ADB urges BD to diversify exports to reduce economic vulnerabilities

Staff Reporter :
The Asian Development Bank (ADB) has highlighted in its recent policy brief that Bangladesh’s heavy reliance on single industry,Readymade Garments (RMG) sector, has made the country’s economy vulnerable.
The brief emphasizes that the country’s export profile remains heavily concentrated in apparel products.
Titled “Expanding and Diversifying Exports in Bangladesh: Challenges and the Way Forward,” the ADB policy brief underscores the importance of addressing trade policy issues and enhancing export competitiveness as core components of the reform agenda amid the current economic conditions.
Authored by Mohammad Abdur Razzaque, an economist (Consultant) at the South Asia Department (SARD) of ADB, along with Rabiul Islam Rabi, a Research Analyst (Consultant) at SARD, and Barun Kumar Dey, a Senior Economics Officer at SARD, the brief offers insights into strategies for broadening and strengthening Bangladesh’s export base to ensure sustainable economic growth.
The Asian Development Bank (ADB) document highlights that despite recommendations for reforms in national planning documents such as the 6th, 7th, and 8th Five-Year Plans, these reforms have not been sufficiently prioritized for implementation.
According to the ADB, high tariff protection that favors import-competing sectors, along with weak domestic product standards and compliance, has created disincentives for exports outside of the readymade garments sector.
The ADB also points out that given that over 70 percent of Bangladesh’s exports benefit from Least Developed Country (LDC)-specific trade preferences, graduation from LDC status could potentially impact export competitiveness.
To improve export competitiveness and achieve diversification, the ADB suggests several key actions. These include addressing policy-induced biases against exports, enhancing product quality and standards, attracting foreign direct investment to integrate with global supply chains, managing exchange rates prudently to enhance external competitiveness, addressing supply-side constraints specific to sectors, and tackling high business costs. These actions are deemed essential for advancing Bangladesh’s export profile and economic resilience.
The policy brief from the Asian Development Bank (ADB) proposes several policy recommendations aimed at addressing export disincentives and promoting export diversification in Bangladesh.
Firstly, tackling policy-induced export disincentives is crucial, particularly the anti-export bias created by protective measures such as high tariffs and para-tariffs. ADB emphasizes the importance of tariff rationalization to mitigate this bias, suggesting that lowering tariffs can encourage domestic manufacturing while potentially balancing any revenue loss through increased domestic production.