Economic policy of top 10 export destinations and our thoughts

Export plays a significant role in the socio-economic structure of Bangladesh and even the tiniest disturbance in export-oriented sectors wreak havoc to the national economy and pose threat to the social life of the citizens. Despite being crucial for the economy, Bangladesh’s export sector is yet to become sustainable. It is heavily dependent on the RMG industry which is dependent on a small number of nations. This unsustainable development of the exporting sector has made the national economy vulnerable to catastrophic events which was made evident during the Covid19 pandemic. Not only did Bangladesh lose a significant portion of the export in the first six months of the calendar year 2020 but also return to normalcy is far from certain.

Over 95% of our export dollars are earned from only 20 countries and over 60% comes from the top ten. Needless to say, the post pandemic business policies of these and our drive to diversify exporting destinations will determine how long it will take to return to normal.

In this article we will look into the financial policies adopted by 10 countries who import Bangladeshi products.

Germany, the top importer of Bangladeshi products, has been successful in controlling the epidemic early. To mitigate the damage, the country committed almost 500 billion euro to fight the crisis. It spent a significant amount of money to preserve jobs and allocated an additional 50 billion euro in grants to small business owners and self-employed persons severely affected by the Covid-19 outbreak.  It also provided 2 billion euros as venture capital funding for start-ups.

The United States of America, another top importer of Bangladeshi products, spent heavily to preserve all the jobs and provide businesses the necessary cash to operate in the crisis. It has committed 2.3 trillion dollars (11% of the GDP) to fight Covid19 crisis. The money will be spent according to the ‘Coronavirus Aid, Relief and Economy Security Act’ also known as CARES Act. According to this act 510 billion dollars will be spent to prevent corporate bankruptcy and 349 billion dollars will be distributed as forgivable Small Business Administration loans.

Already affected heavily by political instability and the Brexit saga, the United Kingdom’s Covid19 response fund is not as strong as Germany or the USA. However, the nation intends to do its best in preserving businesses. The UK committed 29 billion pounds to support the business sector. The UK government also launched three separate loans schemes to facilitate loans to support SMEs as well as big businesses.

Spain committed 36 billion euros to fight the crisis. The scheme heavily focused on clearing paychecks to the employees and providing assistance to the companies in the time of the pandemic.

France devoted a total 425 billion euros to address the crisis. The fund will be allocated to ensure health insurance and health supplies as well as ensure liquidity support for companies, provide support for SME’s, liberal professions, and independent workers. It will also be provided to companies in financial difficulty.

The Polish Development Fund of almost 26 billion dollars is providing liquidity loans and subsidies for micro, small/medium, and large enterprises. 60 percent of which can be non-returnable.

Italy announced a fund of 25 billion euros to address the crisis in March and in May it announced a 55 billion euro re-launch package. A total of 16 billion euros will be distributed to the SME’s as grant support.

Netherlands also did not hold back spending for the Covid19 crisis, making 33 billion euros available for SME’s and large companies to solve the liquidity crisis.

In April, Japan announced 1.1 trillion-dollar worth of Emergency Economic Package which is over 21% of the country's GDP. Majority of the money (16% of the GDP) will be spent to protect employment and businesses.

Canada is spending 317 billion Canadian dollars to fight the crisis. Of this fund, 20 billion will be spend in the healthcare system. Rest of the money will be allocated to benefit vulnerable communities, people, households and businesses.

We can see from the numbers that all of Bangladesh’s top export destinations are spending heavily to revive their economies. This can be good news for Bangladeshi manufacturers as Bangladesh is known for making products at a low price point. But new manufacturing nations may emerge after the pandemic which will only add competitions in the market.

Availability of excessive amounts of cash in the market may trigger a new wave of business all over the world. Demand is likely to increase for new exportable products. Detailed assessment of the new markets and solidification of the diplomatic ties with nations can make our economy more sustainable.