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Bangladesh to Benefit from Improving Investor Confidence

Among the 25 economies in the HSBC Trade Forecast, Bangladesh’s shares of textiles and garment exports are expected to increase from 2.8% in 2010 to 3.8% in 2020, powered by an ample labor supply, low cost base, and tightening industry safety regulations.

In 2013, the report found that Bangladeshi exports rose 11.9% and have grown at a similar pace during the first five months of 2014. Over 70 percent of survey respondents said the outlook for trade volumes will improve over the next six months. And almost 80 percent expect the currency to have a favorable impact on business growth over the period.

That rosy outlook is reflected in country’s rise on the HSBC Trade Confidence Index. It climbed sharply from 103 in H2 2013 to 141 in H1 2014, making it the second highest in the sample of 23 countries, and an indicator that efforts to introduce more safety regulations to Bangladesh’s garment industry has boosted investor confidence.

Simon Cooper, chief executive of HSBC Commercial Banking, said, “Businesses can’t afford to fixate on the risks posed by today’s geopolitical problems and uneven rates of growth at the expense of their future planning. Conditions have undoubtedly been tough for trade recently, but we are now turning a corner. The medium and long term prospects look significantly better for businesses that have prepared themselves for recovery in both developed and developing markets.”

However, to keep the momentum moving and improve longer-term growth, Bangladesh will have to look to its neighboring countries to become trade prospects. The United States and the European Union—Germany and the United Kingdom, in particular—remain Bangladesh’s biggest trading partners, but recent data on purchasing managers’ indexes and Hong Kong container shipment suggest modest improvements to trade flows with Asia. Due to geographical proximity, China, India, Korea and Indonesia are poised to be Bangladesh’s fastest growing import partners.

Bangladesh will also have to increase labor productivity and move into higher value-added textile sectors, according to the report. In particular, investments aimed at services and consumer products appear to be the most fruitful for the future.