FTA won’t be enough to narrow trade gap with India, say experts
Financial Express (Bangladesh)
FTA won’t be enough to narrow trade gap with India, say experts
FE Report
8/14/2005
A group of international experts said Saturday at a workshop that mere increase in volume of trade under the proposed Free Trade Agreement (FTA) would not be enough to reduce the huge trade imbalance between Bangladesh and India.
They maintained that the trade imbalance between the two close neighbours could be effectively reduced if India ensured easy access for Bangladeshi products to its market and encourage its private sector to invest in the manufacturing sector here to ship their products back to India.
The experts said the FTA might increase Bangladesh’s exports to India initially but it would give India an upper hand in the longer run because of the latter’s lower cost of production and wider industrial production base.
At the workshop titled "Bangladesh-India Trade and FTA", the experts observed that although Bangladesh had liberalised its import regime substantially, India had failed to respond proportionately, resulting in the accumulation of huge trade surplus in the latter’s favour.
The current trade imbalance with India is estimated at more than US $ 1.50 billion, while the cumulative deficit stood at US $ 11.25 billion over a decade.
"When Bangladesh liberalised its import policies in 1991-92, India exported US $ 300 million. And her export rose to US $ 1 billion in 1995-96," said Commerce Secretary Faruq Ahmad Siddiqi.
He said further liberalisation under the proposed FTA might not be beneficial to Bangladesh.
The Commerce Secretary’s observation came in contrast with that of Veena Sikri, India’s High Commissioner to Bangladesh, who advocated for an FTA, referring to how such an agreement had multiplied Sri Lanka’s export to India.
"The balance of trade which favoured India by 15 to one when the (FTA) agreement was signed has come down to five to one," Sikri said.
Appreciating the Lanka-India FTA, Sikri, who attended the workshop as special guest, said the two countries are now discussing a Comprehensive Economic Partnership Agreement (CEPA) which will not only expand the list of goods covered under the FTA, but also promote cooperation in services, investment and trade facilitation.
Bangladesh and India have long been debating on how to reduce trade gaps, with India insisting on an FTA, and Bangladesh demanding for more market access.
Commerce Secretary said India could remove non-tariff barriers for Bangladeshi products in her North Eastern states and could ease market access to curb trade imbalance effectively.
"Unless India is sincere, the trade gap would not decline," the Commerce Secretary noted.
Former Commerce Secretary Alamgir Farrouk Chowdhury said India should be offering Bangladesh the preferential trade facilities without expecting any reciprocity until imbalance declines substantially.
Farooq Sobhan, a former ambassador and the current president of a private think tank, Bangladesh Enterprise Institute, moderated the workshop’s inaugural session. The World Bank and BEI jointly organised the discussion to review a WB’s study on FTA and its impact on Bangladesh economy.
Dr. Zaidi Sattar of the World Bank, former Commerce Secretary Alamgir Farrouk Chowdhury, South Asia Enterprise Development Facility official Marlon Lezama, former State minister for Foreign Affairs Abul Hasan Chowdhury addressed the inaugural session, among others. Dr. Garry Pursell presented the WB study findings on impact of FTA on Bangladesh.
Veena Sikri put emphasis on uninterrupted rail, road and riverine communications between ports of Bangladesh and India to minimise transportation expenses of goods and increase efficiency.
She refereed to such "practices being followed in the EU and the ASEAN and would allow seamless transport connectivity within the region."
She argued that "there are strong economic reasons why we should encourage increasing containerisation of our bilateral trade, through both the rail as well as riverine routes, since this is cost effective, efficient and tamper-proof."
The Indian envoy said this would ensure 24-hour uninterrupted transport of goods and reduce incidences of smuggling and duty evasion.
Sikri said at present a container between Kolkata and Dhaka (via Singapore) costs US$2,500 and takes 15 days, while through Indo-Bangladesh common riverine transportation, this would cost only $500 and take just 5 to 6 days. This will also improve the services in Petrapole and Benapole land ports.
"If Ashuganj can be declared a port of call under Indo-Bangladesh bilateral Inland Water Trade and Transit Protocol with multi-modal facilities, goods from India can be offloaded there, instead of at the nearest Land Customs Station, for either local consumption or onward transportation. This will both facilitate bilateral trade and higher volume of business for the truck owners of Bangladesh. Similarly, rail-based container movement should also be encouraged between the two countries, to begin with between Sealdah and Joydevpur," she added.
The High Commissioner also dwelt on the efficiency of land port stations of Petrapole of India and Benapole of Bangladesh. "Having personally visited many of the land customs stations including Petrapole, I completely agree with the findings (of a study) that at Benapole-Petrapole, the cumulative loss of time in loading at Kolkata, transportation, unloading at Benapole, parking, customs and crossing of border, etc is 99 hours as against the ideal time of 29.6 hours."
It is also difficult to imagine the reality that the two customs houses have no mode of communication between them, she said, "even while our proposal for establishing a hotline continues to lie unanswered with the Bangladesh government. The first and foremost task therefore is to improve the infrastructure of the LCS, especially Benapole-Petrapole, in a coordinated manner, as they are our gateways of trade."
This would include the provisions for improving approach roads, providing banking and communication facilities, construction of warehouses, etc.
She told the audience that the government of India was in the process of full-scale modernisation of the Petrapole port that would take care of many of these concerns.
