HOW UNITED STATES’ ECONOMY AFFECTS BANGLADESH’S

ECONOMY

The United States of America is the only superpower in the world today, Bangladesh and the United States belong to a number of the same international organizations, including the United Nations, ASEAN Regional Forum, International Monetary Fund, World Bank, and World Trade Organization, are directly influenced by US policies.

Bangladesh and the United States enjoy excellent diplomatic, economic and military relations

Trade between the US and Bangladesh is very important for the latter. The US is a very important destination for goods produced in Bangladesh (especially RMG),It is, therefore, extremely important for Bangladesh to maintain good relation with the US in order to achieve its development objectives and to improve its international trade prospects.

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Bangladesh’s economic freedom score is 53.9, making its economy the 131st freest in the 2015 Index. Its overall score has decreased by 0.2 point since last year, with improvements in labor freedom, freedom from corruption, and monetary freedom outweighed by notable declines in investment freedom and business freedom. Bangladesh is ranked 27th out of 42 countries in the Asia–Pacific region.

Bangladesh’s Economy

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The United States’ economic freedom score is 76.2, making its economy the 12th freest in the 2015 Index. Its score is 0.7 point higher than last year, with modest gains in six of the 10 economic freedoms, including control of government spending, outweighing a slight decline in business freedom.

United States’ Economy

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BUSINESS FREEDOM

TRADE FREEDOM

FISCAL FREEDOM

GOVERNMENT SPENDING

MONETARY FREEDOM

INVESTMENT FREEDOM

FINANCIAL FREEDOM

PROPERTY FREEDOM

FREEDOM FROM CORRUPTION

LABOR FREEDOM

OVERALL SCORE

UNITED STATES BANGLADESH WORLD AVERAGE

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In the international arena Bangladesh has achieved a reputation by providing troops for UN peace keeping missions. In this regard, it is also important that US-Bangla relations remain friendly. US opposition to the participation of troops from Bangladesh in UN missions can lead to the suspension of international peace keeping activities for Bangladesh, resulting in significant economic loss.

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The US is Bangladesh’s major trading partner; two-way trading amounting to over $4.8 billion. Until August 2013, bilateral trade for the current year amounted to $3.77 billion in export from Bangladesh to the USA and $497 million import of goods and services by Bangladesh from the USA.

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Trade BalanceThe U.S. goods trade deficit with Bangladesh was $4.6 billion in 2013, a 5.2% increase ($230 million) over 2012.

Investment U.S. foreign direct investment (FDI) in Bangladesh (stock) was $368 million in 2012 (latest data available).There is no information on the distribution of U.S. FDI in Bangladesh.Bangladesh's FDI in the United States (stock) was $5 million in 2012 (latest data available), up 25% from 2011.The distribution of Bangladesh's FDI in the United States is not available.

U.S.-Bangladesh Trade FactsBangladesh is currently our 58th largest goods trading partner with $6.1 billion in total (two way) goods trade during 2013. Goods exports totaled $712 million; Goods imports totaled $5.4 billion. The U.S. goods trade deficit with Bangladesh was $4.6 billion in 2013.

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U.S. exports to Bangladesh include agricultural products (cotton, wheat, dairy products), aircraft, machinery, and iron and steel products. The United States is one of Bangladesh’s largest export markets. The two countries have signed a bilateral investment treaty and a bilateral treaty for the avoidance of double taxation. Bangladesh provides several tax, foreign exchange, customs, and labor incentives to investors in its export processing zones.

Exports

The top export categories are: Cotton, Yarn and Fabric ($106 million), Electrical Machinery ($63 million), Iron and Steel ($46 million), and Miscellaneous Grain, Seed, and Fruit (Soybeans) ($44 million).U.S. exports of agricultural products to Bangladesh totaled $253 million in 2013. The leading categories were: cotton ($105 million), soybeans ($34 million), soybean meal ($31 million), and wheat ($25 million).

ImportsBangladesh was the United States' 46th largest supplier of goods imports in 2013.U.S. goods imports from Bangladesh totaled $5.4 billion in 2013, a 9.0% increase ($440 million) from 2012, and up 158% from 2003.The five largest import categories in 2013 were: Woven Apparel ($3.7 billion), Knit Apparel ($1.2 billion), Miscellaneous Textile Products ($185 million), Headgear ($110 million), and Fish and Seafood (Shrimp and Prawn) ($59 million).U.S. imports of agricultural products from Bangladesh totaled $19 million in 2013. The leading category was Tobacco ($11 million)

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. U.S. imports from Bangladesh include apparel, other textile products, headgear, shrimp and prawns, and agricultural products (primarily tobacco)

In its latest trade forecast, the bank said textiles and garments are Bangladesh’s most important export sector

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The country's banking and financial institutions, and insurance and services sectors are largely dependent on the RMG sector

Bangladesh exported $24.5 billion of garment products in 2013-14, according to the data. The garment sector accounts for about 80 percent of exports

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The country's banking and financial institutions, and insurance and services sectors are largely dependent on the RMG sector

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Bangladesh is becoming a RMG-hub because the industry is enjoying some absolute and some comparative advantages over other RMG manufacturing countries. Most of the transferred orders from China, India, and Turkey are being captured by Bangladesh in the recent past due to advantage over wages and production costs.

