The Impact of International Trade in The Economic

Development of Bangladesh – Gain or Loss

Course Title: Economic Conditions Analysis
Course Code: BUS 530, Section: 06

Submitted To:
Md. Azad Uddin, Ph. D
Professor
MBA & EMBA Program
North South University

Submitted By:
Name ID
Rafiqul Islam 2225427660
Awana Karim Raisa 2235312660
Arefun Nahar Pushon 2016350060
Date of Submission:
June 15, 2023

Acknowledgement:
All praises to the Almighty Allah, who has bestowed his kindness upon us by giving us the
opportunity, time, courage, strength, and patience to carry out and complete the Group Term
Paper properly.

We are very much thankful to our honorable course Instructor, Md. Azad Uddin, Ph. D, faculty
of the MBA & EMBA program of North South University, for giving us the opportunity to
complete this. His valuable suggestions, guidelines, and helpful advice lead to the successful
completion of this report. His valuable time, support, and patience have been remarkable and are
also appreciated from the bottom of our hearts. Without his constant supervision and valuable
pieces of advice and suggestions from time to time, we would not be able to complete the whole
thing in the right manner. We strongly believe works like this one will surely help us to develop
& make us better adapted as well as capable to cope with the issues & practical exposures in this
field as well as to the whole of the Legislative tools that are being extensively exploited in
today’s world.

Finally, we must not lose the opportunity of expressing our sincere appreciation to all our group
members, who gave their level best in doing the group work. In addition, we would like to
remember the almighty Allah for blessing us with the strength, ability, and patience to do this
task.
Table of Contents
Introduction:................................................................................................................................................1
Objective of the Study:................................................................................................................................1
Overview of Bangladesh's International Trade Performance.......................................................................2
Export......................................................................................................................................................2
Import......................................................................................................................................................3
Positive Impacts of International Trade on Economic Development...........................................................4
Challenges and Constraints in International Trade for Bangladesh.............................................................6
Recommendation.........................................................................................................................................8
Conclusion...................................................................................................................................................8
Bibliography................................................................................................................................................9
Introduction:

International trade plays a

significant role in economic
growth of a country
International trade plays a
significant role in economic
growth of a country
International trade plays a
significant role in economic
growth of a country
International trade plays a
significant role in economic
growth of a country
International trade plays a
significant role in economic
growth of a country
International trade plays a
significant role in economic
Page 1 of 14
growth of a country
International trade plays a
significant role in economic
growth of a country
International trade plays a
significant role in economic
growth of a country
Any country's economic growth depends heavily on international trade. Trade and a nation's
level of industrialization are closely correlated with its development stage. Foreign direct
investment (FDI) is made more likely by international trade, which not only boosts productivity
but also provides countries the chance to participate in a global economy. Ashamed (2017) The
phrase "international trade" refers to the buying and selling of goods and services between
countries to satisfy the requirements of their respective populations. Through international trade,
nations are able to sell their domestically manufactured miracle services to other nations. Due to
globalization, it is now much easier for citizens of one country to buy or sell goods to citizens of
other countries, making international trade extremely important to the prosperity of any nation.

Objective of the Study:

Bangladesh has a proven track record of progress and expansion, particularly during periods of
significant global unpredictability. Over the past 20 years, rapid economic expansion has been
backed by a large demographic dividend, solid ready-made garment (RMG) exports, sustained
remittance inflows, and stable macroeconomic conditions. In this research, our aim is to find
how the international market has impacted in past years due to various circumstances. Our
research mainly includes FDI, Export and Import values for the past five years starting from
2017 to 2021. The observation has been done by the World bank Indicator which gives an
accurate result in terms of table and charts. Bangladesh has a lot of challenging factors with one
of the lowest labor rates in the world, Bangladesh has been able to build its industrial base,
which is being led by the RMG sector. However, it is in a good position to increase its value
chain position and diversify its exports. Large industries for footwear, pharmaceuticals, and
agricultural processing are also present in the nation. Other significant industries include
shipbuilding, light engineering, information, and communication technology (ICT), business
process outsourcing, leather, jute, and ceramics.

