Introduction:

This study mainly aims at the Brexit and its impact on Bangladesh as well as rest of the global
economy. It also enhances the understanding of functioning Brexit within EU and the rest of
the worlds. The significant effect on the economy of Bangladesh is more emphasized on this
study.

Brexit and the EU:

Brexit is an abbreviation for "British exit," referring to the U.K.'s decision in a June 23, 2016
referendum to leave the European Union (EU). The vote's result defied expectations and
roiled global markets, causing the British pound to fall to its lowest level against the dollar in
30 years. Former Prime Minister David Cameron, who called the referendum and campaigned
for Britain to remain in the EU, announced his resignation the following day. Home Secretary
Theresa May replaced him as leader of the Conservative party and as Prime Minister.
Following a snap election on June 8, 2017, she remains Prime Minister. The Conservatives lost
their outright majority in Parliament, though, and with it – May's critics argue – a mandate
for a "hard Brexit," in which Britain leaves the EU's single market and customs union. (The
alternative is known as "soft Brexit.")

The deal May negotiated with the EU has been rejected by the House of Commons three
times, and Britain has less than two weeks to come up with a plan in order to avoid crashing
out of the bloc without a deal on April 12. May has given up on winning the support of hard-
line Brexit supporters in her own party and is now hoping to reach a compromise with the
main opposition party.

The European Union - often known as the EU - is an economic and political partnership
involving 28 European countries. It began after World War Two to foster economic co-
operation, with the idea that countries which trade together are more likely to avoid going to
war with each other. It has since grown to become a "single market" allowing goods and
people to move around, basically as if the member states were one country. It has its own
currency, the euro, which is used by 19 of the member countries, its own parliament and it
now sets rules in a wide range of areas - including on the environment, transport, consumer
rights and even things such as mobile phone charges.

Current Situation of Brexit:

Prime Minister Theresa May on Saturday defended her decision to turn to Britain's main
opposition to get her EU divorce deal approved, warning without cross-party consensus Brexit
could "slip through our fingers".

The beleaguered leader opened talks this week with the Labour Party in a bid to break months
of stubborn opposition in parliament to the withdrawal agreement she struck with European
leaders last year.
MP’s have rejected three times her deal finalised with the bloc last November to end 46years
of membership.

May's overtures to Labour came ahead of an EU summit on Wednesday where she must
secure another Brexit extension, until 30 June, to prevent Britain crashing out the bloc at the
end of next week with no accord.

The country's original 29 March departure date was delayed to 12 April last month.

"We must deliver Brexit and to do so we must agree a deal," May said in a statement released
by Downing Street, adding the two main parties agreed on major aspects of Brexit.

"That is the basis for a compromise that can win a majority in parliament and winning that
majority is the only way to deliver Brexit.

"The longer this takes, the greater the risk of the UK never leaving at all. It would mean letting
the Brexit the British people voted for slip through our fingers."

However after several days of negotiations with Labour, its leader Jeremy Corbyn complained
he had not "noticed any great change in the government's position so far".

"I'm waiting to see the red lines move," he added.

Meanwhile EU members, who must give unanimous backing to any further Brexit delay, are
growing increasingly impatient at the dysfunction in Westminster.

They could offer just a shorter postponement -- or a longer period of up to a year.

French foreign minister Jean-Yves Le Drian told reporters at a G7 meeting in France on

Saturday that it was time for the Brexit crisis to end.

"The British authorities and the British parliament need to understand that (the EU) is not
going to be able to constantly exhaust itself with the ups and downs of domestic British
politics," he said.

However Irish Prime Minister Leo Varadkar cautioned it was "extremely unlikely" a member
would veto another extension, while revealing he now favoured a lengthy delay.

