Accepting the economic realism
Saturday, 16 January 2010
Enayet Rasul Bhuiyan
Politics has a way of crippling or frustrating mutually gainful economic relations between countries. This is unfortunate. Countries ought to learn to jettison unnecessary and inflexible mind-sets, to overcome prejudices and to look at each issue on the pure merit of it, if they are to lend dynamism to the various processes of uplifting their economies through trans-borders cooperation.
France and Germany were once the worst of enemies only 65 years ago. The same was the relationship between Germany with UK and other countries in Europe. Japan and the USA were combatants in a world war in which the USA even hurled nuclear weapons against Japanese cities. Vietnam was bombarded in the sixties with intensity greater than World War II by US forces.
But what have been their economic relationships in the post war periods? They have all come closer and closer to engage in different interactions of mainly economic nature. The greater part of Europe now forms a vast common market where individual countries have gained substantially in the individual sense and the collective sense from such cooperation. Japan and Vietnam have not stopped from having economic interactions with the USA or discouraged the same on emotional grounds of war time atrocities. Both are today strongly willing trade partners of the USA. Past histories have not put off the leaders and peoples of these countries from the pragmatism of exploring ways of economic cooperation with their erstwhile hated enemies to reap the benefits of the same.
Countries and polities that realize the greater gains to come from accepting economic realism and acting in time, have a better economic future compared to the ones who for no good reasons decide to live in a cocoon of economic isolation regardless of the negative cost of the same for their economies. Bangladesh and India, today, present an interesting case or challenge to promoting economic regionalism for shared benefits.
Bangladesh had justifiable reasons in the past not to jump at Indian proposals because in matters of trade India promised so much at negotiations on the tables but defeated the same at the field levels. For example, India promised reduction and withdrawl of duties from Bangladeshi products wishing to enter its markets. But our exporters found their way practically blocked as Indian authorities imposed new para tariffs or non tariff barriers on these products. It was like India giving with one hand and taking away with another.
But times are changing and so have been changing the Indian government, think tanks and policy planners. A clear sign is seen of India realizing the bigger picture. They have come to realize that short term gains from devious policies are nothing compared to the huge advantages and gains India stands to reap by practicing fair dealings with its neighbours. It would be a win-win situation for all. Both India and its neighbours will substantially gain from the processes. But India as the biggest economy of the region will be able to make the greatest increase in output, trade and economic growth from a sort of liberalization policy practiced with its neighbours. The neighbours would also likely respond to Indian overtures because the same would end stagnancy and contribute significantly to their own economic growth which would not otherwise happen from the continuation of the status quo.
The Indian economy is on a fast growth track like China. Indian leaders realize that they could increase output in the global economy and gain as a result in the backdrop of the economic slowdown in the developed countries. But that would require the Indian economy to become more competitive in its trade. And in this matter, Bangladesh with its strategic location can extend its helping hand. But this help need not be free. Bangladesh can also gain a great deal from cooperating with the Indian plans. For example, from allowing transshipment of Indian goods over Bangladesh territories, Bangladesh can easily earn a billion dollars annually as fees. This amount can go up substantially even in the mid term with the volume of trade increasing. Infrastructures will have to be built inside Bangladesh for this and from this process Bangladesh can earn from employment of its labour and from construction activities inside its borders.
Bangladesh can allow the laying of a pipeline across its territories to carry Myanmar's gas to India and also earn a handsome regular charge for the service. Besides, it can also find a major source of gas for its own utilization in its present gas starved conditions by helping the setting up of this line.
India made proposals to use Bangladesh's ports. It is willing to even invest in the expansion of these ports and to build others for allowing the same to be partly used for the shipment of its goods. The use of Bangladeshi ports would substantially reduce transportation costs of Indian exporters and help their lead time. India, of course, would be paying well in foreign currencies to Bangladesh on a regular basis for such use of ports that would make its exporters more competitive in the external trade. Besides, it would invest in port expansion and development generating economic activities inside Bangladesh.
A long standing proposal is there from India for a free trade arrangement (FTA) with Bangladesh. Some quarters in Bangladesh fear that such an arrangement would swamp Bangladesh's markets with Indian goods hurting local industries. But they suffer from a misconception. FTA would not mean unfettered access of all kinds of Indian goods and services into Bangladesh. Even the number of goods under FTA would have to be agreed by the two countries in phases so that no swamping effect can take place .
