Export Diversification: An urgency deserving attention and action
With over 80% of exports tied to garments, Bangladesh’s economy soars on one wing alone. Diversification—both within and beyond RMG—is no longer optional but essential for resilience in an uncertain global market
Warren Buffett, one of the most successful investors and renowned for his long-term strategy, once said: "Do not put all your eggs in one basket." This principle has long been regarded as the cornerstone of diversification, and it applies equally to personal, corporate, and national investments.
Defying this principle, Bangladesh has nonetheless performed well so far, being recognised as an emerging economy and a potential next Asian Tiger, thanks to its strong growth driven mainly by the ready-made garments (RMG) industry and inward remittances. Yet this raises a critical question: how far can one fly with just one wing?
The RMG industry has consistently contributed more than 80% of Bangladesh's total exports since 2013–14, according to BGMEA data. Recently, this sector accounted for 81.49% of total exports and created employment for more than 4 million people, the majority of whom are women. This demonstrates both the remarkable success of the sector and the significant participation of women in the country's economy.
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However, such heavy dependence on a single sector exposes the country to concentration risk—something that was felt acutely only a few days ago when US President Donald Trump's reciprocal tariff of 35% was nearly imposed. It is important to note that Bangladesh has its highest single-market exposure in the US , which accounts for 18% of total merchandise exports worth $48.28 billion. Although the tariff was ultimately avoided, the episode highlighted the country's vulnerability. Without diversification—both within the RMG sector and beyond—Bangladesh's export growth cannot remain sustainable.
As in previous years, the interim government has set the merchandise export target for FY26 at $55.00 billion, a 13.40% increase from the $48.29 billion achieved in FY25. The total export target, including services, has been fixed at $63.50 billion, up 16.5% from $55.45 billion in FY25. While the targets appear consistent and achievable, the plan contains no clear roadmap for diversification, with specific targets and timelines still absent.
A comparison with regional peers underscores the challenge. India's export basket, according to the latest financial year's data, comprises engineering goods (26.88%), petroleum products (13.86%), electronic goods (8.89%), pharmaceuticals (7.01%), gems and jewellery (6.87%), chemicals (6.60%), ready-made garments (3.68%) and others (26.20%). This reflects a diversified structure with no single-product concentration above 30%, supported by a focus on capital- and skill-intensive sectors.
Similarly, Vietnam's exports include computers and electronic products (17.90%), telephones and parts (13.29%), machinery and accessories (12.87%), textiles and sewing products (9.13%), footwear (5.64%), wood products (4.02%), transport equipment (3.72%) and others (33.44%). Vietnam thus maintains single-product concentration below 20% with a strategic mix of low-end and high-end products that leverage a skilled workforce.
By contrast, Bangladesh's export basket—dominated by RMG, with smaller contributions from leather, agricultural products, jute, engineering products, and pharmaceuticals—shows over 80% concentration in a single labour-intensive industry, reflecting both a lack of diversity and limited skills development.
The need for diversification has never been more urgent, given shifting global trade dynamics, evolving political landscapes, and rapid technological advancement. If pursued effectively, diversification will not only reduce risk but also unlock opportunities in untapped markets.
Diversification within the RMG sector
Bangladesh's current RMG exports of $39.35 billion are heavily concentrated, with 50.10% going to the EU, 19.18% to the US, 11.05% to the UK, 3.31% to Canada, and 16.36% to non-traditional markets. This highlights the need to expand into new markets such as Japan, South Korea, Australia, Southeast Asia, and the Middle East.
Developing backward linkages to reduce dependence on imported raw materials, shifting from cotton-based to man-made fibres, and targeting high-end garment items could significantly strengthen the sector's resilience and value addition.
Diversification beyond the RMG sector
Leather and leather products
Despite an ample supply of raw materials, particularly from sacrificial animals during Eid-ul-Adha, Bangladesh's leather industry continues to struggle with compliance and certification challenges. The global leather market, according to Fortune Business Insights, is projected to reach $855.36 billion by 2032.
To tap into this potential, Bangladesh must modernise and ensure the effective operation of the Central Effluent Treatment Plant (CETP) in Savar, enabling businesses to secure certification from the Leather Working Group (LWG). Building a strong vertical supply chain through backward linkages would also help enhance competitiveness and sustainability.
Agricultural products
Global demand for processed and organic agro-products is rising. Bangladesh's fertile land and favourable climate can be leveraged through better cold storage facilities and stricter quality control.
According to the World Population Review's Food Index 2024, per capita food waste in Bangladesh is 82 kg annually, amounting to 14.1 million tonnes in total—higher than in the US(73 kg), China (76 kg), and India (53 kg). Reducing waste could itself unlock export opportunities.
Jute and jute products
With the global shift toward sustainable alternatives, jute offers Bangladesh a chance to reclaim its position as a global leader in this sector, building on its historical legacy and expertise.
Pharmaceuticals and APIs
Bangladesh's pharmaceutical industry currently meets 98% of domestic medical demand and exports to over 150 countries, taking advantage of TRIPS waivers available to LDCs. But with LDC graduation due in 2026, these advantages will end. Rising chronic disease and ageing populations globally are driving demand, but Bangladesh must develop an Active Pharmaceutical Ingredient (API) ecosystem and maintain strong R&D investment to reduce costs by over 20% and remain competitive.
Engineering and ICT-enabled products/services
Bangladesh has a large and growing tech-savvy youth population. Attracting investment from global tech companies, expanding vocational training centres across districts, and fostering stronger industry–academia collaboration could create jobs and boost exports. With proper support, Bangladesh could become a hub for outsourcing and digital innovation.
Ultimately, words must translate into action. Ensuring political stability, removing trade barriers, and improving the ease of doing business are essential steps to foster a conducive environment. The more diversified Bangladesh's export basket becomes, the more resilient its economy will be—protecting both the RMG sector and other emerging industries. The sooner this process begins, the better, because opportunities do not remain open forever.
Josef Ahmed is a corporate banker at City Bank PLC and a Finance graduate from the University of Dhaka
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
