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Dr Khondaker Golam Moazzem on export

Published in The Financial Express on Wednesday, 22 July 2015.

Exports to India climb despite hurdles

Ziaur Rahman

Exports to India jumped more than 15 per cent in the just-concluded fiscal year 2014-15, led by readymade garment shipment.

Merchandise shipments to India, which is also Bangladesh’s second-largest source of imports after China, amounted to US$ 527.167 million in last fiscal as against $ 456.633 million in 2013-14, data from the state-run Export Promotion Bureau (EPB) showed. The amount was $ 563.960 million in 2012-13.

Despite the growth, exporters, especially the garment manufacturers, are not happy as shipment of the main item remained almost static in the Indian market due to tariff and non-tariff barriers (NTBs).

The growth also shows the decreasing trend and apparel makers said bilateral trade between Bangladesh and India remains heavily tilted toward India and the trade deficit with India keeps growing fast.

Apparel exports to India increased to $ 104.25 million in the just-concluded fiscal from $ 96.25 million in the previous year registering a growth of 8.31 per cent. The growth was 27.98 per cent in the previous year (2013-14).

Exporters identified the increase as nominal compared to those of other countries.

Apparel exports, even in new markets like, South Africa grew by 37.05 per cent. In China, it surged by 26.33 per cent, 23.88 per cent in Australia and 14.02 per cent in Japan.

Exports to India increased substantially in fiscal year 2012-13 after India’s then prime minister Manmohan Singh’s visit to Bangladesh. After the visit, India allowed duty-free access of all Bangladeshi products to its market, except 25 alcoholic and drug items, to narrow the trade gap between the two countries.

But the tempo of exports could not be maintained as India imposed 12.5 per cent countervailing duty on the export of garments in April 2013, which, exporters said, is the major hurdle impeding Bangladesh clothing shipment to India.

Although Bangladesh experienced considerable growth in import from India, it faces various non tariff barriers to enter the Indian market which increases the trade deficit, said an exporter.

“Even after duty-free access of Bangladesh-made garment to India, Bangladesh could not make any significant growth in export mainly because of some tariff and non tariff barriers and the government’s lack of initiative in negotiations with the counterpart on different trade-related issues,” said Vice President of the Bangladesh Garment Manufacturers and Exporters Association Reaz Bin Mahmood.

“The tariff and non-tariff barriers imposed now and then by India somehow restrict the market access of Bangladeshi products to India compared to those of Indian products in Bangladesh,” said Mr Mahmood.

He also identified depreciation of Indian rupee against the US dollar as a key factor that made Indian exporters more competitive than their rivals.

Rupee has been depreciated by about 20 per cent over the last one year, said the BGMEA vice president.

“The export would have been much higher if there were no restrictions on apparel items,” said another exporter.

The exporter stressed the need for removal of tariff and non-tariff barriers on exports from Bangladesh as the country enjoys preferential trade facilities under the MFN (most favoured nation) category.

Analysts and business people also attributed the reasons to some other non-tariff barriers including testing and certification and weak border infrastructure which they said dampen the export potentials.

The country has witnessed a persistent trade deficit growth with India over the last several years. Because of the obstacles, a huge amount of trade, according to businessmen, also takes place through informal channel between the two countries.

Despite getting the Indian MFN status, Bangladesh fails to reap the benefit due to lack of national treatment in case of export which, experts said, forces Bangladesh to face export tariff and non-tariff barriers.

“Unless Bangladesh gets national treatment in the Indian market, export from Bangladesh will not pick up,” said Dr. Khondaker Golam Moazzem, an additional research director of the think-tank Centre for Policy Dialogue (CPD).

India, according to experts, imposed the duty to protect its local industry.

Lack of trust and non-payment of bills by some Indian importers are also hampering the country’s export, especially the apparel export, to India.

Under developed port facilities, non diversification of export items and lack of infrastructural facilities are also hindering increased trade and commerce between the two neighbouring countries.

The Director General of Indian CII (Confederation of Indian Industry) Chandrajit Banerjee in a statement said that India-Bangladesh trade could double to $ 10 billion by the year 2018, provided trading irritants like non-tariff barriers and infrastructure related issues are resolved.

The CII statement comes against the backdrop of External Affairs Minister Sushma Swaraj’s visit to Bangladesh in June last year.

The two-way trade between India and Bangladesh stood at $ 6.6 billion in 2013-14 with India’s exports at $6.1 billion and imports from Bangladesh at $ 462 million.

This represents more than double the value of $ 2.7 billion five years ago.

However, the trade imbalance in favour of India and decline in Bangladesh exports to India are of concern. “Skewed trade could be redressed with greater investment participation of Indian companies in Bangladesh”, said the CII.

Indian exports to Bangladesh include mainly cotton, sugar, cereals, vehicles and accessories, etc.

In contrast, Bangladesh exports textile fibres, paper yarn, fish, apparel, mineral fuels, salt, cement, raw jute and jute products etc to India.

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