Posts Tagged ‘export’
I have been reading The Economist, a London based news magazine focused primarily on different aspects of Economics, for quite a while now. I really like the set of data they produce and visuals they create. Of late, I stumbled upon a news, which was more of a “misfit” with what the magazine dishes out in general. Citing a drop in labor recruitment from Bangladesh in Saudi, the reporter speculated whether that’s related to Bangladesh insistence on trial of War Criminals. The data they presented indeed show a sharp drop in Bangladesh nationals heading to Saudi kingdom. To rub salt in the wound, they also showed that the recruitment of Pakistani Nationals are still on and flourishing.
“Where before the ebb and flow of Pakistani and Bangladeshi workers were synchronised, their figures have since come unstuck. Bangladesh’s loss looks very much like Pakistan’s gain.”
The reason, it came up with, was purely political.
“Saudi Arabia silently disapproves of the imminent hangings of the leadership of the Jamaat-e-Islami, the religious party that serves as a standard-bearer for its strand of Islam in Bangladesh. … It will not have escaped the Saudis’ notice that Bangladesh’s foreign minister likened the Jamaat, a close ally of theirs …”
However, it hardly showed any statements or formal communication to prove their point. There are multiple data points those directly indicate that the assertions Economist had made, are false.
Let me accept the fact that indeed recruitment from Bangladesh has gone down to an unprecedented level. The similar data for Pakistan, India, The Philippines and Sri Lanka seems not to be touched by much. (To mention, Economist skipped the data for Pakistan in 2011 that showed a drop, why?) But whether it’s due to a political reason, is not at all indicated.
First, if you look at the history of Bangladesh labor recruitment in Saudi, it’s not a one-way drive up always. Several times recruitment from Bangladesh stagnated and it had little to do with the political story that the Economist is trying to sell. Last time when it fell between 2003-2005, Jamaat was an important ally in the ruling coalition in Bangladesh. So, the story of Jamaat leverage with Saudi affairs looks purely like a myth.
Next, if we look at what caused the nosedive of flow of Bangladesh workers in Saudi, we can find a few key points. First, Saudi Govt. introduced a legislation to limit nationals of a country, so that it does not become more than 20% in any sector and promoted more diversified labor recruitment strategies. Bangladesh, which supplied tons of workers in Agriculture and Construction sectors, ran out of quota. At the same time, Saudi Govt. changed the rules around minimum wages to allow immigrants to work in Saudi only if they earn $147 per month. A lot of poor Bangladesh labors, who fill in the cheap labor categories mostly (62% of worldwide Bangladesh immigrants are “less-skilled” as in 2012 and the number should be higher for those in Saudi), were cut off from entering the Kingdom due to the minimum wage requirements. And wait, all these legislation were passed in March, 2008 and effective from mid of the same year. Indeed, if you look at the graph closely, the numbers peaked in 2007 and started to drop in 2008. However, the current AL Govt came to power only in 2009 and announced its plan to set up a War Crimes Tribunal only in late 2008. So, how could a change in Saudi Law (which otherwise seems country-neutral) be caused by election manifesto in Bangladesh?
To elaborate, there are more regulations to come in Saudi. Recently, a legislation calls for $53 per foreign worker per month to be paid by his/her employer to Saudi Govt. It will definitely worsen the conditions of low-paid Bangladeshi workers in Saudi. Again, this has little relationship with War Crimes Tribunal in Dhaka but closely related to regulatory changes in Saudi.
Meanwhile, it is foolish to presume that Awami League leaders in Dhaka are sitting idle. They are working hard to fix the leaking boat to get the labor export back to where it was. They have a great success with Oman now recruiting tons of Bangladeshi workers and overall labor immigration to Gulf countries from Bangladesh looks to bounce back to the original pre-2008 levels. If we are convinced that Saudi downturn was pure Economics and nothing better could have been done by the Bangladesh Govt. to stop that, then the whole thing translates into a gain of Oman market only. In UAE, recruitment is back to the original level. So, how can we convince ourselves that Jamaat-E-Islami, that holds such power to take Saudi Kingdom beyond their pure rules of Economics and “teach a lesson” to the current Awami League Govt, holds absolutely no power in neighboring Islamic countries such as Oman and UAE?
One little piece of news published in Indian media speaks in the same line that I have been talking about. It highlights that workers below matriculation (i.e less skilled) are no longer going to the Gulf in high numbers. From 2008, when 88,389 workers qualified below matriculation left for the Gulf, the figure fell sharply to 21,129 in 2012. In 2011, number of less-skilled workers heading for Saudi, was just 4011. The news also attributed this to availability of more jobs at home and somewhat praised local Govt. The news for Bangladesh was similar, however, it became a tool for Govt criticism.
Coming to the headline, is it just pure “bad”-journalism case for the Economist to blame? In Freakonimcs, we saw a lot of often unrelated events and actions are tied up with numbers. But, numbers are often dangerous when any sudden change is explained with whatever the author believes or want to make the readers believe in. In this case, whether the author really believed that Govt actions (i.e. War Crimes Tribunal) promoted the fall in Saudi recruitment or wanted us to digest those and hinder the trial process of one of the most heinous Genocides of all times, is left to the readers to decide.
Data Sources :
1. ADBI Presentation
3. ADBI Report
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 :
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).
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