Dhaka, Bangladesh
Export sector likely to suffer

Currencies of competing countries devalued

Export sector likely to suffer

News Report Bangladesh's exports are likely to suffer in the international markets against the backdrop of sharp depreciation of currencies of competing countries against the US dollar, opined exporters, researchers, bankers and policy-markers. According to available sources, the currencies of all emerging countries fell against the dollar in last few months because of escalating trade war between the United States and China and the US sanction on Turkey. According to the Bloomberg statistics, Indian rupee depreciated by 10.04 per cent against the dollar in the current year, while the currency of Indonesia fell by 7.89 per cent. Indian rupee fell to a record low of 71 per dollar in opening trade on Friday. The data also show that Chinese yen depreciated by 4.85 per cent in the year. Bangladesh Bank data show that taka depreciated only by 1.26 per cent against the dollar in the current year and stood at 83.75 against the dollar. A rapid depreciation of emerging market currencies, including Indian rupee, will hit Bangladesh's export competitiveness and may cause rise in payments for cheap imports, economists and exporters fear. A BGMEA leader has cautioned that Bangladesh's garments may lose competitiveness in the US and the EU countries as the currencies of most of the countries competing with Bangladesh, including India and Indonesia, witnessed a drastic fall in their value against the dollar while Bangladesh's currency remained almost static in the last few months. Economists have observed that due to the depreciation of the currencies of India and China, imports from the countries are getting cheaper for Bangladesh, which may put pressure on its current account balance. The currencies of all emerging countries fell against the dollar in last few months because of escalating trade war between the United States and China and the US sanction on Turkish officials. Bangladesh is passing through hard times in international business as the currencies of all emerging countries have been devalued against the US dollar because of the US-China trade tension,' Policy Research Institute executive director Ahsan H Mansur said. He said that the depreciation of currencies of competing countries will cut the competitive edge of Bangladesh in the RMG export market and also encourage cheap imports from India and China that might put pressure on the country's current account balance. Bangladesh is the second largest RMG exporter in the world with around $30 billion in annual export value while India's annual RMG export stands at around $17 billion and that of Indonesia around $13 billion. RMG export from China, the leading manufacturer with around $158 billion, however, is also likely to be hit, despite a fall in its currency value, because of its trade war with the US. Bangladesh's imports from both China and India, the two largest sourcing countries for Bangladesh with around $19 billion in annual total payments, is likely to rise because of the devaluation of the countries' currencies as the products of the countries would be cheaper. Due to the drastic fall of the rupee against the dollar, India would attract huge amount of foreign currency from Bangladesh as the highest number of Bangladeshis travel to India every year for the purpose of tourism and treatment, Mansur said. According to the Indian tourism ministry, over 22l lakh Bangladeshis visited India in 2017, which is 60 per cent higher from 13.7 lakh in the previous year of 2016. Suggesting a devaluation of the taka against the dollar, Mansur said that the government should ensure a balanced policy for export and import. He said that devaluation of the taka would make the country's export sector more competitive in the global market. Faruq Hassan, President of the Dutch-Bangla Chamber of Commerce and Industry, said that the government should introduce an export-friendly exchange rate, otherwise the RMG sector will lose competitiveness in the global market. 'We are already in a disadvantaged position and our competitive edge is eroding as cost of doing business is increasing. Considering all the things including increasing wage for workers and high prices of gas due to LNG, the government should provide policy support to the RMG sector,' he said. Bangladesh's exports that crossed the billion-dollar mark last year will also suffer unless Bangladesh's currency taka is devalued against the US dollars, said a member of the India-Bangladesh Chamber of Commerce and Industry while talking to The News Today According to Export Promotion Bureau (EPB) data, Bangladesh's exports to India stood at $1.25 billion, up by 42.91 per cent, which was $873.27 million in the previous fiscal Bangladesh's exports to India, a non-traditional potential export destination, for the first time have reached the billion-dollar-mark, with goods worth $1.25 billion sold to the neighbouring country in the just concluded fiscal year. According to Export Promotion Bureau (EPB) data, Bangladesh's exports to India stood at $1.25 billion, up by 42.91%, which was $873.27 million in the previous fiscal. Of the total amount, apparel sector earned $499.09 million in 2018-19 fiscal, which is 79.09% higher compared to $278.67 million in the previous year while knitwear products accounted for $369.43 million and woven items $129.66 million. Among other major products, Bangladesh exported to India vegetable textile fibre and paper yarn worth $141.84 million and animal and vegetable fat worth $158.57 million. It also earned $84.60 million and $33 million by exporting jute and jute goods and leather and leather goods respectively. Currently, there are 11 countries - the USA, Germany, the United Kingdom, Spain, France, Italy, Canada, Japan, the Netherlands, Poland and India, whose imports from Bangladesh is over $1 billion. India and Poland joined the club this year. Vaqarjaved Khan, research associate, currencies at Angel Broking said, "Indian rupee depreciated by nearly 1 rupee to slid past the 72 per dollar mark. US-China trade war jitters and weak quarterly GDP data from India led to the fall. Q1FY20 GDP came in at 5% falling to a six-year low. Actual GDP data was lower than market estimates, hence created a wave of pessimism for Indian rupee." The domestic currency also came under pressure due to the ongoing US-China trade war. The currency is likely to extend its fall if trade war escalates between the two nations, according to newspaper reports. "On the global front, trade war escalated between the two biggest nations. First US imposed 15 percent tariffs on Chinese imports and then China retaliated by imposing tariffs on $75 billion of US goods. On account of pertinent risk in global market and slowdown in Indian economy, FIIs have sold nearly Rs 17,592 crore in Indian equity market in August 2019. Rupee is likely to depreciate towards 73.5 by the end of September 2019 if trade war escalates further between US and China and outflows from Indian equity market continue, " added Khan. On Friday, Indian govt data said GDP growth slipped to 6-year low of 5 per cent as compared to 5.8 per cent in the previous quarter, weighed down by slump in manufacturing output, weak consumer demand and deceleration in private investment. Expansion in manufacturing sector hit its slowest in 15 months in August as demand and output grew at their weakest pace in a year and cost pressures increased, a private sector survey showed recently.

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