Export-led growth in Bangladesh: a time series analysis

In over three decades, Bangladesh has witnessed substantial growth in its export of goods and services. Over this period economic growth has accelerated withGDP initially recording an average growth rate of below 3% in the early 1970s and rising to 5% during the 1990s. The trade and industry policies have changed from being highly import substituting and government controlled to become more liberalized and deregulated. In the 1970s, Bangladesh was a strongly inward-oriented economy ranking among the top in price distortions caused by high tariff barriers. By the 1980s, the dismal growth performance of the early 1970s and a general enthusiasm about export-led growth – reinforced by the disillusionment experienced by most developing countries over their importsubstituting development experiments of the 1950s on the one hand and by the success of the Asian Tigers with export-oriented development strategies on the other – made a case for a policy shift in Bangladesh, as in many other developing countries. Progressive trade liberalization and domestic deregulation were the foci of trade and industrial policies since the 1980s; policies that recognized the need for: (i) greater efficiency and international competitiveness; (ii) faster growth of export-oriented industries; (iii) reduction of regulation and control along with tariff rationalization; (iv) a liberalized market-based competitive structure; (v) and disinvestment of public sector enterprises. To promote exports, several measures were undertaken. For example, in the 1980s the government established the first export processing zone in Chittagong. It was followed by other measures such as tax breaks for export-oriented enterprises and income tax rebates. Later on, two more export processing zones were established in Dhaka and Khulna. In recent years, Bangladesh has experienced not only a substantial increase in the volume of exports but also important changes in the composition of those exports; moving away from traditional items such as jute and jute products and towards new manufactured products such as ready-made garments.