Comparative Analysis of Trade Competitiveness Between Bangladesh and Vietnam 2

Project Paper
Title: Comparative Analysis of Trade Competitiveness between Bangladesh

and Vietnam: Lessons for Bangladesh
Session (2015–2016)
15 December 2019
Submitted By
Samanta Islam
(ID: E16141059)
Muhammad Nafis Shahriar Farabi
(ID: E16141045)
Alif Mohammad Arif
(ID: E16141073)
Bachelor in Social Science

Department of Economics
Faculty of Arts & Social Sciences
Bangladesh University of Professionals
Mirpur Cantonment, Dhaka-1206
Project Paper
Title: Comparative Analysis of Trade Competitiveness between Bangladesh

and Vietnam: Lessons for Bangladesh
Session (2015-16)
15 December 2019
Submitted By
Samanta Islam
(ID: E16141059)
(ID: E16141045)
Alif Mohammad Arif
(ID: E16141073)
A Project paper submitted to the Department of Economics, Bangladesh University of

Professionals, in partial fulfillment of the requirements for the degree of
Bachelor in Social Science
Faculty of Arts & Social Sciences
Mirpur Cantonment, Dhaka-1206
Acknowledgments
This Project paper was supported by Bangladesh University of Professionals. We thank our
supervisor who provided insight and expertise that greatly assisted the research.
We thank Md. Emran Hasan who provided us with the proper guideline to conduct the project
paper work-related research & other necessary tests throughout the period. His comments and
assistance greatly improved the manuscript. Our heartfelt gratitude goes to our other faculty
members, classmates, friends and family members for their time to time support and
collaboration.
We would like to show our gratitude to the reviewers for their insights. We are immensely grateful
for their comments on an earlier version of the manuscript, although any errors are our own and
should not taint the reputations of those esteemed persons.
i
Declaration
I hereby declare that this project paper entitled “Comparative Analysis of Trade Competitiveness
between Bangladesh and Vietnam: Lessons for Bangladesh” has been carried out under the
Faculty of Arts and Social Sciences, Bangladesh University of Professionals in fulfillment of the
requirement for the Degree of Bachelor in Social Science. I have composed this paper based on
the researchers’ findings from various literature. This has not been submitted in part or full to any
other institution for any other degree. I even certify that there is no plagiarized content in this
project paper.
15 December 2019
_________________________
Samanta Islam
(ID: E16141059)
_________________________
(ID: E16141045)
_________________________
Alif Mohammad Arif
(ID: E16141073)
Faculty of Arts and Social Sciences
ii
Certificate of Supervisor
We, the undersigned, hereby, declare that we have read this project paper and we have attended
the project paper defense and evaluation meeting. Therefore, we certify that to the best of our
knowledge this project paper is satisfactory to the scope and quality as a project paper for the
degree of Bachelor in Social Science, Field of Study: Economics, Bangladesh University of
Professionals.
PROJECT PAPER REVIEW & EVALUATION COMMITTEE MEMBERS
_______________
(Chairman)
_______________
(Supervisor)
________________
(Referee)
iii
Table of Contents
Acknowledgments...................................................................................................................................... i
List of Tables ............................................................................................................................................. v
List of Figures ............................................................................................................................................ v
List of Acronyms ...................................................................................................................................... vii
Abstract .................................................................................................................................................... xi
1. Introduction .......................................................................................................................................... 1
2. Economic History of Vietnam and Bangladesh ..................................................................................... 2
2.1 Vietnam ............................................................................................................................................... 2
2.2 Bangladesh .......................................................................................................................................... 4
3. Review of Relevant Literatures ............................................................................................................. 6
4. Objective ............................................................................................................................................... 8
5. Methodology ......................................................................................................................................... 8
6. Salient Features: Bangladesh economy vs. Vietnam economy ............................................................ 9
6.1 GDP growth rate ............................................................................................................................... 12
6.2 Inflation ............................................................................................................................................. 12
6.3 Unemployment ................................................................................................................................. 13
6.4. Education ......................................................................................................................................... 14
6.4.1. Vietnam ......................................................................................................................................... 14
6.4.2. Bangladesh .................................................................................................................................... 15
6.5 Poverty and inequality ...................................................................................................................... 16
6.5.1. Vietnam ......................................................................................................................................... 16
6.5.2. Bangladesh .................................................................................................................................... 17
7. Competitiveness among the nations .................................................................................................. 18
8. Current scenario of the export industry of Vietnam .......................................................................... 20
9. Current scenario of the export industry of Bangladesh...................................................................... 23
10. Trade Balance.................................................................................................................................... 24
10.1 Vietnam ........................................................................................................................................... 24
10.2 Bangladesh ...................................................................................................................................... 26
11. Export earnings and Import Expenditure.......................................................................................... 27
12. Textiles and garments of Vietnam .................................................................................................... 29
iv
13. The successful journey of Vietnam in the electronics sector ........................................................... 30
13.1. Challenges ...................................................................................................................................... 31
14. Garments industry of Bangladesh..................................................................................................... 31
15. Business Climate ............................................................................................................................... 34
16. Corruption ......................................................................................................................................... 35
17. The rationale behind Vietnam’s Success .......................................................................................... 36
18. Discussion.......................................................................................................................................... 41
19. Lessons for Bangladesh ..................................................................................................................... 43
20. Conclusion ......................................................................................................................................... 49
References .............................................................................................................................................. 50
List of Tables
Table 1: Comparison in Economic Trend ................................................................................................... 10

