Bangladesh: a good destination for foreign investment

Bangladesh: a good destination for foreign investment

Md. Joynal Abdin

The Financial Express on May 3, 2009

Economic supremacy is the dominant feature of the present-day world. In order to survive, we have no option but to attain economic development. Foreign investment is recognised as a key ingredient for economic growth for the least developed countries (LDCs) and for Bangladesh, being one of the LDC with a domestic savings rate — which in quite insufficient for investment after fulfilling its basic needs — the importance of foreign investment is undeniable.

Today investing in a developed country is not viable due to very high labour cost and other factors. As a result, global investors are seeking for opportunities to invest in the developing countries or LDCs for the best return. But as an LDC, we have a lot to do to attract such investments in our own interest. Foreign direct investment (FDIs) will create employment, increase efficiency of our labour, encourage technology transfer and develop new exportable sectors for us.

Foreign investment in Bangladesh unfortunately, is not satisfactory. According to the UNCTAD, in 2003 Bangladesh had achieved only 0.05 per cent foreign investment, while the proportion was 0.9 per cent in India, 0.52 per cent in Vietnam, 10.2 per cent in Indonesia and 70 per cent in China.

In Bangladesh, most foreign investments have gone into the energy sector (mineral resources / mining). Comparatively foreign investment in the manufacturing sector is not high. This may be due to the fact that Bangladesh has a small domestic market and is not fully capable of consuming quality goods due to low purchasing power.

Indian’s Tata group was expected to invest $2.0 billion in Bangladesh. The group had plans to set-up a $ 700 million basic steel industry in Ishwardi to produce hot rolled coil and other basic steel products. It also wanted to invest $ 700 million in two 500 megawatt power plants near Ishwardi. Its proposal also included investment of a $ 600 million fertiliser plant in Chittagong.

The Tata group would need 200 mmcfd gas per day in the initial stage, which would rise to 3500 mmcfd once the plants went into full operation. The group planned to invest $ 1.50 billion in the first phase and $ 0.50 billion in the next phase. Tata wanted a 20-year guarantee of gas supply at a price and an agreed formula which was considered not viable for the state. Till now Tata has no investment in Bangladesh, but it has strong trade relations with the country. Tata group’s $ 2.0 billion investment is expected to be at least five times the total foreign investment received by Bangladesh in the past few years. Now Tata may not be too keen to invest in Bangladesh but it was not our fault because they demanded what was not feasible for us.

Why would foreign investors come to Bangladesh? Because the government has given the highest priority to attract foreign investment, making Bangladesh otherwise an attractive location. The foreign investors has following advantages in Bangladesh:

a.      The country has cheaper labour force;

b.      Tax holiday up to 12 years;

c.       Bangladesh allows 100% foreign ownership;

d.      Permanent residentship for foreign nationals investing more than US $ 75000 or equivalent amount;

e.      Concessionary financial benefits similar to the local investors;

f.        Lower inflation rate compared to other Asian countries;

g.      A wide range of tax exemptions;

h.      Facilities for repatriation of invested capital, profits and dividends;

i.        Multiple entry visa facilities for visiting foreign investors;

j.        Reinvestment of reportable dividend treated as new investment;

k.       Bangladesh enjoys MFN and GSP facilities from a number of countries including USA; and

l.        Bangladesh has two seaports for export and provides relatively low cost establishment.

The potential areas for investment in Bangladesh include: agriculture, fisheries, agro-based industries, chemicals, light industries, natural gas and oil exploration, textile, tourism, energy sector, telecommunications, etc.

Although the prospects for foreign investment in Bangladesh are otherwise bright, we have at the same time some barriers to investment. Such barriers include, mainly, the following:

Political instability: a common problem in Bangladesh. Though we expected substantial change in our political environment, we are not observing any positive signs yet. This is a major disincentive for foreign investors.

 

Corruption: Corruption is the main problem in Bangladesh at present. It plays a negative role in attracting foreign investment here.

Lack of infrastructural facilities: Modern communication system is essential for foreign investment. But Bangladesh’s poor infrastructure hinders the prospect of foreign investment. Only one operational port and one Dhaka-Chittagong highway are not sufficient for industrialisation of Bangladesh.

Trade union: Most of the trade unions of the country have political ties with the parties in power and opposition. This hampers industrial production and pollutes the with environment. As a result, production targets fail, the industry incurs losses.

Long procedure: Redtapism, indecision, delays in decision making etc., are the common features of our bureaucracy which frustrate investors. Currently, the period for investment in China is six days, this is 166 days for Bangladesh.

