High tariffs on the import of raw materials are a major barrier to the diversification of Bangladesh's export basket, a noted economist said yesterday.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), said Bangladesh's average nominal tariffs are currently higher than the average tariffs of low-income, middle-income and high-income countries.

"The import tariff in Bangladesh is very high. That's why you have to find a way to rationalise the tariff regime in Bangladesh," he said at a seminar, styled "Bangladesh's Export Readiness: post-LDC graduation perspective", organised by the Dhaka Chamber of Commerce and Industry (DCCI) at its office in the capital.

"Our industrialisation has been dependent on readymade garments. So, export diversification is limited. Although Bangladesh exported some new products, they could not survive in the market for long. It's very alarming," Raihan said.

According to the Policy Research Institute of Bangladesh, the country exports 1,377 non-readymade garment products. Of them, 174 products are highly competitive, 408 items are moderately competitive and 795 are marginally competitive.

Bangladesh's Export Policy 2021-2024 aims to increase export earnings from $45 billion to $80 billion by facilitating the shipment of non-traditional and labour-based goods.

In his presentation, Raihan said the export baskets of Vietnam, Thailand and India showed a lot of diversity while Bangladesh's was highly concentrated on readymade garments.

An analysis of the export data shows that 82-85 percent of Bangladesh's total exports are of garment items.

Around 1984 to 1985, Bangladesh and Vietnam had similar export concentrations and an export size of around $1.5 billion. While Bangladesh's export size has grown to $55 billion, Vietnam's has ballooned to close to $300 billion and they have diversified their export basket.

"Bangladesh's exports have increased, but are almost one-fifth of Vietnam's exports," Raihan said.

He said that Bangladesh's graduation from least developed country (LDC) status would create many opportunities, but pragmatic, large-scale policy reforms would be needed to make the most of it.

For export readiness after LDC graduation, he suggested the harmonisation of the monetary policy and fiscal policy, increasing regulatory efficiency and quality, reducing non-performing loans, and ensuring long-term financing from the capital market.

"Moreover, we are lagging in trade logistics," he added.

He also underscored the importance of enhancing labour productivity through skill development. For that, public expenditure in the education sector is important, he said.

Ashraf Ahmed, president of DCCI, said: "We do not have much time as Bangladesh is going to graduate from LDC status in 2026, which is knocking at the door."

He added that while it is true that the government of Bangladesh is committed to supporting the business community to create a commendable position in the international market, the private sector needs sustainable policy reforms in the days to come.

"The more conducive the business environment is, the faster we can achieve the 'strategic bets approach' to have more products in our export basket," he said.

Asif Ashraf, director of the Bangladesh Garment Manufacturers and Exporters Association, said that the special incentives provided to the RMG sector had been scaled down recently, questioning why such a decision was taken before 2026.

Pointing out that exports were still dominated by the RMG sector, he also said the non-cotton market had the most potential but it remained untapped by local manufacturers.

Mohammed Mahbubur Rahman Patwary, managing director of Sonali Aansh Industry Ltd, added: "We have to incentivise non-RMG products that have the potential to grow. After LDC graduation, most incentives will not be effective. We may examine the examples of countries who have already graduated and see how they are managing their main export basket."