Table 2: Comparison in International Index ............................................................................................... 19
Table 3: Comparison in Business competitiveness ..................................................................................... 19
Table 4: Trade as a % of GDP .................................................................................................................... 20
Table 5: Top 5 Export Destinations of Bangladesh and Vietnam ............................................................... 22
Table 6: Top 5 exporting goods for Bangladesh and Vietnam ................................................................... 22
Table 7: Import Destinations of Bangladesh and Vietnam ......................................................................... 25
List of Figures
Figure 1: GDP Growth Rate Comparison between Bangladesh and Vietnam ............................................ 12
Figure 2: Comparison of Inflation Rate between Bangladesh and Vietnam ............................................... 13
Figure 3: Comparison of the unemployment rate ....................................................................................... 14
Figure 4: Bangladesh and Vietnam’s Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population)
.................................................................................................................................................................... 16
Figure 5: Comparison of inequality in Bangladesh and Vietnam ............................................................... 17
Figure 6: Trade Balance of Vietnam (Billion USD) ................................................................................... 25
Figure 7: Trade balance of Bangladesh (Billion USD) ............................................................................... 26
Figure 8: Percentage of export earning for Bangladesh .............................................................................. 27
Figure 9: Percentage of Export earning for Vietnam .................................................................................. 28
Figure 10: Percentage of Import expenditure for Bangladesh and Vietnam ............................................... 28
Figure 11: Textile and garment export growth rate of Vietnam ................................................................. 29
Figure 12: RMG share of total export in Bangladesh ................................................................................. 32
v
Figure 13: Share of knitwear and woven in total RMG export of Bangladesh in 2018 .............................. 32
Figure 14: GCI performance of Vietnam in 2019 ....................................................................................... 37
Figure 15: Export Concentration of Vietnam. ............................................................................................ 38
Figure 16: Comparison in FDI inflow between Bangladesh and Vietnam ................................................. 39
Figure 17: Vietnam’s introduction of new products ................................................................................... 40
Figure 18: Vietnam’s growth in international market share ....................................................................... 41
Figure 19: GCI performance of Bangladesh in 2019 .................................................................................. 44
Figure 20: Export Concentration of Bangladesh......................................................................................... 45
Figure 21: Complexity in export diversification of Bangladesh ................................................................. 47
Figure 22: New product space for Bangladesh ........................................................................................... 48
vi
List of Acronyms
A2i Access to Information
ADB Asian Development System
ASEAN The Association of Southeast Asian Nations
BASIS Bangladesh Association of Software and Information Services
BB Bangladesh Bank
BBs Bangladesh Bureau of Statistics
BIDS Bangladesh Institute of Development Studies
BoP Balance of Payment
BRTA Bangladesh Road Transport Authority
CIT Corporate Income Tax
CMT Cut, Make, Trim
CPD Centre for Policy Dialogue
CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
CPV Communist Party of Vietnam
CRI The Commitment to Reducing Inequality
DFQFMA Duty-Free and Quota Free Market Access
ECI Economic Complexity Index
ECOSOC United Nations Economic and Social Council
EPB Export Promotion Bureau
EPZs Export Processing Zones
vii
ESAF Enhanced Structural Adjustment Facility
EU European Union
EVFTA European Union-Vietnam Free Trade Agreement
FAO Food and Agricultural Organization
FDI Foreign Direct Investment
FTA Free Trade Agreement
FY Fiscal Year
GCI Global Competitiveness Index
GDP Gross Domestic Product
GEF The Global Economic Forum
GNP Gross National Product
HCI Human Capital Index
HS Harmonized System
HS 61 Articles of apparel and clothing accessories, knitted or crocheted
HS 62 Articles of apparel and clothing accessories, not knitted or crocheted
ICO International Coffee Organization
ICT Information and Communication Technology
ILO The International Labour Organization
IMF International Monetary Fund
ITC International Trade Centre
LDC Least Development Countries
LFMEAB Leathergoods & Footwear Manufacturers & Exporters Association of Bangladesh
viii
MDG Millennium Development Goals
MFA Multi- fibre Arrangement
MT Metric Ton
NPL Non-Performing Loan
OECD The Organisation for Economic Cooperation and Development
Otexa Office of Textiles and Apparel
Oxfam Oxford Committee for Famine Relief
PISA Program for International Student Assessment
PPP Purchasing Power Parity
QRs Quantitative Restrictions
R&D Research and Development
RCA Revealed Comparative Advantage
RCEP Regional Comprehensive Economic Partnership
RMG Ready-made Garments
ROO Roles of Origin
SAARC South Asian Association for Regional Cooperation
SAF Structural Adjustment Facility
SAP Structural Adjustment Programme
SDG Sustainable Development Goal
SEZs Special Economic Zones
SOE State-owned Enterprise
TI Transparency International
ix
TIB Transparency International Bangladesh
TICFA Trade and Investment Corporation Framework Agreement
TPT The Policy Times
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Program
USD United States Dollar
USITC United States International Trade Commission
VET Vocational Education and Training
VINATEX Vietnam Textile and Garment Group
VITAS Vietnam Textile and Apparel Association
VND Vietnamese Dong
WB World Bank
WDI World Development Indicator
WEF World Economic Forum
WHO World Health Organization
WITS World Integrated Trade Solution
WTI World Trade Indicator
WTO World Trade Organization
WTS World Trade Statistics
x
Abstract
Bangladesh and Vietnam have been the largest garments exporters to the world in recent decades
after China. Therefore, competition between Bangladesh and Vietnam in the textile industry is
getting intense day-by-day. Nonetheless, both the country shared some of the similar traits in
policy reformation. Such as, both the nations became independent during the 1970s and reformed
export-oriented policies during the 1980s. However, except for the apparel industry, Bangladesh
had not gained any extraordinary success that can be comparable to Vietnam. Moreover, Vietnam’s
trade competitiveness had always been better than Bangladesh in most of the period. The paper
aims to identify the areas where Bangladesh is lagging behind Vietnam in terms of trade. In this
regard, the various international index had been compared. From the comparisons, it has been
linked with the trade scenario associated with both the nations. The findings are Vietnam’s policy
has always been investing more in human capital, infrastructure and chances of export
diversification. Additionally, Vietnam had been prosperous in attaining FDI inflows in different
sectors of the economy. Hence, the country gained strong trade competitiveness through
diversified export basket especially in electronics. In Bangladesh, FDI inflows and export growth
rates had increased over the years. Then again, most of the foreign investments go towards the
textile industry. Therefore, the export basket is highly concentrated around the garments sector.
Moreover, Bangladesh had not been able to produce productive human capital and economic
infrastructure. As a result, competitiveness did not improve noticeably. For a successful export
diversification, increasing FDI inflows in other sectors rather than garments is necessary for
Bangladesh to achieve akin success like Vietnam.
Keywords: Competitiveness, Policy reformation, FDI inflows, Garments, Export diversification
xi
1. Introduction
Globalization and the integration process are changing the business environment among the
nations especially the developing ones. Access to new markets, resources and transformation in
technologies are creating various new challenges for the businesses. However, surging competition
is the biggest challenge of them all i.e. maintaining qualities of the organizations, effective state
policies, enlarging international trade, attracting productive investments, expand payment balance
of payment etc. (Čiburienė and Zaharieva, 2006). Therefore, the fortune of a country influenced
by the performances of the domestic business entities which depend on the policies and regulation
of the nations.
Bangladesh and Vietnam are two Asian countries that share some similar traits in business and
economic position i.e. apparel industry, which can be striking to analyze. Both nations became
independent during the ’70s and being at a vulnerable economic state both nations brought policy
reforms in the ’80s that later accelerated their economy. At the period of the liberation war,
Bangladesh was a closed economy with less than one-seventh of the trade ratio where the export
basket was mostly comprised of raw jute (Haque and Taslim, 2011). After that, knitwear and
woven apparel products (HS 61 AND HS 62) took place in the export basket in the early 1990s
when Bangladesh government encouraged open economy and involvement of private sectors along
with reduced tariffs and restrictive quantitative policies to expand trade (Haque and Taslim, 2011).
On the other hand, in 1986, Vietnam launched political reforms under Đổi Mới which have
prompted economic growth and development. Therefore Vietnam transformed from one of the
world's poorest countries into a low-middle-income nation (Vuong, 2014).
As a result of the reforms, trade liberalization assisted individually to increase their share of export
in the GDP. The United Nation’s report on World Economic Situation and Prospects 2019
announced that Bangladesh is the 3rd fastest Gross Domestic Product (GDP) growing country in
2019 due to rigorous private consumption, accommodative monetary policy, and increasing
investment demand. GDP growth of Bangladesh should be above 8% (Bangladesh Economic
Prospects 2019), Whereas, World Bank published that Vietnam’s GDP growth in 2019 is likely to
decelerate from 7.8% to 6.6% due to reducing in external demand and tight fiscal policies1.
1
See http://www.xinhuanet.com/english/asiapacific/2019-09/25/c_138421767.htm for details.
1
However, the high rate of GDP growth cannot portray the actual scenario of the development.
Recently, Bangladesh has lost its competitive edge to her biggest competitor in trade, Vietnam at
the European Union apparel market because of the EU’s extension of duty-free access to Vietnam
(European Commission, 2018). Moreover, from the report of Global Competitiveness Index 2019,
it can be noticed that Vietnam’s economic development had increased that helped the country to
secure the rank 67th while the rank of Bangladesh is 105th. It is noted that Vietnam is progressing
in infrastructure and ensured cheap mass access to internet keeping in the mind of the fourth
industrial revolution (UNDP, 2017). While in Bangladesh, there is a shortage of skilled workforce
and technological focused employment for the fourth industrial revolution.2
The paper had been divided into three sections. In the first section, history and economic policies
are presented to show the motivation behind the reformation. Moreover, a current scenario has
been included along with the countries’ overall deliberation on growth, inflation, education,
employment, health, poverty and inequality. Then in the second section, the international index on
the various important issue, especially on business and trade, had been analyzed. After than in the
third section, Bangladesh and Vietnam’s export-import industry is evaluated to show the
differences between the nations. Finally, the rationale behind Vietnam’s economic miracle and the
lessons for Bangladesh had been added to study the salient features of Vietnam’s economic
approaches in policy and regulations that helped the country to flourish more than Bangladesh.
2. Economic History of Vietnam and Bangladesh
2.1 Vietnam
Vietnamese economy experienced peaceful development since the end of the Vietnam War in
1975. A brutal U.S. war against North Vietnam and Viet Cong created a massacre and the U.S
army had to withdrawal U.S. military troops in 1973. The conflict started after the Second World
War when Ho Chi Minh, the then prime minister of Vietnam asked for the support of U.S president
Henry Truman in preventing the French government to rule Vietnam as a colony. But the U.S.
president ignored and when the French military struggled to control, in 1954 the country was
divided into North and South by the international agreement. Unification of North Vietnam and
2
See https://www.dhakatribune.com/opinion/op-ed/2019/02/14/what-the-4th-industrial-revolution-has-in-store-for-
bangladesh for details.
2
South Vietnam was initiated after the Vietnam War. After that, the nation had faced heavy
economic damage and a lack of proper structural institutions. From 1975–1985, Vietnam was a
centrally planned economy. At that period the Vietnam government had focused on the economic
policy that can enhance heavy industry and increase production. But the economy was stagnated
during 1976–1980 especially in the power and cement sector (Beresford and Phong, 2000).
Moreover, the Fourth Congress of the Vietnamese Communist Party could not fulfill most of the
economic targets. Though there was a slight change in the overall economy afterward the war the
national recession from 1976–1980 made the crisis worse. On the other hand, about 70% of the
population at that time was working in the agriculture sector but the annual growth in this sector
was not enough which caused outbreaks of famine (Thang, 2000). Also, there was a wide persistent
trade deficit in the economy. From 1976–1985, export turnover was US$ 1.7 billion per year which
could not compensate more than one-third of the total imports (Phong, 2004). Quality of life was
unsatisfactory with rampant inflation. Therefore, 10-year after the war, the centrally planned
economy could not make a substantial impact on economic development. However, in 1986, the
Sixth Congress of the Vietnamese Communist Party was created through transforming to an open
market-oriented economy, aiming to eradicate state subsidization, encourage foreign trade,
attracting FDI and diversify the ownership of the asset through private organizations and
individuals. This free-market economic reforms introduced by the Communist Party of Vietnam
(CPV) is called Đổi Mới reform (Hays, 2008)3. It had amplified the economic growth and
development which could overcome the previous economic stagnation, reduction of inflation, and
established macro stability. Moreover, export had increased an average of 20% every year since
then. Furthermore, in 1989, Vietnam took place at the top three rice exporter in the world (Kien
and Heo, 2008). According to Hung (1999), in 1993 the number of poor households reduced from
28% to 19.3% measured by the Vietnamese poverty standards while GDP per capita had increased
by 1.6% in comparison with the centrally planned economies. Along with that improvement of