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Overview of Bangladesh's International Trade Performance
Over the years, Bangladesh has seen a considerable increase in its exports. The availability of a
competent labor at competitive salaries, government programs to promote trade, and the nation's
competitive edge in some industries have all contributed to the country's strong trade
performance. Here is an overview of Bangladesh's international trade performance:
Export
Export is the selling or transfer of products or services made in one nation to clients or customers
in another one. It entails the transfer of products and services across international borders,
usually for commercial and economic purposes.
To assess the importance of international trade in the overall economic activity of a Bangladesh,
we collect five year’s Exports & Imports of goods and services (% of GDP)
 Exports of goods and services (% of GDP)
2017 2018 2019 2020 2021
12.8 12.7 13.1 10.4 10.7
*Source: World Development
Indicators
 2017: Exports of goods and services accounted for 12.8% of GDP.
 2018: Exports of goods and services accounted for 12.7% of GDP.
 2019: Exports of goods and services accounted for 13.1% of GDP.
 2020: Exports of goods and services accounted for 10.4% of GDP.
 2021: Exports of goods and services accounted for 10.7% of GDP. (Data Bank, 2023)

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 Exports of goods and services (% of GDP)
14
12.8 13.1
12.7
12
10.4 10.7
10

0
2017 2018 2019 2020 2021

From the data, we observe fluctuations in the percentage of exports to GDP over the years. The
values range from 10.4% to 13.1%. It is important to note that these figures indicate the relative
importance of exports in the overall economic output of the country during each respective year.
The slight decline in the export-to-GDP ratio in 2020 may be attributed to the global economic
impact of the COVID-19 pandemic, which disrupted international trade and led to a contraction
in global economic activity. However, the ratio rebounded slightly in 2021.
It's worth noting that the specific factors influencing these fluctuations would require a more
detailed analysis of the country's export performance, economic policies, global trade conditions,
and other relevant factors.
Import
Imports are commodities and services that a nation purchases from outside and brings onto its
local market. It involves the crossing of international boundaries for the influx of commodities
and services.
 Imports of goods and services (% of GDP)
2017 2018 2019 2020 2021
17.2 19.8 18.5 15.8 17.1
*Source: World Development
Indicators
 2017: Imports of goods and services accounted for 17.2% of GDP.
 2018: Imports of goods and services accounted for 19.8% of GDP.
 2019: Imports of goods and services accounted for 18.5% of GDP.
 2020: Imports of goods and services accounted for 15.8% of GDP.
 2021: Imports of goods and services accounted for 17.1% of GDP. (Data Bank, 2023)

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 Imports of goods and services (% of GDP)
25

19.8
20
18.5
17.2 17.1
15.8
15

10

0
2017 2018 2019 2020 2021

From the data, we observe fluctuations in the percentage of imports to GDP over the years. The
values range from 15.8% to 19.8%. These figures indicate the relative importance of imports in
the overall economic activity of the country during each respective year.
It's important to note that the import-to-GDP ratio provides insights into the level of dependence
on foreign goods and services. A higher ratio indicates a larger share of imports in the domestic
economy, while a lower ratio suggests a smaller reliance on imports.
The changes in the import-to-GDP ratio can be influenced by various factors, such as changes in
domestic consumption patterns, fluctuations in global commodity prices, trade policies, and
economic conditions. Detailed analysis of these factors is required to understand the specific
drivers behind the fluctuations in import levels over the given years.

Positive Impacts of International Trade on Economic Development

International trade has been essential to Bangladesh's economic growth. International trade has
played a crucial role in the nation's tremendous growth and decrease in poverty throughout the
years. The following are some effects of global commerce on Bangladesh's economic growth:
1. Economic Growth and Expansion of Industries:
Bangladesh has experienced a significant increase in its export earnings over the years. The
growth of international trade has been a key driver of the country's economic expansion,
contributing to its overall GDP growth rate. International trade has facilitated the
development and expansion of key industries in Bangladesh. Export-oriented sectors such as
ready-made garments, textiles, jute goods, seafood, pharmaceuticals, and leather goods have
witnessed remarkable growth, attracted investments and generated employment
opportunities. The demand generated by international trade has prompted domestic industries
to enhance their production capacities and adopt more efficient production processes. The
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 focus on meeting export requirements has driven productivity improvements, leading to
increased output and competitiveness. International trade has been a significant source of
government revenue in Bangladesh. Export earnings contribute to foreign exchange reserves,
which strengthen the country's balance of payments position. Import duties and taxes on
traded goods also generate revenue for the government, which can be used for public
investments in infrastructure, education, healthcare, and other development initiatives.

2. Diversification of Industries:
International trade has encouraged the diversification of industries in Bangladesh. Initially,
the nation's economy was heavily reliant on the jute industry, but as trade increased, other
industries, such as textiles and apparel, have developed as important economic drivers. This
diversification has decreased reliance on a single industry and increased resilience to shocks
from the outside world.

