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

Abstract

Ginting, Razzaque, and Hasan (2025) focus on two areas: first, the critical policy barriers toward export diversification and second, the potential options to overcome such barriers. In doing so Ginting et al. briefly discuss the nature of export concentration in Bangladesh, identify the key policy obstacles for expanding and strengthening the non-readymade garments sector, and suggest a few actionable solutions.

Ginting et al. have rightly pointed out the impressive development trajectory of Bangladesh during the past few decades which has been manifested through high growth of Gross Domestic Product (GDP), increases in per capita income, and progress in several social indicators. The export-oriented readymade garments (RMG) sector has been an important contributor to the economic transformation of Bangladesh. While the strong growth of the RMG sector has created employment opportunities, especially for women from poor families, and generated a multiplier impact on the economy, this has also led to overreliance on the RMG sector making the economy little diversified.

Ginting et al. (2025) has significant relevance for Bangladesh in the short and long terms, particularly in the context of its current development landscape. Throughout Ginting et al. (2025), one special circumstance has been highlighted by the author which is the implications of Bangladesh's graduation from the least developed country (LDC) category and measures to tackle the possible ramifications during post-graduation period. The loss of various LDC specific international support measures (ISMs) will put Bangladesh in a disadvantageous situation during the post-graduation period. RMG and other exports from Bangladesh will face competition in the global market due to erosion of tariff preference. Hence, export diversification is critically important for keeping Bangladesh economy stable.

The diagnosis of the problems in Ginting et al.'s (2025) Section 3 is well-articulated which can be useful menu for the policymakers to expand Bangladesh's export basket. Ginting et al. have identified two sets of policy measures which have helped RMG exports but those have also become important bottlenecks that affected export diversification. These are: (i) global trade policy regime which offered quota support through Multi-Fibre Arrangement (MFA) till 2005; and (ii) domestic export incentives for the RMG sector in the form of back-to-back letters of credit, bonded warehouse facilities, duty drawback facilities, and cash incentives to RMG exporters. But no less important are the structural issues such as the cost of doing business, inadequate infrastructure, and the overall investment climate, which Ginting et al. have alluded to.

Ginting et al.'s recommendations (Section 4) for export diversification emanate from the discussion of the impediments identified by the authors. Sections 3 and 4 are indeed the main focus of their paper. Without repeating what has already been highlighted by Ginting et al., I would like to highlight three specific issues which Ginting et al. could have incorporated in their paper.

Which are the top five potential non-RMG exports and what specific policy and actionable measures needed? While suggesting export diversification beyond RMG, it will be useful to list at least top five potential non-RMG exports and discuss item-wise specific policy and actionable measures needed which should be beyond the common and overarching issues such as institutional strengthening, enabling business environment, and capacity development. The actionable agenda should elaborate on the responsibilities of specific ministries and departments. An examination of their potentials in various markets will also be helpful for policymaking.

What could be the global policy regime for the non-RMG exports in the near future and how to prepare for that? With the evolving global trade policy regime, it is important to prepare for fulfilling all compliances required by the importing countries. This includes environmental and climate change related requirements failing to comply with will disqualify exports from Bangladesh. Given the global commitment for net-zero emission by the middle of the century, developed countries are now imposing emission related compliances on the exporters into their countries. The Carbon Border Adjustment Mechanism (CBAM) of the European Union (EU) is a case in point. This is now applicable for a few carbon intensive products, such as aluminum, cement, fertilizers, hydrogen, and iron and steel. But what if it is expanded for other products which are of interest to Bangladesh? How should Bangladesh prepare for such additional price burdens during post-LDC graduation?

Finally, institutional reform is an unfinished agenda in Bangladesh. The lack of institutional reforms hinders the implementation of policies. This is equally true for fiscal, monetary, and trade policies. Weak institutions are not only incapable of formulating independent policies solely based on economic logic but are also unable to execute good policies. Export diversification has been hindered in the absence of strong institutional measures to withdraw various types of supports from the RMG sector.