Objectives of the study

The objective of the study is very unique which entirely deals with the noted points
mentioned below.
1. Concentrate on the function of Brexit and its impact on Bangladesh’s Economy.
2. Why is there a call for Brexit?
3. Influence of Brexit in UK and others
4. Period need to leave EU
Literature Review:
The European Union represents 6% of the world’s population. But it accounts for more than
20% of global imports and exports. The EU emerges as the leading trade power in the world
today. As such, it exhibits a strong interest in creating conditions in which trade can prosper.
The European Union is specially committed to supporting developing countries' efforts to
integrate into the trading system and to help them reap the benefits of market opening, giving
them a hand where needed. The European Union applies this particularly trade policy to the
poorest countries, for which the benefits of globalization remain elusive. Furthermore, the
European Union aims at free but fair world trade. The EUs trade policy now covers a broader
canvas, beyond trade liberalization. It is about updating and improving international rules and
giving trade partner countries a wider coverage to ensure fair trade and harnessed
globalization.
Like the other LDCs, Bangladesh gets more trading benefit from the European Union. The EU
works closely with Bangladesh in the framework of the EU-Bangladesh co-operation
agreement since in 1976. This agreement provides broad scope for cooperation extending to
trade and economic development, human rights, good governance, and the environment.
Enhanced market access to the EU and an improved trading environment, the EU has
provided the Generalized System of Preference (GSP) for Bangladesh. As such Bangladesh
always enjoyed the advantage of duty and generally quota free access to the EU market.
Export sector of Bangladesh has undergone structural changes in the decade of 80 in the last
century with a significant shift from jute-cantered exports to readymade garments and
knitwear (Rahman, 2004). The main items that Bangladesh exports to the EU are ready-made
garments (90%), frozen food (6%) and others (4%) cover leather and leather goods, jute,
pharmaceutical product, and tea.
RMG, ready-made garment, industry has virtually thriven in the competitive advantage of a
quota free access to the EU market. Moreover, the EC’s autonomous decision to grant duty
and quota free access to all products produced in the less developed countries (with the
exception of arms) comes up with new perspectives for Bangladesh (World Bank, 2002). The
main imports from the EU consist of transport equipment, textile and textile articles, food
stuffs, beverages and tobacco, machinery and appliances, and chemical products. The balance
of trade with EU, over the years, remained hugely in favour of Bangladesh (5572.06 million
US dollars in 2010) (Statistical Year Book, 2011; Direction of Trade Statistics, 2011).
Bangladesh enjoyed positive balance of trade from the year 1991and this trend is still to exist
in the recent years
Methodology To analyse the data and make it comprehensive, we used the data from
secondary sources
Impact Analysis:
Apart from exports to the UK, the third largest export destination for Bangladesh, remittance
income from the European country may come under strain as an impact of its departure from
the EU. In the long run, Bangladesh's economy might take a hit if the current uncertainty in
the global economy persists further. “It is bad news for the global economy. It is not good
news for Bangladesh at all, as we are dependent on the global economy, and the UK is a major
market for us”. There had already been uncertainty in the global economy and Brexit
exacerbated it further. The devaluation of the pound may have an immediate impact on
Bangladesh's exports and remittance. The UK is Bangladesh's third largest export destination
after the US and Germany, and the second largest in Europe. As Britain chose to leave the EU,
economists and exporters said it would be a major challenge for Bangladesh to retain duty-
free trade privilege of its goods to the UK. Because of Brexit, the whole EU as well as the UK
would face an economic crisis. As a result, people would buy less and the exporting countries
would feel the pinch. Once the UK leaves the EU, it would no longer depend on the EU for
crucial decisions. In such a case, the trade privilege may be reduced, as there would be no
partner to oppose the decisions. The UK is not only an export destination. Many international
companies are headquartered there. This country is very important to us. The UK matters
greatly in the future plan for expansion of our export basket in terms of value and volume.
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,
contributing greatly to Bangladesh's remittance income of more than $15 billion. Because of
