Thinking Aloud: Volume II, Issue 6

The theme for the November, 2015 issue of Thinking Aloud is Export Diversification. The first article on “Export diversification: Myths and realities” critically evaluates the current paradigms of views on export diversification in the developing countries, and argues that diversification of exports would require removal of both policy induced and supply side constraints, creating favorable incentive structure in the economy, and mobilizing political capital in support of that. The second article, “Why do countries differ in export diversification?” emphasizes on major factors that influence differences in export diversification across countries and time. Fixed effect panel regression models have been used over the period of 1962 to 2010 for 182 countries. The regression result indicates a strong positive association between per capita GDP and export diversification. The regression results also show that increased flow of credit to the private sector as we all as higher level of investment lead to a rise in the level of diversification. Interestingly, the study finds no statistically significant relationship between tariff liberalization and export diversification. However, regression results very clearly show that there are statistically significant positive effects of improvement in different business environment indicators and institutional indicators on cross-country and over time differences in export diversification. The 3rd page write-ups shed lights on leather and leather goods, pharmaceuticals and electronics sectors in Bangladesh for their potentiality in export diversification, and different supply-side constraints these sectors encounter. The majority of such constraints include lack of access to finance, weak physical infrastructure, inefficient ports and high transport costs, shortage of skilled workers, technological bottlenecks, lack of entrepreneurship and management skills, lack of information, and high costs of doing business.