Policy thoughts on trade and economic development

To achieve our national trade and economic development goals pursuant to the present sustainable development agenda, it is absolutely imperative for Bangladesh to reform and streamline its supply and demand-side trade and economic policies and regulatory regimes. In view of that, it is important to assess and analyse comprehensive socio-economic impact of the prevailing tax, tariff and fiscal policies and enumerate prudent, predictable and sustainable business and revenue-friendly fiscal policy options for sustainable acceleration of investment in all sectors of Bangladesh's economy taking into account the trends and practices followed by countries like the EU nations, India, China, Japan, Vietnam, Cambodia and Korea.

When it comes to the supply-side issues, there is a need to assess and analyse the comprehensive socio-economic impact of the prevailing monetary and financial policies in the last decade and enumerate prudent monetary and financial policy options for sustainable acceleration of investment in a predictable manner, taking into account the trends and practices followed by countries like India, China, Vietnam, Malaysia and Korea.

The adverse impact of red-tape, dual and over-lapping jurisdictions, un-necessary costs and time under the prevailing business regulatory systems are there and those are in need of a careful review.

We also need to enumerate prudent policy options for reduction and removal of red-tape, un-necessary costs and time for starting and doing business in a sustainable and predictable manner.

The country needs to assess the impact of limitations, complexities, lack of administrative compliance, unnecessary costs and time under the prevailing import and export regulatory systems and enumerate prudent policy options in the light of the related World Trade Organisation (WTO) agreements and International Chamber of Commerce (ICC) Inco-Terms provisions for simplification, reduction and removal of red-tape, unnecessary costs and time for legally-binding integrated import and export regulations. It is needed to facilitate a business-friendly policy regime in a sustainable and predictable manner taking into account the best practices followed by developed and developing countries.

The global practices for export promotion, compatible with the WTO agreements and practised worldwide, should also be followed by Bangladesh.

We need to revisit duty exemption on exports, including exemption from AIT (advance income tax) through refund of AIT and VAT, CD (customs duty) and SD (supplementary duty) paid on inputs and services used for export of goods at specified product-scheduled rates, procurement of domestically-produced inputs without payment of duties for production of goods and services for export and PPP warehouses at home and abroad.

Export incentives and subsidies, compatible with the WTO agreements and practised worldwide, should also be provided by Bangladesh. These are export credit with special rates of interests, subsidised rate on production inputs including power and other utilities for the export sector as a whole, financial assistance for export promotion activities like market studies/surveys, setting up showrooms, warehouses, participation in international trade fairs, publicity campaigns, brand promotion, reimbursement of registration charges for pharmaceuticals, testing charges for engineering products abroad, etc.

Modalities of foreign investment by Bangladeshi entrepreneurs need assessment. Analysing the comprehensive socio-economic impact of investment abroad by the Bangladeshi entrepreneurs, among others, in respect of Gross National Income and foreign exchange regime, outgoing and incoming flow of funds, employment generation of Bangladeshi nationals at home and abroad, tax and revenue flow, risk management and elimination of fraudulent practices etc and enumerating prudent criteria, conditionalities and policy options for Bangladesh taking into account the rules and regulatory practices followed by countries like India, China, Vietnam, Malaysia and Korea have to be done.

Demand-side issues: Realising the bleak prospect of obtaining global free market access for Bangladesh under WTO, GSPs (generalised system of preferences), RTA regimes, SAFTA, BIMSTEC, APTA, D-8 and others and also keeping in view the trends and practices of countries like India, Pakistan, Sri Lanka, Vietnam, Cambodia, China, Korea, Malaysia, the Philippines, Indonesia and others in pursuit of global and regional market access for goods and services and the possible impact on Bangladesh's foreign trade, the country must diversify its global market access for goods and services with global, regional and domestic trade facilitations to ensure predictable and sustainable destinations of its exportable products around the region and the globe taking into account, among others, the following parameters:

Bangladesh already has unilateral and very liberal services, public procurement and investment policy regime open on the MFN (most-favoured nation) basis under its domestic regulations. It should, therefore, take the credit and claim on a reciprocal basis similar treatment of goods and Mode 1, Mode 3 and Mode 4 accesses for the services sector from the trade partners, keeping in view the trends and practices of countries like India, Pakistan, Sri Lanka, Vietnam, Cambodia, China, Korea, Malaysia, the Philippines, Indonesia and others in pursuit of global and regional market access for goods and services and its possible impact on Bangladesh's foreign trade.

