An empirical analysis of foreign trade composition, performance and trend of Bangladesh

A REPORT ON
An empirical analysis of foreign trade composition, performance and trend of Bangladesh

Executive Summary
The report began with a brief overview of the purpose and cause of preparing it. Next it slides to the information about the backdrop of completing it. It covers almost about all necessary information of the respective topic. As every work has a specific function or purpose hence there is a relevant objective of this report. The introductory part ended with the limitations of the assigned subject.
The main segment of the report started with the trend analysis of the components of foreign trade. Later the balance of payment From 1991 to 2012 is highlighted which resulted into trade deficit. Later on, top five export-import goods have been analyzed and demonstrated with appropriate graphical presentation. At the final stage the top five export-import destinations are illustrated properly with the help of appropriate graph and information. The data used in preparing this analysis has also been provided in the appendix form at the end of this term paper.

Table of Content

Content Page Number

Chapter 1: Introduction……………………………………………………..06
Chapter 2: Export-Import Quantity…………………………………............07
Chapter 3: Trade Balance……………………………………………............09
Chapter 4: Top Export-Import Goods……………………………………….11
Chapter 5: Top Export-Import Destination Countries………………………………………………………...15
Chapter 6: FDI……………………………………………………………….20
Chapter 7: Conclusion………………………………………………………..21
CHAPTER 01: INTRODUCTION
ORIGIN OF THE REPORT
This report was assigned to us to evaluate our understanding of international trade and finance and how we evaluate the causes and effect of export-import and foreign investment. The report was assigned as a significant part of fulfillment of B.B.A program of Department of Finance which is under Faculty of Business Studies of University of Dhaka. It was assigned to us by our honorable course instructor Md Sajib Hossain.
OBJECTIVE OF THE REPORT
The primary objective of the report is to understand the terms of international trade and finance and to become familiar with the components of it. It is also prepared to determine the behavior of different measures in different economic situations and the causes and effects of the changes in the economy. METHODOLOGY
We initiated our work on this report by finding out what is the length of the pattern of it. We read the relevant topics like export, import, foreign direct investment, balance of payment, trade deficit, trade surplus, terms of trade etc from our textbook. Other sources were Bangladesh Bank and various websites. After collecting all the data we could, we sat in a group to create an outline of the facts we gathered. The respective part was distributed among all the group members. Completing the distributed part we all discussed about all the highlighted facts & errors to rectify the report.
LIMITATION
Showing the trend and performance analysis under some criterion is a difficult task. The report is prepared on information collected from only Bangladesh Bank and different websites of regarded topics. The information provided there is scanty too.

CHAPTER 02: Import Export Quantity
Export trend of Bangladesh:
Bangladesh exports mainly readymade garments including knit wear and hosiery (75% of exports revenue). Others include: Shrimps, jute goods (including Carpet), leather goods and tea. Bangladesh main exports partners are United States (23% of total), Germany, United Kingdom, France, Japan and India.

Figure 1: Export of Bangladesh From 1991-2012
From fiscal year 1990-91 to 2011-12, we can see a positive trend in export of Bangladesh. The trend path moves through different rate of growth year to year. In 1990-91, total export earning was tk.6056 million.During 1990-91 to 1993-94, the amount of export earnings rise gradually for a little amount and the growth rate was bit uniformed. In the year 1994-95, export earnings was tk.13928 crore and the growth rate turns to 1.29 percent.
During 1994-95 to 1999-00, export earnings rise smoothly and growth rate moves up gradually. Total export receipts of Bangladesh (including exports of EPZ) during the financial years, 1994-95 to 1999-00 are amounted to Tk. 13928 crore,Tk. 15879 crore, 18813 crore, tk.23416crore, tk.25491crore and 28818 crore respectively.

Import trend of Bangladesh:
Bangladesh mainly imports petroleum products, chemicals, plastic & rubber articles, cotton, yarn, textiles and articles, Iron & steel, capital machineries, food grains, edible oil etc. Bangladesh’s main import partners are China, India, Singapore, Korea and Japan.

