Improving trade with Bangladesh

Balance of Trade refers to the difference between the value of a country's merchandise exports and the value of its merchandise imports. The trade regime of Bangladesh has undergone many changes over the years. Initially, it followed a line of import substitution, implying a stress on restricting imports. The country also had difficulties in import financing during the 1970s. But with the change in government policy towards promoting a laissez faire economy and with inflows of foreign aid in increased volumes, Bangladesh started to import more in the early 1980s. There was a marked departure in the trade policy of the country in the 1990s, when its trade regime was substantially liberalised with the implementation of the Financial Sector Reforms programme.

The export policy of the country up to 1990 was characterised by adoption of ad hoc measures, which discouraged the growth of the manufacturing sector having high export potentialities. The two-year export policy announced in 1993 contained a lot of incentives. Later, the government announced a five-year export policy for 1997-2002, which aimed at increasing production and trade through attracting entrepreneurs to establish export-oriented industries, improving the balance of payments through narrowing the trade gap with the diversification of exportables, and expanding the export base, developing marketability of export items, and establishing backward linkage with export-oriented industries. The new export policy contains an export development strategy leading to intensive export-oriented activities.

Bangladesh has been experiencing deficits in her trade balance despite adoption of many export promotion measures during the 1980s and 1990s. The deficit in the trade balance of the country increased from 8.5% of the GDP in 1975-76 to 14.1% of the GDP in 1981-82, and then gradually declined to 6.6% of the GDP in 1991-92. The deficit remained at a moderate level during the 1990s and was 6.9% of the GDP in 1997-98 and 5.5% of the GDP in 1999-2000. The decline in deficits in the trade balance was due to faster growth of exports during 1984-85 to 1994-95. During this period, there was a significant shift in the structure of the export sector from primary goods to manufactured goods and from traditional to non-traditional items of exports. The percentage share in the value of traditional items of exports declined from 97.27 in 1972-73 to 68.99 in 1982-83, and further to 12.17 in 1994-95. The percentage share in the value of manufactured commodities, on the other hand, increased form 57.03 in 1972-73 to 64.58 in 1982-83 and further to 86.98 in 1994-95. This marked shift in the structure of exportable goods was due to the substantial growth of the readymade garments sector during this period.

Along with the growth in exports, the import payments of Bangladesh also showed continuous increase. Export receipts as percent of GDP increased, amidst fluctuations, from 4.0 in 1974-75 to 6.9 in 1984-85, and further to 13.3 in 1994-95. Import payments as percent of the GDP, on the other hand, increased sharply from 8.0 in 1974-75 to 19.7 in 1984-85, and further to 22.6 in 1994-95. There were some structural changes in the composition of imports. Import payments in respect of major primary goods declined from $836 million in 1984-85 to $585 million in 1989-90, but rose to $868 million in 1994-95, and further to $1,448 million in 1998-99. On the other hand, import payments in terms of major intermediate goods increased from $433 million in 1984-85 to $567 million in 1989-90, to $924 million in 1994-95, and further to $1,104 million in 1998-99. Import of capital goods increased substantially from $691 million in 1984-85 to $1,296 million in 1989-90, $1,688 million in 1994-95, and further to $1,969 million in 1998-99. Despite the steep rise in import payments, a corresponding rise in export receipts helped in restricting the growth of the trade deficit.

Bangladesh provided a series of incentives to augment her export earnings viz., duty drawback facilities, tax holidays, bonded warehouse facilities, income tax rebates, availability of credit to exporters at concessional rates, retention of foreign exchange by exporters, the export credit guarantee scheme, Export Development Fund, depreciation of taka against dollar, etc. Consequent upon taking all these measures, export receipts from traditional items of exports continued to decline while export of manufactured products continued to increase during the nineties. The percentage share of traditional exports in total export earnings declined from 25.51 in 1990-91 to 12.17 in 1994-95, to 8.41 in 1997-98 and further to 7.55 in 1999-2000. The percentage share of manufactured products increased from 82.18 in 1990-91 to 86.98 in 1994-95, to 90.27 in 1997-98, and further to 92.45 in 1999-2000. The emergence of exportable goods like leather and leather goods and frozen foods in addition to readymade garments, added a new dimension to the export market of Bangladesh, leading to a rise in export earnings from manufactured goods.

The rise in import payments was faster than the rise in export earnings, resulting in the persistence of the trade deficit in Bangladesh. Faster rise in import payments occurred due to the liberal import policy pursued by the government, rise in prices of petroleum products, rise in food imports from time to time and also due to increased imports of intermediate goods and capital goods during the 1980s and 1990s.