Negative image: Bangladesh is known to the world as a country of corruption, political unrest, natural calamities and poverty. Militancy is now being added to create a negative image abroad.

The Nobel Laureate Mr. Amaryta Sen, however, was positive about our country. He said though there are problems and lackings in various sectors, the country very bright future it is going to attract some important foreign investment in the near future. Not only this Bangladesh has developed its manpower rapidly.

Our demand to our policy makers is ‘make Amaryta Sen’s word a practical scenario for Bangladesh.’

Advertisements

Need for research to look into falling sales trend

Need for research to look into falling sales trend

Md. Joynal Abdin

The Financial Express on April 25, 2009

CURRENTLY the world economy is experiencing a serious financial crisis. The largest economies of the world have failed to tackle it. Due to their inherent weaknesses, the smaller economies may face more problems than the highly industrialised and the rich ones. 
Bangladesh is a least developed country (LDC) and would like to be a middle income country within 2015. In this regard, it has no alternative, but to become industrialised. After its independence in 1971, its economy has advanced a little compared to that of Malaysia or Vietnam.
To develop an economy, it has to increase production to such a level that it can achieve the economy of scale. Because, the more is the volume of production, the less is the unit cost of goods produced. The total production of a country is not exported. Local consumption plays a vital role in increasing production.
In this case, retail sales are the key indicator of local consumption. If retail sale decreases, it is easy to understand that local consumers are not buying the products in a massive scale. This results is decline in production. This may affect gross domestic product (GDP) of the country and the economy may slow down as a result. 
The world is moving fast. The economies that can meet the demand of the competitive market are growing quickly. In this situation, we noticed gradual decline in retail sales, especially during last caretaker government period. It means our GDP is going down. This may hamper our long-term target of becoming a middle-income country within 2015. So immediate research is needed to identify its cause and actions have to be taken to overcome this problem.
Today the economy is becoming more competitive, but our local consumption is declining. If local consumption declines, then local production is bound to go down. So research has to be done to find out the following:
It is to be sure whether sales are decreasing or not. If it is decreasing, then to what extent? Will it hamper our GDP?
If retail sales reduce, then how can it affect local production? Generally, reducing local sales means reducing consumption. If consumption reduces then producers are bound to reduce production. Less production may be the cause of higher cost of production per unit.
The reasons for decreasing sales: this research will help to identify the causes of decreasing sales.
How to solve the problem: there should be some recommendations to overcome this problem.
This research has to be carried out in order to avoid any depression in the economy. This may be a major problem for market operators in the future. In the initial stage, marketers must evaluate the previous data to be sure whether sales are plunging or not.

 

South Asia needs economic integration

South Asia needs economic integration

 Md. Joynal Abdin

The Holiday on  April 24, 2009

 Though South Asia covers 4,488,300 sq kms of the world’s surface area with a population of 1.5 billion, still it has only a negligible share of the world’s total volume of trade. Most of the people of this region live below the poverty line. Only mutual initiatives towards economic integration can play a vital role in upgrading the standards of living of the poor people.

   Economic integration in general is a process of removing progressively the discriminations which occur at the national borders. Such discrimination may affect the flow of goods and services and the movement of factors of production either directly or through economic activity via the factor of production.

   This may have two outcomes, both positive and negative. Negative effects include the possibility that the infant industrial sector may not survive the open market competition or that the sick industries might face ruin. Apart from short-run benefits, there are also the long-run benefits such as greater technical efficiency due to greater competition, larger markets, higher consumer surpluses, and more foreign investments.

  

 Five main stages

  There are five main stages of regional integration such as free trade areas, customs unions, common market, economic union and total economic integration. The meaningful integration through increased participation in the global/regional economy generates a lot of benefits.

   a.      There is efficient allocation of resources due to the changing production patterns promoting comparative advantage;

   b.      Domestic competition gains international standards of efficiency;

   c.      Wider options are available to consumers;

   d.      The ability increases to tap international capital markets for smoothing consumption in the face of short-term shocks (as well as to achieve higher long-term growth; and,

   d.      There is exposure to new ideas, technologies, and products, etc.

    Our journey through South Asia Free Trade Arrangement (SAFTA) and some other existing initiatives to form more FTAs among the member countries created the awareness for economic integration. But there is a long way to reach the destination. Proper initiatives, commitments and timely actions are required to gain success.

