Remittances: A major thrust is feasible

Should there be a shortfall in export earnings from RMGs in the post MFA conditions, which seems very likely to be significantly so, the national current account balance can be maintained even, say, around its 2002/03 position (a surplus of about US$373 billion -- see Bangladesh Bank, Economic Trends, December, 2003, p. 18) only if commensurate foreign exchange receipts can be secured through increased export of other goods and services with the import bill not going grossly out of step, and/or increased net transfer from abroad in terms of income, loans and grants, and remittances. To be sure, the current account of the balance of payments incorporates net foreign exchange earnings from merchandise exports and imports and trade in services, net external income, and net current account international transfers -- both official (including loans and grants) and private (mainly remittances by Bangladeshi workers abroad).

During the 1970s and up to mid-1980s, jute and jute goods accounted for the majority of Bangladesh's export earnings. But the export of jute and jute goods declined since then in both absolute and proportional terms, mainly because of synthetic inroad into the jute end-uses and the failure to promote alternative uses of jute. [In absolute terms the jute and jute goods exports fetched, in current prices, US$591 million in 1980/81; US$417 million in 1985/86; US$369 million in 1990/91; and US$305 million in 2001/02. Proportionally: 74 per cent of total export earnings in 1980/81; 46 per cent in 1985/86; 22 per cent in 1990/91; and only 5 per cent in 2001/02 -- see for export values: Bangladesh Bureau of Statistics, Government of Bangladesh (GoB), Statistical Pocket Book 1983 (p. 382), 1987 (p. 177), and 1992 (p. 204), and Ministry of Finance, GoB, Bangladesh Economic Review 2003, p. 51 of Bangla version; and for exchange rates: Economic Trends, op. cit., September 1986, p. 48 and December 2003, p.83].

As the jute export sector declined, there was the welcome development of the export of RMGs, particularly during the 1990s although the sector started to grow from the early 1980s (nil in 1980/81; US$181 million or 20 per cent of the total export earnings in 1985/86; US$563 million or 50 per cent in 1990/91; and US$4,583 million or 77 per cent in 2001/02 --references are the same as cited in the preceding paragraph). Despite rather low value addition, the RMG industry has provided a major source of export earnings and employment, particularly of women. An alternative to jute and jute goods exports arrived -- and helped the export sector along.

Now, with a major decline in the RMG exports in prospect, the question arises: what, if any, are other sources of Bangladesh's export earnings which can make up for the likely shortfall in the export earnings from the RMGs and, indeed, make for increased export earnings beyond that in future. Let me, like other commentators on the issue of RMG export, also make the point that in the remaining eleven months, no stone must be left unturned by all concerned to enable the RMG industry to face the new circumstances effectively and successfully following the dismantling of the quotas.

Even if RMG exports can be maintained at reasonable levels in future (the chance of which seems rather bleak as things stand now), efforts are called for to diversify and increase exports towards improving the country's prospects in the global economy. The issue of diversification of exports has been discussed a lot within official circles and outside but progress has been limited. Moreover, in the wake of import liberalisation, the counterpart domestic industries and enterprises have been facing steep competition from imports within Bangladesh; and many micro and small enterprises, particularly in rural areas of the country, have had to be closed down and possible new ones could not be established in the face of competition from liberalised imports. On the other hand, in the international market, our export efforts naturally face competition from other countries supplying the same goods and services. At this stage of its development, Bangladesh has been unable to benefit from increased international trade under the liberalised trade regime.

In fact, Bangladesh has been losing out in both domestic and international markets. This issue needs serious attention and a reorientation of policy is urgently needed in terms of necessary support to both domestic- and export-oriented industries, particularly the latter, which have the potential to achieve competitiveness within a reasonable time period.

While all export possibilities must be seriously explored and pursued, one particular export area in which Bangladesh can make significant progress with relative ease, if appropriate pre-planning is undertaken, is export of human power. In this context, the point needs to be made that the movement of workers remains excluded from the ongoing globalisation. In fact, movement of people to developed countries from the developing world is extremely tight, becoming increasingly difficult in the wake of Twin Tower disaster on 11 September 2001.