Bangladesh has no possible options other than streamlined, sustainable and predictable free trade relations with most potential trading partners like, among others, the US, the EU, the post-Brexit UK leading to Commonwealth free-trade area, the 12-country Russia-CIS bloc, D-8 PTA 2006, ASEAN, RCEP and BRICS-BIMSTEC, with the acknowledgement that Bangladesh is expected to graduate out of the list of LDCs by 2018-2024-2027 to the status of a rapidly-growing developing country.

SAFTA terms of trade in goods and services between Bangladesh and India will be very prudent and highly-acceptable of the negotiations for Bangladesh for the above initiatives. This will facilitate trade creation by neutralising the prevailing trade diversion in favour of India. The 8th SAARC Summit has agreed to slash the sensitive list under SAFTA by 95 per cent by 2020 to increase intra-regional trade. Bangladesh should propose the same to its BFTA partners and negotiate for total exclusion from the sensitive list for products originating from Bangladesh. Products originating from Bangladesh should be exempted from all customs duties with effect from the date of commencement of such an FTA (free trade agreement). Bangladesh, in turn, may offer to the FTA parties the preferential tariff accorded to India under SAFTA which would be reduced to 0-5 per cent level for 95 per cent tariff lines in parallel with the SAFTA Tariff reduction commitments. Rules of Origin should be based on value addition criteria.

Bangladesh should open its services sector on the MFN basis to maximise promotion of the services trade at home and abroad, particularly when our services regime is already open on the MFN basis under our domestic laws and regulations and also under the SAFTA Services Agreement.

Bangladesh has kept open its Public Procurements for foreign participation on the MFN basis, in turn Bangladesh should ask for reciprocal treatment from the respective FTA partners and beneficiary countries. The FTA should ensure harmonisation of TBT and SPS measures and signing of MRA to streamline the flow of traded goods. Certificates on Technical Regulations and Standards issued by the respective designated national bodies should be accepted on the basis of MRA mutually agreed upon.

National treatment should be accorded in respect of charges and fees for imported products at the rate applicable for like/similar domestic products and fees levied must be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or for fiscal purposes.

The FTA partners shall adopt and notify non-restrictive, automatic and transparent import licensing procedures. The FTA shall recognise that effective protection and enforcement of intellectual property rights encourage technological innovation, transfer of technology and investment under the respective terms and obligations of the WTO Agreements under the respective domestic regulations.

The FTA should affirm ILO (International Labour Organisation) core labour standards as adopted in the WTO Singapore Ministerial (Paragraph 4) and Doha Declaration (Paragraph 4) and recognise the importance of providing adequate and effective protection and enforcement of worker rights in accordance with each participant's obligations and domestic labour laws.

Bangladesh should integrate itself with the OBOR initiative in right earnest and work for the adoption of a Customs Cooperation Agreement to facilitate trade amongst the Member Countries as envisaged in the WTO Trade Facilitation Agreement including gradual harmonisation of customs documentation and clearance procedure for transit and transhipment of goods across the borders of the member countries.

To streamline most economic and speedy global connectivity by ensuring frequent flights, smooth shipping and land route transit through Bandar Abbas to Russia and the CIS, Bangladesh should immediately become a party, without having to undertake any additional obligations other than its commitment, under WTO, to the UNECE- TIR (Transports Internationaux Routiers) Convention 1975 (India- EU-Iran-China- Russia-CIS along with others are already parties to the Convention). Accession to TIR Convention would create TIR corridors, linking Iran-Russia-CIS countries-Central and South Asia as well as China with Bangladesh.

