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Signing of FTAs put on back burner

Red tape takes years for decisions

Syful Islam | May 27, 2019 00:00:00

The government has taken a wait-and-see policy towards signing bilateral free trade area (FTA) deals, officials concerned said.

Commerce ministry high-ups, allegedly, have been dithering on the issue in the name of doing a feasibility study.

But a number of trade officials are of the opinion that Bangladesh should sign several FTAs before leaving the club of poor countries in 2024.

When asked, commerce secretary Mofizul Islam said the government would not advance towards signing FTAs without figuring out pros and cons.

FTA deals with some countries having substantial export potential are under review, he added.

"Our export basket is very thin. We have to proceed very cautiously," Mr Islam told the FE.

Bangladesh is member of two multilateral FTA and three preferential trade area (PTA) blocs.

It has no bilateral FTA or PTA deals with any country.

The two multilateral FTA deals are South Asia Free Trade Area (SAFTA) agreement and BIMSTEC FTA (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Free Trade Agreement).

On the other hand, three multilateral PTA deals are Asia-Pacific Trade Agreement (APTA), TPS-OIC (Trade Preferential Scheme among OIC member states) and D-8 (Developing-8) Preferential Trading Agreement.

However, the BIMSTEC FTA is yet to take effect.

Last year, the finance ministry gave the green light to commerce ministry to move towards inking bilateral and multilateral FTAs with several countries.

It named China, India, Indonesia, Brazil, Malaysia, Thailand, South Korea, Pakistan, Japan, Argentina, the United Arab Emirates, Australia, Sri Lanka and Saudi Arabia as potential countries for FTAs.

"Bangladesh's large trade gap with many countries can be minimised through signing of FTAs since the deals will help raise exports," finance ministry said in a letter.

Last June, Bangladesh and China began conducting a joint feasibility study on the possibility of striking an FTA.

According to trade officials, Beijing is eager to ink a bilateral FTA deal with Dhaka.

But Dhaka is less interested in doing so for possible loss of revenue in the form of duty and taxes, with China being the top sourcing country for Bangladesh.

Bangladesh imports goods worth over $11 billion from China and its exports stand only roughly at $1.0 billion.

Dhaka is also reluctant to sign an FTA deal with Malaysia for similar reason of potential loss of revenue worth billions of taka collectable as import duty.

According to a study carried out by the Bangladesh Tariff Commission FTA with Malaysia would prove beneficial to Dhaka, provided trade in services and investment is included.

"…preferential arrangement only considering trade in goods may not bring substantial benefits for Bangladesh. Rather, greater economic integration covering trade (goods and services) and investment would be more useful."

Since 2015, Bangladesh has not been in contact with Malaysia regarding the signing of FTA.

Before that, Kuala Lumpur had sent to Dhaka the name of its chief negotiator and requested a discussion on bilateral talks.

Officials said Dhaka is rather interested to ink FTA deal with Colombo.

But Colombo, according to officials, is less interested in commencing talks with Dhaka before it concludes its ongoing FTA negotiations with China and Korea.

In February, Bangladesh initiated talks with Indonesia on signing a PTA deal, mainly aiming to get duty-free access for its major exportables.

Bangladesh needs to sign multiple FTA and PTA deals as it is graduating to a developing country shortly, a senior commerce ministry official told the FE.

After its graduation, the country will lose various tariff-related facilities it now enjoys as a least developed country.

The signing of preferential trade deals like FTA and PTA before leaving the poor county's club would be a wise move, the official remarked.

Contacted over phone on Sunday, former finance adviser to a caretaker government Dr Mirza Azizul Islam said Bangladesh would not remain eligible for existing trade preferences after its graduation.

"In that case, higher rate of import duty will be applicable to Bangladesh's export goods in their destinations," he told the FE.

At this point, Bangladesh needs to sign bilateral FTA or PTA deals with major importing countries.

"I don't think FTA or PTA with major sourcing countries would be harmful since we have no other options but to import raw materials from there," Mr Islam said.

Earlier, Distinguished Fellow of the Centre for Policy Dialogue Dr Debapriya Bhattacharya also underscored the need for exploring possibility of striking FTAs with major countries.

But, prior to that some issues have to be taken into consideration so that Bangladesh can benefit from the deals, he told the FE.

Dr Bhattacharya said Dhaka should check whether it would get preferential tariff cut or its exportables can be included in the FTA concession list.

"The amount of loss of revenue from FTAs needs to be calculated and, at the same time, efforts should be made to remove non-tariff barriers while signing FTAs," he observed.

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