Service exports still low, income increase by 4pc

Alongside the export of goods, Bangladesh also exports services. However, compared with goods, export earnings from the services sector remain modest amounting to only about one-sixth of total export earnings.

Growth in service exports is also lower than that of merchandise exports. In the 2023–24 financial year, while merchandise exports recorded growth of nearly 11 per cent, service exports increased by only 4 per cent.

In the outgoing financial year, the highest export earnings in the services sector came from various government services and transport services.

In addition, a notable amount of export income was generated from travel and telecommunications sub-sectors. However, service exports declined in several other areas.

These findings have been highlighted in a report by Bangladesh Bank on merchandise and service export earnings. According to the report, total export earnings from both goods and services amounted to approximately USD 50.47 billion (5,047 crore) in the last financial year.

Of this, merchandise exports accounted for around USD 43.56 billion (4,356 crore), while service exports generated USD 6.91 billion (691 crore). Merchandise exports grew by 11.7 per cent during the year, whereas service exports recorded growth of 4.1 per cent.

Foreign currency earnings generated by Bangladesh from various types of services are classified as service export income.

For example, income earned when a domestic technology company develops software for a foreign client, earnings from freelancing, revenue from foreign tourists visiting Bangladesh or income from container transport or cargo services are all considered service export earnings.

According to Bangladesh Bank data, service exports have shown an overall upward trend over the past three years.

In the post-pandemic period, service export earnings rose to USD 7.40 billion (740 crore) in the 2022–23 financial year. The following year, this figure declined by around 6.5 per cent to USD 6.64 billion (664 crore). In the outgoing year, service export earnings increased once again.

According to the Bangladesh Bank report, in the last financial year the highest service export earnings, USD 1.56 billion (156 crore), came from various government services. This figure was nearly 6 per cent lower than that of the previous year.

Transport services recorded the highest growth in the services sector, generating export earnings of USD 1.4356 billion (143.56 crore), representing growth of 44 per cent.

In addition, export earnings amounted to USD 740 million (74 crore) from information technology services, USD 720 million (72 crore) from manufacturing-related services, USD 450 million (45 crore) from travel and USD 9.8 million (98 lakh) from merchandising services.

During the last financial year, export earnings increased by nearly 10 per cent in information technology services, 27 per cent in manufacturing-related services, 1.5 per cent in travel, 16 per cent in merchandising services and approximately 24 per cent in the insurance services sector.

Several service sectors experienced negative trends in export earnings. In the last financial year, construction services generated USD 330 million (33 crore), representing a decline of 48 per cent compared with the previous year.

Export earnings from port-based cargo handling and collection services amounted to USD 150 million (15 crore), which was 39 per cent lower than the previous year.

Earnings from maintenance and repair services declined by 37 per cent. In addition, income from financial services (excluding insurance) fell by more than 7 per cent. Earnings from the sale or use of intellectual property also declined by 11 per cent during the last financial year.

As with merchandise exports, the United States remains Bangladesh’s largest partner in service exports. Nearly 15 per cent of Bangladesh’s total service export earnings originate from the United States.

In the last financial year, Bangladesh earned USD 1.02 billion (102 crore) by exporting various services to the country. Hong Kong ranked second, generating USD 710 million (71 crore), followed by Singapore in third place with USD 590 million (59 crore).

Beyond these, Bangladesh also earns foreign currency through service exports to China, India, the United Kingdom, the United Arab Emirates, Germany, South Korea and Japan.

United Kingdom, the United Arab Emirates, Germany, South Korea and Japan.

Experts note that expanding the services export sector is crucial to reducing reliance on merchandise exports and increasing foreign currency earnings.

By developing skilled human resources and enhancing technological capabilities, the contribution of this sector can be significantly increased.

Masrur Riaz, chairman of the private research organisation Policy Exchange Bangladesh, stated that although diversification of exports has become an urgent necessity for Bangladesh, the discussion often remains confined to the merchandise sector.

While there is consideration of sectors such as pharmaceuticals and agro-processing beyond the ready-made garments industry, the services sector has yet to receive adequate attention as a key component of export diversification.

Masrur Riaz further observed that growth in global trade in services is currently outpacing that of merchandise trade.

With the expansion of the digital economy in particular, service exports, especially digital services are set to become one of the central sources of value addition in the global economy in the coming years.

In this context, service exports could represent a significant opportunity for Bangladesh.

He added that Bangladesh currently has very limited preparedness and strategic focus to capitalise on this potential.

Although there is policy-level recognition of the need to increase service exports, in practice the sector continues to be neglected.

At the same time, insufficient attention has been given to the development of skills and capacity which needs to be built for the expansion of the services sector.