Figure 2: Import of Bangladesh from 1991-2012
Like the export, import of Bangladesh also maintains a positive trend from FY 1991-91 to 2011-2012. The amount of import was followed by different growth rate throughout the following years. In 1991-1992 the amount of import was tk.10121 million. In 1992-1993 it was amounted to tk.12321 millon but in the following year the amount was dropped down to tk.11139 million. In 1993-1994 it maintained the soaring trend and rise at tk.18735 million and thereafter this trend is continued for the latest fiscal year 2011-2012. From FY 1991-1993 to 2011-2012 the highest amount of import was spotted in the FY 2011-2012 which was amounting to tk. 319720 million.
CHAPTER 03: Trade Balance
Trade balance is the difference between a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.
Figure 3: Trade deficit of Bangladesh from 1991-2012
From the above chart it can be said that Bangladesh’s balance of trade results into trade deficit. This trend has soared up. The highest amount of trade deficit is observed in 2011-2012 which is tk 127614 million.been followed by several fiscal years. The deficit balance increases every year. In 1990-1991 the amount of deficit was tk 4065 million. In 1992-1993 the amount was dropped into tk 1882 million but the following year it increased to tk 3049 million and hereafter it maintains the increasing trend in the following years. There was a decline in the amount of trade in the year 1996-1997 but in the next year it again
Due to the increase in import at an increasing rate and export at a decreasing rate, trade deficit is increasing at an rate increasing over the years. The main reason behind it is the soaring fuel import costs and a sapping demand for its key garment exports. Bills for imports, notably fuel for power generation, have soared, while demand for exports such as ready-made garments was slowed down by the global economic slump. The trade deficit is likely to increase, if import of non-essential items continues along with growing imports of petroleum products, which are pertinent to run oil-fired power plants of the country.
During the last decade, Bangladeshi exports shifted from the sale of agricultural products and raw and processed natural resources to labor-intensive manufactured goods (including clothing, footwear and textiles), but the country unlike neighboring India, could not catch up with the exporters of silk-intensive products.

Bangladesh has a long history of maintaining a negative trade balance, importing more goods than its exportation. If the recent business scenario remains as usual, trade deficit might be doubled.
In FY 2010-11, the trade openness was 49.41 percent in which, 20.47 percent was export related openness and 28.93 percent import related openness against only 15.56 percent trade openness in FY 1990-91. Continuation of the current trend suggests that trade openness might increase to 52.97 percent in FY 2011-2012. It is a matter of concern that openness mainly occurred due to the increasing import, though at the same time, the rate of export is also increasing but at a deceasing rate. Bangladesh only uses its cheap labor to transform those input into final commodity, as readymade garments cover around 60 percent of the total export and most of the input of the garments are also imported from abroad.

There is no denying the fact that the persistent trade deficit demonstrates the structural deficit of the economy in terms of concentration of destination of exports in a few countries and a few products. Despite recognition of such shortfalls, a little has been done in the forms of strategies and implementation for finding new markets and new products. The country needs such a strategy by way of fiscal incentives, subsidies and tax breaks.

CHAPTER 04: Top Import-Export Goods
Top Five Import Goods:

Each year, Bangladesh has to import some products from foreign market in order to meet the demand of local consumers. However, import trend in each year is not the same. A wide variety in commodity import has been observed during 1990-2012. In this section, we are showing the top imported product by our country.

Figure : 4

From the above chart we see that during 1990-95, textile was the top imported product among all. During product was wheat and during 1990-95, total wheat was imported with an amount of 90400 million taka. The other top three products were POL, edible oil and crude oil. Total amount of POL imported was 56960 million taka, total amount of edible oil imported was 64400 million taka and total amount of crude oil imported these five years, total textile was imported with an amount of 278080 million taka. the second highest imported was 47440 million taka

Figure : 5
During 1996-2000, The highest imported product was Textile with an amount of 453360 million taka. The next top imported product was iron, steel and other base metal with an amount of 151040 million taka . the other three top imported goods were POL, chemical and Yarn.

Figure : 6
During 2001-05, the top goods imported by Bangladesh was again textile, with an amount of 506080 million taka. During 2001-05, we can also see that, substantial amount of POL was also imported, with an amount of 295120 million taka. Moreover, Bangladesh also started importing chemical with a total amount of 82160 million taka. The other top products where iron, steel and other base metals and raw cotton.

Figure : 7

From the graph we can see that during 2005-06, total textile was imported with an amount of 138240 million taka and total POL was imported with an amount of 112000 million taka. on the other hand during 2011-12, , total textile was imported with an amount of 241840 million taka and total POL was imported with an amount of 313760 million taka. Therefore in recent years, the quantity of POL imported increased and textile has been decreased. Moreover, import of raw cotton was also very high during 2010-11, with an amount of 215120 million taka. the other two top products imported were iron, steel and other base metals and chemical.

