Signing of a free trade area (FTA) agreement with member-states of the Gulf Cooperation Council (GCC) may not be feasible for Bangladesh as it will cause huge revenue loss to the country, trade officials have said.
"The import duty in GCC countries on most of the goods is nearly 5.0 per cent while in Bangladesh it is much higher. So, if we sign FTA deal with them, we will incur significant revenue loss," additional secretary of the Ministry of Commerce (MoC) Manoj Kumar Roy told the FE.
He said Bangladesh imports a large volume of petroleum products from the GCC countries. "If we have to give duty waiver on petroleum import, we will incur a huge loss which may surpass our benefits from the pact."
"There is a risk in signing FTA or any preferential trade agreement with the GCC countries since it may lead to fall in our revenue earnings," Mr Roy added.
According to a study of the Bangladesh Tariff Commission (BTC), the GCC collectively is one of the major import sources of Bangladesh but not an important export destination.
Some export products from Bangladesh to the GCC states include pharmaceuticals, vegetables, food products, spice, meat and meat products, poultry, cosmetics, and detergents, subject to various non-tariff barriers, especially for religious, health, national security and environmental reasons.
On the other hand, Bangladesh has significant imports of 13 products from the GCC countries which are mainly raw materials or intermediate goods. Petroleum is the main product which Bangladesh imports from there.
The study said since Bangladesh is badly dependent on petroleum oil for meeting domestic demand, tariff reduction by forming FTA on this product might decrease revenue earnings.
It said since the existing tariff rate with the GCC is only 5.0 per cent, Bangladesh's gain from duty-free access facility will depend on the extent the reduced import price is translated into reduced consumer price.
However, the study said the GCC has a market of US$11 billion for RMG products. If Bangladesh can obtain duty-free access in these products by forming FTA, it may pave way for increasing RMG exports to the GCC markets.
It said tariff reduction by forming FTA on petroleum oil and other industrial raw materials like aluminium, iron and steel products might decrease production and trade cost which may intensify competitiveness of the products of Bangladesh both in domestic and foreign markets.
Bahrain, Kuwait, Oman, Qatar, the Kingdom of Saudi Arabia and the United Arab Emirates are members of the GCC, a regional inter-governmental political and economic union consisting of all Arab states of the Persian Gulf, except Iraq.
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