Dynamic strategy, diversified products key to reaping benefits

DailySun || Shining BD

Published: 6/2/2024 5:57:19 AM

As Bangladesh and China have moved to sign a Free Trade Agreement (FTA) to boost bilateral trade and investment, experts have called for devising a dynamic strategy and diversifying products to reap the full benefits.

They said the proposed agreement will be a win-win for both countries, offering Bangladesh access to China’s massive market and attracting Chinese investment.

But a failure to formulate a proper strategy and diversify products may give China the unilateral edge.

Economists said there is huge potential for enhancing the Bangladesh-China relations in terms of products, services and investment thanks to big consumer markets and booming economic activities.

A feasibility study is underway to conclude the FTA negotiations by 2026, a commerce ministry source said.

To press for the FTA issue, the Bangladesh China Chamber of Commerce and Industry (BCCCI) and Chinese Enterprises Association in Bangladesh (CEAB) will jointly organise a seminar titled” China-Bangladesh Free Trade Agreement: A Mutually Beneficial Win-Win Choice” at the Chinese Embassy in Dhaka on Sunday.

According to the Bangladesh Bank, Chinese entrepreneurs invested $259.54 million in Bangladesh in 2023. China clinched the fourth position in investment after the UK ($613.93m), the Netherlands ($366.96m) and the US ($314.90m) last year.

FTA may reduce bilateral trade gap

The bilateral trade between Bangladesh and China was $18.5 billion in fiscal year 2022-2023. There is was trade gap of over $17.15 billion, heavily tilting in favour of China.

Bangladesh imported products worth $17.83 billion from China in FY23 against the exports worth $677.36 million, according to data from the Export Promotion Bureau (EPB) and the central bank.

The country imported $19.35 billion goods against $683.43 million exports in FY22 while $12.93 billion against $680.66 million in FY21, $11.49 billion against $600.11 million in FY20 and imported products worth $13.85 billion against the exports of $831.20 million in FY19.

Talking to the Daily Sun, Executive Director of the Institute for Inclusive Finance and Development Mustafa Kamal Mujeri said currently China is much ahead in trade with Bangladesh. “So, Bangladesh must adopt an active policy to take the benefits after signing the FTA.”

“Bangladesh has to enter the Chinese market with quality products at competitive prices. Bangladesh is now earning around 80% of foreign currencies from readymade garments exports. China is now the global leader there. So, Bangladesh must diversify products to grab the Chinese market. Or else, China will take the one-sided benefit from the FTA,” he also said.

Mujeri, also former director general of Bangladesh Institute of Development Studies (BIDS), said Bangladesh must create a congenial investment atmosphere to woo Chinese investors to invest here.

FTA to increase FDI, foster economic growth

Bangladesh will graduate from the group of Least Developed Countries (LDCs) in 2026. So, the county will lose duty-free quota-free access to the developed and developing countries after graduation.

Business leaders said the FTA will help the country overcome the challenges a little bit.

BCCCI Secretary General Al Mamun Mridha said the FTAs have proven to be a powerful tool to attract Chinese investment worldwide.

“By learning from the experiences of the countries like Vietnam, Indonesia, Australia and Pakistan, Bangladesh can strategically negotiate a win-win FTA with China. This can pave the way for increased FDI, fostering economic growth and development in the private sector,” he said.

Speaking to the Daily Sun, Deputy Secretary of FTA Wing at the commerce ministry Md Firoj Uddin Ahmed said the FTA between Bangladesh and China is under study.

“We’ll be able to know the details of the FTA, including potential and challenges, on completion of the feasibility study,” he said.

FTA negotiations may conclude by 2026

At a recent joint press conference on the exchange of draft feasibility study reports on the proposed FTA, Commerce Ministry’s immediate past Senior Secretary Tapan Kanti Ghosh said the government has been working to conclude the FTA negotiations by 2026.

Earlier, Chinese Ambassador to Dhaka Yao Wen said China wants to implement the FTA with Bangladesh by 2026. “We’re in the stage of feasibility studies, but we’re looking forward. It’ll be completed soon. We’ll go to the stage of physical negotiations after completing feasibility studies. Our objective is that by the year 2026, there’ll be an FTA between China and Bangladesh,” he said.

BCCCI Secretary General Mamun said FTAs between China and various countries have not only enhanced trade but also significantly attracted Chinese investment globally. Around 50% of FDI from China to ASEAN countries have gone to the manufacturing sector.

“ASEAN-China FTA came into effect in 2010. In 2023 alone, China invested over $3.96 billion in Vietnam. Between 2019 and 2022, Chinese investors invested $20.9 billion across 9,080 projects in Indonesia,” he said.

Mamun stressed the need for developing an investment-friendly policy. “Implementing the policy which provides tax incentives, streamlines regulatory processes and improves ease of doing business can make Bangladesh an attractive destination for Chinese investors,” he also said.

He added that Bangladesh holds competitive advantages such as textiles, pharmaceuticals and technology. “Ensuring reduced tariffs and better market access can attract Chinese investments in these areas.”

Shining BD