Economic Environment Group G Section 1

Topics: International trade, Free trade, Export Pages: 15 (795 words) Published: June 7, 2015
Master in Management
IE Business School
Group G

TRADE AND INDUSTRIAL POLICY
The Bangladesh Case
Sara Saud Alabdulhadi
Tushar Badjate
Mario Bernús
Giulia Bloise
Philipp Bongartz
Enid-Marie Choffel
Joseph Zeidan

BANGLADESH

IE Business School - Group G

1

Question 1: Is the growth of the Bangladesh garment industry during the 80s and the 90s an example of an economic success story?

GARMENT INDUSTRY SETTLEMENT
The Desh Garments Ltd. Factory

Daewoo-Desh
Agreement

First Garment
Factory

1979

1979

IE Business School - Group G

Knowledge Leak /
More than 115
Increasing returns Workers Leave Desh

1981

1983

More than 700 Garment
Companies are in place

1985

2

ECONOMIC SUCCESS!
Sectoral Share
1979-80 1984-85 1989-90 1994-95 1999-00 2003-04 2012
in GDP
Agriculture

33.21

31.46

29.52

26.02

25.58

22.83

17.7

Industry
17.08
Manufacturing

18.70

20.78

24.28

25.70

27.80

28.5
17.6

Services

49.84

49.70

48.70

48.72

49.37

53.09

49.72

Source: Policy Reforms and Trade Liberalization in Bangladesh, Nurun N. Rahman

GROWTH PERFORMANCE OF THE MANUFACTURING SECTOR

Source: Bangladesh Bureau of Statistics (BBS)

Is this enough?

IE Business School - Group G

Question 1

ECONOMIC SUCCESS?

BANGLADESH UNEMPLOYMENT RATE

Source: Bangladesh Bureau of Statistics (BBS)

Source: WWW.THEGLOBALECONOMY.COM

IE Business School - Group G

Question 1

ECONOMIC SUCCESS?

Source: Transparency Internati
onal’s Corruption Perceptions
Index 2012

CLIMATE CHANGE VULNERABILITY INDEX

Source: Maplecroft Global Risk Advisory Firm

IE Business School - Group G

Question 1

Question 2: Which trade and industrial policy was implemented by the government of Bangladesh during the initial years of this industry’s expansion?

Bangladesh Political Development
1971-1974

1975-1989

1990-2005

Constrained
Patrimonialism

Clientelistic
Authoritarianism

Competitive
Clientelism

Little legislative activity in the areas of
labour law, industrial relations or finance.

Tariff Reforms, Elimination of Import
Restrictions, Industrial Export Promotion.

Washington Consensus.

IE Business School - Group G

6

1980s – EXPORT ORIENTED
1. Tariff Reforms:
-

Reduction of the level and rationalization of structure of tariffs in textile, steel and engineering, chemical and electronics industries.

2. Import Restrictions Removal:
-

Special Bonded Warehouse Systems (suggested by Daewoo) for duty-free imports to exporters.

3. Industrial Export Promotion:
-

Back-to-Back Import Letters of Credit for ensuring security in international exchanges. Provision of Infrastructure for Export Processing Zone (EPZ).

IE Business School - Group G

Question 2

1990s – TOWARDS FREE-TRADE
Compliance to WASHINGTON CONSENSUS
(IMF, World Bank)
1.
2.
3.
4.
5.
6.

Liberalize international trade.
Open the nation to foreign direct investment.
Privatize state enterprises.
Reduce public expenditure and tax rates.
Ensure that interest rates are market determined.
Adopt floating exchange regimes and let exchange rates be competitively determined.
7. Deregulate markets except where compelling grounds exist for market intervention to ensure safety, protection of the environment or consumers or to ensure prudential supervision of financial institutions.

IE Business School - Group G

Question 2

EXPORTS-IMPORTS GROWTH

Source: WWW.TRADINGECONOMICS.COM | WORLD BANK

IE Business School - Group G

Question 2

TOWARDS LIBERALIZATION
MOST IMPORTED COMMODITIES
FROM: China, India, Singapore.

MOST EXPORTED COMMODITIES TO:
U.S.A., Germany, United Kingdom.

1. Cotton (all types), cotton yarn/thread and cotton
fabrics.

1. Readymade garments (Knitwear, Woven
garments).

2. Mineral fuels, mineral oils and products of their
distillation bituminous substances;...
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