infrastructure, electric power, communication, postal system, health, education, traffic system,
freshwater and mass media had developed. In 1997, communists politicians, Vo van Kiet and Do
Moui retired which caused an increase in corruption but then again during 1997–2007, there was
3
Đổi Mới (Vietnamese: [ɗo᷉i mə̌ːi]; English: "Renovation") is the name given to the economic reforms initiated in
Vietnam in 1986 with the goal of creating a "socialist-oriented market economy". The term đổi mới itself is a general
term with wide use in the Vietnamese language.
3
a prevalent macro stability, increase in FDI and employment and most importantly elimination of
politics from the economic policy created a market system that can be mentioned as ‘leissez faire’
(Adam, 2016). With all these reforms and political changes resulted in economic growth and
development. Hence, in 1990, Vietnam’s GDP per capita was $98 which became $1,190 in 2009
and achieved the title of being a ‘middle-income country’ (Ohno, 2009).
2.2 Bangladesh
Bangladesh has become independent from Pakistan in 1971 through a bloodshed war which
completely destroyed the country’s economic structure. Formerly Bangladesh was named East
Pakistan and was ruled by the West Pakistan government. At the period of the liberation war,
Bangladesh was a closed economy with less than one-seventh of the trade ratio. East Pakistan was
not developed as much as West Pakistan and discrimination against East Pakistan prevailed in
every aspect. Therefore in 1971, the war was inevitable for the people of East Pakistan. After the
liberation war, East Pakistan was named as Bangladesh and Awami league leaders had formed the
Bangladesh government bodies. In the post-independence period, imports were highly restricted
and import tariff was around 36% and more in Bangladesh (Haq and Zakaria, 2011). The reason
was to protect the domestic industries from international competitions. High import tariff and
highly regulated financial system resulted in a shortage of resources and expansion of inefficient
industries. Therefore, the country was running an inward trade industry policy that overvalued the
exchange rate regime. Furthermore, the GDP growth rate was low and fluctuating every year and
the overall economic performance was not satisfactory. Hence the economy of Bangladesh was
called ‘bottomless basket’ by the U.S. Secretary of State, Henry Kissinger (Helal and Hossain,
2013). However, the fixed exchange rate regime was replaced by the managed exchange rate
floating system in 1980 in Bangladesh (Haq and Zakaria, 2011). In 1982, Bangladesh launched
strategies along with World Bank and IMF for a greater export-oriented market that initiated the
structural adjustment program (SAP) which formed the “structural adjustment facility” (SAF) and
“enhanced structural adjustment facility” (ESAF) in 1987 (Raihan, 2008). These programs
included a wide range of policy reforms in industry, fiscal, monetary, privatization of state-owned
enterprises, promotion of FDI and exchange rate system. At the Second Five-Year Plan of 1980–
1985, the government targeted to minimize the export-import gap. Moreover, during 1985–1990,
4
the aim was to adopt policies that can stimulate the export. Furthermore, in the Fifth Five Year
Plan, import liberalization had been adopted by reducing tariff and removing Quantitative
Restrictions (QRs). The focus was on strengthening the institutional framework and developing
entrepreneurial capacity (Haq and Zakaria, 2011). According to World Bank per capita increased
from $257 $1,210 from 1990 to 2015 respectively. However, the availability of cheap imported
intermediate goods was a significant factor in the growth. Moreover, Bangladesh had done fairly
well in the export sector among the SAARC countries. During FY’94–95, the export sector of
Bangladesh achieved a 37.04% growth rate (Rahman, 2008). Ever since the Bangladesh
government had carried out some extensive trade reforms consistent with the Uruguay Round
Accord and agreement with the World Trade Organization (Athukorala, 2000). Especially,
reforming the anti-export bias which is prevailing in the country and making economic
development. As a result, Millennium Development Goals: End-period Stocktaking and Final
Evaluation Report (2000–2015) suggested that within 2015, the population of Bangladesh living
under the poverty line decreased from 56.7% to 29%. As a result of gradual development,
Bangladesh is likely to leave the Least Development Country (LDC) category by 20244.
According to the World Trade Statistic Review of World Trade Organization, Bangladesh is the
second biggest garment exporter accounting for 6.4% of the global market share after China in
2018 (Textile Today, 2018). Then again, according to WTO-UNCTAD estimation 2008–2018,
Vietnam has been crowned in the list of top garments exporter with a 14.6 percent export growth
while Bangladesh gained 9.8 percent growth securing its second position after Vietnam5.
Moreover, the report indicates that almost 30-fold had been increased in Vietnam’s exports of
electrical machinery between 2008 and 2018. Therefore, even after starting from the bottom
scratch nearly at the same time, economic and political turmoil hindered Bangladesh to grow as
much as Vietnam.
4
See https://www.un.org/development/desa/en/news/policy/leaving-the-ldcs-category-booming-bangladesh-
prepares-to-graduate.html for details.
5
See https://www.thedailystar.net/business/export/news/bangladesh-second-export-growth-wto-1783945 for details.
5
3. Review of Relevant Literatures
There are significant works of literature on the comparisons among nations based on trade
competitiveness, innovations and challenges to evaluate the economic performances. For
instance, Windrum and Tomlinson (1999) issued an article based on the comparison among
four countries: Germany, Japan, Netherlands and the U.K., Netherlands’ knowledge-
intensive services and international competitiveness. The paper offered a comparison of
the respective country’s distinctions and their quality of services which connects between
services and other economic activities through innovation spillover effect. For this reason,
labor-based production function had been constructed where each nation’s inpu t-output
data had been incorporated. From the result, the author showed that the U.K. had a
successful structure in service sector trade that helped the nation to hold up high their
global competitiveness. That is why the study suggested Germany to reconstruct its service
sector for gaining international competitiveness. Yilmaz (2003) analyzed on Turkey’s
competitiveness within the world organization. The purpose of this paper is to give an
overview of the international competitiveness of the Turkish economy and the structure of
specialization comparing with the Balkan nations, the Czech Republic, Hungary, Rumania,
European country and also the EU/15.This analysis made an attempt to seek out Turkey's
ability to cope with challenges that may arise from the competition with the European
Union (EU). Moreover, enhancing human capital can increase the competitiveness of the
nations. Neseem (2017) conferred a comparative study on Indian and Chinese economy.
India and China are two emerging Asian countries experiencing rising economic growth
throughout the recent decades. China’s semi-free enterprise has already exceeded the
economies of France, European nations and Japan. Here the factors of comparison are the
gross domestic product, GNP per capita, tax, infrastructure, health etc. The analysis
concluded that China is superior as compared to India in terms of economic growth and
trade competitiveness. Then again, the paper recommended that India need s to focus more
on better-education and the healthier working class in society.
Countries' competitiveness depends on the national policy and trade reforms provided by
the governments. Moreover, inter-governmental co-operation and negotiations accelerate
international trade and growth. In this regard, Gylfason and Hochreiter (2009) showed a
study where a comparison of the economic performance between the Republic of Estonia
6
and Georgia since the collapse of 1991. Most of the findings showed that smart governance,
institutional reforms, and enhancements within the instructional system play an important
role in raising output. Whereas Georgia still struggles with weak governance. However,
the Republic of Estonia has created major advances altogether and enhanced economic
performance. Furthermore, Siddique (2013) examined the trade relations between Australia
and Thailand from the period of 1990-2011. Trade patterns and trade performance of those
two nations are analyzed. The trade patterns are examined with reference to the changes in
trade composition, the intra-industry trade index and trade intensity index. The findings of
the paper recommend that the composition of bilateral trade has modifi ed considerably
since the ’90s as a result of economic and trade reforms. The export of automotive vehicles
is the strongest trade link between the two countries. Moreover, the analysis indicates that
Thailand’s export competitiveness had contributed to the growth of exports to Australia.
As compared, Australia’s export growth to Thailand didn't result in any boost.
There is literature about the garments sector competitiveness of Banglad esh such as Ara
(2009) showed future challenges of Bangladesh in international trade competitiveness
especially in the apparel sector. Through different indicators and a graphical
representation, the paper identifies various challenges and issues regarding the business
climate of Bangladesh among South Asian nations. Kathuria (2013) analyzed the
competitiveness of the apparel export sector of India and Bangladesh through Balassa's
index of Revealed Comparative Advantage (RCA). The findings showed that India and
Bangladesh’s share of textile competitive advantages had increased over the period
between 1995 and 2003. Among those clothing, exports are classified as one of the basic
advantages of these two nations. Therefore, challenges and constraints had been
highlighted in the paper for India and Bangladesh in the upcoming future. Joarde et al.
(2013) examined the post MFA performance of the Bangladesh apparel sector. It had been
anticipated the negative impacts on the export of garments sector because of the elimination
of MFA. In the paper, it had been concluded that Bangladesh, Vietnam and China survived
in the market even after the 2008 global recession where MFA had a role to play. Simpson
et al. (2016) presented research on Bangladesh and Vietnam’s apparel industries to show
that after China, Bangladesh and Vietnam have a comparative advantage in the textile
industry. The paper indicated that Vietnam’s labors are more expensive than Bangladesh
7
as they are more skilled. Therefore, Vietnam is being able to capture high quality with
greater efficiency fashion demand in the international market. Whereas, Bangladesh is
fulfilling the need for high volume basic clothe demand which might be valuable to
consumers. As the Textile and garments sector is one of the largest sectors for Vietnam for
economic growth, Vietnam has a similar comparative advantage in the clothing industry to
beat Bangladesh in the international market. On the other hand, Vietnam has a diversified
export basket where Bangladesh export basket is heavily concentrated around garments and
textiles. Then again, studies relating to Bangladesh and Vietnam’s competi tive comparison
can be useful to identify the lags of Bangladesh that are hindering the country to become
as successful as Vietnam. Hence, the aim of the paper is to analyze Vietnam’s
competitiveness which is necessary for Bangladesh to focus.
4. Objective
Broad Objective
 To compare the trade competitiveness between Bangladesh and Vietnam
Specific Objectives
 To Give comparative analysis on the economic indicators between the two countries
 To differentiate the countries competitiveness regarding trade and associated
infrastructure through international index
 To identify the important feature of Vietnam’s economic policy that brought surplus
trade
 To Show the defective policy implication of Bangladesh that created hindrance in
attaining targeted goals.
5. Methodology
This paper aims to differentiate between Bangladesh and Vietnam’s competitiveness and
analyzing their current economic progress linking with their effective policy reformation.
In this regard, both qualitative and quantitative data had been collected and examined. For
quantitative data, different international data indicators had been used. Such as- WDI,
World Bank, Bangladesh Bank, ITC trade map, Atlas Economy etc. However, for
8
qualitative analysis, sources had been the research articles and diverse economic policies
taken by the government. To compare the trade competitiveness, various international
index i.e. had been shown. The scope of the research is to identify the salient feature of
Vietnam’s policies that achieved surplus growth and associate those policies with
Bangladesh counterpart to pinpoint the adverse side of Bangladesh. Therefore, over the
period trade competitiveness in the light of international index had been evaluated.
Rigorous research on the facts of the trade competitiveness had been incorporated to
scrutinize export performance and business infrastructure. Nevertheless, the lessons for
Bangladesh from Vietnam had been included to show the current policy gap in Bangladesh.
Moreover, the study analysis is completely unbiased and evidence-based.
6. Salient Features: Bangladesh economy vs. Vietnam economy
Bangladesh was a socialist country soon after the liberation war. After the unwanted murder
of Bangabandhu Sheikh Mujibur Rahman in 1975, the Bangladesh government turned into
a capitalist society from socialism. Moreover, the country became one of the free-market-
oriented economies among South Asian countries (Abdin, 2016). On the other hand,
Vietnam was a centralized economy after the Vietnam War and it was replaced with a
mixed economy where private ownership and decision-making are encouraged but the
system still relies on the central planning system. Though the Vietnam economy is ruled
by the communist party recently, the country has announced to turn towards capitalism
(Karlin, 2019). The size of the area of Vietnam is larger than Bangladesh, however, both
the country is densely populated. Bangladesh has 163. 05 million and Vietnam have
approximately 96.4 million people approximately (World Population Review, 2019).
Nevertheless, the population growth rate in Bangladesh is higher than in Vietnam.
Bangladesh had experienced a robust macro-economic change in the early 1990s when the
per capita growth rate was increasing every year (Bhattyacharjo, 2005). Bangladesh had
signed numerous bilateral or regional free trade agreements with neighboring countries i.e.
Bangladesh has Trade and Investment Cooperation Framework Agreement (TICFA) with
the USA. Additionally, Bangladesh has a noteworthy contribution to global readymade
garment (RMG) business growth. Moreover, the country maintains a Duty-free and quota-
9
free (DFQF) market access under the World Trade Center (WTO) regime (Abdin, 2016).
As a result of the significant trade policy reforms, the average growth rate of Bangladesh
was over 6 percent (IMF, 2018). Along with poverty other social indicators i.e. gender
disparity, education, and maternal mortality etc. vital issues have also enhanced by
evolving from an agrarian society to manufacture based economy.
Table 1: Comparison in Economic Trend
Indicator Bangladesh Vietnam
GDP (Billion US dollars) 274.02496 244.94845
Per Unit GDP 1,698.3 (2018) 2,563.8 (2018)
Life Expectancy 72 (2017) 75 (2017)
Child Mortality 32 (2017) 21 (2017)
74 (2018) 95 (2018)
Literacy rate, adult total (% of people ages 15 and
above)
Access to Electricity (% of Population) 88.0 100
Mobile Cellular Subscription (per 100 people) 97 (2018) 147 (2018)
Fixed Broadband Subscription 6.33 13.60
Inflation 5.5 (2018) 3.5 (2018)
Population 161,356.04 95,540.40 (2018)