   In south Asia, almost all the countries have some strengths and weaknesses. But all limitations can be overcome, if they share their strengths among themselves.

   Private sector is the only key player in this endeavour under the prevailing global economic dispensation.

   India-Sri Lanka, Sri Lanka-Pak BFTAs

   Only two bilateral free trade arrangements (BFTAs) are in operation in South Asia namely, India-Sri Lanka BFTA, and Sri Lanka-Pakistan BFTA. The proposals for establishing India-Pakistan BFTA, Pakistan-Bangladesh BFTA and India-Bangladesh BFTA are under consideration. The steps so far are encouraging but not up to the mark for economic integration.

   South Asian leaders should realise the importance of an effective SAFTA in the light of European Union (EU).

   Role of private sector: All arrangements of economic integration are bound to fail if private sector does not play its role effectively.

   Private sector has to play the final game because they are the doers. They have to guide the government about how they might achieve their expected benefit. They have to bring the problems they face to the notice of the government in doing trans-border business among the signatory states. Government will communicate these problems to be solved by the state concerned.

  Barriers: SAFTA through SAPTA

   SAFTA through South Asian Preferential Trade Arrangement (SAPTA): Introduction of South Asian Free Trade Area (SAFTA) was a historic action by the South Asian countries to facilitate trade liberalization and later formation of SAFTA.

   Inputs for any technical or business negotiation have to be supplied by the business community who are actually doers of the job. These inputs can be used as core text of the speech of the ministers concerned in the forum and taking necessary measures to farther advancement.

   [1] Barriers: Usually there are three types of problems in trans-border business. These are – tariff barriers, non-tariff barriers and non-routine barriers. Tariff barriers are getting removed according to the agreement declarations but non-tariff barriers may be more effective in some cases. First steps towards economic integration should be to remove all sorts of barriers to international business.

   [2] Negative list: A country must think of its own industries but those should not be used as barriers to the major exportable goods from other countries. If any common product is there, market should be opened up to face competition. We must have to remember that open competition increases efficiency.

   Some may argue that infant or sick industries have to be protected. Here comes the question of strategic advantage. If any industry has strategic advantage, it will have to continue; otherwise, it will die even after lots of subsidies. RMG is vivrant, but jute remained in infancy since the British period.

   [3] Rules of origin must not be more stringent than that prevailing under SAPTA. The Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) therefore advocates non-restrictive and simplified rules of origin, based on value addition criteria.

 

   [4] Recommendations: The following trade facilitation measures should be implemented as an obligation to ensure enabling trade policy and governance for smooth and speedy movement of goods across the borders which can make FTA effective as well as work to build confidence among the nations, which can lead us towards the next step of economic integration.

  

   Bangladesh, India, Nepal, Bhutan

   Bangladesh, India, Nepal and Bhutan have to be connected through functioning roads and transit facility should be ensured. More generally, we can say that trucks from any country should have the right to enter any signatory state without prior permission with legal goods.

   Simplification of customs procedures do need to aim at cutting the time taken and cost of transactions at each customs point. Regional customs action plan should be implemented.

   An effective appeal procedure has to be put in place for customs and other agencies’ rulings must be in place.

   Effective measures should be taken to ensure cosmopolitan environment which will help to ensure more business transactions.

   Transport and communications infrastructures, port and warehousing facilities must be developed to benchmark levels within a time frame.

Impact of government policies on business

Impact of government policies on business

 Md. Joynal Abdin

THE Financial Express on April 17, 2009

ONCE upon a time economists thought government policies has no impact on business. But after the Great Depression of the 1930s, Keynes, the great economist, showed government policies could effect business. For example, if a government imposes more taxes and duties on a particular sector than is justified by its profit margin, it would go down or the businessmen in it can lose their interest in the sector and can give up their business. Similarly, tax and duty exemption for a particular sector would encourage businessmen to invest in it. As a result the sector will grow. If a country’s monetary policy ensures availability of loans at reasonable rates, investment will go up.

The prevailing global order has a tremendous impact on a country’s business. It may be legal or illegal. For example, the USA manipulate the UN to impose sanctions on Iraq in the 1990s. The sanctions destroyed Iraqi business for which it lost business worth billions of dollars as well as its money in the banks of the USA and its allies. Iran is another example. The impact of government policy on business can be explained from the political and technical perspective.

From the political pint of view, political parties, their ideologies as well as world politics are relevant.

From the technical perspective, the following policies of a government can impact business directly or indirectly: (a) taxation, (b) subsidies, (c) interest rates, (d) exchange rates, and (e) public-private partnerships.

