Reducing Bangladesh's China and India Import Concentration: A Diversification and FX-Resilience Plan

Diagnosis

Bangladesh's import basket is concentrated in two suppliers. Per the curated note, China accounts for roughly 25 percent and India roughly 12 percent of imports, together more than a third of the country's purchased goods. This is not a trade-balance complaint, it is a concentration risk. Two related exposures follow from it.

First, foreign-exchange exposure. When a large share of imports is sourced from a small number of partners, currency stress, payment-channel friction, or a correspondent-banking shock is harder to absorb because there is no diversified alternative to switch toward quickly. The note flags FX as a primary concern, and concentration amplifies any reserve or settlement pressure.

Second, supply concentration. The note names supply concentration directly. Critical intermediate inputs (industrial raw materials, machinery, fertilizer feedstock, and components for the export-garment supply chain) flowing from two origins means a disruption at either source (port closure, export restriction, logistics breakdown) transmits straight into domestic production and prices with little buffer.

The structural horizon matters here. This is not a shock to manage this quarter, it is a dependency to unwind over years through procurement rules, supplier development, and standards capacity. Acting now, before any acute FX or supply event forces a disorderly adjustment, is the cheaper path.

Recommended actions

1. Map the concentrated lines and set diversification targets. Owner: Ministry of Commerce (MoC), with the Bangladesh Trade and Tariff Commission. Mechanism: a standing import-concentration assessment, published as an MoC circular, that identifies the specific product categories where China and India dominate and the inputs most critical to export production. Observable signal: a public, line-level concentration register exists and is updated, replacing the single aggregate share with actionable detail.
2. Open alternative sourcing through tariff and standards facilitation. Owner: Bangladesh Trade and Tariff Commission (tariff) and Bangladesh Standards and Testing Institution (BSTI) for conformity. Mechanism: align tariff treatment and accelerate BSTI testing and certification for the same goods from additional origin countries, so importers face no penalty or delay when switching suppliers. Observable signal: BSTI certification turnaround for substitute-origin goods shortens, and import volumes from non-China, non-India origins rise in the concentrated lines.
3. Build domestic substitution capacity for the highest-risk inputs. Owner: Bangladesh Investment Development Authority (BIDA), coordinating with MoC. Mechanism: targeted investment facilitation and a dedicated incentive track for local or near-shore production of the critical intermediates identified in action 1. Observable signal: new approved investments land in the priority input categories, and the imported share of those specific inputs declines.
4. Reduce settlement and port chokepoints that lock in current suppliers. Owner: Chittagong Port Authority, with MoC. Mechanism: ensure handling capacity and clearance procedures do not implicitly favor the dominant trade lanes, so diversified cargo from new origins clears without disadvantage. Observable signal: dwell time and handling treatment for cargo from new supplier countries match that of the incumbent lanes.
5. Stand up an FX-resilience review tied to concentration. Owner: MoC, reporting to the relevant macro authorities. Mechanism: a periodic review that links the import-concentration register to settlement and reserve exposure, flagging where a single-origin disruption would hit FX hardest. Observable signal: the review is institutionalized and informs procurement and reserve planning rather than sitting unused.

Sequencing (first 12 months)

Start with action 1: the concentration register is the keystone, because targets, tariff alignment, investment incentives, and the FX review all depend on knowing exactly which lines and inputs are exposed. Once the register exists, run actions 2 and 4 in parallel (tariff and standards facilitation, port neutrality) since both lower the switching cost for importers and can move within the year. Action 3 (domestic substitution via BIDA) begins in the same window but matures over the structural horizon. Action 5 (FX-resilience review) follows directly from action 1's output and closes the loop.

Risks and constraints

The binding constraints are political and fiscal. Cheaper, faster sourcing from the two dominant partners creates an entrenched importer interest that will resist switching costs, so tariff and standards facilitation must remove friction rather than impose it. Domestic substitution through BIDA carries fiscal cost and long lead times, and incentives can be captured if not tied to the concentration register's priorities. BSTI and port capacity are real bottlenecks: diversification fails if substitute-origin goods cannot be certified or cleared as easily as incumbent supply. Diplomatic sensitivity with both partners also constrains how openly targets are framed.

Bottom line

With China at roughly 25 percent and India at roughly 12 percent of imports, Bangladesh's concentration is a standing FX and supply-chain liability that the Ministry of Commerce should manage structurally, not reactively. The first move is a line-level concentration register, which unlocks tariff alignment, standards and port neutrality, and targeted domestic substitution before any acute shock forces a disorderly and costly adjustment.