Sufficient safeguards given under Articles 45, 57 and 58 of TIR Convention can be invoked, if Bangladesh is not willing to give transit rights. TIR is governed by the United Nations TIR Convention, overseen by UNECE which facilitates multimodal journey conducted by truck, containers transported by rail, river, or sea with the same customs privileges.

Bangladesh-US trade relations: The two fundamental principles to be followed for Bangladesh-US Trade Relations under TICFA are:

1. "to reinforce the rules-based multilateral trading system embodied by the WTO by entering into mutually advantageous arrangements, in keeping with the WTO Agreements;" ...

2....."and affirming that this Agreement is without prejudice to the rights and obligations of these Parties under the agreements, Understanding, and other instruments related to or concluded under the auspices of the WTO."

Obligations undertaken by the USA in TICFA, in keeping with the agreements, Understanding, and other instruments related to or concluded under the auspices of the WTO, among others, are:

* To keep the issue of labour standards outside the jurisdiction of trade policy measures as mandated in the decisions on ILO core labour standards adopted under Paragraphs 4 and 8 of the WTO Singapore and Doha Ministerial conferences respectively.

* To operationalise US duty-free and quota-free market access for all goods originating from Bangladesh as an LDC as adopted and prescribed in each of the first to the ninth (Bali) WTO Ministerial Conferences as an implementation agenda outside the single undertaking package as decided in the Eighth Ministerial Conference in Geneva in 2011.

* "Implementation of Article 66.2 of the TRIPS Agreement" giving effect to notify annually the commitment made in the Doha Ministerial Conference declaration in paragraph 11.2 of the Decision on Implementation-Related Issues and Concerns to put in place a mechanism for ensuring the monitoring and full implementation of the obligations of providing incentives for transfer of technology to LDCs under grants and or concessional terms.

* "Transfer of Technology" and "Compulsory Licensing" measures with focus, among others, on areas such as Gasification of Coal, Clean and Renewable Energy, Biotechnology, Pharmaceuticals, Environmental protection and pollution control.

* Providing technical and financial assistance and supply of environmental technology, machinery and equipment, goods and services in grant and or concessional terms, to facilitate adoption and implementation of adaptation projects, purchase of goods, the implementation of projects, the acquisition and transfer of technologies, and the contracting of environmental services.

Bangladesh should therefore actively pursue the following agenda for its trade relations with the USA:

* Implementation of obligations undertaken by the USA in TICFA as stated above "in keeping with the agreements, understanding, and other instruments related to or concluded under the auspices of the WTO

* Bangladesh-US Comprehensive Free Trade Agreement under the basic terms of TICFA without prejudice to each other's rights and obligations under WTO. Bangladesh should take the credit and claim on a reciprocal basis duty-free market access for goods and Mode 1, Mode 3 and Mode 4 accesses for the services sector from the USA.

* Products originating from Bangladesh should be exempted from all customs duties. Bangladesh, in turn, may offer to the USA preferential tariff accorded to India under SAFTA which would be reduced to 0-5 per cent level for 95 per cent tariff lines in parallel with SAFTA tariff reduction commitments.

* Tariff and Non Tariff Barriers should be removed bilaterally on a reciprocal basis for mutual benefit without prejudice to WTO regulations as envisaged in the TICFA.

* Harmonisation of TBT and SPS measures and signing of MRA to streamline flow of traded goods.

* Mutual recognition of testing laboratories: Certificates on Technical Regulations & Standards issued by the respective designated national bodies should be accepted.

BD-EU-post-Brexit UK: The EU-GSP (including EBA-everything but arms) and other GSP beneficiary countries (India, Vietnam, ASEAN+) are negotiating bilateral free trade agreements with the EU to safeguard long term sustainable interests. British Prime Minister Theresa May has named India, Canada, China, Mexico, Singapore and South Korea among the countries keen on free trade agreements with the post-Brexit UK. Bangladesh must also act accordingly and take up a strong pro-active role in establishing an FTA with the EU and separately with the UK and initiate to form a Commonwealth free trade area.