(2018)
10
(Thousands)
Area 56,977 mi² 127,881 mi²
Unemployment rate 4.3 (2019) 1.9 ( 2019)
Exchange rate 84.7500 23,154.630

BDT/USD VND/USD
Export earnings (Billion USD) 40.55832 (2018) 233.65069 (2018)
Import expenditure (Billion USD) 64.24223 (2018) 225.67952 (2018)
Foreign direct investment, net inflows (BoP, current

US$) 2,940,222,420 15,500,000,000
(2018) (2018)
Remittance (Billion USD) 17.3 (2019) 16.7 (2019)

Current account balance (BoP, current US$)
-7,592,873.49 5,898,553.00
thousand thousand
Source: Authors’ compilation from various reports of World Development Indicator (WDI)
Then again in the last decade, the eastern tip of the Indochina peninsula, the Southeast
Asian country Vietnam has achieved more success than Bangladesh. In 2005, China was
the only Asian country that outperformed the 8.4% GDP growth rate of Vietnam (Zissis,
2006). Vietnam’s economic boom had started in 1995 when the country normalized its
relationship with the U.S. and became a member of the Association of Southeast Asian
Nations (ASEAN) (Zissis, 2006). Ever since the country’s business environment grew
tremendously. The rapid growth rate of Vietnam was due to encouraging a more liberal
economic system and reformation in policy that resulted in an influx of private enterprises
and foreign investment (The Asian Post, 2019) 6. In 2000, Vietnam signed a free trade
agreement with the U.S and in 2007, joined the World Trade Organization (WTO).
Moreover, the World Bank report of doing (2020) business indicated that Vietnam made
6
See https://theaseanpost.com/article/vietnams-reforms-paying for details.
11
progress in enforcing contracts, increasing access to credit and electricity, paying taxes and
trading across borders. However, Bangladesh made no progress in such cases. Additionally,
Vietnam had been successful in creating a foreign investment hub in Southeast Asia. Hence,
it was stated by the report of Financial Times, in 2017 that Vietnam is the largest exporter
of garments and second-largest exporter in electronics Southeast Asian countries.
According to the World Economic Forum’s Inclusive Development Index 2018, the rank
of Vietnam was 33 whereas the rank of Bangladesh was 34. Therefore, Vietnam has better
quality infrastructure and favorable economic conditions than Bangladesh.
6.1 GDP growth rate
From the early 90s, the GDP growth rate of Vietnam accelerated than Bangladesh. The
continuous development in the economy has been facilitating a higher GDP growth rate in
Bangladesh in recent years.
Figure 1: GDP Growth Rate Comparison between Bangladesh and Vietnam
12
10
0
1994
2007
2015
1985
1986
1987
1988
1989
1990
1991
1992
1993
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
GDP growth Bangladesh(annual %) GDP growth Vietnam(annual %)
Source: Authors’ compilation from various reports of World Development Indicator (WDI).
6.2 Inflation
12
In the case of Vietnam, the inflation rate is volatile. In 2008 and 2012 the inflation rate was the
highest. But the government was being able to reduce the rate of inflation in recent years. However,
Bangladesh, the inflation rate had been lingering around 5% for a long period of time.
Figure 2: Comparison of Inflation Rate between Bangladesh and Vietnam
25
20
15
10
-5
Vietnam's inflation rate Bangladesh's inflation rate
6.3 Unemployment
In Vietnam, the unemployment rate has been lower around 2%. Meanwhile, in Bangladesh, the
rate is increasing over the years. Moreover, the unemployment rate in Bangladesh is stagnant
around 4% from 2012.
13
Figure 3: Comparison of the unemployment rate
0
1993
2006
2019
1991
1992
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Bangladesh's Unemployment rate (% of total laborforce)
Vietnam's Unemployment rate (% of total laborforce)
6.4. Education
6.4.1. Vietnam
Vietnam is outperforming its neighboring countries in Southeast Asia on education where

Vietnam spends around 5.65% of its GDP on education which is high in comparison to the
global standard of 4.68% (WDI, 2013). The government of Vietnam also observes the test
scores of Vietnamese on culture and historical factors to ensure work ethic under
Confucianism that can rebuild the country after the war (Truong et. al, 2016). As the
country is transforming from agriculture to manufacturing sector skilled labor force is
required. Hence, shortcomings of its education system encouraging Vietnamese mobility
for attaining quality education. After China and India, currently one of the most dynamic
outbound students are from Vietnam. Tertiary enrollment had tripled between 1999 and
2015 in Vietnam (Trines, 2017). Despite the growth in higher education, Vietnam cannot
efficiently engage its growing youth population. Therefore, Vietnam has increased
allocation for vocational institutions for the development of human capital. Further , the
country collaborated with Australia, the EU, Germany, Japan, South Korea and the Asian
14
Development Bank to modernize the VET system, as a result between 2000 and 2010, the
number of students enrolled in vocational training increased by 132% (Trines, 2017).
6.4.2. Bangladesh
Bangladesh's government’s education expenditure had decreased from 12% to 11.7% in the
FY2009 to FY2020 respectively. Bangladesh has achieved steady GDP growth over the
decade, GDP allocated to education remained relatively low. Nevertheless, the enrolment
of primary education had been increasing but higher education quality and skill
development are not being given enough consideration (ADB, 2018). On top of that, higher
education is expanding without considering the market demand (Murshid, 2016). However,
public institutions are unable to accommodate the students for higher education. Therefore,
surging demand for private institutions cannot meet up the quality of education. Moreover,
the implementation of policy reforms in improving the education system remains weak due
to a lack of funding and inadequate school infrastructure. Moreover, there is a lack of
inclusive participation in education since female participation in higher education is low
compared to males. In this regard, CPD mentioned that structural weakness of the education
system i.e. absence of job market-friendly skill attainment is the reason for overall high
youth unemployment and an increase of female unemployment in every educational stage
(The Dhaka Tribune, 2018). As a result, future investment in the higher education sector
gets negatively affected because of low returns (Rahman, 2014). Additionally, the
prospects of vocational education are not satisfactory. Currently, only 14% of the students
are enrolled in technical education institutions however, the government has recently
increased seats in polytechnic institutes to 57,780 from 25,000 7. Hence, the labor
productivity of Bangladesh is lower than in Vietnam (ILO, 2014).
7
See https://www.dhakatribune.com/bangladesh/education/2018/03/31/government-expand-technical-education for
details.
15
6.5 Poverty and inequality
6.5.1. Vietnam
According to the World Bank Report (2018), poverty in Vietnam is decreasing especially
among ethnic minorities poverty rate decreased by 13%. From 2014 to 2016, the poverty
of Vietnam has fallen near about 4% and 9.8% respectively. Moreover, the report
documented that 70% of Vietnam’s population is classified as economically solvent where
13% are now included in the global middle-class. Per capita income in Vietnam had become
round $2300 in 2017 from $100 in the 1980s (Quyen, 2019).
Figure 4: Bangladesh and Vietnam’s Poverty headcount ratio at $1.90 a day (2011 PPP) (% of
population)
Bangladesh Vietnam
40
40
30 30
20 20
10 10
0 0
1990 1995 2000 2005 2010 2015 2020 1995 2000 2005 2010 2015 2020
However, around 9 million people in Vietnam are still living in extreme poverty (Nguyen,
2018). Whereas nearly 72% of ethnic minorities, living in mountains are poor whose
average per capita consumption remains less than 45 percent of the Kinh and Hoa (World
Bank, 2018). Therefore, there is a high inequality among the rich and poor in Vietnam.
According to World Bank (2016), between 1993 and 2012, the average income of the
bottom 40 increased remarkably at an annual rate of 9% in Vietnam. Then again, the report
included that despite the inclusive growth of Vietnam, inequality in opportunities has risen
over the years especially very wealth and average Vietnamese and it is more likely to grow.
In Vietnam, ethnic minorities, farmers, migrants and informal workers, and women are
16
more likely to remain poor and excluded from services and political decision making
(Oxfam International, 2017).
Figure 5: Comparison of inequality in Bangladesh and Vietnam
Bangladesh Vietnam
39.3
32.9 33.4 33.2 32.1 32.4
28.8 27.6
25.9 26.9 37 36.8
35.7 35.4 35.8 35.6 35.6 35.3
34.8
1983 1985 1988 1991 1995 2000 2005 2010 2016 1992199820022004200620082010201220142016
6.5.2. Bangladesh
In Bangladesh, the poverty line fell from 44.2% in 1991 to 13.8% in 2016 –17 (World
Bank, 2018). The indicators like poverty gap and square poverty gap ha ve also shown
significant changes. In 1991–92 the poverty gap was 17.2% meaning average shortfall of
the total population from the poverty line was 17.2%. (BBS, 2010). According to HIES
2016, Monthly household income of Tk.11,479 in the year 2010 increased to Tk. 15,998 in
2016. (HIES,2016). Moreover, the report included that the extreme poverty rate came down
to 12.9% at the national level in 2015. In 2005, the National poverty headcount rate was
40% in Bangladesh. It dropped to 31.5% in the year 2010. Inclusive economic growth,
developed infrastructure, higher literacy rates have contributed to this poverty reduction.
But, the share of the population below the national poverty line of Bangladesh is higher
than neighboring countries India, Bhutan, Sri Lanka (ADB Basic Statistics, 2019).
According to HIES 2016, income share received by the richest 10% of the population
increased from 35.84% to 38.16% from 2010 to 2016 respectively. But the scenario is
opposite in the case of the poorest 10% of the population. In 2010, income share received
by the poorest 10% of the population was 2% of the total national income which declined
17
to 1.01% in 2016. So, inequality has risen though we observe high economic growth and
declination of poverty which is very confusing. Bangladesh’s effort to mitigate the
difference between the rich and poor has been awful which is reflected in the ranking of
Oxfam’s CRI Index, 2018 as Bangladesh ranked 148 among 157 countries.
An important measure of inequality is known as the Gini Coefficient. It is measured on a
scale of 0 to 1. The higher the number, the higher extent of inequality is prevalent in that
society. From the graph it can be seen that in Bangladesh the inequality is increasing over
the years, however, Vietnam is being able to decrease the inequality every year.
7. Competitiveness among the nations
The determinants of competitiveness are complex as it has many dimensions i.e. investment
in capital, infrastructure, technological progress, macroeconomic stability, good
governance, well-functioning institutions, market size, and many other indicators are
incorporated in the Global competitiveness report. Furthermore, there are the World
Economic Forum calculated the Global Competitiveness Index (GCI) for measuring
national competitiveness. The Global Economic Forum (GEF) defines competitiveness
through institutions, policies and determinants of the level of productivity. Then again,
IMF defines competitiveness through the value of the real exchange rate, domestic policies
and internal and external balance etc. According to OECD, competitiveness is a country’s
ability to increase living standards, free-market conditions, free trade, produce comparative
advantage goods and services to meet the demand of the international markets and
expanding real incomes in the long run (Ara and Rahman, 2003). A similar definition had
been provided by the European Commission which is competitiveness is the ability of an
economy to provide a sustainable high standard of living with low rates of unemployment 8.
8
See https://ec.europa.eu/europeaid/sectors/economic-growth/private-sector-development/competitiveness_en for
details.
18
Table 2: Comparison in International Index
Index Bangladesh Vietnam

World Bank's Doing Business Index of 2019 176 69
Transparency International's Corruption Perceptions Index of 2018 149 117
Global Competitiveness Index (GCI) 2019 105 67
Human Capital Index 2018 105 48
Global Peace Index 2018 101 57
Global Innovation Index 2019 116 42
Source: Authors compilation using various resources.
The ranks of Vietnam in most of the index is higher than Bangladesh because Viet nam has
created a business climate that enabled the country to flourish in doing business.
Table 3: Comparison of Business competitiveness
WEF Index component Bangladesh Vietnam

