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MoF opposes FTA deal with Malaysia

Financial Express (Dhaka) | 17.9.2012

MoF opposes FTA deal with Malaysia

Nazmul Ahsan

The Ministry of Finance (MoF) has opposed the move of striking an agreement on bilateral Free Trade Area (FTA) with Malaysia fearing the proposed deal, if signed, would only increase the trade deficit for Bangladesh.

The ministry in its observation said if a clause in the proposed bilateral FTA agreement enabling free movement of ’natural persons’ was not included, then it would bring no tangible outcome for the country.

The finance ministry in its recent stance on Bangladesh-Malaysia FTA made the blunt observation, a senior trade official has said.

"There is no immediate rationality to forge an FTA with Malaysia. The current trade deficit would go in favour of Malaysia as the imports from China will be diverted to Malaysia under an FTA arrangement between Dhaka and Kuala Lumpur," the finance ministry, quoting the observation of Finance Minister AMA Muhith on the particular issue, said.

Furthermore, the MoF said the country should not opt for the agreement with Malaysia unless the provision of exporting manpower was not incorporated in the proposed FTA agreement.

The officials concerned in the Ministry of Commerce (MoC) said they would have no alternative now other than going slow with the FTA idea with its counterpart-Malaysia, after the finance ministry had stood against the move.

Experts have said that no FTA in the world has provision in its text on movement of natural persons. The issue of manpower export falling under the service sector could be settled under another arrangement between the two countries, they have added.

Meanwhile, Malaysia sought a number of clarifications to Bangladesh government on the rationality of a number of clauses including ’movement of natural persons’ the MoC had included in its FTA Templates. The MoC sent the Templates (a pre-draft agreement) to Malaysia about a one year back.

The ministry in its template included the provision of ’movement of natural persons’ under the Mode-Four (IV) of the World Trade Organisation (WTO) in the FTA. It also sought special and different treatment for the products of Bangladesh to the Malaysian market under the proposed deal.

Earlier, a study of Bangladesh Tariff Commission (BTC) said the proposed FTA deal will help boost the country’s export of goods and manpower substantially to Malaysia and encourage the latter’s investment in Bangladesh significantly. The Commission said Bangladesh has the potential for export of at least 103 of its items to the Malaysian market.

In its template, Dhaka proposed to include issues like socio-economic development, strengthening of economic competitiveness, upgrading of human resource development and promotion of sustainable economic development within the broad areas for economic cooperation under the proposed trade deal, sources said.

The study report of the BTC said Malaysia has a large demand for a number of products, in which Bangladesh has considerable export capacity. Although Malaysia is now importing such products from other countries, a suitable FTA may help divert Malaysia’s imports away from other countries to Bangladesh, the report noted.

Malaysia has shown its interest for a considerable period of time to strike a bilateral FTA deal with Bangladesh. Last year, the Malaysian government offered to provide duty-free market access to 19 Bangladesh products under an early ’harvest system’ as soon as the negotiations on a bilateral FTA start, a senior trade official said.

Presently, Malaysia is the largest investor among the member-countries of the Association of South East Asian Nations (ASEAN), in Bangladesh.

The trade gap between Bangladesh and the Southeast Asian nation is substantial. Bangladesh imported goods worth $1.762 billion from Malaysia in 2010-11 fiscal year (FY), while it exported goods worth $43.87 million in the same fiscal.

Bangladesh mainly imports edible oil, vegetable fat, machinery, mechanical equipment, electrical goods, animal products, base metal, wood and wood articles, sulphur, organic chemicals, plastic, textile, and textile articles from Malaysia. On the other hand, the major exporting items from Bangladesh to Malaysia are knitwear, woven garments, tobacco, home textile, raw jute, jute goods, dry food, agri-products and frozen fish.

 source: Financial Express