the plunge in the pound, migrant workers and non-resident Bangladeshis may postpone
sending money back home until the currency revives. The plunge may hit Bangladeshi
exporters, as purchase of goods or services by the UK from other countries will be more
expensive.
The UK is a good destination not only for apparel, but also for fresh vegetables and agro-
products because of the significant number of Bangladeshis residing in the UK. Export of
jackfruits and mangoes has risen recently. Other items high in demand are carrot, tomato,
potato, eggplant, spinach, cauliflower, papaya, pumpkin, bottle gourd, cabbage, coriander
leaf, okra, cucumber, bitter gourd, bean, jute leaf, drumstick, radish, fish and meat. Local
companies also export agro-processed food to the UK.
Bangladesh exports fruits and vegetables worth more than Taka 400 core to the UK a year.
Nearly 40 percent of the country's total export of vegetables, fruits and allied products a year
is destined for the UK. Garment shipments to the EU increased by 4.11 percent year-on-year
to $15.37 billion last fiscal year, according to the EPB.
At present, the 28-nation economic union accounts for 60.28 percent of the country's
garment exports a year.
In Europe, Germany was the prime destination, as in previous years, accounting for $4.33
billion of the $15.37 billion export receipts. The UK came in next, importing garment items
worth $2.9 billion from Bangladesh.
The main impact on Bangladesh’s economy would be in RMG sector.
Bangladesh earned $28.09bn from RMG exports in the FY 2015-16 which just ended around
10.21% growth from the previous year according to EPB figure. Whereas country’s RMG
exports concentrated to major destination like EU (European Union). The EU is the basket of
RMG exports and United Kingdom (UK) is the potential part of this basket. But the matter of
concern is now the UK people decided to leave European Union (EU) as 52% people voted for
exit while 48% cast vote to stay with the union by a referendum held on June 23. Britain’s exit
(Brexit) from the EU will hurt Bangladesh exports especially the RMG sector to UK markets as
it will cast shadow on the exchange rates, fear the country’s economists and RMG exporters.
The UK buyers of Bangladeshi garment products have started putting price pressure on
manufacturers following the free fall 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 exporter’s 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. Now the question arises that
$50 billion garment export target by 2021 may not be possible.
While UK is the third largest single export destination for Bangladesh, it is very important for
us as the exporters enjoy duty-free market access for all products under Generalised System
of Preferences (GSP). That is why it has become a big question for the country as to whether
it will be able to enjoy the trade facilities after the exit of UK.
Bangladesh's exports to the UK may greatly be affected due to a possible suspension of duty
benefits by the British government following Brexit
Brexit will also have a negative impact on remittance earnings. Our economy is partly
remittance-based. A depressed pound will result in low remittance sent by our people living
in the UK. What is more, immigration status, until the Brexit negotiations are completed, will
be the same as before, but who knows what will become of our people once the Brexit is
officially completed. Thus, the future of our people is somewhat uncertain.
Aware of the country's future performance, and if the rate for pound continues to fall,
businesses and investors are very likely to move their money out of the UK economy. Under
such circumstances, Britain's economy can enter into a recession, badly affecting the rest of
the world including Bangladesh. The IMF (International Monetary Fund) expects that
international trade and investment globally will shrink in response to the political uncertainty
of an exit, especially one that may throw Britain into a sharp recession.
Last but not least, usually, every year a good number of undergraduate students go to the UK
from our country to pursue better education. But, truth be told, undergraduates in the UK
usually pay the highest tuition fees in the world. In order to avoid huge tuition fees, many
pupils from our country choose to study at some other affordable European college outside
the UK even after their admissions with the British colleges are complete. Up until now, such
students as those are required to fulfil few formalities to this end. However, after Brexit, it is
far from clear, what will happen to any such student? The likelihood is that students will face
great hardship in terms of money and time to get into other European colleges. This can
jeopardise the way to getting higher education for many students of moderate means.