Efficiency in the legal framework in challenging regulation 88 59
Efficiency in the legal framework in settling disputes 96 76
Property risk 100 98
Quality of land administration 130 80
Govt. ensuring policy stability 90 67
Transport infrastructure 100 66
Utility infrastructure 113 87
ICT adaptation 108 41
Skills of workforce 123 103
Effects of tax and subsidiaries on competition 91 72
Trade openers 119 92
Trade tariff 130 96
Financial system 106 60
Soundness of banks 130 114
Cost of starting a business 107 66
19
Time to start a business 102 96
Entrepreneurial culture 110 68
Innovative capability 105 76
Source: World Economic Forum (2019).
According to the WTO Statistical Review (2019), Vietnam ranked the top position and Bangladesh
secured the second position in export growth among the emerging economies. The report
mentioned that Vietnam’s annual export growth is 14.6 percent while Bangladesh attained 9.8
percent growth. Despite the narrow export basket in the World Trade Organization index,
Bangladesh managed to be the highest export growth country in South Asia.
Table 4: Trade as a % of GDP
Year Bangladesh Vietnam
2013 46.29 165.09
2014 44.51 169.53

2015 42.08 178.77
2016 37.95 184.69
2017 35.30 ---
Source and notes: Authors’ compilation from World Trade Indicator (WTI). This ‘---‘ denotes the unavailability of
data.
In terms of trade as a % of GDP Vietnam’s share had been higher than Bangladesh (Table 4). The
increased global market share of Vietnam and diversified export basket increased trade growth and
competitiveness of Vietnam over the years.
8. Current scenario of the export industry of Vietnam
Vietnam had stressed on being the export-led growth country since the reformation in the mid-
1980s (Chaponnière and Cling, 2009). Since 2012, Vietnam is experiencing a trade surplus as the
export growth had increased more than the import (Clarke et.al, 2017). The country experienced
20
trade surpluses with the United States, Hong Kong, United Kingdom, Cambodia and the United
Arab Emirates in 2017 (General Statistics Office of Vietnam, 2017). Nevertheless, Vietnam is
becoming a leading market for foreign investment in e-commerce activities. In 2018, the e-
commerce market has stretched US$6.2 billion and it is expected that approximately 59.48 million
internet users will rise within 2022 (Mah, 2018).
Additionally, the cost of doing business in China is increasing particularly at China’s Pearl River
Delta or Hong Kong. Therefore, many foreign companies are being attracted to Vietnam for the
cheap production cost especially, the working force is growing annually where the workers are
young and inexpensive. (Wong, 2015). Vietnam’s manufacturing sector in 2015 accounted for
25% of total GDP where the labor costs were 50% of China and 40% of Thailand (Mah, 2018).
Moreover, the recent trade war between China and the USA, alongside Vietnam’s recent CPTPP9
ratification, and the signing of the EU-Vietnam FTA (free trade agreements), the country is
becoming the more and more favorable place of international trade and investment. Besides, to
reach the other ASEAN market, Vietnam is a convenient export hub for its congenial geographic
location, and hence the Regional Comprehensive Economic Partnership (RCEP) is also under
negotiation10. Therefore it is expected that Vietnam’s exports would rise in the upcoming years.
Vietnam has become successful in the diversification of its export basket. From textiles and
garments into footwear, and now into electronics, the diversification has stricken the sustainable
export income in Vietnam. In 2017, Vietnam became the largest ASEAN supplier to the USA with
a net export value of US$48.43 billion (Thomas, 2019). Despite being a developing country,
Vietnam has become a net exporter of crude oil, gas and petroleum reserves, coal reserves,
hydropower electricity; minerals, including iron ore, tin, copper, lead, zinc, nickel, manganese,
marble, titanium, tungsten, graphite, mica, limestone; additionally, agricultural products, pepper,
coffee, rice, cashews and more. Other than textile and electronics, Vietnam’s pharmaceutical
market value became US$5.2 billion in 2018 (Mah, 2018). Moreover, Vietnam’s market for the
9
The CPTPP is a free trade agreement between 11 countries in the Asia-Pacific region: Australia, Brunei Darussalam,
Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Signed on March 8, 2018, it
entered into force on December 30, 2018, after a majority of signatories ratified the agreement. The pact binds its
members, which represent about 13.5 percent of global merchandise trade, to 30 chapters providing for freer trade and
investment access. See https://www.csis.org/analysis/cptpp-almost-one-year-later for details.
10
The Regional Comprehensive Economic Partnership (RCEP) is a sprawling free trade agreement between 16 Asia-
Pacific countries—the 10 members of ASEAN, plus China, Japan, South Korea, Australia, New Zealand, and India—
that account for half the world’s population and about one-third of global GDP. See
https://foreignpolicy.com/2019/11/01/trump-tariffs-free-trade-rcep-asean-india-china-bangkok/ for details.
21
automobile is expected to surge within 2025 (Ariffin, 2019). Furthermore, After Brazil, Vietnam
is the worlds’ second-largest coffee exporter because of its favorable climate and low production
cost (International Coffee Organization, 2019).
Table 5: Top 5 Export Destinations of Bangladesh and Vietnam
Bangladesh Top 5 Export Value (USD Vietnam Top 5 Export Value

Export Destinations Billion) Export Destination (USD Billion)
United States of 166.169 United States of 47.5297

America America
Germany 148.206 China 41.3665
United Kingdom 1.07154 Japan 18.8337
Spain 0.6588 Republic of Korea 18.2406
France 0.44183 Netherlands 7.0851
Source: Export Promotion Bureau and General Statistics Office of Vietnam (2018).
Table 6: Top 5 exporting goods for Bangladesh and Vietnam
Bangladesh Export Value (USD Vietnam Export Value (USD

(Goods) Million) (Goods) Million)
Knitwear 4170.22 Phones all of the 49219.5

kinds and their parts
Woven wear 3887.34 Electronic parts 29562
(Including TV
parts), computer and
their parts
Agricultural 262.57 Textile, sewing 30477.5
Products products
22
Leather Products 254.39 Footwear 16235.5
Raw Jute and Jute 220.85 Wood and wooden 8907.3

Products products
Source: Export Promotion Bureau and General Statistics Office of Vietnam (2018).
9. Current scenario of the export industry of Bangladesh
According to the WTO Statistical Report 2019, Bangladesh is now the 42nd largest exporter in the
world. The reason behind the successful growth of the developing countries is creating a network
through different bilateral multilateral treaties to increase their exports according to their
competitive advantages. For Bangladesh, it enjoys a competitive advantage in RMG, jute, human
resources, knitwear, woven wear, frozen foods, leather goods and tea etc. The country is working
to make the export sector liberal and trying to eliminate the barriers.
In the last three decades, the RMG industry contributed to the growth of Bangladesh significantly.
The physical infrastructure creation through the garments sector was 4222 RMG units where
around 4 million workforces constituting 90% of female labor were involved. Moreover, nearly
10.4% of the GDP and 81% of the total export earnings come from this sector in Bangladesh (Islam
et. al, 2016). Therefore, Bangladesh's export basket is heavily concentrated in the textile industry.
The government was not successful in diversifying export baskets from inception. In 1972, the
Bangladesh government took the initiative to increase productivity and reduce costs in tea
production. Solving the market problems, in the 80s and 90s the tea sector experienced a huge
growth but later in 2009, export started to decline (Mehtaj and Junayed, 2018). The main reason
for the continuous fall in tea export is the increasing domestic consumption, urbanization,
inefficient garden workers than the other competitors etc. Moreover, during 1970s raw jute and
semi-processed jute contributed greatly to the export. However, during the 80s the jute export had
deteriorated because of erroneous government policies and a decline in global demand. In the
current period, because of the global concern of plastic pollution, processed jute materials are
getting higher attention. Hence, the government is again trying to find scopes for jute export.
Likewise, anti-dumping law on Bangladeshi jute had been lifted in 2017, which provided
incentives to the producers to increase jute export (Islam and Ali, 2017). After the liberation war,
23
30 tanneries had been taken over by the government. But the government was not active enough
to take the responsibilities of the tanneries to generate profit. After a while, the sector went back
to the private sector (Mehtaj and Junayed, 2018). Bangladesh government had set a $5bil leather
export target within 2021 then again, in 2017, leather export declined due to the decrease in global
demand, appreciation of the currency, shortage of gas and labor unrest. However, (Ovi, 2019).
Fish export had increased recently in Bangladesh. There was a surplus fish production with an
annual output of 41.34 lakh MT against a demand of 40.50 lakh MT in 2016-17 (Yearbook of
Fisheries Statistics of Bangladesh 2016-17). Nevertheless, Bangladesh was ranked 5th in world
aquaculture production for its success in fisheries over the years. (FAO statistics, 2016).
For creating job opportunities for the young population and export basket diversification, the
Bangladesh government is giving special attention to the ICT sector. As a result, this sector in
Bangladesh is becoming one of the fastest-growing sectors with an average annual growth rate of
20–30 percent approximately (BASIS, 2012). The government has formulated key policies i.e. 100
percent foreign ownership of companies, and software parks which facilitate high-speed internet
connection trade facilities etc. to enhance this sector.
10. Trade Balance
10.1 Vietnam
According to WITS, over the period of 2007 and 2015, Vietnam exports and imports have
experienced significant growth of 10.85% & 17.2% respectively. In 2016, total export was 176.58
million US$ and total imports were 174.98 million US$ leading to a positive trade balance of 1.6
million US$. The USA had experienced the largest positive trend in trade with Vietnam in 2015
where Vietnam expended at a rate of 23% leading all the other top 50 countries (Clarke, 2017).
24
Figure 6: Trade Balance of Vietnam (Billion USD)
300
250
200
150
100
50
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
-50
Export Value Import Value Trade Balance
Source: Authors’ presentation from various reports of World Development Indicator (WDI).
On the other hand, Vietnam’s domestic market is predicted to increase by 20% per year (Mah,
2018). So, with a population of over 95 million and being Southeast Asia’s fastest-growing middle-
class country, the import market of foreign goods in Vietnam would surely rise.
Table 7: Import Destinations of Bangladesh and Vietnam
Bangladesh’s Top 5 Import Value Vietnam's Top 5 Import Value

