Signing free-trade area (FTA) deal with Sri Lanka may enhance bilateral trade and benefit Bangladesh through access to an untapped market, an official feasibility study suggests.
Based on its findings, the tariff commission says Bangladesh has enormous untapped potential on the Sri Lankan market while possibility of revenue loss is very low.
Since Sri Lanka is a very small economy with limited number of industries, the negative impact on Bangladesh industries following the striking of FTA deal might be low.
Bangladesh and Sri Lanka are exchanging tariff preferences through SAFTA (South Asian Free Trade Area) and APTA (Asia-Pacific Trade Agreement). But the existing framework of preferential trade arrangements couldn't deliver much in enhancing bilateral trade.
"A comprehensive bilateral free-trade agreement may come good in a sense that bilateral negotiation is easier than plurilateral negotiations," the commission noted in giving the green signal.
Officials at the ministry of commerce (MoC) said the two South Asian nations have already agreed to sign an FTA deal to enhance bilateral trade, and a joint study in this regard will be conducted to find the pros and cons of the proposed treaty.
Now Bangladesh is carrying out the background study on signing the deal. The Bangladesh Tariff Commission (BTC) has conducted a feasibility study and the Bangladesh Foreign Trade Institute (BFTI) will conduct another one.
Thereafter, a joint study will be conducted preceding the framing of terms of reference (ToR) of holding negotiations.
A committee, led by an additional secretary of the MoC, has already been formed for carrying out FTA negotiations as Bangladesh government is keen on concluding the deal by October next year.
According to officials Dhaka has already sent a draft ToR of negotiations to Colombo for their consent.
They said the FTA deal with the island country would be comprehensive one, encompassing all the three categories: goods, services, and investment.
Meanwhile, a senior MoC official said presently Sri Lanka is negotiating FTA with China and Korea. Colombo is interested to commence FTA negotiations with Bangladesh only after inking FTAs with China and Korea.
The BTC study views that Bangladeshi products like potato, vegetables, food preparations, petroleum products, plastic bags, rubber sheets, leather goods, iron and steel, electronic accumulators, and pharmaceuticals have substantial export potential on the Lankan market.
It suggests bilateral investment is also needed to make most out of FTA, the MFN (most favoured nation) and national treatment because it may not only enhance value-chain activities between the two countries but also support each other in joining in global value chain as well as in increasing supply-side capacity building.
In fiscal year 2015-16, Bangladesh and Sri Lanka had a total trade worth US$76 million. Of the paltry volume, Bangladeshi exports fetched $30.45 million against imports from Sri Lanka worth $45 million.
Bangladesh mainly exports woven garments, knitwear, home textiles, agro-products, frozen foods, leather and leather goods, footwear, raw jute, jute goods, and bicycle to Sri Lanka.
The major imports from that country include live animals, animal products, vegetable products, animal or vegetable fats and oils, prepared foodstuffs, mineral products, and plastics and rubber articles thereof.
Sri Lanka has bilateral FTAs with some big economies like India and Pakistan. The Indo-Sri Lanka FTA was signed on 28th December 1998 that came into force on 1st March 2000 while the Pakistan-Sri Lanka FTA took effect on 12th June 2005.
The two free-trade deals have helped Lanka raise its export to some extent.
syful-islam@outlook.com
