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MTBiz November 2012

Oct 28, 2014

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  • 1. INTERNATIONALTRADEGLOBALIZATIONBANGLADESHMonthly Business Review, Volume: 04, Issue: 03, November 2012

2. NAME OF SECTIONMTBizCONTENTSDeveloped and Published byMTB Group R&DPlease Send Feedback to: [email protected] Rights Reserved @ 2012nympheaDesign & PrinngDisclaimer: MTBiz is printed for non-commercial & selected individual-level distribuon in order to sharing informaon among stakeholders only.MTB takes no responsibility for any individual investment decision based on the informaon in MTBiz. This commentary is for informaon purposesonly and the comments and forecasts are intended to be of general nature and are current as of the date of publicaon. Informaon is obtainedfrom secondary sources which are assumed to be reliable but their accuracy cannot be guaranteed. The names of other companies, products andservices are the properes of their respecve owners and are protected by copyright, trademark and other intellectual property laws.Naonal News 04Internaonal News 08MTB News & Events 12Naonal Economic Indicators 14Banking and Financial Indicators 15Domesc Capital Markets 16Internaonal Capital Markets 18Internaonal Economic Forecasts 19Enterprise of the Month 20Associaon of the Month 21Contemporary Knowledge 22Economy Outlook 23CSR Acvies 24Arcle of the Month page 02BANGLADESH IN INTERNATIONAL TRADE:A COMPARISON TO WORLD & COMPARABLE ECONOMIES 3. MTBiz2Since Globalization of International Trade expanded, dierenteconomies started reducing tari barriers to foreign products andeasy access to their markets. Certainly it increased total GlobalInternational Trade Volume and resulting less priced products toend consumers. However, the more economies opened up, themore, they became part of a virtual single economy and therefore,a systemic risk has arisen to show, impact in one economy spreadingacross the whole system and worldwide. For example, manycountries got access to large developed economies like US and EUand their export income grew than ever before and gradually theirGDP dependency on export to those countries were dependant andhence vulnerable to any problem to the importing countries.Since the Great Recession of 2007, the world has seen declininggrowth rate of the World GDP. As of Q3, 2012, EU and US are stillsuering and WB and UN have forecasted lower growth for theseeconomies. China has still been able to keep its growth rate tosome extent stable, yet, analysts suggest that, China may fall onits GDP Growth in near future, by 2020. According to WTO, Worldtrade expanded in 2011 by 5.0%, a sharp deceleration from the2010 rebound of 13.8%, and growth will slow further still to 3.7%in 2012, WTO economists project. They attributed the slowdown tothe global economy losing momentum due to a number of shocks,including the European sovereign debt crisis.1This paper primarily examines the international trade position andits trend of Bangladesh. Lately, an impulse is being sensed andmuch talk is loud in the media about declining import and especiallyimport of capital machinery to Bangladesh. Secondary objective ofthis paper is to assess the length and depth of this assumption ofdeclining trend in capital machinery as well as, to explore reasonsbehind it, if any. Finally, this paper would examine and comparetrend of International Trade of Bangladesh to Worlds InternationalTrade as well as to the Asian economies and to the LDCs to ndhow Bangladesh is performing in International Trade comparedto Region, LDC cluster as well as whole world, and to ascertainwhether current trend of International trade of Bangladesh is bettercompared to its Region, LDC Cluster and the globe.INTRODUCTIONGrowth lies at the core of business. Reaching out to customers withthe speed and exibility to best meet their needs and managingthe cost base to deliver a sustainable return is the central challengeof management. That challenge has a growing global dimension:entering new markets, optimizing operations across borders,nding the right value and cost mix, and seeking skills and fundingfrom the global pools of both capital and talent. No longer just atrend, globalization is now the dominant business environment.Trade lies at the heart of globalization. The pursuit of growth hasconverted businesses into natural pioneers growing beyond theircurrent competitive and geographic boundaries. When free tocompete, businesses from all countries have crossed borders toseek new opportunities and to pose new competitive threats todomestic players. But companies from some countries have beendisadvantaged by politics, regulation or lack of resource andfor much of the past century, companies from the developed worldhave been the most active in taking the largest share of the newglobal market.New patterns of trade have clearly emerged in this era. The sourcesof raw materials and low-cost workers have now become highlyskilled and wealthy markets in