Import Country Bangladesh (Billion Import Country (Billion USD)
USD)
China 0.00207 China 65.5692
United States 0.00129 Korea, Rep. 47.6281
Germany 0.001139 Japan 19.1074
Japan 0.00066 United States 12.7475
France 0.00048 Taiwan 13.2433
Source: Bangladesh Bureau of Statistics and General Statistics Office of Vietnam (2018).
25
10.2 Bangladesh
Bangladesh is the 30th largest export in the world (WTO Statistics, 2019). According to the Export
Promotion Bureau 2018, the shipment of frozen and live fish such as shrimp and crabs increased
by 1.58 percent and agricultural products such as tea, vegetables, fruits, spices, dry food, and
tobacco rose 34.92 percent. Pharmaceuticals, furniture, petroleum byproducts, plastic goods,
ceramics, handicrafts, cotton, cotton products, carpet, terry towel, footwear, wigs, furniture, leather
and leather goods and jute and jute goods did not perform well. Leather and leather good trade
decrease by 6%, largely because of the shifting of tanneries to Savar which could not function as
per the full potential.
Figure 7: Trade balance of Bangladesh (Billion USD)
50
40
30
20
10
0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
-10
-20
Export Value Import Value Trade Balance
Source: Authors’ presentation from various reports of World Development Indicator (WDI).
Exports of jute and jute goods, another important foreign currency earner, fell by 20.41% in 2018
in Bangladesh. Home textiles, building materials, ships, and bicycles also performed poorly. The
merchandise export was approximately 12.25% and service export was near about 34.10% in 2018.
Therefore the overall export growth of Bangladesh is nearly 15.20% in 2018. As a result, the trade
deficit is not improving in Bangladesh.
26
11. Export earnings and Import Expenditure
The export Basket of Bangladesh is highly concentrated around the apparel industry. But in the
case of Vietnam, the scenario is quite different. Vietnam is widely known for the textile industry
but there are other businesses that are growing gradually. Especially. High-technology
manufacturing sectors like Samsung, LG Electronics, Nokia, and Intel making multi-billion dollar
investments in Vietnam. Other business areas include information and communications
technology, automotive, and medical device are bourgeoning.
Figure 8: Percentage of export earning for Bangladesh
Raw Jute
U.S.A and Jute
Leather
18% Products
Products
3% 2%
Others
Agricultur 9%
al Products
Others 3%
44%
Germany Knitwear
15% 43%
Woven
wear
40%
UK
11%
France Spain
5% 7%
Bangladesh Vietnam
Source: World Development Indicator (2018).
27
Figure 9: Percentage of Export earning for Vietnam
Phones all
United of kinds
States and their
20% parts
Others
25%
Products
31%
Other
Countrie
s
44%
China
17% Electronic
Wood and parts
wooden (Including
products TV parts),
5% computer
Footwear
Japan and their
8% Textile,
Netherla 8% parts
Korea,
nds sewing 15%
Rep. products
3% 8% 16%
Figure 10: Percentage of Import expenditure for Bangladesh and Vietnam
France,
3.31%
Japan, Other
Countrie China
4.49% 28%
s
China,
32%
14.08%
Germany
, 7.77%
Taiwan
6%
United South
United Korea
States, States Japan
5% 21%
8.76% 8%
28
12. Textiles and garments of Vietnam
Within ASEAN, Vietnam is becoming the strongest competitor in textiles and apparel
manufacturing. Vietnam’s textile export turnovers were over 30.4 billion U.S. dollars in 2018, up
16.6 percent from 2017 (Xinhua, 2019). Vietnam is currently exporting textile and apparel to
nearly 180 countries in the world (Textile Today, 2018). This textile industry of Vietnam has a
long tradition since Vietnamese women used to sericulture and weave thread into silk with the help
of minimal tools that can create an amazingly high-value product. Therefore the Vietnamese textile
industry has started to take form in the Northern region at first during 1958 and in the Southern
region in 1970 (Textile Today, 2018). Moreover, French-built some factories at Nam Dinh,
Haiphong, and Hanoi. Ever since the textile industry of Vietnam became an integral part of the
economy even at the period of crisis and creating huge job opportunities till now. The Vietnam
Textile and Apparel Association (VITAS) is a non‐ governmental association working in the
garments industry promoting investment cooperation, international cooperation and provide
consultation to its members and government bodies in case of policy mechanism and development
in garments industry. Another company called The Vietnam Textile and Garment Group
(VINATEX) is the biggest state-owned group of companies.
Figure 11: Textile and garment export growth rate of Vietnam
20% 18.80%
18% 16.60%
16%
14%
12%
9.60%
10% 9.00%
7.50%
8%
6% 4.50%
4%
2%
0%
2012 2013 2014 2015 2016 2017
Source: ITC trade Map (2017).
29
Over 6,000 textiles and garments manufacturing companies where more than 2.5 million workers
are employed in Vietnam (Mah, 2018). The growth of the garments sector of Vietnam was
remarkable. Moreover, Vietnam’s manufacturing plant, known as “Rang Dong Industrial Park”,
worth of US$400 million has been initiated in Vietnam’s Ninh Thuan province in 2017 (Apparel
Resource, 2017). The target of the park is to achieve the capacity to make input materials and
compete with China. Textile Intelligence report published that Vietnam’s garments production
capacity would rise by nearly 14% and export might increase by 15% approximately that would
help the industry to reach US$50 billion by 2020 (TPT Bureau, 2019). Moreover, China is the only
nation that could surpass Vietnam in terms of net garments exports to the USA but the U.S.
Customs data indicates that while US imports from China declined by 12.3% over the first half of
2019 and imports from Vietnam grew by almost one-third (USITC Dataweb, 2019). This is the
result of the US-China trade war which is boosting Vietnam’s economy. Vietnam Textile and
Apparel Association forecasted that garment and textile export turnovers may reach 40 billion U.S.
dollars in 2019 (Textile Today, 2019). Though the garments manufacturing accounts for 70% in
Vietnam while CMT (Cut, Make, Trim) is the main method of export, the supply of cotton is only
2% of the total demand in this sector (Vo and Francic, 2018). As a result, a big portion of cotton
is imported to Vietnam.
13. The successful journey of Vietnam in the electronics sector

Vietnam is becoming a prominent electronics exporter, with electrical and electronic products.
This sector has recently surpassed coffee, textiles and rice export growth in Vietnam. According
to the report of Vietnam Briefing, from 2011 to 2016, imports of electronics have nearly tripled
but exports have amplified about five times. In 2014, the electronic industry was 23.4% of
Vietnam’s GDP. From 2014 to 2015, the electronics export of Vietnam has enlarged from US$12.8
billion to US$65.8 billion respectively. In 2015, Vietnam became the 12th largest electronics
exporter and 3rd largest in ASEAN. Moreover, the objective of US$40 billion valued electronic
exports by 2017 had already been achieved by Vietnam (Latova, 2017). Nevertheless, the majority
portion of the electronic industry of Vietnam is owned by foreign multinational companies like
Samsung and Panasonic. Mostly Samsung is the largest exporter that had helped to achieve trade
surplus by producing almost a third of total industry output. Moreover, Samsung has invested over
30
US$17 billion into the country and helping the government to support domestic industries (Mah,
2018). This has created a business opportunity for foreign technology companies to set up an
operation base in Vietnam.
Nearly 90% of total electronic exports were the portion of FDI (Samuel, 2019). Foreign companies'
aim is to take advantage of the Free Trade Agreements (FTAs) of Vietnam. Additionally, under
EVFTA (EU-Vietnam FTA), a large portion of the tariff will be eliminated11. Then again, the
Vietnamese government provides corporate income tax (CIT) breaks for the high tech companies.
13.1. Challenges
Currently, domestic enterprises are not being a subject to add value to the electronics industry
since most of the materials are needed to be imported. Moreover, there is a severe lack of
investment in the research and development (R&D) sector of Vietnam’s electronics industry12.
Therefore, domestic industries do not own any core technology. As a result, the production cost is
high. So, Vietnam needs to invest more in basic science development to reduce its reliance on
imported technologies. Then again, the process is a long term plan.
14. Garments industry of Bangladesh

In the early 1990s, Bangladesh had introduced new strategies to expand their trade. To increase
the trade ratio, the government encouraged open economy and involvement of private sectors
along with reducing tariffs and restrictive quantitative policies. After the recent global recession
of 2008–2009, exports of most of the countries declined because of the fall in aggregate domestic
expenditure. Especially, the USA and the EU, two major global markets shrank significantly as a
result of the decrease in import demand. The adverse impact of the trade fall of the two major
global markets is often resulting as an economic downturn for the developing nations. But the
export of Bangladesh especially the readymade garments did not decline (Haque and Taslim,
2011). Government initiatives had increased the percentage of export goods and services in GDP
11
See https://trade.ec.europa.eu/doclib/press/index.cfm?id=2041 for details.
12
See https://english.vietnamnet.vn/fms/business/219888/how-will-vietnam-s-electronics-industry-progress-in-the-
next-decade-.html for details.
31
from approximately, 12% to 17% in 2009 (World Bank, 2015). People tend to buy cheaper goods
at the time of recession and low labor costs gave Bangladesh a competitive edge. Another reason
could be the elimination of MFA quota gave incentives to compete more in the U.S. market for
Bangladesh exporters.
Figure 12: RMG share of total export in Bangladesh
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Authors’ compilation from a various report of Export Promotion Bureau and Bangladesh Bureau of Statistics
Figure 13: Share of knitwear and woven in total RMG export of Bangladesh in 2018
Wovenwear, Knitwear, 41.42%

42.07%
Source: Export Promotion Bureau (2018)
32
Bangladesh is the second-largest garment exporter worldwide just after China, accounting for
6.5% of the total market share (Textile Today, 2018). Moreover, among the South Asian countries,
Bangladesh had the highest apparel shipment13. Garment export earnings, which accounted for
over 84 percent of the national exports, amounted to $34.13 billion in 2018. Where $16.88 billion
came from knitwear and $17.24 billion from woven garment products. 32 billion USD in the
economy generating employment for 45 lakh people (Akhtar, 2018). Bangladesh had increased its
garments export to the EU between the period of 2001-2014 because of the relaxed rules of origin
(RoO) provided by the EU for woven and knit products. As a result, more than 60% of the total
RMG export of Bangladesh goes to EU countries (Kabir et. al, 2016). For Bangladesh, the USA is
the largest export destination for clothing. According to Otexa Data (2018), Bangladesh's apparel
export to the USA has increased by around 7% in 2018. Moreover, the ongoing trade war between
the USA and China had fueled nearly $30 billion in the garments sector of Bangladesh. Consistent
with Otexa Data 2017, the export growth of the Bangladesh apparel industry in the USA was
4.51% which was stated as a negative growth for Bangladesh. Ongoing trade war may have
brought some blessings for Bangladesh but it is not sustainable in the long run. Recently, the Asian
Development Bank, (2019) reported that Bangladesh merchandise exports will increase an
additional $400 million and its Gross Domestic Product (GDP) will grow by 0.19% in the next one
to two years if the prevailing international trade conflict involving the US and China intensifies.
Bangladesh’s export both to the EU and to the USA is heavily concentrated on RMG products
which are 80% of total exports (Kabir et. al, 2016). According to the Center for Policy Dialogue
(CPD), Bangladesh is not being able to reap off the benefit of the trade war like Vietnam and other
countries because of the lack of product diversification. Export growth in the USA in the first two
months of FY’20 was 3.1 % for Bangladesh, 8.2% for Cambodia and 11.1% for Vietnam (Uddin,
2019). To amplify the benefits Bangladesh needed to develop infrastructure and attract investment
relocating from China. But the FDI inflows remain low over the years. According to the World
Bank (2019), Foreign Direct Investment (FDI) remains low at less than 1 percent of GDP in
Bangladesh. Therefore, the share of machinery in total imports for leading industries such as
textiles, garments, pharmaceuticals, packing and leather has also declined by 31.8 percent in 2018.
13
See https://www.thedailystar.net/business/export/news/bangladesh-second-export-growth-wto-1783945 for
details.
33
Moreover, unhealthy price competition has been prevailing in the textile sector that is hurting many
small and medium factories currently running14. Though as a spillover effect of the trade war,
Bangladesh exports to the U.S. enlarged but other competitors have performed better in grabbing
the apparel market share of the USA. In 2018, the share of Vietnam in the apparel trade grew to
6.2 percent, India 3.3 percent and Turkey 3.1 percent (WTO-UNCTAD, 2018).
15. Business Climate
Between 1990 and 2016, Vietnam impoverished and transformed their economy and
conquered a place among the newly industrialized “tiger cub ”. According to the
International Monetary Fund (2017), Vietnam’s dynamic economy and stable growth rate
were the results of domestic demand and export-oriented manufacturing sectors. Moreover,
the government took policies and provided greater attention to improve the business
climate and enhance competitiveness. In this regard in 2014, the Vietnamese Government
issued Resolution No. 19/NQ‐ CP—Major Tasks and Solutions for Improving the Business
Environment and National Competitiveness (Ministry of Planning and Investment, 2015).
Additionally, various reforms had been initiated especially in taxation, customs, social
insurance, construction license, land registration, electrical access, corporate establishment
and dissolution, and investment procedures (Ministry of Planning and Investment, 2015).
Although the country does not support the business community fully. The Economists ranks
Vietnam’s business environment at 59 th out of 82 countries after surveying for the period
of 2014–2018. Moreover, Vietnam ranks 70 th out of 190 countries in the World Bank's ease
of doing business. (World Bank, 2019). Furthermore, the Index of Economic Freedom by
the Heritage Foundation (2017) showed that Vietnam ranks at 147 th out of 180 countries
and the report mentioned Vietnam in the group of “mostly unfree” economy. Insufficient
access to finance can hinder the path of business growth (Ayyagari et.al., 2005; Khan,
2001). In that case, Vietnam’s position is not in favor. Cumbersome procedures, long
appraisal times, long-distance from banks, strict requirements of collaterals, and
administrative documents etc. are reducing the number of loans (Lainez, 2014).
14
See https://www.thedailystar.net/business/export/double-digit-export-growth-of-bangladesh-in-fy-2019-1768774
for details.
34
Bangladesh has carried out business reforms to improve its global and regional
competitiveness. The rank of Doing Business 2020 was 168 th which was 176 th in the
previous year. The past three reforms were:
1. Reducing the cost of setting up new business especially in registration, name
clearance fees, digital certificates, etc.
2. For obtaining a new electrical connection, the amount of security deposit had been
reduced.
3. The most significant improvement was the access to credit information which
coverage was expanded by the credit information bureau.
According to World Bank (2019) transferring property in Bangladesh takes on an average
of 271 days which is six times higher than the global average. Moreover, it takes on an
average of 1,442 days which is almost three times more than the 590 days of the global
average. Additionally, obtaining a new electrical grid is a long procedure that degrades the
business climate of Bangladesh.
16. Corruption
Vietnam’s economic growth had accelerated because of sustained foreign direct

