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Protifolon

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The Protifolon series is brought to you by Bangladesh Online Research Network (BORN) www.bdresearch.org an information and knowledge intermediation initiative of D.Net in colloboration with Institute ...

The Protifolon series is brought to you by Bangladesh Online Research Network (BORN) www.bdresearch.org an information and knowledge intermediation initiative of D.Net in colloboration with Institute of Development Studies (IDS), University of Sussex, UK. (visit http://blog.masumbillah.net for more)

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    Protifolon Protifolon Document Transcript

    • Welcome to D.Net’s Protifolon, a new policy briefing series that highlights cutting edge thinking on the emerging issues affecting Bangladesh. This first edition examines the Global Financial Crisis (GFC) in the context of trade, exports migration and remittances and summarises recommendations for policy makers. 01 Overview Additionally the Bank has extended period. Trade, migration taken measures to stabilise the and remittance are the most likely Since the collapse of the exchange rate, provide extra sectors to be impacted as 43.3% United States sub prime mortgage liquidity to the financial sector and of Bangladesh’s openness is market and the subsequent raised the limit on private foreign international global crisis, many related to trade and 10 % to borrowing. It has also relaxed the developed and developing remittance. Overseas conditions for opening fresh countries have been plunged into Development Assistance (ODA) letters of credit (L/Cs). deep recession. Bangladesh and Foreign Direct Investment though has found itself in a slightly In February 2009, the Finance (FDI) may also be vulnerable in the different position. Its economy is Minister AMA Muhith admitted longer term but to a lesser extent not so dependent on international that the global financial crisis was due to only 3.2% integration with capital and foreign investment, having an impact on trade in which has helped to lower the the global economy (CPD and Bangladesh. In April the immediate impact of the crisis. ILO, 2009). Government announced their Despite this the Bangladesh stimulus package with 65 million Whilst the longer term nature government has formed a dollars directed to assist exports. of FDI commitments has kept the high-level technical committee This though falls short of the 877 net inflow of investment relatively and taskforce to monitor and million dollars needed according stable, the sluggish growth of rich advise on the crisis, and ministries to industry experts (Yahoo news, countries may eventually slow it and financial institutions have 2009). taken several precautionary down. Aid receipts (excluding During 2008, 57% of measures. Importantly in October dollars) are providing less in local Bangladesh’s economy was 2008 Bangladesh Bank withdrew currency due to unfavourable involved in the global economy 90 % of its total investment from exchange rates and future aid and this is increasing. This foreign banks which has helped to commitments from donors may be indicates that the country might further shield the economy, so that in jeopardy if the downturn it is only now that the affects of the be progressively more affected continues. crisis are being felt. should the crisis continue for an
    • Impact on trade Within the RMG sector predictions suggest that whilst overall RMG The health of Bangladesh’s orders may decline it may not all economy depends significantly on be bad news. Consumer cost foreign trade. Almost 90% of cutting in the developed countries exports are targeted to United may actually increase demand for States, European Union and other lower priced products (the developed countries. Rising so-called Wal-Mart effect) – a unemployment, the subsequent section of the market well suited decline in disposable income and The to Bangladesh producers. phase of being declining consumer confidence in indifferent and complacent Demand for workers has these markets could have serious remained steady in the RMG is over. From the indications impacts on export potential. sector because of the positive that we are receiving from Although exports showed robust growth in the second half of last the exporters, from the growth (19.4%) during year. However stimulus packages migrant workers, and also July-December 2008, they in competing countries are registered negative growth from the production sectors, beginning to impact the demand (-1.4%) during October- we think that there are signs for labour in the textile sector. For December 2008, (Bangladesh of some slowdown. It would example 12 spinning mills Bank, 2009) – the worst figures in reportedly closed as be smart for us to take some recent history. All other sectors manufacturers began procuring steps in order to address the also registered negative growth yarn from India at lower prices. emerging concerns. (CPD, 2009) during this period. The World Bank forecasted that due to slower Dr. Mustafizur Rahman Policy makers and other 02 Executive Director, CPD activity in the export sector institutions are being urged to services growth will fall to the consider the following measures For complete interview visit: to limit damage to the trade sector range of 5.8% to 6.7% in http://www.bdresearch.org.bd/gfc [BIDS, 2009 and CPD, 2009]: /interview.htm FY2008. closely monitor the RMG In Bangladesh Ready Made sectors particularly order Garments (RMG) makes up about provide cash subsidy and volume, export trends, export three quarters of total exports. incentives to support affected prices and composition of Other major exports include industries and workers exported products frozen foods and leather goods. consider a low-interest credit facility to affected frozen food firms provide cash incentives for a limited period to finished leather producers in order to be competitive with China, Morocco and India withdraw duties and VAT (Value Added Tax) on inputs and machineries increase the efficiency of customs, ports, and Source : Freefoto.com infrastructure