The government policy of a country depends upon its political culture. It can also vary depending on the form of government. Policy in a communist country will be different from that in a democracy or monarchy. The government policy in a politically stable country will also be different from an unstable country. In a stable political system, a government can take sustained business-friendly decisions to strengthen local business. The government, in this situation, gets the help of the opposition. But in an unstable political system in which the opposition boycotts parliament and takes to street agitations businesses and investment would suffer.

In such a negative political culture, a country cannot have a sustained business-friendly environment or policy. In an unstable system, a government finds it difficult to maintain law and order which affects the business environment. It hampers business. Foreign investors do not invest in such an environment.

Taxation policy can affect businesses. High tax rate on imported products would encourage local entrepreneurs to produce goods at home. But high tax rate on raw materials will discourage domestic production and encourage imports.

Lending rates of the banks and the financial policy of a government can affect the economy. If interest rate rises, investment falls because businessmen would not borrow at unviable rates. 

Regional trade and economic cooperation in South Asia

Regional trade and economic cooperation in South Asia

 Md. Joynal Abdin

Financial Express on April 12, 2009

 GLOBALISATION polarised the world and made international trade very competitive. Each and every country is trying to exploit whatever trade opportunities are available. The World Trade Organisation (WTO) contracting countries are facing various barriers to trade promotion. Due to bureaucratic and time-consuming process of removing the barriers, many countries are now thinking of alternatives like regional and bilateral free trade agreements for duty-free market access for many of their products.

 The European Union (EU), considered a model of regional integration, has emerged an economic power. It acts as a unit in various international bodies like the UN and the WTO.

 The South Asian leaders formed South Asian Association for Regional Cooperation (SAARC) and adopted South Asian Preferential Trading Arrangement (SAPTA) and South Asian Freed Trade Agreement (SAFTA), keeping this in mind. The SAFTA came into effect January 01, 2006 for free trade among the eight SAARC member countries: Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka. South Asia is miles from the cherished goal of free trade.

 Bangladesh must study and analyse the opportunities and disadvantages of business under the SAFTA. The business community must strengthen their strengths to take opportunities of the SAFTA and prepare to overcome their weakness to avoid its disadvantages.

 Bangladesh does need to assess properly the possible effects of SAFTA on its trade with other SAARC member-countries, whether or not it would increase trade, if not why? Bangladesh should raise the issue of its major exportable products in the  negative list in the next trade negotiations with the SAARC countries under the SAFTA. It should study the barriers its businessmen are facing in doing business with the other SAARC countries to pinpoint the measures to make SAFTA more effective.

 The study should concentrate on analysing the possible impact the SAFTA would have on Bangladesh’s trade with the SAARC countries. It should identify Bangladesh’s major exportable products in the negative or sensitive list of the SAARC countries, so that it can take up the issue in next trade negotiations under the SAFTA.

 Bangladesh should identify major barriers to intra-SAARC trade. It should take up the issue of making SAFTA an effective regional trade arrangement by removing the problems.

 The study should identify the opportunities and disadvantages of the SAFTA. However, an in-depth study requires for a researcher to travel all the SAARC countries to meet their ministers and officials to get their views on the issues involved. This is possible only when the required statistics is available.

                Bangladesh’s trade with SAARC countries

                                                                                         (U.S $ in Million)

Year SAARC Countries       World         Percentage

1997/98     1160.77     12696        9.14 %

1998/99     1444.80     13342        10.82 %

199/2000   1040.40     14155        7.35 %

2000/2001 1402.46     15830        8.85 %

2001/2002 1183.29     14526        8.14 %

2002/2003 1563.41     16206        9.64 %

2003/2004 1885.76     18457        10.21 %

2004/2005 2398.87     21832        10.98 %

2005/2006 2342.41     25272        9.26 %

2006/2007 2855.04     29123        9.80 %

2007/2008 4155.71     35735        11.62 %

                     Source: EPB. 

 Bangladesh’s trade with SAARC countries is rising slowly though, interrupted at times. But this trade under the SAFTA has not risen as it should have.

However, Bangladesh’s trade with rest of the world has risen sharply. It means SAFTA has brought no significant beneficial effect for Bangladesh trade. 