BD-BBIN: Bangladesh is the missing link in India's aggressive connectivity policy pursuits. With a surge in costly infrastructure development to be borne by Bangladesh, passage under BBIN (Bangladesh-Bhutan-India-Nepal) would better integrate Kolkata-Agartala-Arunachal Pradesh-Assam-Manipur- Meghalaya-Mizoram-Nagaland and Tripura with India's heartland. This along with the river-based Kolkata-Agartala transhipment route through Ashuganj and Akhaura would marginalise exports of Bangladesh commodities to the north eastern region of India.

Interests of Bangladesh, Nepal and Bhutan under the BBIN arrangement to provide all the benefits to India are very limited and insignificant for being proportionate only to their mutual trade which is very small and non-elastic.

There are hardly any cost-effective option for Nepal and Bhutan to conduct third country transit trade via Bangladesh other than Kolkata airport and Haldia port.

Moreover, transit of cargo vehicles is highly uneconomic because on way back the vehicles have to go empty. The long ongoing practice of transhipment is the only economic option for mutual trade in the region. Ironically BBIN does not contain any provision allowing bilateral business-to-business cargo vehicle movement.

BD-BCIM: The Bangladesh, China, India and Myanmar (BCIM) region is one of the richest in the world in terms of resources. This region covers 9.0 per cent of the world's total area with 7.3 per cent of the global domestic product and involves 440 million people. The economic corridor of BCIM has huge prospects in the arena of trade, investment, energy, transport and tourism. Bangladesh should take immediate proactive initiatives to integrate with ASEAN and RCEP on a fast track basis.

BCIM-BBIN-BIMSTEC Energy Cooperation: BCIM-BBIN-BIMSTEC governments should take, on an urgent basis, effective steps to conclude a regional energy trade agreement in line with the last energy deal adopted under SAFTA to foster and facilitate regional energy trade including, among others, setting up of joint venture projects on hydro-electricity and renewable energy, regional connectivity and cross-border energy trade.

A national trade negotiating authority should be established to do the following:

1. To streamline and ensure highest level of coordination in all trade-related negotiations in Geneva and elsewhere the government should establish and constitute a Bangladesh Trade Negotiations Council (BTNC), headed by the Minister of Commerce. The BTNC should only be entrusted to carry out all trade and WTO-related negotiations.

2. The capacity and human resources of negotiating teams and our missions abroad should be strengthened and experts from the private sector and think-tanks should be engaged as may be necessary from time to time. All posts of commercial councillors should be filled by officials with certified expertise on national, regional and international trade.

3. BTNC, BTC, BFTI and WTO Cell should establish a common platform, digital linkage and database.

4. Ministry of Commerce, BTNC, BTC, BFTI and WTO Cell should form a panel of experts with recognised expertise on national, regional and international trade from the private sector stakeholders, think-tanks and officials from the line ministries and agencies to serve as their respective backup units.

5. The candidates for training at the WTO and other trade-related international institutions should be selected from both government officials and private sector with required knowledge and background to be able to benefit from the training courses and render dedicated services in the respective areas of expertise. The services of trained officials in the areas of international trade and commerce must be retained and they should not be transferred under current rules on a normal basis.

To ensure global IPR (intellectual property right) registration of Bangladeshi products without having to undertake any additional international obligations other than that it has already undertaken by incorporating and implementing WIPO Conventions and Treaties under the terms of WTO TRIPS Agreement-Article 3, 4 and 5, it is imperative for Bangladesh to become a party, like the 30 LDCs, to the three Global IPR Protection Systems. We strongly urge the government of Bangladesh to be a party to the Patent Cooperation Treaty; Madrid Agreement on Trade Marks and the Hague Agreement on Industrial Design as soon as possible.

This will facilitate global IPR registration of Bangladeshi products by filing a single application in the country with only 10 per cent fees and enhance its value added global trade without having to undertake any additional international obligations other than what it has already undertaken.