investment, political stability, infrastructure development and the modernization of a
stifling regulatory system plagued by corruption. Corruption is a very important issue in
Vietnam and the government is disinterested in this regard (Transparency International,
2012). Corruption in Vietnam has negative effects on its economy, private investment,
employment and per capita income (Dang, 2016). The growth of private enterprises gets
hampered and hurting the firms' performances (Nguyen et. al., 2016). On the contrast, De
Jong et al. (2012) showed that Vietnam’s corruption has an inverse U ‐ shaped relationship
with firm performance. The paper had argued that firms are gaining profit from corruption
and the benefits of venality are subject to diminishing returns. Nevertheless, the World
Economic Forum (2016) suggested that corruption is the most problematic factor in doing
business in Vietnam. In the case of Bangladesh, Bangladesh was in the highest corrupted
nation during 2001–2005 as per the Transparency International report 2004. Government
initiatives have helped the country to improve and eradicate corruption to some extent. In
35
2018, Bangladesh was ranked 26 th out of 100 countries. Yet, among the eight South Asian
countries Bangladesh continues to be the second-worst after Afghanistan in corruption
(Transparency International, 2018). Corruption is identified as one of the biggest impediments
of development in Bangladesh. In 2015, the total amount of bribes paid was Tk.88 billion which
inclined to Tk.106 billion in the year 2016. The most corrupt agency was the law enforcement
agency and BRTA (Bangladesh Road Transport Authority) and Department of immigration and
passports were the 2nd and 3rd highest corrupted agencies (Law enforcement Bangladesh’s most
corrupted sector in 2017, says TIB, 2018)15.
17. The rationale behind Vietnam’s Success
According to the Voluntary National Review (2018), 17 SDGs have been broken into 115
targets by Vietnam to achieve healthy economic growth and development. Therefore,
Vietnam has been progressing quite fast in achieving SDG goals. The fruitful result can be
recognized from the rapid decline of the multi-dimensional poverty rate from 9.9% to 7%
between 2015 and 2017. Vietnam is also experiencing rapid demographic and social
changes. According to the World Bank (2019), the population is expected to expand nearly
120 million within 2050. Now more than 70% of the population is under 40 years old with
a life expectancy of nearly 80. Nevertheless, health and education have always been a
priority to Vietnam policy reforms.
15
See https://bdnews24.com/bangladesh/2018/08/31/law-enforcement-bangladeshs-most-corrupt-sector-in-2017-
says-tib for details.
36
Figure 14: GCI performance of Vietnam in 2019
93
89 89
83
77 79
76
71
67
64
60
41
26
Source: Global Competitiveness Index (2019)
In that case, the government had taken initiatives beforehand to use this vast majority of
people productively. Therefore, they have been investing and developing infrastructure to
build up human capital. World Health Organization (2018) reported that approximately,
73% of Vietnamese have access to health services. Moreover, Vietnam ranks 48 out of 157
countries on the human capital index (HCI), second in ASEAN behind Singapore. It had
been projected that a child born with complete education and full health in Vietnam will
be 67% productive when she grows up (Doanh, 2016). Additionally, Vietnam’s HCI is
highest among middle-income countries. In the case of Bangladesh, the country is not being
able to create a productive labor force in accordance with the country’s specific needs
(BIDS, 2017). As a result, unemployment is not decreasing, remittance outflow is rising
and the country is failing in creating prolific human capital (BIDS, 2017). Whereas in
Vietnam, coverage and learning outcomes are high, evidenced by remarkably high scores
37
in the Program for International Student Assessment (PISA) in 2015 among the OECD
countries 16
Within 2016, 99% of the Vietnamese population used electricity as their main source of
energy hence over the last 30 years, the provision for basic services has been improving
rapidly (World Bank, 2019). While in 2019, it had been officially announced that 93% of
people have access to electricity in Bangladesh. 17
Vietnam has been immensely successful in export diversification. Their policy reformation was
mainly concentrated on increasing the trade volume. Trade as a percentage of GDP in Vietnam has
been higher than Bangladesh for a long period of time. Vietnam has shown a stellar export
performance of a 14.4% annual growth rate year (The Atlas Economy Complexity, 2017).
However, the growth rate of Bangladesh remained around 7% (LFMEAB, 2019). The chief reason
for Vietnam’s economic accomplishment is the successful export diversification. Whereas, in
Bangladesh, only the garments sector had expanded. Vietnam’s export basket includes electronic
goods, machinery, footwear and agriculture product etc. Moreover, the share of Vietnamese goods
in the USA import goods has been rising. Whereas. The market share of Bangladesh in the USA
remained constant at 6% (LFMEAB, 2019).
Figure 15: Export Concentration of Vietnam.
2000 2016
Source: The Atlas Economy Complexity. http://atlas.cid.harvard.edu/
16
See https://www.oecd.org/pisa/pisa-2015-results-in-focus.pdf for details.
17
See https://www.thedailystar.net/backpage/access-to-electricity-in-bangladesh-coverage-reaches-93-percent-
1748935 for details.
38
Vietnam’s rapid economic success is heavily dependent on the high FDI inflows and export
diversification. There is a huge gap between the FDI inflows in Bangladesh and Vietnam.
Moreover, Vietnam’s 60% garments sector is driven by FDIs while for Bangladesh except
for EPZ, the garments sector is driven by indigenous investors (LFMEAB, 2019).
Therefore, Vietnam’s non-RMG and RMG sector had been fueled by capital and technology
that enabled the country to follow dynamic export-oriented growth.
Figure 16: Comparison in FDI inflow between Bangladesh and Vietnam
2010 2011 2012 2013 2014 2015 2016 2017 2018
Bangladesh ( USD Billion) Vietnam (USD Billion)
Source: Authors’ presentation from the World Development Indicator (WDI)
Nevertheless, Vietnam was able to introduce $100 billion to valued 50 new products within 2002-
2017 (The Atlas Economy Complexity, 2017).
39
Figure 17: Vietnam’s introduction of new products
As a result of their intensive export diversification strategy helped to increase its market share
globally. They have been successfully penetrating the international market with their diversified
products and enhancing economic growth.
40
Figure 18: Vietnam’s growth in international market share
From 1992, the Vietnamese government launched a privatization process with the objective of
improving the performance of state-owned enterprises (SOEs) (Nonneman and Jorissen, 2015).
SOEs have played an important political role and in 2017, 1.2 million people were employed by
SOEs (Hutt and Penh, 2019).
18. Discussion
In comparison with the competitiveness of two emerging nations, Bangladesh and Vietnam with
similar starting points had been scrutinized in terms of trade and competitiveness. In this regard,
at first, the history of the reformation of both nations had been analyzed to compare their
economical drive to become export-led countries. After the heavy damage of the Vietnam War in
1975, the political leaders focused to rebuild the country. In this regard, they had introduced free-
market reforms and established diplomatic relations with the USA for trade gain (Hays, 2008). A
41
similar case had been noticed in Bangladesh after the liberation war in 1971. The country initiated
to become an export-oriented country with the help of different international organizations such
as the World Bank and the IMF. Both countries succeeded and experienced significant economic
growth. Then again, Vietnam was able to become a middle-income country within 2009 however,
Bangladesh is scheduled to leave the LDC category within 2024 (Ohno, 2009; UCOSOC, 2018).
Hence, the question comes, where did Bangladesh go wrong? The objective of the paper is to find
out the causes and motivation of the facts where Bangladesh needs to improve to achieve the
desired success. In this paper, the countries' competitiveness had been analyzed and equated
through the different international indexes. In most of the indices, Vietnam had experienced
economic growth and development. While Bangladesh lagged behind associated with Vietnam. In
Vietnam, it is more likely to make 64.3% of more money, 45% less likely to be unemployed and
29.8% more likely to be educated than Bangladesh18. The biggest economic success of Vietnam
was the successful export diversification and increased FDI inflows. According to the WTO
Statistical Review 2019, Vietnam ranked the top position and Bangladesh secured the second
position in export growth among the emerging economies. The report mentioned that Vietnam is
leading the export growth tally with 14.6 percent while Bangladesh attained 9.8 percent growth.
However, the competitiveness of Bangladesh has always been low even though the country was
able to increase export growth rate. The main reason behind it the growth in the RMG sector only
which did not require a huge number of highly skilled labor and critical infrastructure to develop
(Raihan, 2019). According to WDI reports, in recent years, Vietnam has been experiencing trade
surplus because of their diversified export basket, meanwhile, the deficit of Bangladesh is rising
as a result of concentration around the only textile industry. The core reason behind the successful
diversification of Vietnam is the large FDI inflows in Vietnam. Vietnam achieved a trade surplus
as it exported products worth $272 billion and imported $259 billion in 2017 (The Atlas Economy
Complexity, 2017). Therefore, the upcoming industrial revolution and technology might change
the current trade pattern and Vietnam is preparing far better than Bangladesh. As stated by the
report of Economic Complexity Index (ECI) of Atlas of Economic Complexity 2011, Vietnam’s
ECI is 0.09 which indicates greater attainment in the measurement of GDP per capita growth in
terms of governess, competitiveness and human capital. Moreover, it indicates the strong negative
correlation with income inequality suggesting more knowledge intense productive structures
18
See https://www.mylifeelsewhere.com/compare/bangladesh/vietnam for details.
42
(Hidalgo and Hausmann, 2009). The recommendation for Bangladesh is to increase expenditure
on human capital while increasing FDI inflows for strategic bet approach in export basket
diversification. This strategy’s main idea is to explore a completely new market to penetrate. In
this regard, policy reformation and implementation for achievable export diversification are
essential. Exploring new markets through bilateral and multilateral relationships is obligatory.
19. Lessons for Bangladesh
According to UN ECOSOC, Bangladesh is expected to graduate from LDC status by 2024.