Bangladesh exports to, and imports from SAARC countries

 Fiscal Year         Import From SAARC Countries     Export to SAARC Countries

1997/98     1036.58     124.19

1998/99     1340.27     104.53

199/2000   937.48       102.92

2000/2001 1299.04     103.42

2001/2002 1092.73     90.56

2002/2003 1439.17     124.24

2003/2004 1734.71     151.05

2004/2005 2171.58     227.29

2005/2006 2026.12     316.29

2006/2007 2486.47     368.57

2007/2008 3696.39     459.32

 While Bangladesh’s imports from SAARC countries have increased significantly after the SAFTA was activated, but its exports have not increased accordingly.

Comparison between Bangladesh’s export to SAARC countries and world, before and after SAFTA was activated:

Fiscal Year         Export to SAARC Countries Export to World Market         Percentage of Export

 1997/98     124.19       5172 2.40 %

1998/99     104.53       5324 1.96 %

199/2000   102.92       5752 1.78 %

2000/2001 103.42       6467 1.59 %

2001/2002 90.56         5986 1.51 %

2002/2003 124.24       6548 1.89 %

2003/2004 151.05       7603 1.98 %

2004/2005 227.29       8655 2.62 %

2005/2006 316.29       10526        3.00 %

2006/2007 368.57       12177        3.02 %

2007/2008 459.32       14110        3.25 %

Under the SAFTA arrangement, every member-country retains the right to protect its industry by imposing restrictions on imports. The list of restricted products is known as the sensitive list of negative items. The big negative list under the SAFTA calls for  a careful study and review.

The following are the major exportable products of Bangladesh in the negative list of the other SAARC countries under the SAFTA regime. Products are namely,

01.   Woven Garments – HS Code – 5208.11.00 – 5911.40.00

02.   Knitwear – HS Code – 6101.20.00 – 6310.90.00

03.   Lather Goods & Foot wars – HS Code – 4107.11.00 – 6406.99.00

04.   Ceramic Products – HS Code – 6901.00.00 – 6914.90.00

05.   Jute & Jute Goods – HS Code – 5601.10.10 – 5705.00.90

06.   Tea – HS Code – 0902.10.00 – 0902.40.00

07.   Handicrafts –HS Code – 4202.11.00

08.   Calendars – HS Code – 4910.00.00

09.   Bicycle – HS Code – 8714.11.00 – 8714.99.00

10.   Pharmaceuticals Product – HS Code – 3001.20.00 – 3006.92.00

11.   Meat – HS Code – 0201.10.10 – 0210.99.20

12.   Vegetables – HS Code – 0601.10.00 – 0801.11.00

13.   Ship (Finished Vessels) – HS Code – 8901.10.10 – 8908.00.90

Afghanistan listed 18 major exportable products of Bangladesh in its negative list under the SAFTA regime. They include RMG, ceramics and handicrafts etc. 

The negative list of Pakistan contains 39 major exportable products of Bangladesh. They include RMG, green tea, light engineering products, bicycle etc.

The negative list of India under the SAFTA regime contains  27 major exportable products of Bangladesh. They include RMG, textile materials, footwear’s, meat, sports item, ceramic and tiles etc.

The negative list of Nepal under the SAFTA regime contains 49 major exportable products of Bangladesh. They include RMG, textile materials, tea, ceramic and tiles etc.

The negative list of Bhutan under the regime contains six major exportable products of Bangladesh. They include RMG, textile, and green tea.

The negative list of Sri Lanka under the SAFTA contains 53 major exportable products of Bangladesh. They include meat, tea, textile, ceramics, households, and RMG.

The negative list of the Maldives under SAFTA regime contains  12 major exportable products of Bangladesh. They include fishing vessels, RMG, tea and jute products.

The other SAARC countries use very high rate of tariff structure as tariff barriers to obstruct imports.

There are also non-tariff barriers to trade in the SAARC region. These include: a.  Lack of Trust; b. Lack of Land Connectivity; c. Transit Crisis; d. Lack of Inter Border Transportation Entrance; e. Complicated VISA system; f. Political Conflict; g.  Lack of ICT support and h. Large Negative List.

However, the SAFTA can be more effective if the agreements thereof are properly implemented, the tariffs are reduced for intra-SAARC trade, the non-tariff barriers are removed, the negative lists are shortened and the private sector representatives are involved in the negotiations.

A SAARC task force does need to identify the problems for taking remedial actions. If a coordinated common economic policy is taken and a regional fund is created to promote poverty reduction, economic cooperation among the member-countries of the SAARC can be strengthened. 