3. Employment Generation and Poverty Reduction:

The growth of export-oriented industries has been instrumental in generating employment
opportunities in Bangladesh. The ready-made garments sector, in particular, has been a major
employment provider, absorbing a significant portion of the country's labor force. This has
played a crucial role in reducing unemployment rates and improving livelihoods, especially
for women.
The expansion of industries driven by international trade has had a positive impact on
poverty reduction in Bangladesh. By creating jobs, particularly in labor-intensive sectors,
trade has provided income-earning opportunities for the poor and vulnerable segments of
society, lifting many out of poverty and improving their living standards.

4. Foreign Direct Investment (FDI):

Foreign direct investment has been drawn to Bangladesh through international trade. Foreign
businesses have established manufacturing plants in the nation to benefit from its inexpensive
labor and preferred access to industrialized nations' markets. New technology, management
techniques, and job prospects have been brought in by FDI inflows, promoting economic
growth and industrial development.
 2017: Net inflows of FDI amounted to $1,810,395,804.
 2018: Net inflows of FDI amounted to $2,421,626,238.
 2019: Net inflows of FDI amounted to $1,908,045,387.
 2020: Net inflows of FDI amounted to $1,525,312,160.
 2021: Net inflows of FDI amounted to $1,723,856,464. (Data Bank, 2023)

The data indicates that Bangladesh experienced fluctuations in net inflows of FDI during the
period. In 2018, there was a notable increase in FDI inflows, reaching the highest value in the

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given years. However, FDI inflows decreased in 2019 and 2020 before slightly recovering in
2021.

5. Market Access and Trade Agreements:

Bangladesh has benefited from preferential market access to developed countries through
various trade agreements. These agreements, such as the Generalized System of Preferences
(GSP) and the Everything But Arms (EBA) initiative, have allowed Bangladesh to export
goods to developed markets at reduced or zero tariff rates. Access to these markets has
boosted exports, attracted investment, and facilitated economic growth.

6. Technological Upgradation:
International trade has exposed Bangladeshi industries to advanced technologies and
production techniques. Through trade, the country has gained access to machinery,
equipment, and expertise that have helped improve productivity and competitiveness. This
technological upgradation has enabled Bangladesh to move up the value chain and enhance
the quality and variety of its exported products.

7. Skills Development and Human Capital:

International trade has contributed to the development of human capital in Bangladesh. The
expansion of export-oriented industries has increased demand for skilled and semi-skilled
workers, leading to investments in training and skill development programs. As a result, the
workforce has become more skilled, which enhances productivity and the country's overall
competitiveness.

8. Economic Linkages and Industrial Upgrades:

International trade has encouraged economic linkages and industrial upgrades in Bangladesh.
As the country integrates into global value chains, it becomes connected with international
suppliers, buyers, and investors. These linkages often result in the transfer of production
stages, increased value addition, and the development of ancillary industries, fostering
industrial upgrading and economic diversification.

9. Regional Integration:
Bangladesh has actively pursued regional trade agreements and integration initiatives, such
as the South Asian Free Trade Area (SAFTA) and the Bay of Bengal Initiative for Multi-
Sectoral Technical and Economic Cooperation (BIMSTEC). These regional partnerships
have expanded market access for Bangladeshi goods and services within the South Asian
region, promoting economic cooperation, investment flows, and cross-border trade.

10. Enhanced Productivity and Competitiveness:

Global trade has prompted Bangladeshi industries to enhance their productivity and
competitiveness. To remain competitive in the international market, businesses have had to

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 adopt efficient production techniques, improve product quality, and optimize supply chain
management. This focus on productivity has led to overall improvements in the economy and
has helped Bangladesh carve a niche in specific export sectors.
It's important to recognize that the benefits of international trade are not automatic or evenly
distributed. Realizing the full potential of trade requires supportive policies, infrastructure
development, and investments in education and skills. Additionally, it's crucial to address social
and environmental sustainability concerns to ensure that trade benefits all segments of society
and promotes long-term inclusive and sustainable development.

Challenges and Constraints in International Trade for Bangladesh

However, it is important to note that international trade also poses challenges for Bangladesh,
such as vulnerability to global market fluctuations, competition from other countries, and the
need to address social and environmental concerns associated with certain industries.
1. Trade Imbalances and Overreliance on Specific Sectors:
Bangladesh's export performance is heavily concentrated in a few sectors, particularly
garments and textiles. This concentration makes the country vulnerable to changes in global
demand and price fluctuations, posing risks to its trade balance and overall economic
stability.
While Bangladesh has made strides in certain industries, it faces challenges in terms of
diversifying its export basket. Limited competitiveness in non-traditional sectors and the
presence of trade barriers in certain markets hinder the expansion of export opportunities.

