Bangladesh and Australia like to describe each other as "old friends", and the phrase is not just diplomatic rhetoric. Australia was among the first countries to recognise Bangladesh after its independence in 1971. More than half a century later, that early political goodwill has matured into a relationship shaped by Commonwealth ties, people-to-people connections, shared democratic traditions and a steadily deepening economic partnership. Yet for all the warmth and symbolism, the hard truth remains: the full potential of bilateral trade and investment between Dhaka and Canberra is still largely untapped.
Trade between the two countries has grown impressively. Total two-way trade now stands at around $5bn, expanding at an average rate of more than 16 per cent annually over the past five years. Bangladesh has become Australia's 22nd largest export market, with Australian exports reaching $3.3bn in 2024. Bangladesh, for its part, enjoys duty-free and quota-free access to the Australian market -- a privilege that will continue even after it graduates from least developed country (LDC) status scheduled for November 2026. These are not trivial achievements. But they also raise an uncomfortable question: why, given such favourable conditions, does the relationship still feel underpowered?
Part of the answer lies in understanding how both sides are now trying to reframe the relationship. A significant step in that direction is the ongoing research titled Bangladesh Trade and Investment Study: Market Opportunities and Trade Barriers, jointly conducted by the Bangladesh Foreign Trade Institute (BFTI) and the Institute of International Trade (IIT) at the University of Adelaide. Funded by Australia's Department of Foreign Affairs and Trade (DFAT), the study reflects a more analytical, less rhetorical approach to bilateral engagement.
Its objectives are ambitious but necessary: to identify market opportunities for Australian exporters and investors, diagnose trade and investment barriers, and propose practical recommendations to boost economic flows in both directions. The scope of the study is equally telling. It spans agriculture; fisheries and livestock; energy and minerals; air connectivity; and vocational education -- sectors where Australia's comparative advantages are globally recognised. At the same time, it examines Bangladesh's own export-oriented and emerging sectors, including ready-made garments, information technology, light engineering, leather goods and footwear.
This breadth is important because it challenges a long-standing mismatch in expectations. Australian investors, by and large, have not aligned their interests with Bangladesh's officially declared thrust sectors. This misalignment partly explains the relatively low level of Australian foreign direct investment (FDI) in Bangladesh, despite strong trade growth. Another often-cited factor is investor preference for predictability. Australian firms tend to favour markets where Canberra has clear bilateral investment protection arrangements -- legal frameworks that reduce risk and enhance confidence.
Here, Bangladesh faces a strategic choice. Five years ago, the two countries signed a Trade and Investment Framework Arrangement (TIFA), establishing a joint working group to explore ways to deepen economic engagement. TIFA has provided an institutional platform, but it stops short of offering the legal certainty many investors seek. Trade officials in Dhaka increasingly argue that a bilateral investment treaty is the missing piece. Such treaties are widely used to protect foreign investors' rights, ensure fair treatment and provide safeguards against arbitrary policy shifts. For investors, they function as a form of legal insurance; for host countries, they signal seriousness about reform and openness.
The timing could hardly be more critical. Bangladesh's accession to larger trade blocs such as ASEAN or the Regional Comprehensive Economic Partnership (RCEP) may take years. In the interim, a bilateral investment treaty with Australia could serve as a bridge -- anchoring confidence at a moment when Bangladesh is transitioning out of LDC status and seeking to reposition itself as an upper-middle-income economy over the next decade.
Australia, for its part, has signalled growing interest. The appointment of a resident Austrade Trade and Investment Commissioner in Bangladesh in February 2025 was a quiet but meaningful milestone. It reflects recognition that Bangladesh is no longer merely a development partner or a low-cost sourcing destination, but a fast-growing market of more than 170 million people with expanding consumer demand, digital ambition and infrastructure needs.
The complementarities are striking. Australian exports of cotton and natural fibres feed directly into Bangladesh's globally dominant ready-made garment industry. Australian expertise in education -- particularly vocational and technical training -- aligns closely with Bangladesh's demographic reality: a young population urgently needing skills for a changing labour market. In energy and minerals, Australian companies are well placed to support Bangladesh's infrastructure expansion and energy transition, including renewable energy development.
Beyond commerce, the relationship is underpinned by a dense web of cooperation. Australia runs one of its most substantial development assistance programmes in Bangladesh, with a strong focus on education, economic resilience, gender equality and governance. Since 2017, Australia has committed more than $1.25bn to humanitarian responses linked to the Rohingya crisis, easing Bangladesh's burden in hosting over 1.1 million displaced people. This humanitarian engagement is not peripheral to trade; it shapes trust, political goodwill and long-term stability -- all prerequisites for sustainable investment.
People-to-people links are another quiet strength. More than 73,000 Bangladesh-born people now live in Australia, forming a bridge between the two societies. Student mobility has surged: over 18,000 Bangladeshi students enrolled in Australian institutions in 2024, a 50 per cent year-on-year increase, and numbers climbed further in 2025. Sporting exchanges, cultural cooperation agreements and governance fellowships add texture to what might otherwise be a purely transactional relationship.
Strategically, both countries share an interest in a peaceful and rules-based Indian Ocean region. They work together in forums such as the Indian Ocean Rim Association, the Bali Process, the Commonwealth, the World Trade Organization and the United Nations. Bangladesh's role as the largest contributor to UN peacekeeping operations underscores its growing global profile -- one that Australia has consistently acknowledged.
Yet none of this should breed complacency. Bangladesh still faces challenges in doing business: regulatory complexity, infrastructure gaps and policy unpredictability among them. Economic reforms -- from banking sector restructuring to labour law amendments -- are underway, but their credibility will ultimately be tested by implementation. For Australian investors accustomed to stable, transparent systems, progress in these areas will matter more than promotional roadshows or lofty declarations.
The opportunity, however, is real. Bangladesh is no longer a peripheral economy; it is a pivotal one in the Indo-Pacific. Australia is no longer just a distant partner; it is a source of technology, skills and capital that Bangladesh needs for its next growth phase. Moving from potential to performance will require more than goodwill. It will demand concrete legal frameworks, targeted investment strategies and a willingness on both sides to see each other not through the lens of habit, but of possibility.
Old friends, after all, can still discover new reasons to work together.
mirmostafiz@yahoo.com