Achieving economic integration of South Asia

Achieving economic integration of South Asia

 Md. Joynal Abdin

The Financial Express on April 10, 2009

 Though South Asia covers 4,488,300 sq kms of the world’s surface area with a population of 1.5 billion, still it has only a negligible share of the world’s total volume of trade. Most of the people of this region are living below the poverty line. Only mutual initiatives towards economic integration can play a vital role in upgrading the standards of living of the poor people.

Economic integration in general is a process of removing progressively the discriminations which occur at the national borders. Such discrimination may affect the flow of goods and services and the movement of factors of production either directly or through economic activity via the factor of production.

Academicians have predicted two opposite outcomes, both positive and negative. Negative effects include the possibility that the infant industrial sector may not survive the open market competition or that the sick industries might face ruin. On the other hand, positive effects in the short-run include inland ‘trade-creation effects.’ But that must outweigh trade diversion effects in order to achieve beneficial trade liberalization. However, apart from short-run benefits, there are also the long-run benefits such as greater technical efficiency due to greater competition, larger markets, higher consumer surpluses, and more foreign investments.

There are five main stages of regional integration such as free trade areas, customs unions, common market, economic union and total economic integration. Such stages are the outcome of policy decisions taken by regional inter-governmental forum and/or supranational institutions in order to affect the depth and breadth of regional integration.

The meaningful integration through increased participation in the global/regional economy generates a lot of benefits. These include:

There is efficient allocation of resources due to the changing production patterns promoting comparative advantage;

Domestic competition gains international standards of efficiency;

Wider options are available to consumers;

The ability increases to tap international capital markets for smoothing consumption in the face of short-term shocks (as well as to achieve higher long-term growth; and,

There is exposure to new ideas, technologies, and products, etc.

Our journey through South Asia Free Trade Arrangement (FTA) and some other existing initiatives to form more FTAs among the member countries created the awareness for economic integration. But we must have to remember that there is a long way to reach the destination. Proper initiatives, commitments and timely actions are required to have success.

In south Asia, almost all the countries have some strengths and weaknesses. But all limitations can be overcome, if they share their strengths among themselves. Private sector is the only key player in this endeavour under the prevailing global economic dispensation.

Actions towards economic integration in South Asia:

 

BFTAs: Only two bilateral free trade arrangements (BFTAs) are in operation in South Asia namely, India-Sri-Lanka BFTA, and Sri-Lanka-Pakistan BFTA. The proposals for establishing India-Pakistan BFTA, Pakistan-Bangladesh BFTA and India-Bangladesh BFTA are under consideration. The steps so far are encouraging but not up to the mark for economic integration.

SAFTA through South Asian Preferential Trade Arrangement (SAPTA): Introduction of South Asian Free Trade Area (SAFTA) was a historic action by the South Asian countries to facilitate trade liberalization and later formation of SAFTA. South Asian leaders should realise the importance of an effective SAFTA in the light of European Union (EU).

Role of private sector: All arrangements of economic integration are bound to fail if private sector does not play its role effectively.

Private sector has to play the final game because they are the doers. They have to guide the government about how they might achieve their expected benefit. They have to bring the problems they face to the notice of the government in doing trans-border business among the signatory states. Government will communicate these problems to be solved by the state concerned.

Inputs for any technical or business negotiation have to be supplied by the business community who are actually doers of the job. These inputs can be used as core text of the speech of the ministers concerned in the forum and taking necessary measures to farther advancement.

A. Barriers removing: Usually there are three types of problems in trans-border business. These are – tariff barriers, non-tariff barriers and non-routine barriers. Tariff barriers are getting removed according to the agreement declarations but non-tariff barriers may be more effective in some cases. On the other hand, some new problems are arising day by day. These may be for short period, though those may be more dangerous than any others. These types of problems may be addressed as non-routine barriers. First steps towards economic integration should be to remove all sorts of barriers to international business.

B. Negative list: A country must think of its own industries but those should not be used as barriers to the major exportable goods from other countries. If any common product is there, market should be opened up to face competition. We must have to remember that open competition increases efficiency. Some may argue that infant or sick industries have to be protected. On this score, we must think about the strategic advantage. If any industry has strategic advantage, it will have to continue; otherwise, it will die even after lots of subsidies. For example, in Bangladesh, the readymade garment (RMG) is the energetic sector from the day it was born in 1980s. But jute remained in infancy since the British period. However, at the same time some jute mills are also making enough profit.

