Apparel exports to the EU markets would face 11.6 per cent duty after 2029, a seminar was told here on Tuesday, suggesting Bangladesh to develop a long-term strategy and action plan so that it can sustain competition without the duty-free facilities.
Speaking at the seminar, experts also recommended signing trade deals that might facilitate retaining the existing market access benefit as well as attracting investment mainly to face the post-graduation challenges like erosion in duty benefits.
Bangladesh has been the single-largest beneficiary of the European Union's LDC-specific trade preferences as its exports rose to US$23.2 billion in the last fiscal year, rising from only US$2.0 billion in 2000-01.
The country is also taking advantage of China's market share most in the EU market mainly because of the duty benefit, while Vietnam gains most from China's shift to the US market.
Research and Policy Integration for Development (RAPID) and Fredrich-Ebert-Stiftung (FES) Bangladesh jointly organised the seminar on "50 years of EU-Bangladesh Partnership: Charting Ahead on a Legacy of Success" at a city hotel.
Prime Minister's economic affairs advisor Dr Mashiur Rahman was the chief guest while EU ambassador to Bangladesh Charles Whiteley was special guest at the seminar, moderated by Dhaka University Professor and executive director of RAPID M Abu Eusuf.
UNDP Bangladesh country economist Dr Nazneen Ahmed moderated a panel discussion while resident representative of FES Bangladesh Felix Kolbitz, among others, also spoke.
Presenting the keynote paper, RAPID chairman MA Razzaque showed how EU's LDC tariff preference helped Bangladesh raising its clothing exports, making the country the world's second largest clothing exporter.
Taking advantage of tariff preference, Bangladesh captured more than 22 per cent of extra-EU apparel imports, he noted, adding that the country still has a huge export potential in the EU as only 60 per cent of the potential is currently being utilised.
Bangladesh's graduation in 2026 would result in immediate cessation of LDC-related trade preferences in most countries including Canada, China, India, and Japan, he said, adding only the EU and the UK would provide an additional three-year transition period until 2029.
In comparison, while Bangladesh stands to lose trade preferences, free-trade agreements could allow its competitors to gain competitive advantages in the EU.
Citing an example, he said Vietnam will enjoy zero duty market access to the EU by then due to its free trade agreement (FTA) with the EU.
He recommended developing a national-level consensus on the options about emerging issues like EU Green Deal and its carbon border adjustment mechanism (CBAM), and any policy shifts in the EU.
Dr Mashiur Rahman stressed on improving the labour force quality, export products diversification, investment in services sectors, including health and education, and capacity building of Bangladesh to enable the country to comply with the EU's new regulations.
Responding to money laundering issue, he said: "It is important to consider why money laundering takes place. Those who have money are not certain about the security of their money and wealth, and they do not have enough opportunities for investment."
"Money looks for safe heaven. In absence of security and enough investment opportunity, money is laundered," he said, calling for international cooperation to track who is involved in illicit money transfer and where they are siphoning off the money.
Mr Rahman also preferred not to allow bringing back such money in the country, saying that it distorts the market.
Professor of International Relations at Dhaka University Dr Imtiaz Ahmed said money from Bangladesh is laundered to the EU which is a 'serious problem'.
He noted that money laundering itself a corruption, but corruption itself is not the problem. If the black money is reinvested in Bangladesh, it could have been productive. Instead, it is being invested in Europe, he said.
Regarding the Bangladeshi Diaspora there, he said the communities are different from that of Vietnam and that the local diaspora are not engaged in business or investment here in the country.
He sought the EU's support so that they make investment in not only industries but also in other areas like education and entertainment. Mr Whiteley said the EU has developed a wide ranging relationship with Bangladesh in the last 50 years and it is now changing towards development of humanitarian assistance and trade.
The EU businesses want to come here but still there are some untoward obstacles to investing or bring them able to a win-win situation, he added.
EU has US$2.0 billion investment stock here in Bangladesh while US$6.0 billion in Vietnam.
"I think this can change and change quickly if policy makes right in Bangladesh side," he said, terming Bangladesh a great place to do business. He, however, stressed on improving the situation further.
Explaining the measures they are taking to overcome the challenges, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan urged the EU to extend the transition period by six years for Bangladesh after its graduation from least developed country status in 2026.
Taking the geopolitical situation, Russia-Ukraine war, Rohingya crisis and the Covid-19 pandemic into consideration, the EU should allow its duty-free market access for Bangladesh up to 2032, he said.
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