VOL 16 NO 432 REGD NO DA 1589 | Dhaka, Friday November 13 2009

Bangladesh survives global economy meltdown

M.S. Siddiqui
Over the past few years, a series of riots spread across the Third World countries. Furious
mobs have raged against skyrocketing food and energy prices, stagnating wages and
unemployment in India, Senegal, Yemen, Indonesia, Morocco, Cameroon, Brazil,
Panama, the Philippines, Egypt, Mexico and many other countries. Unrest rocked the
streets of China, France, Russia, and elsewhere. People revolted in Greece.
For the most part, those living in wealthier countries took little notice. But now, with the
global economy crashing down around us, people in even the wealthy nations are reacting
violently to what they view as an inadequate response to the tumbling economies. Even
the cries of "burn the shit down!" are being heard in the Western European countries
maintaining the highest standards of living in the world - where adequate social safety
nets, decent health care, heavily subsidised education, minimum living wages, and a
dignified retirement are, in large part, guaranteed. The far ends of the ideological
spectrum appear to be gaining currency as the crisis develops, and people grow
increasingly hostile toward the politics of the status quo.
For the first time, after the end of the World War II, global gross domestic product (GDP)
will contract, by an estimated 1.4 per cent in 2009. The collapse in world trade has been
even more striking. Merchandise trade will decline by a magnitude that has not been
matched in peacetime since the Great Depression of 1930s.
The global financial markets had been sputtering for more than a year. They are exposed
to low-quality mortgage-backed securities leading to several high-profile financial
failures in the US and UK.
On the other hand, according to World Bank development indicator, Bangladesh, along
with some other countries including Brazil, China and India, has made a miraculous
achievement in economic development with a GDP growth of 6.2 per cent in 2008. The
other three countries, Brazil, China and India, unlike Bangladesh, have strong industrial
base and good international market as well as very good regional export market. They
have very good agricultural production. But, Bangladesh has readymade garment-
dominated export portfolio having market in the USA and Europe only. Though there
was a strong possibility of sharp decline in export market for Bangladesh, these
development indicators present Bangladesh, along with Brazil, China and India, with
sustainable growth despite global economic meltdown.
Bangladesh began to feel the pinch of the recession in its overseas employment and
export sectors by the end of 2008. The garment sector buyers advised the manufacturers
to go slow with orders and delayed further orders. Then, most of the garment industries
started tough negotiation with buyers on low price of the products. The manufacturers
had to accept minimum prices at almost break-even point to survive. According to the
statistics of the Bangladesh Export Promotion Bureau (EPB), the country's export earning
in December 2008 dropped by over 10 per cent due to the declining demand and prices in
global markets.
Bangladesh Bank (BB), the central bank of Bangladesh, expected the foreign exchange
reserve to stand over US$ 6.1 billion (610 crore) by April 2009 due mainly to hefty
growth in inflow of remittances and export earnings. According to BB statistics,
Bangladesh's remittance inflow grew 24.43 per cent to around US$ 7.03 billion (703
crore) in the July 2008-June 2009 fiscal year despite job cuts around the world. The
World Bank (WB) reported on 30th July, as published in local newspapers, that
Bangladesh is expected to receive remittance worth US$ 10.87 billion (1087 crore) in the
current fiscal year if the global oil price does not fall and the local currency is not
appreciated.
Bangladesh's exports in the first eight months of the fiscal year, July 2008-June 2009,
posted 15.90 per cent growth and stood at around US$ 10.35 billion (1035 crore). The
country's Letter of Credits (L/Cs) against imports, worth 1.57 billion (157 crore), were
settled in February over that of US$ 1.999 billion (199.9 crore) in January, according to
the central bank's provisional statistics.
Bangladesh's frozen food export posted a 7.97 per cent growth in the first five months of
fiscal year 2008-09 over the target, despite global market slowdown. According to the
Bangladesh Frozen Foods Exporters' Association (BFFEA), the country fetched over US$
230 million (23 crore) in the July-November period from export of frozen food items to
over 40 countries of the world.
Export earning in the July-November period was also 5.28 per cent higher than that in the
same period of fiscal year 2007-08 though the financial meltdown hit many developed
countries even after a fall in consumption of frozen food items there. Prices of most
frozen foods, second largest export item of Bangladesh after garments, also declined to
some extent in global market as their consumption fell.
In the current fiscal year 2009-10, rice production is expected to reach the highest level in
the history of Bangladesh. Primary forecasts by different public and private organisations
show that rice production will stand at 3.21 crore tonnes by the time the country enters
the next fiscal, up more than 8.12 per cent from a year ago. The new height in rice
production will be more than the country's total estimated demand for 3.0 crore tonnes.
A provisional estimate by the Bangladesh Bureau of Statistics (BBS) shows that the
agriculture and forestry sector grew by 4.81 per cent in the current fiscal from 2.93 per
cent a year ago, enabling the economy to register a growth of 5.88 per cent, when growth
in the manufacturing sector is down.
"It was a very timely decision aimed at providing subsidy for non-urea fertilisers to
promote using balanced fertilisers, and to reduce the cost of agricultural production," said
Centre for Policy Dialogue (CPD), in its report titled the State of Bangladesh Economy in
FY 2008- '09.
"The expected good Boro harvest will have a sobering effect on the food grain market
with positive impact on food inflation in the country. If the current trends are maintained,
it is more likely that the average inflation will be softened further in the coming months,"
said Bangladesh Bank in its quarterly publication for January-March 2009.
Bangladesh also experienced a sharp fall of 45.0 per cent in manpower export in January
this year due to the declining demand in some Middle East countries, which downsized
their development activities amid the financial slowdown.
On the other hand, the ongoing global economic downturn could not hit Bangladesh
seriously as its economy mainly depends on the agricultural sector, remittance earning
from worker abroad and export of low-end garments to the West.
The writer, a part-time teacher at The Leading University, can be reached at
shah@banglachemical.com