C. Rules of origin: Rules of origin must not be more stringent than that prevailing under SAPTA. The Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) therefore advocates non-restrictive and simplified rules of origin, based on value addition criteria (summation of freight on board (FOB) value of exports – summation of cost insurance freight (CIF) value of imports >or = 30 per cent) to match their industrial capabilities as in SAPTA, with derogation of 20 per cent value addition for RMG and other such labour incentive exports products.

 

D. Free Movement of People: Till now visa procedures of SAARC countries is very complicated. To facilitate economic integration at first free movement of goods, services, investment as well as people has to be ensured. Primarily visa system should make easier and intra-SAARC connectivity should be ensured.  

E. Recommendations: The following trade facilitation measures should be implemented as an obligation to ensure enabling trade policy and governance for smooth and speedy movement of goods across the borders which can make FTA effective as well as work to build confidence among the nations, which lead us towards the next step of economic integration:

Bangladesh, India, Nepal and Bhutan have to be connected through functioning roads and transit facility should be ensured. More generally, we can say that trucks from any country should have the right to enter any signatory state without prior permission with legal goods.

Cross-border trade regulations and documents do and to be harmonised by an end date.

A South Asian Association for Regional Cooperation (SAARC)-harmonised tariff nomenclature at eight digit level should be created based on the Harmonized Commodity Description and Coding Systems (HS) of the World Customs Organization.

There should be online publications of relevant trade regulations and procedures, including fees and charges, in the local language and in English.

Simplification of customs procedures do need to aim at cutting the time taken and cost of transactions at each customs point. Regional customs action plan should be implemented.

An effective appeal procedure has to be put in place for customs and other agencies’ rulings must be in place.

Effective measures should be taken to ensure cosmopolitan environment which will help to ensure more business transactions.

Transport and communications infrastructures, port and warehousing facilities must be developed to benchmark levels within a time frame.

Direct shipping and air links with necessary support and incentives provided by the respective governments have to be established

Bangladesh and other least developed countries (LDCs) must ask for immediate compliance of Articles V, VIII and X of the GATT 1994 by the non-LDCs and notify their transit measures and tariff schedules, NTBs and regulations on rules of origin, labelling requirements, customs clearance and appeal procedures to SAARC Secretariat.

Private sector specialists should have facilities to take part in the negotiation for effective dialogue among the states.

One ‘problem dealing authority’ can be established to quickly respond to any problems in the field level of operations. They must have to be authorised to take necessary actions according to international law without waiting for political decisions of the government concerned.

Non-tariff measures/barriers: Import licensing; Members must adopt and notify non-restrictive, locally administered, automatic and transparent import licensing procedures at least for the regional trade. Instead of Kolkata handling import licensing for Tripura, the licensing office should be opened in Agartala.

Technical Regulations and Standards: Member countries must harmonise TBT and SPS measures (on prioritised traded products) to streamline flow of traded goods. The SAARC/Regional Accreditation Body must be established and in the meantime technical regulations and standards conformity assessment certificates issued by the respective designated national public or private sector institution must be accepted.

Non-acceptability of conformity assessment certificates of any particular product, if and when arise, should be resolved by mutual cooperation without restricting its trade. Technical and financial assistance must be ensured for capacity building in this regard.

National treatment must be accorded to charges and fees for imported products at the rate applicable for similar domestic products. Fees levied must be limited in amount to the approximate cost of services rendered and should not represent an indirect protection to domestic products or for fiscal purposes.

Trade restrictive and discriminatory registration, labelling and testing requirements should be removed by extending most favoured nation (MFN) and ‘national treatment’ to imported products. Labelling and testing requirements without any valid scientific grounds must be waived.

Customs valuation: Customs valuation must not be used for protective purposes or as barrier to trade. A common interpretation of the GATT/WTO valuation agreement should be adopted to ensure uniformity and standardized implementation of the agreement.

Information exchange: Member states must ensure exchange of vital information on the prevention and repression of smuggling, trafficking of narcotics and psychotropic substances, and other customs frauds.

All these issues have to be recommended from the private sector to their government concerned for raising the same during international negotiations with the states concerned. Private sector will also have to work as pressure group to the governments concerned so that these recommendations may be implemented as early as possible. 

Bangladesh Concerns in WTO negotiation

Bangladesh concerns in WTO negotiation

Md. Joynal Abdin

The Independent – April 7, 2009

The World Trade Organisation (WTO, 1995) had carried out a very difficult task from day one of its operation. It worked to reduce Tariff and Non-tariff barriers to promote international trade. It negotiated with the member countries at multilateral level to facilitate trade and investment globally, worked to mitigate international disputes, and also worked as a platform to promote technical and trade related aid towards the LDCs.