Top five Export Goods:

The performance of export sector of our country is very impressive. Bangladesh has been able to achieve substantial amount of foreign earning through exporting of different type of products. Here we have shown top five exported product by our country during 1990-2012.

Figure : 8

From the graph we can see that during 1990-2010 The top export product was readymade garments. During 1990, total amount of RMG exported was 69360 million taka and during 2012 total amount of RMG exported was 1527200 million taka. During these 20 years, the total amount of RMG exported was 11307920 million taka. The other exported goods were frozen food, jute goods, leather and chemical products. Total frozen food has been exported with an amount of 624300 million taka, jute goods has been exported with an amount of 608873 million taka, leather has been exported with an amount of 367507 million taka and total chemical product has been exported with an amount of 204513 million taka.
CHAPTER 05: Top Import-Export Destination Countries
Top Five Export Destination Countries:

Bangladesh exports variety of products to different country as foreign market has significant demand for our product. In this section, we are showing top 5 countries to which our products are exported.

Figure : 9
From the above graph we can see that USA is the largest importer of our product. During 1990 Bangladesh exported total amount of 168391.73 million taka to USA whereas she exported with an amount of 1001832 million taka in 2000. The other countries are Germany, United Kingdom, Italy and France. Germany was the second largest importer during that period. During 1990 Bangladesh exported total amount of 52408.65 million taka to Germany whereas she exported total amount of 349325.6 million taka in 2000.

Figure : 10

During 2001 to 2012, the largest export destination countries of Bangladesh are USA, Germany, UK, Italy and France. The top most exporter country is USA which imported products with total amount of 891544.7 million taka. The second major importer country is Germany, which imported products with an amount of 311923.8 million taka. The third largest importer country is UK, to which our country exported product with an amount of 284135.6 million taka. The other two top countries are Italy and France. During 2012, Bangladesh exported products to USA with an amount of 3002155.7 million taka. on the other hand, total product was exported to France with an amount of 1017208.3 million taka. The country exported product to Germany with an amount of 2509582.7 million taka and to UK with an amount of 1580082.5 million taka.

Top Five Import Destination Countries:

In each year, Bangladesh imported many consumer and industrial products from abroad. Bangladesh imports products from different countries. Here, we have given a brief detail about the top five import destination countries.

Figure : 11
During 1990 to 1994, Bangladesh imported major portion of its product from Japan with a total amount of 604704 million taka. During 1994, Bangladesh imported product from Japan with an amount of 199156 million taka. At the same period, Bangladesh imported product from India with an amount of 165795 million taka. the other three major import destination countries are Singapore, Hong Kong and China. But during 1996-2000, products import from India substantially increased. During 1995-1996, Bangladesh imported product from India with an amount of 449259 million taka and from China with an amount of 288781 million taka. During 2012, total product imported from India was an amount of 418890 million taka, from Singapore with an amount of 352678 million taka, from Japan, with an amount of 344708 million taka, and from Hong Kong, total product imported with an amount of 217030 million taka.

Figure : 12

During 2001-2004, the major import destination country was India which exported products to Bangladesh with a total amount of 1508241 million taka. The second major country was China which exported products to Bangladesh with a total amount of 2136470 million taka. The other three top import destination countries were Singapore, Japan and Hong Kong.

Figure : 13
During 2004-09, China and India were the major import destination countries. During 2008 and 09, total amount of goods imported from China was amounted to 2151780 and 2374610 million taka respectively and total amount of goods imported from India was amounted to 2327380 and 1969874 million taka respectively.

Figure : 14 During 2009-10, China was the major import destination country which exported goods to Bangladesh with an amount of 2642179 million taka. The fifth largest country was Japan, which exported products to Bangladesh with an amount of 724504 million taka. the other major countries were Singapore, India, and Malaysia. During 2012, Bangladesh imported highest portion of its product from China with an amount of 5088670 million taka. the other import destination countries were Singapore, India, Korea and Japan.

CHAPTER 06: Foreign Direct Investment (FDI)

FDI:
An investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.