    • Impact on migration and remittance Bangladesh is the fifth highest remittance-earning country in the world and is the second largest sector in the country which is integrated with the world economy. About 1.7 million workers left Bangladesh in search of jobs during 2007 and 2008 and about five million Bangladeshis are currently working abroad, mainly in Saudi Arabia, Kuwait and Malaysia. Source : Centre for Policy Dialouge (CPD) In 2009, it is predicted that the number of workers going abroad the Middle East have drawing on varied research, will be significantly lower with accumulated large reserves of oil, shows the impact that remittance UAE, Saudi Arabia, Malaysia and migrant workers will still be in can have in reducing vulnerability, Singapore already struggling with demand, but a World Bank report providing financial safety nets and slow economic growth and suggests Bangladesh needs to improving areas such as access to declining demand for construction create an additional one million education and household debt. and other services [CPD and ILO, jobs for the people likely to lose The IOM report suggests that 2009]. Overall remittances during jobs at home and abroad (Asian the dependency on this income 2008 were 37.3% higher than the 03 Tribune, 2009). Any downward can create serious issues when previous year but since August trend is likely to create issues for the political or economic 2008 they showed a decreasing the receiving families. circumstances in the destination trend as did the number of countries change and that “the A 2005 International workers travelling overseas importance of remittances for the Organization for Migration (IOM) [Bangladesh Bank, 2009]. receiving family cannot be report examines the utilisation of Bangladesh Bank suggests that underestimated.” remittance in Bangladesh and, because the oil rich countries of For the migrants working abroad as well, economic crises can exacerbate already difficult conditions as their host countries become more constrained. Concerns include inadequate access to decent living and working conditions, cuts in social service provision, fear of xenophobic attacks and restricted access to worker rights (IOM, 2009). Whilst evidence for this in relation to Bangladeshi workers is difficult to find, it is important in the growing turmoil to safeguard against human right violations. So what measures can be Source : IRIN News introduced to protect migrant
    • workers and their families? Whilst Qatar through diplomatic Recommended readings Bangladesh Bank have sought to intervention 1. Macroeconomic Management in improve the efficiency of examine further alternative the Face of Global Challenges, transferring remittance, the Centre for Policy Dialogue, migrant destinations including March 2009. Bangladesh Government has Iraq, Bahrain, Mauritius, http://cpd.org.bd/downloads/M devised a seven point strategy Sudan, Libya, and South Africa acro-Management.pdf which includes extending existing seek technical and financial 2. Global Financial Crisis and manpower markets and exploring Bangladesh, Bangladesh support from the ILO and new host countries in Europe. Institute of Development initiate memorandums of Studies, March 2009. However in April’s emergency understanding (MOUs) http://www.bids-bd.org/images/ stimulus package remittances pre_GFC_16Mar09_Ahsan.pdf between Bangladesh and the were absent (New Age, 2009). To 3. Navigating the Global Financial destination countries of the protect migrants abroad and to try Storm: Challenges for migrants. These MOUs could and retain remittance levels the Bangladesh, Bangladesh Bank, contain basic rights such as full November 2008. Government need to prioritise this http://www.bangladesh-bank.or wages every month and safe issue. g/research/policypaper/pp0903. working conditions pdf Recommendations include: For returning migrants 4. Impact of the Global Economic agree steps with Saudi Arabia provisions should be put in place Crisis on the Employment and and Kuwait to protect Labour Market of Bangladesh, to assist in their repatriation, Bangladeshi’s working there Centre for Policy Dialogue, reception and reintegration and January 2009 ensure good relations are Official Development Assistance http://cpd.org.bd/pub_attach/o maintained with existing p80.pdf (ODA) could be increased to migrant destinations such as 04 5. Global Financial Crisis: Impact create employment opportunities. UAE, Malaysia, Oman, and on Bangladesh, D.Net Bangladesh, October 2008 References: http://www.bdresearch.org Asian Tribune (2009) World Bank suggests Bangladesh to create 1 million additional jobs for people likely to lose jobs at home and abroad URL: http://www.asiantribune.com/?q=node/16786 6. National Policy Responses to Bangladesh Bank (2009) Bangladesh Bank Economic Trends; URL: the Financial and Economic http://www.bangladesh-bank.org/pub/monthly/econtrds/econtrds.html Crisis: The Case of Bangladesh, Centre for Policy Dialogue (2009) Macroeconomic Management in the Face of Global Challenges; ILO, January 2009 URL: http://www.cpd.org.bd/downloads/Macro-Management.pdf http://www.ilo.org/wcmsp5/gro Centre for Policy Dialogue and International Labour Organization (2009) Impact of the Global ups/public/---asia/---ro-bangko Economic Crisis on the Employment and Labour Market of Bangladesh; URL: k/documents/meetingdocument http://www.cpd.org.bd/pub_attach/op80.pdf /wcms_101570.pdf International Organization for Migration (2009) IOM (2009) The impact of the global financial crisis on migration; URL: 7. Bangladesh Economic Update http://www.iom.int/jahia/webdav/shared/shared/mainsite/policy_and_research/policy_docum ents/policy_brief_jan2009.pdf world Bank, 2009 New Age Business (April 2009) Stimulus fails to satisfy exporters; http://www.adb.org/Documents URL:http://www.newagebd.com/2009/apr/20/busi.html /Economic_Updates/BAN/2008/ Yahoo News (2009) Bangladesh unveils 500-mln-dlr stimulus package; URL: QEU-Dec-2008.pdf http://news.yahoo.com/s/afp/20090419/wl_sthasia_afp/financeeconomybangladeshstimulus_ 20090419113815;_ylt=AtvG3srd4SYuAbp9zGMHy4AAS5Z4 The series is brought to you by Bangladesh Online Research Network (BORN) www.bdresearch.org an information and knowledge intermediation initiative of D.Net. Published under bdresearch programme of D.Net (Development Research Network), 6/8, Humayun Road, Block B, Mohammadpur, Dhaka 1207, Bangladesh. Tel : 880 2 8124976, 9131424, Fax : 880 2 812021, E-mail : info@dnet.org.bd Protifolon has been developed and designed in collaboration with the IDS Knowledge Services. The views expressed in Protifolon do not necessarily reflect those of D.Net or IDS. The publication may be reproduced or distributed for non-commercial purpose in any form or by any means, or stored in a data base or retrieval system. However, proper quotation and reference is mandatory.