US embassy cable - 05DHAKA5329

UNCLAS SECTION 01 OF 02 DHAKA 005329 
 
SIPDIS 
 
E.O. 12958: DECL: N/A 
TAGS: ECON, ETRD, EINV, BG 
SUBJECT: BANGLADESH'S TRADE PERFORMANCE IN FY 2005 
 
1.  Summary: Bangladesh's imports during the FY 2005 
(July 2004-June 2005) increased by 24% to $13.2 
billion, compared to FY 2004 ($10.65 billion). 
Exports, on the other hand, rose to $8.7 billion, an 
increase of 15% over FY 2004 ($7.57 billion).  The 
overall trade deficit widened from $3 billion to 
$4.6 billion, a 46% increase.  Strong growth in 
imports of capital machinery and rising oil prices, 
coupled with smaller dollar value increases in 
foodstuffs, explain the significant rise in imports. 
End Summary. 
 
FY 2005 Imports 
----------------- 
 
2.  Bangladesh's imports during FY 2005 increased 
24% to $13.2 billion.  Significant changes compared 
to the previous fiscal year (FY 2004) are shown 
below: 
 
a) Imports of capital machinery increased by 53% 
(from $728 million to $1.12 billion) due to growth 
of different manufacturing sectors as well as due to 
import of telecommunication equipment.  Industrial 
sector growth is estimated at 7%-8%, compared with 
overall economic growth around 5.6%. 
 
b) Imports of crude and refined petroleum and 
lubricant products increased by 57% (from $1.02 
billion to $1.6 billion), due the increase of price 
of these products in the international market.  The 
volume of these imports increased a modest five 
percent. 
 
c) Imports of rice increased 82% (from $144 million 
to $262 million) to meet the deficit of rice 
production in FY 2005, following severe flooding in 
summer 2004. 
 
d) Imports of sugar increased by 100 percent (from 
$110 million to $220 million) to meet the deficit of 
sugar production in FY 2005. 
 
FY 2005 Exports 
----------------- 
 
3.  Bangladesh exports during FY 2005 increased by 
15% to $8.7 billion.  Significant changes compared 
to the previous fiscal year (FY 2004) are shown 
below: 
 
a) Exports of knitwear apparel products were 
increased by 31% (from $2.15 billion to $2.82 
billion) due to the demand of such products in the 
world market (having 80 raw materials from the local 
market), the second largest export item.  These 
increases reflect significant increases in volumes 
that offset lower prices. 
 
b) Exports of jute goods increased by 24% (from $246 
to $307 million), due to increased demand in the 
world market. 
 
c) Exports of frozen food increased by 7% (from $390 
million to $420 million), reflecting continuing 
growth in this industry in Bangladesh. 
 
d) Exports of chemical products increased by 62% 
(from $121 million to $197 million), principally due 
to increased fertilizer exports from Bangladesh. 
 
e) Exports of woven apparel products increased by 
1.7% (from $3.53 billion to $3.59 billion). This 
sector saw a surge of quota driven orders at the end 
of calendar year 2004, which offset falling volumes 
and lower prices in the first half of calendar year 
2005.  Preliminary estimates from industry are that 
woven exports have fallen by six percent by value in 
the first quarter of FY 2006, largely due to pricing 
pressures.  Export volumes are stable, mitigating 
any short-term impact on local labor markets.  Over 
time, however, pricing pressures may force some 
consolidation and factory closures in this sector. 
 
4. Trade with the U.S. 
 
U.S. exports to Bangladesh increased 34% during the 
same period (from $248 million to $333 million), led 
by increased exports of raw cotton, generators, and 
telecommunication equipment. U.S. imports from 
Bangladesh increased 23% (from $2.04 billion to 
$2.51 billion) due to increased imports of garments, 
frozen food and sports equipment.  Despite U.S. 
export gains, the overall U.S. trade deficit with 
Bangladesh increased 21% (from $1.8 billion to $2.18 
billion). 
CHAMMAS