This graduation would create challenges in major export markets. Which negatively
impacts the development. Moreover, the country aims to achieve the targets of the
Sustainable Development Goals (SDGs) by 2030 and become an upper -middle-income
country by 2031. Therefore, it is high time for Bangladesh to improvise their focus and
vision to achieve the establishment. However, the lessons that Bangladesh can learn from
Vietnam in this issue are described briefly:
 Attaining the goals of policy reforms
In Bangladesh, critically important laws and reforms are not undertaken, even if
undertaken, not implemented. The reasons are a lack of commitment from the government
or instability in the political situation. Therefore, it reflects the indecisiveness of t he
government in the areas of public policymaking. Most reforms are limited to paper and
failed to implement. Nevertheless, it results in a high costs to the economy and society.
Bangladesh needs to be more meticulous to achieve the goals of reformations to achieve
success alike Vietnam.
 Economic infrastructure development
The share of tax revenue in GDP had been decreasing since 2011. In 2018, the tax -GDP
ratio of Bangladesh was only 8.7% which was the lowest among South Asian countries.
Moreover, the banking sector is experiencing a rising non-performance loan to total loan 19.
From 2011 to 2018 the NPL ration had increased from 6.1% to 10.4% 20. This indicates a
19
See https://www.thedailystar.net/opinion/governance/news/three-cases-policy-paralysis-bangladesh-1823098 for
detail.
20
See https://www.daily-sun.com/printversion/details/417862/2019/08/25/Nonperforming-loans-in-our-banking-
sector for details.
43
serious institution failure. Increasing competitiveness in the infrastructure and capacity
development has become a necessity for Bangladesh to thrive.
Figure 19: GCI performance of Bangladesh in 2019
117 119 121 121

114
105 109 108 106 105
95 93
36
Source: Global Competitiveness Index (2019).
 Emphasize on human capital

There is an automation threat in the garments sector of Bangladesh. According to the
government’s a2i project and the International Labor Organization (ILO), around 60
percent of garment workers in Bangladesh (5.38 million) will become unemployed by 2030
and be replaced by robots due to automation in the RMG sector 21. Despite a large amount
of surplus labor in the country, advances in technology have made it more lucrative for
producers to opt for automation. Moreover, there is a lack of favorable labor laws, skills
development, and social protection. There is a dire need of training for developing and
expanding labor market skills to ensure job retention and assist terminated workers to find
alternative ways to make a living. Then again, public spending on education and health in
GDP remained low and declined over the year. From FY’16 to FY’19 expenditure on
21
See https://www.thedailystar.net/star-weekend/news/automation-threat-rmg-workers-or-opportunity-the-sector-
whole-1814956 for details.
44
education had declined from 15% to 10% respectively 22. Moreover, within 2021, there will
be a shortage of nearly 88.5 million skilled labor force (BIDS, 2017). Therefore,
Bangladesh is not focusing on enriching human capital to tackle future challenges which
will become one of the biggest drawbacks in the near future.
 Attract FDI inflows for export diversification
Bangladesh experienced a higher export growth rate but the competitiveness has not
improved. Since 2013, Bangladesh is enjoying economic growth rate from 6% to 8.12% in
2019 (Bangladesh Bank, 2018). On the other hand, the ranks of Bangladesh in the
competitiveness had remained in an unfavorable position. Hence, foreign investors do not
get the incentive to invest in projects in Bangladesh. Meanwhile, the RMG sector is 84%
of the total export which is highly concentrated. Therefore, most of the FDIs are going to
the apparel sector (Raihan, 2019).
Figure 20: Export Concentration of Bangladesh
2000 2016
However, the scenario of the overall inflow of foreign direct investment (FDI) in
Bangladesh is unsatisfying. The FDI share in GDP in 2018 in Bangladesh was lower than
the LDC average in 2018 (Raihan, 2019). During 2014 and 2018, on an average,
Bangladesh’s FDI-GDP ratio was 1.2 percent and Bangladesh attracted USD 2.5 billion
FDI annually. By contrast, during the same period, the average FDI-GDP ratio of Vietnam
22
See https://www.thedailystar.net/opinion/news/social-sector-allocation-far-adequate-1758349 for details.
45
was 6 percent and the annual average FDI inflow was USD 12.6 billion 23. Competitiveness
in labor, price and non-price of Bangladesh are seriously lagging behind. Therefore, apart
from the readymade garment sector, the country needs to focus on the diversification of
other sectors to compete in the international market. In this regard, the cost-effective
implementation of megaprojects and skill development is necessary for the fourth industrial
revolution. To attract large scale FDI and diversify exports, the special economic zones
(SEZs) can be economically fruitful for Bangladesh.
 Recognizing the complexity in export diversification
The score of the Economic Complexity Index (ECI) for Bangladesh is –0.85. Which is very low
and indicates the lack of economic development. According to the Atlas Economy Complexity,
for Bangladesh apparel or textile related products can be diversified with lower complex than ICT
and other sectors. Hence, Bangladesh has started to explore new market i.e. Japan, Russia, New
Zealand, and South Africa and nevertheless, the ASEAN market can become a potential
destination for Bangladesh's apparel export (Khan and Majumder, 2019).
23
See https://www.thedailystar.net/opinion/economics/news/it-our-competitiveness-which-holding-us-back-1834846
for details.
46
Figure 21: Complexity in export diversification of Bangladesh
 Export diversification through Strategic best approach

From 2002-2017, Bangladesh could only introduce 9 products worth $149million that contributed
only $1 billion in income per capita. After reaching the pinnacle of the Export-GDP ratio of 20.16
in 2012, it has been shrinking ever since (Khan and Majumder, 2019). The reason is the export
basket concentration around RMG product only.
47
Figure 22: New product space for Bangladesh
Over the years, Bangladesh gained competitiveness in the textile and garments sector. Therefore
the country has the advantage to diversify its textile industry and penetrate the new market to
increase export growth. Then again, it is difficult for Bangladesh to diversify its export basket to
another sector easily. In this regard, the Atlas Economy Complexity suggests the “Strategic Bets
Approach”. The strategy can be a hedge against uncertainty. This is a bold move as it requires to
explore a completely new sector other than textile for Bangladesh. Which needs serious
commitments from the leaders of the country. Bangladesh has already taken initiatives for frozen
goods, agro, pharmaceuticals, ICT and jute. Another potential sector is regarded as the “Blue
Economy” which has nearly $2.5 trillion resources in the Indian Ocean, mostly are untapped
resources as Bangladesh could only extract $9.5billion24. Hence, investing and nourishing a new
sector for gain trade advantage is necessary for Bangladesh to diversify their export basket.
24
See https://www.thedailystar.net/city/news/blue-economy-potential-largely-untapped-experts-1796272 for details.
48
20. Conclusion
Vietnam has come a long way within a very short period of time. The reason behind their
economic performance was effective policy implication and integrity. They had invested
wisely to increase their productivity which commenced different sources of export
diversification pathways. For Bangladesh to achieve the desired success, the
implementation of policies is the utmost necessity. Moreover, Bangladesh should improve
its position in the World Bank’s Ease of Doing Business Index and the Global
Competitiveness Report of the World Economic Forum to create a prospect to attract
foreign investors. Inter-ministerial coordination for smooth decision-making processes as
well as innovation and research and development are needed in the garment sector for its
sustainability. Moreover, a dire need for export diversification is the biggest challenge for
Bangladesh's economy in the future.
49
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Project Paper

Title: Comparative Analysis of Trade Competitiveness between Bangladesh

Bachelor in Social Science

Title: Comparative Analysis of Trade Competitiveness between Bangladesh

A Project paper submitted to the Department of Economics, Bangladesh University of

PROJECT PAPER REVIEW & EVALUATION COMMITTEE MEMBERS

Table 1: Comparison in Economic Trend ................................................................................................... 10

A2i Access to Information

ADB Asian Development System

ASEAN The Association of Southeast Asian Nations

BASIS Bangladesh Association of Software and Information Services

BBs Bangladesh Bureau of Statistics

BIDS Bangladesh Institute of Development Studies

BoP Balance of Payment

BRTA Bangladesh Road Transport Authority

CIT Corporate Income Tax

CMT Cut, Make, Trim

CPD Centre for Policy Dialogue

CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

CPV Communist Party of Vietnam

CRI The Commitment to Reducing Inequality

DFQFMA Duty-Free and Quota Free Market Access

ECI Economic Complexity Index

ECOSOC United Nations Economic and Social Council

EPB Export Promotion Bureau

EPZs Export Processing Zones

EVFTA European Union-Vietnam Free Trade Agreement

FAO Food and Agricultural Organization

FDI Foreign Direct Investment

FTA Free Trade Agreement

GCI Global Competitiveness Index

GDP Gross Domestic Product

GEF The Global Economic Forum

GNP Gross National Product

HCI Human Capital Index

HS 61 Articles of apparel and clothing accessories, knitted or crocheted

HS 62 Articles of apparel and clothing accessories, not knitted or crocheted

ICO International Coffee Organization

ICT Information and Communication Technology

ILO The International Labour Organization

IMF International Monetary Fund

ITC International Trade Centre

LDC Least Development Countries

LFMEAB Leathergoods & Footwear Manufacturers & Exporters Association of Bangladesh

MFA Multi- fibre Arrangement

NPL Non-Performing Loan

OECD The Organisation for Economic Cooperation and Development

Otexa Office of Textiles and Apparel

Oxfam Oxford Committee for Famine Relief

PISA Program for International Student Assessment

PPP Purchasing Power Parity

QRs Quantitative Restrictions

R&D Research and Development

RCA Revealed Comparative Advantage

RCEP Regional Comprehensive Economic Partnership

RMG Ready-made Garments

ROO Roles of Origin

SAARC South Asian Association for Regional Cooperation

SAF Structural Adjustment Facility

SAP Structural Adjustment Programme

SDG Sustainable Development Goal

SEZs Special Economic Zones

SOE State-owned Enterprise

TICFA Trade and Investment Corporation Framework Agreement