Problems and Suggestion:

The government has declined to give a firm guarantee about the status of EU nationals
currently living in the UK, saying this is not possible without a reciprocal pledge from other
EU members about the millions of British nationals living on the continent. EU nationals with
a right to permanent residence, which is granted after they have lived in the UK for five years,
will be able to stay, the chief civil servant at the Home Office has said. The rights of other EU
nationals would be subject to negotiations on Brexit and the "will of Parliament," he added.
A lot depends on the kind of deal the UK agrees with the EU. If it remains within the single
market, it would almost certainly retain free movement rights, allowing UK citizens to work
in the EU and vice versa. If the government opted to impose work permit restrictions, then
other countries could reciprocate, meaning Britons would have to apply for visas to work.
Again, it depends on whether the UK government decides to introduce a work permit system
of the kind that currently applies to non-EU citizens, limiting entry to skilled workers in
professions where there are shortages. Citizens' Advice has reminded people their rights have
not changed yet and asked anyone to contact them if they think they have been discriminated
against following the Leave vote. Brexit Secretary David Davis has suggested EU migrants who
come to the UK as Brexit nears may not be given the right to stay. He has said there might
have to be a cut-off point if there was a "surge" in new arrivals.
According to Capital Economics, a London-based research firm, Brexit would cause at the
most a GDP drop of 0.2 per cent across Asia. This is a matter of concern for us. The
government will have to make necessary adjustments in the proposed budget and keep the
export sector vibrant by maintaining the tax at source on readymade garments export at 0.60
per cent instead of 1.5 per cent.
Nobody exactly knows what will be the impact of Brexit on the world economy including
Bangladesh. However, if the UK continues to allow duty-free market access after its exit,
Bangladesh would not have difficulties in export. If something like this happens, the impact
will be lesser than anticipated. UK would continue to grow because of a large number of non-
resident Bangladeshis there.
Certainly there would be suggestion for Bangladesh as well as the rest of global economy
discussed below.
In fact, consequences of Brexit will generally depend on UK's reactions. Bangladesh needs to
proceed carefully. It should inclusively analyse the post Brexit global economic changes by
forming a national committee involving representatives of trade bodies, law practitioners,
economists, researchers and representatives from concerned ministries and agencies so that
effective actions may be taken promptly. The government ought to start lobbying and need
to renegotiate with UK to retain the duty free access. Accordingly, the government should
also try through the diplomatic channel so that the trading facility now being enjoyed in the
UK through EU to keep pace with the global competitors is maintained.
After the referendum, the pound fell more than 10 percent that is the lowest value since 1985
and devaluation of pound through Brexit might hurt Bangladesh economy in different ways.
UK may adopt an immediate conservative move on their financial expenditure as the
purchase of goods or services in the UK will be more expensive and goods being sold to other
countries from the UK will become cheaper in particular. Again, it could encourage imposition
of a huge tariff on imports to raise revenue or to protect their domestic industries. If Brexit is
effective, migrant workers and NRBs may defer sending money back home until the currency
regains its old position. Racial tension may be raised as vote highlighted disagreement on
immigration. Finally, it will echo around the world that may induce further shock in the world
economy.
As a consequence of Brexit, Bangladesh may lose its competitiveness over its counterparts,
especially in the export trade. Thus, Brexit may negatively impact on exports and remittance
earnings of Bangladesh. Moreover, it may significantly influence our future plan of expanding
export which is linked with Vision 2021. Bangladesh should be keen on its aim to raise the
earning from exports even after Brexit.

Conclusion:
The United Kingdom has finally decided to leave the European Union (EU) as per results of a
referendum. Although it is still too early to predict the fallout of the Brexit which means British
exit, it’s true that the tumbling of the British pound to a 31-year low will affect trading of
countries like Bangladesh. It’s true that it could put a negative impact on the Bangladeshi
exports to the UK, which is the third largest export destination for Bangladesh products.
Bangladesh would have to go for bilateral negotiation to avail trade facilities. But then if the
Brexit brings positive results for the economy of the UK it would not hit Bangladeshi exports,
but if the exit leads to any adverse impact on the economies of the UK and the EU then the
South Asian country. Bangladesh enjoys duty-free benefits for all products and flexible rules
of origins for readymade garments in the EU. Due to Brexit, Bangladesh would have to need
bilateral agreements to avail the benefits in the UK. If any crisis takes place in the economy
of EU and UK due to Brexit, it will hit hard Bangladeshi export business. Top economists at
British universities have feared that Brexit would damage UK’s economy. They thought that
Brexit would cause uncertainty in the markets and pose other economic risks. Although the
Brexit is not directly related with Bangladesh, the country might have to face its immediate
impact. The exit of Britain from EU would not be positive as integration is important this time
for the EU economy. Bangladesh’s exports to the UK totalled US$ 3.20 billion in the financial
year 2015-16 with US$ 2.90 billion coming from the readymade garments sector. The
president of the World Bank has already warned a British exit from the European Union could
have a ‘negative impact’ on developing countries across the globe. Brexit is one of the biggest
risks to lower and middle income nations since the UK’s economic grounding has a direct
impact on stability around the world. The gap between global commodity imports and
commodity exports, which have grown by 6% and 0% this year respectively, could get much
worse as Britain leaves the EU. And uncertainty in global capital markets is bad for the world
economy. On the other hand, the stability of the British economy is really important for the
stability of the global economy and also uncertainty in global capital markets have very
negative effects even on the poorest countries. It is time that Bangladesh makes serious
homework on ramifications of the Brexit and does the needful.