Agro and food products, apparel and clothing, home textiles, leather products, footwear, pharmaceutical products, plastic and plastic goods, ceramics and table wear, electric and electronic goods, fish and frozen fish, furniture products, jute products, jewellery, ships, boats and water transport products, IT and software are among the most promising and priority products of Bangladesh for global IPR Registration.

Sri Lanka, Vietnam and thirty LDCs are already parties to Patent Cooperation Treaty. Sri-Lanka, Vietnam and twelve LDCs including Bhutan are already parties to Madrid Agreement on Trade Marks while Sri Lanka, Vietnam and four LDCs are parties to the Hague Agreement on Industrial Designs.

When it comes to the supply side sectoral issues, the following are recommended:

REAL-ESTATE SECTOR: To enact and implement prudent regulatory policy reforms among others, in respect of rules and regulatory systems, tax and tariff measures, finance and investment at home and abroad for sustainable acceleration of investment in the real-estate sector in a sustainable and predictable manner taking into account the trends and best practices followed by the UAE (DUBAI), India, Malaysia and Thailand.

IRON AND STEEL SECTOR: To enact and implement prudent regulatory policy reforms among others, in respect of import, export, tax and tariff measures, domestic and foreign trade etc. for sustainable acceleration of investment in these sectors in a sustainable and predictable manner taking into account the trends and best practices followed by China, Japan, Korea, India and Malaysia.

ELECTRIC & ELECTRONICS SECTOR : To enact and implement prudent regulatory policy reforms among others, in respect of rules and regulatory systems, tax and tariff measures, finance and investment, technology, quality and IPR management for sustainable acceleration of investment in these sectors taking into account the trends and best practices followed by India, Singapore, Malaysia, Vietnam and Thailand.

NATIONAL GOLD AND JEWELLERY SECTOR: To enact and implement prudent regulatory policy reforms among others, in respect of import, export, bond, and warehousing, tax and tariff measures, domestic and foreign trade etc, for sustainable acceleration of investment in these sectors in a sustainable and predictable manner, taking into account the trends and best practices followed by India, Nepal, Singapore, Malaysia and Thailand.

NATIONAL ETP MANAGEMENT SCHEME: The compliance costs to set up and operate effluent treatment plants (ETPs) are prohibitive because of high cost and lack of technologies and technical and managerial skills for pollution prevention and control.

Investments and subsidies for combined treatment of household sewage and industrial waste water and setting up facilities for recovery and reuse of water and chemicals, and technological upgradation of polluting industries are in the foremost public interest. The government, therefore, must grant fund for CETPs as customary in developed and developing countries.

Common effluent treatment plants (CETPs), the most cost-effective option for compliance with the requirements of the Environment Protection, should be set up as joint ventures with government, private sector and NGOs as non-profit companies registered under the Companies Act. Polluting units and undertakings in the private and public sectors should compulsorily be members of CETPs.

The contribution by the government and the international agencies must be [80 per cent] while the industries may provide 20 per cent of the project cost by way of share capital.

INVESTMENT AGREEMENTS: Currently there is no legal scope of investment abroad by Bangladeshi citizens. The proposed investment agreements are therefore asymmetric and not relevant to Bangladesh. Bangladesh should continue to treat investments from all countries on the MFN basis ensuring national treatment subject to its rights and obligations under international treaties administered under its own laws, regulations and legal system affirming the current trends in investment policy making by the developed and developing countries.

The double-taxation asymmetric treaties granting tax exemptions are a massive distortion in Bangladesh's investment regime in violation of the national obligation of equal treatment for both domestic and foreign investors. Such asymmetric treaties should be terminated and should not be renewed. Bangladesh should also exclude ICSID from its investment laws and follow Australia, Brazil, South Africa, Ecuador and others in this regard.

Manzur Ahmed is a Director, CIS-BCCI and IBFB and former adviser of FBCCI. [email protected]