While Bangladesh is trying to be the ‘next China’, somewhere in the eastern Africa, Ethiopia is trying to be the ‘next Bangladesh’.

Foremost in bilateral trading is the Ready Made Garments (RMG) which account for 80% of total exports (over $22 billion), and, on which the USA enjoys a potent leverage. On June 27 2013, President Obama suspended Bangladesh’s designation as a beneficiary country under the Generalized System of Preferences (GSP) program, citing the country’s inability to take steps to adopt internationally recognized workers rights.

BANGLADESH WILL HAVE TO FOLLOW A 5- POINT ROADMAP

TO REGAIN GSP

Enforcement of fire and building safety code

End to harassment and arrest of workers and labour

leaders and activities

Labour law reforms

Upgrading law for EPZs

Union registration

Bangladesh’s export to the US registered 17 percent higher to $4.3billion in 2012-13 fiscal

Generalized System of Preferences (GSP)U.S. trade preference program the Generalized System of Preferences (GSP) provide opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty

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The World Trade Organisation declared Bangladesh as the second largest RMG exporter after China

For a country like Bangladesh the cooperation of the US is desirable for economic betterment and consolidation of democracy.

Macroeconomic Trends in the Early Months of FY 2015

Subsidy Requirement

Remittances

Foreign Exchange Reserve

Exchange Rate

GDP Growth

Private Investment

Budget Deficit Financing

Inflation

Food Security

ADP Implementation

Import FDI

Balance of Payment

Mixed Signals

Revenue Collection

Debt Servicing Liability

Liquidity Situation

Classified Loan

Export

Foreign Aid

ChallengesPositive Trends

Bangladesh is a key US strategic partner in South Asia.[1] The US is a major development partner of Bangladesh. On the economic front, American companies are the largest foreign direct investors in Bangladesh, and the US is also the single largest market for Bangladeshi exports. The US Military and the Bangladesh Armed Forces maintain long-standing cooperation in defense, counter-terrorism, maritime security and disaster management. Bangladesh also hosts flagship American international development programs in global food security, health and climate change

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The Economic Conditions Report 2014 of Pew Research Centre (a Washington-based research organization) found that 71 percent of the Bangladeshis are happy with the economic health of the country, while only 28 percent dissatisfied. The numbers reveal that majority of Bangladeshis have expressed optimism about the economy, giving the thumbs-up to the government’s economic management.A staggering 66 percent of the respondents said they expect the economic situation in Bangladesh would improve over the next 12 months, while 22 percent said the situation will remain the same. One in 10 respondents said the economic situation will worsen. A lack of job opportunities in the country worries 70 percent respondents. There is, however, low concern about income inequality as only 34 percent Bangladeshis saw the rich-poor gap as a major problem.

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- Bangladesh offers a truly low competitive cost base. Wages and salaries are still lowest in the region, a strong business advantage. Yet this is an increasingly well-educated, adaptive and peaceful population with many skilled workers- Dhaka’s skilled labor cost base is still less than the other major cities- Dhaka’s management grades are 2-3 times less than in Singapore, Shanghai, Bangkok- Industrial estate rent in Dhaka is cost effective than Shanghai, Jakarta, Bangkok.- Office rents are also very competitive with other international cities- Dhaka’s housing rent for foreigners are less expensive than Singapore, Mumbai, Karachi, Hanoi- Cost of diesel in Dhaka is found to be more competitively priced than most other large cities- Vehicles increasingly use LPG as Dhaka gasoline costs are competitive with most other cities

JETRO conducted a comparative survey of investment-related costs in 29 major cities and regions in Asia. The following comparison is based on that survey with some selected cities

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In light of the above, we can say that it is imperative for Bangladesh to establish the best relationship possible with the US in its own interest. Petty misunderstanding should not be allowed to stand in the way of the betterment of Bangladesh's friendly ties with the United States of America .We have to work together, irrespective of party affiliation, to secure the goodwill of the economic and political giant, the world's most effective superpower America.

I believe that good relation with the US will help to establish Bangladesh as a regional hub of south-east Asia.

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Good governance is a major concern for Bangladesh’s development

It took three decades of hard work for the country's garment sector to achieve its position today

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