Projects and Programmes

The European Union is among the three biggest donors of grants to Bangladesh. It ranks fifth for overall development assistance.

The EC-Bangladesh Country Strategy for 2007-13 is funded with an indicative total amount of €410 million under the EC's Development Cooperation Instrument country allocation. The present strategy focuses mainly on three areas where the EC's comparative advantages are best able to contribute to delivering Millennium Development Goal (MDG) targets.

1. Human and social development especially in education and health to further help achieving the sectors’ MDGs.

2. Good governance and human rights strengthening governance institutions and Bangladesh’s democracy, improving the delivery of public services, strengthening public financial management, and promoting the protection of human rights, including minority rights. Substantial support to the Chittagong Hill Tracts development process and to Rohingya refugees fall also under this area.

3. Economic and trade development – With the EU being Bangladesh’s no. 1 trade partner, the EU has a comparative advantage in enhancing competitiveness and investment climate in Bangladesh by supporting measures to improve trade and private sector development into an overall pro-poor growth approach.

Trade Relations With Bangladesh Improving: Pranab

trade centre

Finance Minister Pranab Mukherjee today said that trade relation with Bangladesh is improving and India will take steps to correct the imbalance.

"The overall relation, including trade, is improving with Bangladesh and there is a need to improve trade relations more as India exports more than it imports from that country," Mukherjee said at the inauguration of a car pass project between India and Bangladesh at this land customs station.

Mukherjee said that last November, India allowed a large number of items to enter from Bangladesh at zero duty.

He said this step would correct, to some extent, trade imbalance between India and Bangladesh.

The Finance minister said that both the countries enjoy same cultural heritage and national poets are also the same.

All these would lead to a healthy relationship between the two countries, he added.

Bangladesh Finance minister Abul Maal Abdul Muhith said that the Sheikh Hasina government had been always engaged in improving ties with India.

"We are also getting reciprocal gesture from India," he said.

About the car pass project, by virtue of which trucks from both the countries can enter respective areas, he said it would facilitate India and Bangladesh.

Bangladesh Enterprise Institute (BEI) in association with the Commonwealth Secretariat, UK organized A two-day Regional Symposium on 'Improving Trade Flows in and from South Asia: Overcoming Logistics Challenges'  held on 22nd June and 23rd June 2011 from 9:30 am to 5.00 pm on the day 1 and 09.30 am to 4.00 pm on the day 2 at Ruposi Bangla Hotel (Former Hotel Sheraton), Dhaka, Bangladesh.

Mr. Muhammad Faruk Khan, MP, Honourable Minister,  Ministry of Commerce Government of the People’s Republic of Bangladesh had kindly consented to be the Chief Guest at the event.

The objective of the Symposium is to assess and identify the existing bottlenecks in improving the trade facilitation system in South Asia. This symposium will bring together senior representatives from the government, policy makers, and the private sector, development partners, academia, corporate houses and media to discuss the logistics challenges and suggest possible recommendations to facilitate the intra-regional trade in South Asia. In this regard your expertise and active participation will enrich the discussion.

improving trade

India, Bangladesh extend protocol to liberalise trade

Sunday, 01 April 2012 13:54

New Delhi: Commerce Secretaries of India and Bangladesh - Rahul Khullar and Mohammad Ghulam Hussain respectively extend the countries'' bilateral trade treaty by three years.

They made the announcement here on the conclusion of the two-day long talks, which were the first bilateral secretary-level talks between India in eight years.

"There is an overarching framework agreement which guides how the relationship is to be managed. Within that context, I am pleased to announce that we have come to an agreement, that the trade treaty, which was due to expire on the 31st of March, will be renewed for a period of three years," Khullar said.

Speaking in favour of a freer flow of goods between the two countries, Khullar stressed on the importance of trade ties between the sub-continental neighbours.

"It''s a very vital strategic partnership. I particularly welcome the point that Mr. Hussain, the commerce secretary made repeatedly, which is that our relationship at the broadest, highest levels is at one of its peaks, and we must continue to nurture that relationship carefully, judiciously, so that it flourishes," he said.

Hussain said that the benefits of improving trade relations between the two countries would become more visible with time.

"Everything is now duty-free to India, except 525 items of tobacco and liquor. So, Bangladesh has just given these benefits a few months back. It will take some time, and already there are some positive signs of improving relations. In terms of preferential market access, the opportunity is being used by the exporters of Bangladesh," he added.

Speaking on the fact that India''s exports to Bangladesh far exceeded imports, Hussain said that the matter must be placed in context. Most of Bangladesh''s imports comprising machinery and raw material for manufacturing goods, he said that these imports helped the overall export rate of Bangladesh.

