Determinants of Export Performance of Selected Non-RMG Firms in Bangladesh

Abstract

This report examines Determinants of Export Performance of Selected Non-RMG Firms in Bangladesh. The study is conducted using panel data collected from four non-rmg company over a fifteen-year period from 2011 to 2025. The main objective of the study is to analyze how key factors, including Exchange Rate (EXR), Marketing Expenditure (ME), Trade Incentives (TI), Product Development Expenditure (PDE), Order Fulfillment Rate (OFR), and GDP Rate (GDP), influence export performance, measured by Export Revenue (ER). Over the last thirty years, Bangladesh has maintained a trajectory of significant macroeconomic development, largely driven by the remarkable expansion of the Ready-Made Garments (RMG) industry. As the primary contributor to the country's export revenue, the RMG sector has successfully embedded millions into global trade networks. Nevertheless, this disproportionate dependence on a single sector introduces substantial risks related to structural economic concentration. Consequently, fostering the growth of non-RMG industries has shifted from a secondary goal to a vital strategic necessity for ensuring long-term economic stability, especially as Bangladesh approaches its transition out of Least Developed Country (LDC) status. This research exhaustively investigates the "Determinants of Export Performance of Selected Non-RMG Firms in Bangladesh," utilizing detailed panel data derived from the export operations of the RFL Group. As a premier conglomerate operating in the plastics, electrical electronics, and consumer goods industries, RFL Group serves as an optimal empirical proxy for the broader non-RMG manufacturing sector. The core objective of this study is to empirically quantify the precise impact of six independent variables Exchange Rate, Marketing Expenditure, Trade Incentives, Product Development Expenditure, Order Fulfillment Rate, and GDP Rate on the dependent variable, Export Revenue. The methodological framework of this study is anchored in quantitative panel data econometrics. A balanced panel dataset consisting of 60 discrete observations was rigorously processed and analyzed using Stata 18. The analytical progression incorporated descriptive statistics to understand variable distributions, correlation matrices to identify initial bivariate relationships, ix and Variance Inflation Factor (VIF) assessments to rule out severe multicollinearity. Furthermore, the dataset was subjected to the Breusch-Pagan test for heteroskedasticity and the Wooldridge test for panel autocorrelation. Diagnostic testing revealed a mean VIF of 2.28, confirming the absence of problematic multicollinearity, and the Breusch-Pagan test confirmed homoskedasticity. However, the Wooldridge test detected the presence of first-order autocorrelation within the panel data. Consequently, both Feasible Generalized Least Squares (FGLS) and Fixed Effects (FE) regressions were estimated to ensure robustness. The Hausman specification test yielded a p-value of 0.036, definitively confirming that the Fixed Effects model was the most robust and statistically appropriate estimator for this specific panel dataset, as it effectively controls for unobserved time-invariant heterogeneity among the cross-sectional units. Fixed Effects regression results reveal that the Exchange Rate and Product Development Expenditure significantly and positively influence Export Revenue. These findings confirm that currency depreciation enhances price competitiveness and that R&D investment secures global market share. In contrast, Marketing Expenditure showed a significant negative contemporaneous link with revenue, likely due to lagged returns or defensive spending during periods of volatility in B2B non-RMG export channels. Overall, Trade Incentives, while highly significant in pooled and FGLS estimations, completely lost their statistical significance in the Fixed Effects model. This provides a profound econometric revelation: because government trade incentives are highly static and lack sufficient within-group temporal variation over the observed periods, they do not act as dynamic drivers of short-term firm-level revenue fluctuations, despite their overarching importance to the sector. Both the Order Fulfillment Rate and the overall GDP rate were found to be statistically insignificant within the highly specific context of this dataset. The report concludes with detailed strategic recommendations directed at both the corporate management of RFL Group and macro-level policymakers, heavily emphasizing the prioritization of continuous product innovation and proactive exchange rate risk management to secure sustainable, long-term export diversification..