Currently the world is going through a very dangerous financial crisis, during which and in the post financial crisis period protectionism may grow again. If so, then WTO will have to face a comparatively tougher situation. After all we hope that, WTO will never loss its momentum, it will work to facilitate globalisation in a balanced way. Bangladesh is still now a Least Developed Country (LDC) but hopefully is on its way to becoming a mid income level country. In the meantime we have many important tasks to do to promote our export and raise our foreign currency reserve so that our economy can go forward in that line.

Currently three negotiations are ongoing in the WTO negotiation table these are –

a. Non-Agricultural Products Market Access (NAMA)

b. Agriculture, and

c. Service

At the same time following working groups are working parallel,

a. Trade Facilitation

b. TRIPs and Technical Barriers to Trade

c. Trade Related Technical Assistance

d. Trade and Environment.

Major objective of NAMA is to reduce tariff on industrial goods for all countries. A formula has been agreed upon, which will bring tariffs below eight per cent in developed countries over the period of five years. Here our major demand on behalf of LDCs is Duty Free and Quota Free market access to all products of LDCs in all developed countries and in major developing countries with flexible rules of origin. We must achieve it.

I think we can have this facility if all LDCs can claim it unitedly. But nowadays we observe there is a grouping among the Asian and African LDCs. These grouping may be for geographical and cultural isolation or miscommunication or misunderstanding each other. Another cause of this grouping may be working from behind the screen to make this grouping among the LDCs so that they cannot work unitedly in the WTO negotiation table. Bangladesh as a leading LDC can take initiative to seat with African LDC leaders outside WTO to discuss the issues and reduce the misunderstanding for our own interest.

In NAMA some decisions have already been taken like, LDCs will not be required to undertake commitment. Hong Kong Ministerial conference has agreed to provide duty free and quota free market access for the LDCs at least 97 per cent of total products. Currently Chairman proposed 57 tariff lines for the EU and 29 Tariff lines for the US for implementing tariff reduction within 10 years. Here we are getting some ease but we have to be careful that 97 per cent duty free access list must include our major exportable products, otherwise our total effort will be of little or no value to us. LDCs must work for exemption of their major exportable product out of the three per cent excluded list.

Currently Bangladesh wants further improvement of the DFQF text. Here African LDCs are strongly opposing us. But why are they opposing? Is it bringing welfare only for Bangladesh? On this point we must convince African LDCs with political liaison instead of bureaucratic discussion only. I am sure if our Commerce Minister invites African LDC leaders here to Dhaka, they will respond positively. And in that case a platform will be there to discuss this issue for their assistance here.

Another major concern for us in NAMA is Pakistan and Sri Lanka which are considered to be offered tariff reduction for five products each within five years (instead of 10 years), which will put Bangladesh to a disadvantage  since these lines represent 67 per cent of Bangladesh’s export to USA.  On this issue we may claim at least similar treatment for us. They are morally obliged to allow us this facility as an LDC.

There are two major decisions in Agriculture negotiation, these are a. Lowering Overall Trade Distorting Domestic Support (OTDS) and lowering final bound Aggregate Measure of Support (AMS). As an LDC here Bangladesh may remain silent. b. Lowering de minimis support at least by 50 per cent, we can support it. One thing we must remember that tough Bangladesh is an agricultural country but we are net food importer’s also. In service negotiations, main interests of Bangladesh lie mainly in two issues, Special Priority and Market Access under Mode-4. GATS has a provision for special priority, but the provision goes in conflict with MFN principle. So Bangladesh can concentrate on free movement of our labour force into the developed markets under Mode-4. This can facilitate more remittances for us.

At this stage of discussion I would like to focus on a non-negotiating matter i.e. presently there are only a few officials in our mission in Geneva to handle a group of international organisations. As a result we cannot be present at each table to represent our LDCs’ position, as a group and as an individual member, for scarcity of human resources. This matter has also been discussed in several meetings in the Ministry of Commerce and other concerned institutional meetings. But till now initiative has not been taken to increase the number of officials at our mission in Geneva to sufficient level. Another thing is in Bangladesh we do not also have sufficient skilled Trade Negotiator to handle WTO negotiation at the table sensibly in both the public and private sector. In this regard, Bangladesh Foreign Trade Institute (BFTI) can be made functional to produce qualified trade negotiators for WTO and other FTA and RTA negotiation.