"Many people have talked about this trade gap. Personally, as Commerce Secretary, I am not very worried about that, because I would like to see, what are the products we are importing and what is the use of those products? That helps us to get more exports. That is also true. But in any case, Bangladesh''s exports to India are also growing at a very fast rate," he added.

The Bilateral Trade Agreement between India and Bangladesh was originally signed in 1980.The Agreement provides for expansion of trade and economic cooperation, making mutually beneficial arrangements for the use of waterways, railways and roadways, passage of goods between two places in one country through the territory of the other

Delhi, Dhaka on trade train

With over 100 Indian companies already in Bangladesh, it is not surprising that the country is on the banking radar. From Bharti Airtel, which has invested close to $1 billion, to the AV Birla Group, Arvind Mills and Sun Pharma and even smaller players who make fans, plastic products and garments, several Indian players are sensing an opportunity across the border.

The concessions given on export of textiles are beginning to have an impact and there is already a clamour for protection from Bangladesh, which is now among the largest textiles exporters. Indian officials, however, dismissed suggestions that import of textiles from Bangladesh were affecting the local industry, saying the local market was worth nearly $35 billion (Rs 1.82 lakh crore).

But officials from both sides recognize that there are several bottlenecks, starting with the pile-up of trucks at the border.

Bangladesh is also willing to open up more to Indian companies. They have said they are willing to offer one or two special economic zones to Indian companies. So far there has been no takers but expectations are that the plan will soon take off.

Bangladesh officials say the potential for raising bilateral trade is immense. Both sides have recognized the potential and it is upto the policymakers to seize the initiative to nurture the relationship which analysts say can accelerate the pace of regional integration in South Asia and transform the lives of people living along the India-Bangladesh border.

earn by trade

Improving rights for shipbreaking workers in Bangladesh
IMF delegation meet with Industry and Labour Ministers to discuss the need for improving the health, safety and rights of workers in the Chittagong shipbreaking yards, where workers currently toil under intolerable conditions.

BANGLADESH: "'Shipbreaking Act coming soon' to protect workers rights", is the news headline in the national press in Bangladesh, quoting Industries Minister, Dilip Baruac, after an International Metalworkers' Federation (IMF) delegation met with him on July 18 to discuss improving working conditions and rights in the shipbreaking industry.

The IMF delegation also met with the Labour Minister, Eng. Khandker Mosharraf Hossein, on the same day to highlight the serious concern of international trade unions about the intolerable working conditions in the shipbreaking yards in Chittagong and the lack of inspection mechanisms imposed on the shipbreaking owners.

Reference was made to the recent death of six workers in a shipbreaking yard, two of whom were burned alive. The unacceptable rate of fatalities and  life-crippling work accidents due to a complete lack of protective measures and lack of compliance with international guidelines have earned the shipbreaking yards the name of "death trap".

During the meetings with the government Ministers, IMF stressed the need to defend shipbreaking workers' rights to organize without being threatened or immediately dismissed by the shipbreaking owners and subcontractors, since Bangladesh has also ratified International Labour Organization Conventions 87 and 98 on the right to freedom of association and collective bargaining. Both Ministers indicated that they are aware of the situation and are working towards a law to protect workers' rights.

The IMF delegation, which included IMF affiliates in Bangladesh and the IMF affiliate for shipbreaking workers in India, assured them that IMF and the international trade union movement will be closely following the government's initiatives.  As the IMF delegation said, "If shipbreaking is seriously considered to be one of the  industrial driving forces in Bangladesh, the Government must demonstrate its political will to enforce workers' rights so that shipbreaking can become the pride of Bangladesh, instead of being the shame of Bangladesh."

Earlier, the IMF delegation visited shipbreaking yards in Chittagong with their affiliates and held a two day workshop with the participation of workers from the shipbreaking yards, journalists and Arun Kanti Das, Assistant Director of Labour in Chittagong in order for the IMF to get a clearer picture of the situation in Bangladesh. 

Turkish Airlines introduces direct flight from Dhaka

DHAKA, Feb 22 (BSS) - The Turkish Airlines, which operates flights between Istanbul and Dhaka via Karachi, has decided to operate direct flights from March 25, said a press release. The decision to establish the direct air connectivity between the two countries was taken during the Turkish Prime Minister's visit to Bangladesh in November 2010. Bangladesh embassy in Ankara played an important role in converting the flight into a direct one. The decision of introducing it as a direct flight was raised by Prime Minister Sheikh Hasina with the Turkish premier during their meeting in May 2011 in Istanbul. Officials expect that the new direct flight of the airlines would certainly have a positive impact in further improving trade and investment between Bangladesh and Turkey.

trade industries