Published in The Daily Star on Tuesday, 10 April 2018
Analyst shows ways to cut Indo-Bangla trade gap
Star Business Report
India should source at least 5 percent of its $400 billion worth of annual imports from Bangladesh to narrow down the ever-swelling bilateral trade gap between the two countries, said a trade analyst yesterday.
Bangladesh is no longer an aid-dependent nation, but a trading one, which indicates that the country has the competitiveness to meet the global demand for goods, said Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue.
Even 10 to 15 years ago, Bangladesh’s aid versus trade ratio was 1:1 but now it has become 1:15, Rahman said.
He spoke at the “bilateral conclave on India-Bangladesh relations, deepening cooperation and the way forward” at the Pan Pacific Sonargaon hotel in Dhaka.
The Institute for Policy, Advocacy and Governance organised the discussion. Amit Datta Roy, senior research fellow at the institute, moderated the event.
Bangladesh has the largest bilateral trade deficit with India, importing goods worth $6 billion through the formal channel and exporting nearly $600 million worth of goods, said Rahman.
The two governments should sign a much-needed mutual recognition agreement for more Indian acceptance of sanitary and phyto-sanitary certification of goods made in Bangladesh to help the latter export more, he said.
“We should go beyond the SAFTA (South Asian Free Trade Area). We should sign [an agreement for] comprehensive economic partnership for more business,” Rahman said, urging India to give trade facilities beyond zero-tariff.
Bangladesh earlier enjoyed zero-duty benefit on all exports to India, except 25 alcoholic and beverage items.
In 2012, India imposed a 12.5 percent countervailing duty on the export of Bangladeshi garments, the country’s main export item. As a result, Bangladesh’s export to India has not increased at expected levels.
Rahman called for removing non-tariff barriers, improving the banking system along border areas and upgrading infrastructure at land and river ports of both the countries.
He reasoned that 80 percent of goods were imported from India through the land ports while only three ships have made use of the Ashuganj river port in the past three years.
Rahman said both India and China should not be at loggerheads when it comes to investing in Bangladesh.
India has promised to invest $8 billion in Bangladesh while China has proposed to put in $25 billion.
Bangladesh will need $100 billion in foreign direct investment in the next 10 years, so both countries can invest here without competing with each other, he said.
The value of goods imported from India, through formal and informal channels, stands over $10 billion. So, the $600 million worth of exports from Bangladesh are insignificant, said Mir Nasir Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industry.
Hossain suggested that Indian businessmen invest in IT and power sectors as the government has approved a separate special economic zone in Bangladesh for them.
Prabir De, coordinator at the ASEAN-India Centre, suggested greater collaboration, holding more meetings and building more partnerships to resolve outstanding bilateral business issues.
He urged Bangladeshi companies to set up more business units in Rangpur and Saidpur for easy transportation of goods to India, taking advantage of the geographical proximity.
Power is now the major sector for Indian investment in Bangladesh while pharmaceuticals and IT are the other two, said Goutom Ghosh, director of the Federation of Indian Chambers of Commerce and Industry.