Bangladesh has seen a decade of good economic growth, in contrast to most of the global economy. This has lifted it from among the ranks of less developed countries and it is now looking to attract global investments and improve its infrastructure. India has a strong history of bilateral trade and Indian corporate have a widespread presence in the country. Mohammad Lutfor Rahman, Deputy High Commissioner at the Mumbai High Commission, is a man with diplomatic background across many Asian nations. He discusses the Bangladesh economy today, the current status of bilateral trade and what can be done to raise the same to the next level, in a chat with R N Bhaskar and Pankaj Joshi.
Where would Bangladesh and India bilateral trade relations stand today?
In the last few years, our economy has seen impressive growth. High population growth and low economic growth have long been areas of concern, but these have been substantially addressed. Today Bangladesh has a large financial market, a private sector which is blooming, an affluent middle class – these are all factors for a sustainable future of economic growth.
As far as trade with India is concerned, India is clearly the greater influence on Bangladesh. However, our exports are rising faster than imports, though on a much smaller base. If you look at FY2018 figures vis-à-vis FY 2014, exports have grown from USD 456 million to around USD 900 million, a growth of 97 per cent. Imports from India in this period have grown by 39 per cent, up from USD 6 billion to USD 8.4 billion. We believe that the trade potential from here can be at least four times the present level.
Today business groups like Tata, AV Birla, Dabur, Airtel, Hero MotoCorp, Godrej, Ceat and many others have a strong presence in Bangladesh. Investment proposals by Reliance, Adani, NTPC and others are in the pipeline. For Indian companies, Bangladesh has promised three dedicated economic zones, of which two have already been identified and earmarked.
Which are the strong contributors to your exports and which are the industries you think need to be focused upon? What would be deficiency areas in how your economy has developed?
If we look at sectors, textiles and apparel is the biggest contributor. Of the total Bangladesh exports of USD 37 billion, this sector provides around USD 31 billion. We definitely want to grow this sector, along with others like food processing, gems and jewellery, engineering overall and more so transport. In the services space, we think IT services and education should be focus areas. IT as an industry in Bangladesh is still developing and the overall higher education infrastructure in the country also needs a boost. We can see the future – artificial intelligence, mechatronics, robotics – and want to be ready for that.
In case of bilateral trade with India, we would want to focus on fisheries and fish processing, leather and shipbuilding/ shipbreaking sectors. Some crucial areas like urban infrastructure, border infrastructure, road and rail transportation, energy – all these are where we would seek participation from India, through investment, technology and other means. If you talk of areas where improvement is necessary, the financial system is one. Somehow, the microfinance movement has not achieved its purpose in Bangladesh. Even though the penetration is quite deep and access to finance is much better—be it Grameen Bank, the Bangladesh Rural Advancement Committee or even NGOs like Asha— the terms of lending and process of repayment leave a lot to be desired. The rates are right now quite high and there is no moratorium period for repayment, which impedes capital formation. So the net result is that activity rises, unemployment falls but the net wealth creation for the bottom part of the population through entrepreneurship is not much. A very small percentage of families are able to escape poverty and improve their standard and style of living.
What do you think are the challenges to trade?
In the current global economic environment, the challenges are non-tariff measures and barriers. The impact on Bangladesh is more severe than other trading countries because it is striving to move out of the less developed nations category and therefore some concessions/ relaxations available to that category of nations are now gradually being withdrawn. We on our part also have to look into some areas of improvement – somewhat excessive bureaucratic processes, weaknesses in trade facilitation initiatives, better infrastructure requirements and issues related to visas as well as proper market access for overseas companies.
If you look specifically to India and Bangladesh bilateral trade, the issues are quite similar. For starters, the infrastructure at the border is quite inadequate, which means vehicles stay in the clearance channel for days instead of hours. The connectivity across all three modes – road, rail and water transport – can be substantially improved. The Petrapole/ Benapole border needs upgraded infrastructure in all ways – warehousing, cargo handling, customs and immigration clearance facilities, communications access, even something as basic as uninterrupted electricity supply. Work in these areas will ensure that the trade can rise rapidly to the potential level as discussed, because latent demand is certainly there.
That being said, work is one for improvement. There is a Standard Operating Procedure (SOP) agreement in place, which will improve movement of cargo vehicles. Joint working groups are operational, focused on improvement in the areas of trade and customs procedures.