How BREXIT will Impact the

Bangladesh Economy?
Mohammad Nizam Uddin, FCMA ( F0540)
4th Aug 16, ICMAB

content
I. What is BREXIT?
II. How Brexit vote broke
down?
III. Some FAQs on BREXIT
IV. BREXIT impact on the UK
V. Life after Brexit: What are
the UKs options outside the
European Union?
VI. BREXIT impact on
Bangladesh economy
VII. What is in it for me as CMA?
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What is BREXIT?
I.

It is a word that has become used as a

shorthand way of saying the UK leaving the
EU - merging the words Britain and exit to
get Brexit.

II. A referendum - a vote in which everyone

(or nearly everyone) of voting age can take
part - was held on Thursday 23 June, to
decide whether the UK should leave or
remain in the European Union. Leave won
by 52% to 48%. The referendum turnout
was 71.8%, with more than 30 million
people voting.
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How Brexit vote broke down?

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FAQs Brexit
I.

Why is Britain leaving the European Union?

II. Who is going to negotiate Britain's exit from the EU?

III. How long will it take for Britain to leave the EU?
IV. Why will Brexit take so long?
V. What happens to EU citizens living in the UK?
VI. What happens to UK citizens working in the EU?

VII. What about EU nationals who want to work in the UK?

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FAQs Brexit
What about all the economic warnings about Brexit? Were they
wrong?
What has been the effect on the value of the pound?
Will immigration be cut?
Could there be a second referendum?

Does the UK citizen needs a visa to travel to the EU?

Some say the UK could still remain in the single market - but
what is a single market?

Has any other member state ever left the EU?

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Brexit and development: pathways

of impact

Source: Overseas Development Institute: www.odi.org

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Life after Brexit: What are the UKs options outside the
European Union?

It is highly uncertain what the UKs future would look like outside the European
Union(EU), which makes Brexit a leap into the unknown.
After Brexit, the EU would continue to be the worlds largest market and the
UKs biggest trading partner. A key question is what would happen to the three
million EU citizens living in the UK and the two million UK citizens living in the
EU?
One option is doing a Norway and joining the European Economic Area. This
would minimise the trade costs of Brexit, but it would mean paying about 83%
as much into the EU budget as the UK currently does. It would also require
keeping current EU regulations(without having a seat at the table when the
rules are decided).

Source: Centre for Economic Performance, London School of Economics and Political Science

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Life after Brexit: What are the UKs

options outside the European Union?
Another option is doing a Switzerland and negotiating bilateral deals with
the EU.Switzerland still faces regulation without representation and pays
about 40% as much as the UK to be part of the single market in goods. But
the Swiss have no agreement with the EU on free trade in services, an area
where the UK is a major exporter.
A further option is going it alone as a member of the World Trade
Organization. This would give the UK more sovereignty at the price of less
trade and a bigger fall in income, even if the UK were to abolish tariffs
completely.
Brexit would allow the UK to negotiate its own trade deals with non-EU
countries. But as a small country, the UK would have less bargaining power
than the EU. Canadas trade deals with the United States show that losing
this bargaining power could be costly for the UK.
Source: Centre for Economic Performance, London School of Economics and Political Science

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Brexit impact on Bangladesh

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Figure: RMG export growth, Source: EPB (Export Promotion Bureau)

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Exports- Facts FY 14-15

I.

BD exported 15.37 BUSD to the 28-nation economic union,

60.28% of RMG in FY 14-15

II. The UK is the Third highest export destination after the USA
and Germany and the Second highest in the EU

III. BD exported 3.23 BUSD to the UK in FY 14-15, a growth of

21.28% vs. previous year
IV. RMG makes 90% of the export figures

V. 40% of the countrys total export of vegetables, fruits and

allied products a year is destined for the UK

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Exports- risks & challenges

I.

BD to renegotiate T&Cs with the UK after Brexit; BD now enjoys

12.5% duty benefits since 1971 under Everything But Arms
scheme of the EU, a trade bloc of 28 European nations.

II.

One of the reasons, BD was able to reach its current position of

the second largest apparel exporter worldwide due to EU's
generous trade benefits since 1971.

III. Post Brexit, the European and British economies will experience
instability, there would be depressed demand among people.
IV. Because of the plunge in the GBP, the UK might reduce their
import spending.

V. Brexit could spur a tariff war among countries as they may seek
to raise customs and other duties to protect their domestic
industries.
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Exports- risks & challenges

VI. The UK buyers of Bangladeshi garment products have started
putting price pressure on manufacturers following the freefall of
pound sterling as a result of Brexit. The UK buyers will try to cut prices
and to some extent even to cancel the orders. This pressure on price
will further affect exporters margins that have already been squeezed
due to a rise in operational and compliance costs. If the trend
continues for a long time, inflation will go up and the British
consumers will buy less, which will then affect our exports there
VII. Our competitor countries, especially India might take the
opportunity to take more market share as they approved 6000 Crore
Rs as incentives to the RMG sectors to create 1 Crore more jobs in
three years , in addition to attracting 11 BUSD and generating 30 BUSD
exports.
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Estimation of price and income effects of

Brexit on selected developing country exports

Source: Overseas Development Institute: www.odi.org

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Remittance :risks & challenges

I.

Among western economies, the UK is the second biggest source

of remittance for Bangladesh after the US. Migrant workers living
in the UK send $1 billion in remittance every year

II. Because of the plunge in the pound, migrant workers and nonresident Bangladeshis may postpone sending money back home
until the currency revives and that may spill a catastrophic impact
on the bilateral trade and investment relationship
III. The British immigration regime may become stricter resulting in
less Bangladeshis getting immigration /student visa. If the size of
the British economy does not expand enough, immigration may
continue to be tougher. Bangladeshi job seekers will find it more
difficult to get jobs in the UK.
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Official Development Assistance (ODA)

:risks & challenges
I.

The UK is among the six countries in the world which has fulfilled
the commitments of providing 0.7 percent of its Gross National
Income as overseas development assistance.

II. The UK is Bangladeshs second highest bi-lateral donor. Any

change in their aid policy will have an impact on Bangladeshs
development efforts. ( 385 MUSD Net ODA received by BD in FY
14-15
III. The UK is also the destination of a large number of Bangladeshi
students, many of whom receive scholarships from the UK. Brexit
brings uncertainty on the continuation of such opportunities for
aspirant Bangladeshi students.

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FDI :risks & challenges

British FDI may have decline as UK is the second highest FDI
contributor in Bangladesh. "Contribution of development partner
DFID and UKTI in our socioeconomic development will sharply
decline.

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Other Risks & Challenges

The UK is not only an export
destination. Many international
companies are headquartered there.
The UK matters greatly in the future
plan for expansion of our export basket
in terms of value and volume.

Brexit could be contagious and

provoke other EU countries to leave
the bloc. And if that happened, Europe
would be weakened further.

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What is in it for
me as CMA?

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Appendix

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Source: Import Payment, Bangladesh Bank &Export Statistics, Export

Promotion Bureau
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FDI

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