Comment on “Export Diversification in Bangladesh: Overcoming Policy Impediments”

Abstract

Ginting et al. (2025) examine Bangladesh's export diversification challenges amidst significant economic growth driven primarily by the Ready-Made Garments (RMG) sector. It underscores the risks associated with over-reliance on RMG exports and the upcoming transition from Least Developed Country (LDC) status. Despite being a top policy priority, efforts to diversify exports face obstacles such as protectionist trade policies, limited tariff liberalization, and currency appreciation. While there is agreement on policy options, implementation is hindered by fiscal constraints and inflation. Ginting et al. advocate for proactive policy reforms, including improving the investment climate, reducing business costs, and attracting foreign direct investment (FDI) to enhance export competitiveness and facilitate the post-LDC transition.

Ginting et al. emphasize the importance of addressing structural barriers to promote non-RMG exports and highlight the risks of RMG sector dominance and the effects of LDC graduation on export competitiveness. However, they could strengthen their analysis by comparing diversification efforts with successful models like Vietnam and providing a more nuanced examination of potential policy reforms. Moreover, while Ginting et al. acknowledge the need for strategic engagement post-LDC graduation, they could expand on specific strategies and alternative support mechanisms for exporters.

Beyond highlighting challenges, Ginting et al. could propose actionable solutions to enhance the investment climate, reduce business costs, and facilitate technology transfer to non-RMG sectors.

Given the imminent LDC graduation, Ginting et al. should explore strategies for a smooth transition and mitigate the adverse effects on export performance. There are several related issues to be addressed. For example, how Bangladesh could proactively engage with trade partners to negotiate extended trade preferences and design alternative support mechanisms for exporters? Are there any lessons from similar other countries to be learned? How to address Bangladesh's infrastructural bottlenecks and enhance its export competitiveness through targeted policy interventions that are crucial to minimize disruptions post-graduation?

There is a notable lack of high-value-added items in the RMG product portfolio. Bangladesh primarily engages in the production of basic garments, such as t-shirts and basic apparel, which offer limited profit margins compared with value-added products like designer clothing or specialized textiles. This lack of diversification limits Bangladesh's ability to capture higher margins and increases vulnerability to market fluctuations. What should RMG sector do to move itself to high value-added garment exporting sectors?

The RMG sector in Bangladesh grapples with challenges related to labor rights, workplace safety, and environmental sustainability. Issues such as poor working conditions, low wages, and inadequate safety measures have garnered international scrutiny and led to concerns among global buyers and consumers. Addressing these social and environmental sustainability issues is crucial not only for ethical reasons but also for maintaining the sector's reputation and market access in the long term. Overall, addressing these challenges is essential for the sustainable growth and competitiveness of Bangladesh's RMG sector in the global market.

Certainly, the comments touch upon critical aspects that extend beyond the immediate scope of Ginting et al. but are highly relevant to Bangladesh's export diversification challenges, particularly in the RMG sector. Developing skills is indeed essential for moving toward high-value-added RMG products and diversifying into other sectors. The lack of critical institutions and infrastructure poses significant constraints on future growth and exports in the RMG sector, as well as the broader economy.

The question of why Bangladesh has even struggled to transition to higher value-added garment products warrants careful consideration. It may involve a complex interplay of factors, including institutional limitations, infrastructure deficits, technological barriers, and skill shortages. Addressing these challenges requires both short-term and long-term strategies aimed at building institutional capacity, upgrading infrastructure, enhancing technological capabilities, and investing in human capital development.

In the short term, targeted interventions such as skills training programs, capacity-building initiatives for industry professionals, and investments in technology transfer can help improve productivity and competitiveness in the RMG sector. Additionally, addressing institutional gaps through regulatory reforms, establishing industry standards, and strengthening enforcement mechanisms can create an enabling environment for innovation and value addition.

In the long term, efforts to develop robust institutions, upgrade infrastructure, and foster a conducive business environment are critical for sustaining growth and diversification across sectors. This may involve investments in education and vocational training, research and development, and upgrading logistics and transportation networks to support value-added production and export-oriented industries.

Overall, while Ginting et al. may not explicitly address these broader issues, they are fundamental to understanding the challenges and opportunities for export diversification in Bangladesh.