The New Horizon

A new world explored with a rational view

Bangladesh and its trade imbalance with Asia

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I tried to collect a few statistics on how Bangladesh fares against other Asian countries in terms of trade balance. This is my follow up article on India Bangladesh trade imbalances. In my previous article I tried to analyze the reason behind the trade imbalance against Bangladesh. The World Bank report provided valuable insight into the same matter.

The statistics shows that Bangladesh runs huge trade deficit against almost all Asian economies. It definitely includes industrial powerhouse Japan and Korea, rapidly developing India and China and even underdeveloped countries such as Myanmar and Nepal. While I considered only 25 top countries in the order of trade volume, I am sure similar statistics would prevail with most of the other Asian countries. Here’s a quick look at top 15 trading Asian countries in terms of export and import (2009), in Euros :

Bangladesh Export-Import against other Asian countries

Bangladesh Export-Import against other Asian countries

So, how big is the trade imbalance? Even though there’s an argument saying Bangladesh exports are hampered by restrictive policies or Non-Trade-Barriers of all these countries, it’s difficult to digest that all these countries adopt similar policies against Bangladesh.

The other argument says Bangladesh has lopsided trade record against India and China. The prescribed remedy is to “fix” these two trade imbalances to get Bangladesh reduce its trade deficit. Again, if “lopsided”-ness is the solo measure of “bad”-trade, then we can look at top 25 Asian countries in terms of Bangladesh import % in total trade. To make this index more clear, the higher the number is – the “worse” the trade is for Bangladesh (i.e. more lopsided in favor of the other partner).

Bangladesh Trade - Import in Total Trade

Well, in this figure, Uzbekistan gets the top spot. Bangladesh imported 269 million Euro worth of goods while exported 2 million Euro worth of goods. In that list India comes at 11th (score of 82), just before the other neighbor Myanmar. China, which runs the highest trade surplus against Bangladesh, figures at third slot, with a score of 95, just behind Kuwait at 96. Ah, the “lopsidedness” of India-Bangladesh trade is better than at least 10 other Asian partners!!

Now, comping back to the “lopsidedness” issue. Let me dig deeper on Uzbekistan-Bangladesh trade. As per this news source –

“Bangladesh imports over 40 percent of its annual 4.0 million bales of cotton requirement indirectly from Uzbekistan, the world’s third largest cotton exporter.”

The trade between Uzbekistan and Bangladesh is normal – Uzbekistan has a lot of surplus cotton bales to export because it doesn’t have the surplus manpower to produce garments out of it. Bangladesh is always looking for cotton to keep its garments and textile industry growing with its active labor force in action. So the win-win fuels such a huge “lopsided” trade deficit for Bangladesh. The import of cotton bales from Uzbekistan enables Bangladesh to avoid importing the same from its competitors – India and China. That in turn enables the textile industry to be more competitive (import of raw materials from competitor means losing competitiveness). So, trade imbalance is not a bad thing, after all.

Should there be a concern over all these trade imbalances? There’s no fixed answer. Currently Bangladesh finances its imbalance by higher export to developed EU+US market and by remittances from Bangladeshis working all over the world (especially in the Middle-East). But, the fact that Bangladesh is running a trade deficit against less industrialized countries such as Myanmar, shows the lack of industrial presence.

There are some figures those are worse that that. Bangladesh exports goods worth of only 35 million Euro to Singapore, 24 million Euro to Malaysia and 24 million Euro to Thailand (corresponding Indian figures are 3.6bn, 1.6bn and 1.1bn Euro). All these countries are located quite close to Bangladesh and are relatively developed. There’s a good opportunity for Bangladesh to increase exports to these countries and participate in labor intensive component manufacturing industries of these nations. Similarly, Bangladesh exports 5 million Euro worth of goods to Kuwait and 4 million Euro worth of goods to Qatar. Given that these two countries have highest per ca-pita income in the region (and of the whole world too) and a large number of Bangladeshi migrants are living in those countries, Bangladesh should do more to increase its export to those.

So, there are lots of food for thought for Bangladesh policymakers in terms of trade relations. Since the center of gravity for World Trade is slowly but surely moving towards Asian countries, and given that most of the Asian countries may not need “cheap-labor” as the developed countries look for these days, Bangladesh could be in trouble if it relies too much on export to developed nations only. It certainly needs to “do more” to increase exports to other parts of Asia. Otherwise, there’s a chance to lose out in the race to globalize.

Source for Bangladesh Trade Statistics : EU Report

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Written by Diganta

December 28, 2010 at 1:23 am

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