Inconsistency in weekly holidays creates problem in global trade

Bangladesh has been facing many problems in international trade for a long time. Particularly in international trade, Bangladesh has incurred significant deficits, which cannot be overlooked. In a developing country like Bangladesh, trade deficits are inevitable. The disparity between imports and exports in international trade constitutes the trade deficit. Bangladesh will inevitably face trade deficits in international trade. This is because our imports consistently exceed exports by a considerable margin each year. As a result, the trade balance is naturally tilting against us.

The income of the people of Bangladesh is increasing, leading to widespread consumption growth. Consequently, consumer spending is expanding significantly. To meet this increased consumer demand, various types of goods need to be imported from abroad. However, our export volume is not increasing at the same rate. Consequently, the gap between import expenses and export revenues is widening, leading to a growing trade deficit.

Even though Bangladesh has experienced significant growth in imports, it does not pose a major problem for managing those expenses. This is because Bangladeshi expatriates send a substantial amount of money to the country each year. Through legal channels alone, expatriates send between 20 to 22 billion US dollars annually to Bangladesh. Additionally, significant amounts of remittances come to the country through informal channels as well. Therefore, managing import expenses is not a significant challenge for us.

Families of Bangladeshi expatriates reside in the country, and various goods need to be imported to meet their demands. Import expenditures are a part of our economy. If the country progresses economically, import expenses will naturally increase. In the future, the balance of international trade will remain in our favor, so there is no need to worry. Problems arise only when our export earnings and remittance inflow weaken.

Bangladesh Bank has recently imposed restrictions on some imports and tightened regulations on opening LCs (Letter of Credit) to reduce import expenditures. Although import expenses have decreased slightly due to these measures, we must keep in mind not to reduce imports of industrial machinery, raw materials, and intermediate goods essential for industries.

In case imports suddenly surge for any reason, we must be mindful of why such import expenditures are increasing. Often, we observe that import expenditures rise even when there isn't a significant increase in demand for goods in the domestic market. Behind this, illicit financial activities could be a major contributing factor. Bangladesh annually witnesses a substantial amount of illicit financial flows in the realm of international trade. While an increase in imports is not always negative, it is crucial to ensure that no one exploits the import sector for financial gain through illicit means. Illicit financial flows can be devastating for a country's economy regardless of how they are carried out. When illicit financial flows increase, it puts pressure on our foreign currency reserves. The exchange rate of the US dollar may rise. Illicit financial flows can inflict various forms of damage on a country's economy. Therefore, illicit financial flows are never desirable. Hence, we must ensure that no illicit financial activities take place in our international trade sector.

It is important to keep track of why imports suddenly surge unexpectedly. Many times, even if there isn't a significant increase in domestic demand for goods, import expenditures still rise. Behind this, foreign exchange (forex) plays a significant role. Bangladesh engages in substantial forex through international trade every year. While an increase in imports isn't always detrimental, it's crucial to ensure that it doesn't lead to excessive forex expenditure.

Regardless of how forex is acquired, it can have a detrimental impact on a country's economy. A surge in forex expenditure puts pressure on our foreign currency reserves. The exchange rate of the US dollar may increase. Forex expenditure can harm a country's economy in various ways. Hence, forex expenditure is never desirable. Therefore, we must ensure that our economy isn't overly reliant on international trade, which could lead to excessive forex expenditure.

o mitigate the imbalance in Bangladesh's international trade, concerted efforts must be made to increase exports. Effective measures need to be taken to boost the export of locally manufactured goods. Diversification of export products is essential. Currently, Bangladesh's export trade heavily relies on a limited range of products and a few countries or regions. It is imperative to explore new export products and destinations.

The majority of Bangladesh's export trade revolves around ready-made garments (RMG), but this sector is considered import-dependent in terms of value addition compared to national economic context. If backward linkage is established in the RMG sector, the value addition rate in this sector can significantly increase. In this regard, we have made considerable progress recently. Value addition rates in the knitwear sector are around 84%, while in woven garments, it's around 40%.

We need to ensure that our imports are made to the extent necessary. Simultaneously, efforts must be made to establish alternative industries for imports. Collaboration can be sought in establishing import-substitute industries. While encouraging the establishment of import-substitute industries, it should be ensured that no industry is given extra incentives in the name of import substitution.

Our primary concern should be to ensure that consumers can obtain high-quality products at comparatively lower prices, whether they are imported or locally produced alternatives. No industry should be given additional protection under the guise of establishing import-substitute industries. While the idea of diversifying export products and finding new export markets has been discussed for a long time, our success in this area has been limited. We need to focus on this aspect.

In the future, we will face significant challenges in exporting products to international markets. Therefore, we must make our production system more skilled and quality-oriented. The factories and industries being established in our country should be environmentally friendly. We must refrain from setting up factories that could be detrimental to the environment. Efforts should be made to reduce carbon emissions.

Saturday and Sunday are weekends in developed countries including the European Union. And the weekend in Bangladesh is Friday and Saturday. This inconsistency of weekends is causing some problems in international trade. The matter has become associated with religious sentiments in our country. In many Muslim countries, including Pakistan, Friday is not a weekend holiday. The office remains open on Friday. in Bangladesh, offices are closed on Fridays for Jummah prayers, with a half-hour break provided. Subsequently, normal office hours resume.

We are lagging approximately 12 hours behind Western countries, considering that our weekend spans Friday and Saturday. This not only disrupts international business but also complicates matters. To address this issue, we can explore some alternatives. We can keep offices open in a truncated format on days designated for closure. With a minimal staff, office operations can still be managed during these closed days. Some employees can handle communication with foreign counterparts and conduct financial transactions. By employing such alternative measures, we can manage the issue effectively.

Friday's weekly holiday is not solely based on religious considerations; there are no instructions mandating the observance of religious practices on this day. Weekly holidays can be any day of the week, which doesn't pose any problem.

Recently, there has been a withdrawal of economic incentives from some imported goods, which has been a topic of discussion. However, I believe that this will not have a significant impact on our imports. We need to foster economic growth in our import sector, whether it's today or tomorrow. This cannot be sustained year after year. We must acquire competence in the international market's open competition. Otherwise, it will be challenging for us to stand firm.

Direct economic incentives may not be provided, but other forms of assistance can be given. For example, establishing a training academy where skilled workers can receive training and then work in factories. This will enable factories to employ skilled and trained workers. The port of Chittagong could remain open all year round. Measures can be taken to streamline the transportation sector. If we can supply essential production equipment for industries at subsidized prices like electricity and gas, it will be conducive to increasing production.

Author: Economist and Executive Director, Policy Research Institute (PRI)
Transcribe: M A Khaleque