2. Limited Product Diversification and Competitiveness Challenges:

Bangladesh faces limitations in terms of technological capabilities and innovation,
particularly in high-value and knowledge-intensive sectors. Insufficient investment in
research and development, weak intellectual property rights protection, and limited access to
advanced technologies pose challenges for product diversification and competitiveness.
Meeting international quality standards, product certifications, and compliance requirements
can be a challenge for Bangladeshi exporters. Non-tariff barriers, including technical
regulations and sanitary and phytosanitary measures, can impede market access and
competitiveness.

3. Infrastructure Deficiencies and Trade Facilitation Issues:

Inadequate transportation infrastructure, including roads, ports, and logistics services, can
result in high transportation costs, delays, and inefficiencies in trade operations.
Improvements in infrastructure are necessary to enhance connectivity, reduce lead times, and
improve trade competitiveness.
Cumbersome customs procedures, administrative complexities, and bureaucratic red tape can
hinder the smooth flow of trade. Simplifying and streamlining trade processes, implementing
automated systems, and enhancing customs efficiency are crucial for reducing trade costs and
improving the ease of doing business.

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4. Skills Development and Human Capital Challenges:
Developing a skilled workforce that meets the evolving demands of the global market is
crucial for sustained competitiveness. Addressing skill gaps, enhancing vocational training
programs, and promoting lifelong learning are important to improve labor productivity and
the quality of products and services.
The emigration of skilled workers, often referred to as brain drain, poses challenges for
Bangladesh. Retaining skilled human capital and incentivizing their contribution to the
domestic economy are important considerations for ensuring long-term sustainable
development.

5. Vulnerability to External Shocks and Market Dynamics:

As a small, open economy, Bangladesh is susceptible to external shocks and changes in
global market conditions. Fluctuations in commodity prices, changes in trade policies, and
economic downturns in major trading partners can have adverse effects on Bangladesh's trade
performance and overall economic stability.
Rising protectionist measures, including trade barriers and tariffs imposed by other countries,
can hamper Bangladesh's export competitiveness. Adapting to changing global trade
dynamics and exploring new markets are necessary to diversify trading partners and reduce
dependency on specific regions.

Recommendation
Expand export markets: To decrease its reliance on a few places, Bangladesh should look into
markets outside of conventional ones like the US and Europe. Increasing commercial linkages
with developing nations in South America, Africa, and Asia may open up new growth prospects.
Increase in trade infrastructure: Investing in ports, logistics, and other trade-related
infrastructure can help to increase efficiency, lower costs, and draw in more foreign capital.
Prioritization should also be given to steps to improve customs processes and trade facilitation.
Improve local production capacity: By encouraging domestic manufacturing, Bangladesh's
economy may better withstand trade deficits and reduce its dependency on imported
commodities. This may be accomplished by focusing on policy, providing incentives, and
supporting regional industry.
Encourage value addition: Improving the cost-effectiveness of Bangladesh's goods for export
and fostering sustainable economic growth may be accomplished by encouraging industries to
advance up the value chain by investing in R&D, innovation, and skill development.
Sustainable commerce: To solve environmental issues, Bangladesh should prioritize sustainable
trade. The equilibrium between economic growth and the sustainability of the environment may
be achieved through enforcing rigorous environmental rules, encouraging firms to use eco-
friendly technology, and boosting renewable energy sources.

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Conclusion
In reference to our research, we have observed that the international trade performance has
fluctuated over the past five years as per the world bank database. The export has reduced
gradually although we have resources advances, the reduction might have occurred due to Covid-
19, but import has gradually increased compared to exports which can be due to the dependency
of the foreign products like medicines, medical necessities and other emergency products needed
to survive. As for FDI, the data indicates that Bangladesh experienced fluctuations in net inflows
of FDI during the period. In 2018, there was a notable increase in FDI inflows, reaching the
highest value in the given years. However, FDI inflows decreased in 2019 and 2020 before
slightly recovering in 2021. There are several domestic issues that provide difficulties to
Bangladesh's capacity to continue its growth. The insufficiency of numerous physical and social
infrastructures, the extent of corruption, economic disparity, and other issues are shown as
unavoidable barriers to Bangladesh's capacity to continue its growth. Therefore, the predicted
growth of our country sometimes becomes surprising. Bangladesh might overcome these
obstacles and carry on with its up to this point successful growth trajectory to realize its long-
term goal of becoming a developed nation.

Bibliography

Ahamad, M. .. (2017). Impact of International Trade on Economic Growth. International Journal of

Science and Research (IJSR).
Data Bank. (2023). Retrieved from
https://databank.worldbank.org/indicator/NE.EXP.GNFS.ZS/1ff4a498/Popular-Indicators#

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