
The report ‘Building Competitive Sectors for Export Diversification: Opportunities and Policy Priorities for Bangladesh’ was launched at an event organised by the Policy Research Institute in Hotel Amari in the capital.
It said that a diversified export portfolio comprising competitive sectors, such as leather and footwear, plastics, and light engineering, would help create greater access to international markets for Bangladeshi products.
The report made recommendations for policymakers on strategy development to integrate priority sectors with the global value chain.
IFC senior economist M Masrur Reza and IFC private sector specialist Hosna Ferdous Sumi presented the report at the event.
Despite having significant contribution to the country’s economy, lack of environmental and social compliances is the major constraints to the leather sector growth, the report said.
It also identified poor handling of raw materials and lack of skilled workforce as the other challenges for the sector.
According to the report, compliance and availability of and access to finance and limited market access are the major challenges for the plastics sector.
For the light engineering sector, the IFC identified availability of raw materials, utility supply and technology and process sophistication as major constraints.
Speaking on the occasion as chief guest, prime minister’s economic affairs adviser Mashiur Rahman said Bangladesh’s economy was moving forward at a stable pace.
‘The government has launched a concerted effort to diversify its exports and we sincerely hope this pioneering publication will help inform the policy discourse on sustainable export-led growth,’ he said.
Commerce secretary Mohammad Jafar Uddin said exporting was one pathway to leveraging the dynamic potentials of the global economy.
‘We strongly believe that trade is a powerful engine of growth, not just for the world economy, but very much so for the developing economy of Bangladesh,’ he said.
PRI chairman Zaidi Sattar cautioned that most new products introduced by exporters did not sustain beyond the first year.
He stressed the need for addressing export sustainability on priority basis as it was a critical challenge for maintaining diversification.
Bangladesh has a serious problem with export concentration as the majority of the export earnings come from the readymade garment sector, said PRI executive director Ahsan H Mansur, suggesting that the country should diversify both products and markets.
Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh president Saiful Islam said only three local leather and leather goods companies had the Leather Working Group (LWG) certification.
So the export earnings target of $5.0 billion from leather and leather goods by 2021 might not be possible, he said.
The government should facilitate quick completion of the Central Effluent Treatment Plant of the Savar Tannery Industrial Estate for ensuring better prices for locally made leather and leather goods, he added.
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