Hence, the ongoing economic globalisation, which allows free movement of investment and goods and services, is partial and excludes a key factor of production, which the developing countries has in abundance to export. The developed countries have not also opened their markets for the goods and services of the developing countries as agreed under the Uruguay Round of trade negotiations. Moreover, the developed countries, in particular the USA and EU, have been seriously damaging the prospects of many developing countries through huge subsidies on, for example, their (i.e. of the developed countries) crop agriculture such as wheat, rice, and cotton as well as livestock.

However, as a consequence of aging population and declining birth rates, the developed countries face shortfall of both unskilled and skilled workers. The situation is likely to worsen in future. A UN report issued in March 2000 (see Newsweek, 19 January 2004) projected that the domestic shortfall in the workforce in the EU countries could be as high as 159 million by 2025. They need foreigners to fill up the gaps. The number of foreigners required to make up for the shortfall in the workforce will also be increasing in the USA, Japan, and other developed countries in future. This is an opportunity from which Bangladesh can benefit in a major way.

In 2002/03, remittances by Bangladeshis working abroad have totalled an amount as large as US$3.062 billion (Economic Trends, op. cit., p. 71). This is about twice the foreign aid (concessional loans and grants) actually received by Bangladesh annually in recent years. This also implies that, in 2002/03, on gross basis, remittances are about 33 per cent less than export earnings on account of RMGs (US$4.583 billion as of 2002/03), but, on a net basis, remittances are the country's largest source of foreign exchange receipts, well ahead of RMGs -- in 2002/03, the net export earnings from RMGs work out at between US$2.29 and 2.52 billion, given that imported clothes and other materials account for 45-50 per cent of the total earnings. Given the increasing workforce shortages in the developed countries in future, the number of workers going to those countries, particularly skilled workers and, as a consequence, remittances can be further increased very significantly by Bangladesh in future, if certain steps are taken. These include the following:

? The flow of unskilled workers abroad should be facilitated by the government by removing corruption in the process of facilitation by both private and public sectors and by liaising with existing and possible host countries to find out their needs for unskilled foreign workers and taking steps (i.e. information dissemination, institutional facilitation) to help unskilled workers to go to those countries where needs for such workers exist.

? In so far as skilled workers are concerned, to be able to take advantage of the skill gaps in the developed world, the key steps to be undertaken include the following: (a) ascertain what skills will be needed in which countries over the coming years (5 or 10 or 15 years) and organise effective training programmes to generate those skills, (b) negotiate with those countries to take skilled people from Bangladesh, as required by them, (c) put in place effective corruption-free institutional facilities to enable the trained people to travel to their respective work destinations without hassle, (d) organise effective money transfer systems for quick delivery of monies sent by people working abroad to the addressees without any hassle and at good enough exchange rates, and (e) encourage and facilitate investment of the funds sent by them in such activities as would generate attractive profits. The last three steps -- (c), (d), (e) -- are relevant not only for skilled workers but also for unskilled workers; and the last two -- (d), (e) -- for both the existing and future Bangladeshi migrant workers of all types.

In concluding, I wish to point out that we could not benefit much from the global mega dotcom regime due to lack of foresight on the part of the policymakers and others concerned and their inability to take necessary preparatory steps. Let us not miss out on the emerging/expanding opportunities of sending skilled workers to the developed world. But competition will be tough in this arena, as other developing countries including our neighbours will be hotly pursuing the goal of securing maximum possible benefit from this expanding opportunity of earning foreign exchange. Our policymakers and entrepreneurs should, therefore, pay heed and act decisively and effectively in the pursuit of maximising our share, while time remains.

Dr. Qazi Kholiquzzaman Ahmad is President, Bangladesh Economic Association (BEA), and Chairman, Bangladesh Unnayan Parishad (BUP).