their own right. Today, there is a netredistribution of wealth away from the developed economies aprocess accelerated by the nancial downturn and the economicrecession that it has caused. Companies from those rapid-growth1 World Trade 2011, Prospects for 2012, May 10, 2012markets are now challenging the titans of the Fortune and Forbeslists.A great rebalancing of the global economy is therefore in motion.We are witnessing a surge of investment from West to East, someof it speculative, but much of it the result of individual businessdecisions. Yet this ow of capital is not the only force behind thegreat opening up of the global economy. There is also East to Eastand growing East to West dimension of trade ows. In parallel tohigh volume of trade to India and China, there lies signicantly agreater increase that is happening within regional blocs closer tohome markets.2Overthepast20years,therehasbeenadramaticriseininternationaltrade. From a period of stability in the 1980s, total global exportsaccelerated from just under 20% of GDP in 1990 to reach 30% by2010, meaning that, on average, world trade grew by around twopercentage points faster than world GDP.Thisexceptionalgrowthhasbeendrivenbyavarietyoffactors:Lowertrade barriers, Regional trade agreements, and the active directivesof the World Trade Organization. Other factors, behind the growthinclude, Falling costs of global transport and communications, andFinancial innovation, deregulation and the opening of markets suchas China and Russia to foreign companies.The degree of change if it comes to pass in both scale anddirection of trade will have a profound impact on the competitiveenvironment for all companies, wherever they are located aroundthe world.THE PROMISE AND PERIL OF GROWTHPROMISE OF GROWTHThe rising demand for products and services tailored to Asianconsumers will have a diverse impact on intra-regional trade andmarket sectors. Every rapid-growth market has its own uniquecharacteristics that create market sector specialization. Followingsection outlines specic specialization of the Asian markets togrow:Emerging, or rapid-growth, markets will continue to surgein importance between now and 2020. Although growth ofdemand will primarily be concentrated in Brazil, Russia, Indiaand China (the BRICs), there is also a new wave of emergingmarkets appearing on the horizon.Strong income growth in rapid-growth markets means that naldemand as opposed to production-location decisions willincreasingly drive trade patterns into and between emergingmarkets.Regional companies will need to align and integrate astrong talent management approach with their businessperformance.Goods trade will predominantly be in machinery and transportequipment.Information and communication technology (ICT) equipmentwill account for most of the growth, although South Koreasshipbuilding industry will also expand rapidly.Exports of lower value-added products, including clothes andshoes, will also continue to increase.Service exporters will seek to satisfy fast growing demandwithin Asia-Pacic.2 Jay Nibbe, Ernst & Young; The emergence of new pa ern of International Trade;published in collaboration with Oxford EconomicsARTICLE OF THE MONTHBANGLADESH IN INTERNATIONAL TRADE:A COMPARISON TO WORLD & COMPARABLE ECONOMIES 4. MTBiz 3Economic growth will be slower in advanced economies, butthe US and Eurozone countries will remain important marketsfor exporters.Key downside risk scenarios are a US recession, a hard landingin China and a second global nancial crisis triggered byEurozone defaults.POSSIBLE PERILS OF THE GROWTHLouPagnutti3thinks,whilethereareclearlywinnersintheexpansionof RGMs, potential outcomes can have unintended consequences,which he narrates in two potential alternative growth scenarios.The rst looks at a faster-than-expected expansion of Asias middleclass, which would drive an increase in consumer spending,producing a virtual circle of growth. The higher demand forproducts would trigger higher levels of inter-regional trade,stimulating export growth. This would lead to increased investmentin productive capacity, sparking the creation of more jobs. Morejobs would attract the rural population to cities, swelling the ranksof the middle class.The second, a move up the value chain too quickly by one countryover the others in the region, could reduce intra-regional trade,a key driver of overall regional trade. For example, if China wereto produce more high-tech products, its demand for parts andcomponents from other Asian countries would decrease. Theeconomies of East and Southeast Asia would be negatively aectedin terms of exports. On the other hand, the economies relativelyunaected by this scenario those prospering from the void inproduction left by China would be RGMs (Rapid Growth Markets)with strengths in other manufacturing segments.TRENDS IN INTERNATIONAL TRADE: THE WORLDFour years after the eruption of the global nancial crisis, the worldeconomy is still struggling to recover. During 2012, global economicgrowth has