Figure15: FDI in Bangladesh from 1996-2012
The above diagram shows the trend of FDI inflows in Bangladesh from 1996 to 2012. The figure shows initial increase but a declining trend of FDI. A steady continuation of this trend is seen from 1998 to 2003. After that in 2004 it increased to 64302.4 million taka and this trend continued up to 2005. From 2005 to 2008 this trend continued and during 2008-2009 FDI again rose to 76847.2 million taka. During 2010-11 FDI declined to 62323.2 million taka. But in 2012, FDI again increased to 95590.4 million taka. The Foreign Direct Investment (FDI) in Bangladesh has gone up in 2012, despite a weak global investment climate.

CHAPTER 07: Conclusion

Foreign trade plays an significant role in the economy of Bangladesh. It is considered the measure of economic growth to some extent. Bangladesh is in a moderate condition in terms of foreign trade. Though it’s import amount is much higher than it’s export amount, the foreign trade accelerates the growth of the overall economy.

Appendix:
Appendix 01
Import Export Quantity & Trade Balance

Year
Export
Import
Trade Balance
1990-91
6056
10121
-4065
1991-92
7590
12321
-4731
1992-93
9257
11139
-1882
1993-94
10097
13146
-3049
1994-95
13928
18735
-4807
1995-96
15879
21454
-5575
1996-97
18813
22065
-3252
1997-98
23416
29975
-6559
1998-99
25491
34708
-9217
1999-00
28818
38091
-9273
2000-01
34858
45484
-10626
2001-02
34366
44206
-9840
2002-03
37915
51172
-13257
2003-04
44827
58847
-14020
2004-05
53233
72945
-19712
2005-06
70746
89321
-18575
2006-07
84100
107234
-23134
2007-08
96800
133765
-36965
2008-09
107088
139579
-32491
2009-10
112127
147983
-35856
2010-11
163561
213817
-50256
2011-12
192106
319720
-127614

Appendix 02
Top Five Import Goods (in million Tk)

Major Commodities
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
Textile and articles thereof
32880
40960
54960
67280
82000
83440
87840
101120
88720
92240
Wheat
23760
20800
14080
11280
20480

25360

POL
16320
13440
13760
13440
16480
23200
27280
23600

32480
Edible Oil
12240
13040
12160
9360
17600

22960

Crude Petrolium
11520
12160
14480
9280
14160

Chemical

20560
19840

22240
Cement

fertilizer

Raw Cotton

10800

Yarn

16000
23680
31600
26160

24000
Iron Steel and other Base Metal

16480
25760
34960
31280
27600
31440
rice

17600
28640

54400

Major Commodities
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
Textile and articles thereof
103280
85040
88480
103600
125680
138240
151360
151360
167920
158880
214400
241840
POL
45280
38480
49600
61600
100160
112000
136720
164640
159760
161680
254880
313760
Edible Oil

37680
35280

84000

131520
Crude Petrolium

48320

Chemical
27120
26800
28240

53440

76800

Cement

Raw Cotton
28800
24960
31440
46640
53280
59360
68640
96960
103280
115120
215120
166720
Yarn

Iron Steel and other Base Metal
37120
33040
36400
38320
54400
78400
78800
94320
120160
116240
160320
177920 food grains

112800

152880

Appendix 03
Import Destination Countries (in million Tk)

Country
90-91
91-92
92-93
93-94
94-95
95-96
96-97
97-98
98-99
99-00
00-01
01--02
Japan
120002
142773
142773
199156

284914

237406
344708
456511
376209
Singapore
119160
104713

235810

276335
219489

352678
444437
500511
Hong Kong
65658
94162
117002
132501
160532

174658
201205
217030
217030
257729
253212
India
64449
88237
133847
165795
276794
449259
393771
424626
201205
418890
638872
585155
USA
64443
87757

Korea

100991
113744
160532
149272
153631
173356
137762

China

97049
89264
169001
288781
245613
269333
269364
285790
382547
504516

Country
02-003
03--04
04--05
05--06
06--07
07--08
08--09
09--10
10--11
11--12
Japan
350380
325141
343340
436377

571025
698577
724504
934598
115258
Singapore
577094
536968
545053
569700
713566
873300
1216584
1072764

1352303
Hong Kong
250908
255132

India
786162
944982
1246463
1253300
1566427
2327380
1969874
2223860
3254695
3764285
USA

Korea

803248
1229697
China
543254
706153
1008236
1394589
1775879
2151780
2374610
2642179
4216648
5088670 kuwait 608932
835904
956182
1216269
620085

Taiwan

326592

Malasia

852351
1257172

Appendix 04
Top Five Exported Goods

Appendix 05
Major Export Destination Countries

Appendix 06
Foreign Direct Investment