The government has made a lot of efforts over the past two decades to diversify the country’s export base, but has failed to get expected outcomes ahead of the country’s graduation from the least developed country bloc – scheduled for the next year, said economists.
At least three projects linked directly or indirectly to the expansion of the narrow export base have been implemented with loans from multilateral lenders during the period, in addition to the ‘One District, One Product’ initiative at the government level.  Â
But the export potentials of the sectors like leather and leather goods, pharmaceuticals, and light engineering products have largely remained untapped, said Centre for Policy Dialogue distinguished fellow Mustafizur Rahman.
The readymade garment exports accounted for some 85 per cent of the overall export revenue of $50 billion in 2024 with a heavy reliance on the single item -- a weak point amid a tough competition on the international market.
A $48 million World Bank-funded export diversification project was meanwhile implemented between 1999 and 2024 that mainly helped the county to diversify its RMG exports.Â
The share of knitwear export value doubled during this period reaching $2 billion by 2003-2004, comprising 38 per cent of the total garment exports compared to 25 per cent at the beginning of the project, according to WB project evaluation.
The second WB-funded project titled ‘Export Competitiveness for Jobs’ worth around $119.12 million has been implemented since 2017 with the aim of strengthening competitiveness in leather, footwear, light engineering and plastic goods, and generating about 90,000 jobs.
On September 17, the project was revised for the third occasion and its deadline was extended until next June.
The Asian Development Bank is providing $300 million loan via the ‘Skills for Employment Investment Program’ which is indirectly linked to export diversification by improving the country’s light engineering sector.
‘Projects alone are not enough to achieve export diversification,’ said M Masrur Reaz, chair and chief executive officer of the Policy Exchange Bangladesh.
Terming export diversification as a multidimensional issue, he said that the country should overcome problems like the lack of technology as well as skilled manpower, insufficient logistics, absence of market intelligence, and low foreign direct investment.
Highlighting the need for export diversification for the country’s LDC graduation, economists pointed out that the values of the export volumes from Bangladesh and Vietnam were almost same in the middle of the 1990s.
But Vietnam outpaced Bangladesh in the following years.
The value of the Southeast Asian country’s overall exports jumped from $4.83 billion in 1995 to $384 billion in 2022, expanding into higher-value products like electronics, automobiles, and processed agricultural goods.
On the other hand, the $4.18 billion value of Bangladesh’s overall exports in 1995 went up to $59 billion in 2022, with the RMG sector alone accounting for around 85 per cent of the narrow export basket.
The success story of Vietnam depended on a number of factors, including a more favourable investment climate and a more diversified export basket, said Masrur Reaz.
The foreign direct investment inflow is also closely linked to export diversification, said the economist, explaining that FDI ensures technology transfer and the diversification of market and products, too.
The FDI flow in Bangladesh has remained below 1.5 per cent of the gross domestic product compared to the FDI in Vietnam which reached as high as 12 per cent.
The ease of doing business, turnaround time of ships at ports, transport logistics, and the availability of skilled manpower are crucial for attracting FDI.
‘Bangladesh has been lagging behind in streamlining these crucial issues for long, observed Mustafizur Rahman.
Economists said that the country would face stiff challenges to complete its graduation from the LDC category from the next year, because of its narrow export basket, concentrated heavily on RMG.
They suggested coordinated strong government measures to address the problems like the ease of doing business, port congestion, and insufficient logistics to strengthen the efforts for export diversification.