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Tariff Commission for FTA with KL

Financial Express, Bangladesh

Tariff Commission for FTA with KL

By Nazmul Ahsan

10 May 2011

Bangladesh Tariff Commission (BTC) has given a positive signal to the government in striking a bilateral Free Trade Area (FTA) agreement with Malaysia, saying, the proposed deal will boost the country’s export of goods and manpower substantially in Malaysia and encourage latter’s investment in Bangladesh significantly.

The Commission said Bangladesh has export potentials for its at least 103 major items in Malaysian market.

"Since Malaysia’s local market has demand for a number of potential export products of Bangladesh, an FTA may substantially increase and help diversify the export from Bangladesh to Malaysia," reads the BTC’s report, styled "Report on Possibility of Formation of FTA Between Bangladesh and Malaysia".

"The Commission is of the view that Bangladesh may proceed towards a dialogue with Malaysia on FTA which may open up prospective avenues in trade and investment," the report added.

The report said Malaysia has large demand for a number of products in which Bangladesh has considerable export capacity. Although currently Malaysia is importing these products from other countries, a suitable FTA may divert Malaysia’s import from other countries to Bangladesh, the report explained.

The report, however, said the extent of benefit for Bangladesh out of the proposed trade agreement will significantly depend on special and differential treatment to be provided by Malaysian government on goods and services originating from Bangladesh.

The BTC has prepared the report after the commerce ministry had asked the Commission for its observation and suggestions on the bilateral FTA between Dhaka and Kualalumpur, a source in the ministry said.

Malaysia has long been showing its interest to strike bilateral FTA with Bangladesh. Last year, the Malaysian government offered to provide duty-free market access for 19 products of Bangladesh under an early harvest system as soon as negotiation on bilateral FTA starts, a senior trade official said.

Malaysia exported goods worth $ 703.27 million to Bangladesh in 2009-2010 against its import of 61.98 million from Bangladesh.

The major exporting items from Bangladesh to Malaysia are knitwear, tobacco, home textile, raw jute, woven garments, dry food, furnace oil and frozen fish.

The composition of Bangladesh’s import from Malaysia includes animal or vegetable fats, boilers, machinery, iron and steel, plastic and articles thereof, salt, wood and articles of wood, sulpher and organic chemicals.

The report of the BTC said Bangladesh has 103 potential items which have demand in Malaysian market. The principal items include frozen fish, tobacco, light petroleum distillates, food preparations, pharmaceuticals, urea, sacks and bags of polymers ethylene, leather and leather products, garments items, footwear, ceramic tableware, kitchenware, lead acid accumulators, iron and steel products, bicycle, optical articles and furniture.

"Since Malaysia generally does not apply discriminatory trade measures between domestic and imported goods and services, there is an opportunity for Bangladeshi products to compete with Malaysian local products," the report of the Commission said.

The report said currently Malaysia is the largest ASEAN investor in Bangladesh.

"FTA may further stimulate Malaysian investment in Bangladesh," the report noted.

According to the latest data of Board of Investment, a total of 72 joint venture projects of Malaysia are in operation in Bangladesh. The amount of Malaysian investment in the country is about $ 1.5 billion.

In terms of export potential of human resources, the report said a FTA between the countries will simplify and facilitate movement of natural persons and increase the export of manpower from Bangladesh to Malaysia significantly.

Mentioning a number of problems, the report said Bangladesh may face challenges from strong competitors with whom Malaysia has regional and bilateral trade agreements.

The report said the export of drug in Malaysia is time consuming as it generally takes three years to obtain a marketing approval from relevant authority in Malaysia.

The investment cost in Malaysia is high and employment opportunity is limited to selected sectors like manufacturing, construction, plantation and agriculture.

Asked, BTC Chairman Mojibur Rahman said, it is now the decision of the government, whether it will opt for FTA with Malaysia.