Bangladeshi businesses generally are for an FTA. They think that under an FTA they would be able to export in far greater volumes goods from Bangladesh to India which they cannot do at the moment because of the tariff walls. FTA would mean large expansion of the formal bilateral trade between the two countries and since that trade would be transparent, both government would get revenues from the process. FTA would discourage the smuggling of goods both ways . Both governments are deprived from smuggling but under FTA both would be earning revenues from transparent expansion of the formal or legitimate trade. An FTA between the two countries is also likely to lower the production costs of certain Bangladeshi industries from the cheaper import of their raw materials from India.
The present government of Bangladesh should take a fresh look at Indian economic overtures with an open mind. Bangladesh has reasons to have misgivings from past Indian behaviour. But our leaders should look at the future and start appreciating the clearly discernible favourable changes in the outlook of the Indian government and respond appropriately and positively to the same. They should be wary in scrutinizing the proposals but there need not be any undue caution and foot dragging in respect of proposals from the Indian government that would seem to ensure satisfactory mutual benefits.
Politics has a way of crippling or frustrating mutually gainful economic relations between countries. This is unfortunate. Countries ought to learn to jettison unnecessary and inflexible mind-sets, to overcome prejudices and to look at each issue on the pure merit of it, if they are to lend dynamism to the various processes of uplifting their economies through trans-borders cooperation.
France and Germany were once the worst of enemies only 65 years ago. The same was the relationship between Germany with UK and other countries in Europe. Japan and the USA were combatants in a world war in which the USA even hurled nuclear weapons against Japanese cities. Vietnam was bombarded in the sixties with intensity greater than World War II by US forces.
But what have been their economic relationships in the post war periods? They have all come closer and closer to engage in different interactions of mainly economic nature. The greater part of Europe now forms a vast common market where individual countries have gained substantially in the individual sense and the collective sense from such cooperation. Japan and Vietnam have not stopped from having economic interactions with the USA or discouraged the same on emotional grounds of war time atrocities. Both are today strongly willing trade partners of the USA. Past histories have not put off the leaders and peoples of these countries from the pragmatism of exploring ways of economic cooperation with their erstwhile hated enemies to reap the benefits of the same.
Countries and polities that realize the greater gains to come from accepting economic realism and acting in time, have a better economic future compared to the ones who for no good reasons decide to live in a cocoon of economic isolation regardless of the negative cost of the same for their economies. Bangladesh and India, today, present an interesting case or challenge to promoting economic regionalism for shared benefits.
Bangladesh had justifiable reasons in the past not to jump at Indian proposals because in matters of trade India promised so much at negotiations on the tables but defeated the same at the field levels. For example, India promised reduction and withdrawl of duties from Bangladeshi products wishing to enter its markets. But our exporters found their way practically blocked as Indian authorities imposed new para tariffs or non tariff barriers on these products. It was like India giving with one hand and taking away with another.
But times are changing and so have been changing the Indian government, think tanks and policy planners. A clear sign is seen of India realizing the bigger picture. They have come to realize that short term gains from devious policies are nothing compared to the huge advantages and gains India stands to reap by practicing fair dealings with its neighbours. It would be a win-win situation for all. Both India and its neighbours will substantially gain from the processes. But India as the biggest economy of the region will be able to make the greatest increase in output, trade and economic growth from a sort of liberalization policy practiced with its neighbours. The neighbours would also likely respond to Indian overtures because the same would end stagnancy and contribute significantly to their own economic growth which would not otherwise happen from the continuation of the status quo.
The Indian economy is on a fast growth track like China. Indian leaders realize that they could increase output in the global economy and gain as a result in the backdrop of the economic slowdown in the developed countries. But that would require the Indian economy to become more competitive in its trade. And in this matter, Bangladesh with its strategic location can extend its helping hand. But this help need not be free. Bangladesh can also gain a great deal from cooperating with the Indian plans. For example, from allowing transshipment of Indian goods over Bangladesh territories, Bangladesh can easily earn a billion dollars annually as fees. This amount can go up substantially even in the mid term with the volume of trade increasing. Infrastructures will have to be built inside Bangladesh for this and from this process Bangladesh can earn from employment of its labour and from construction activities inside its borders.
Bangladesh can allow the laying of a pipeline across its territories to carry Myanmar's gas to India and also earn a handsome regular charge for the service. Besides, it can also find a major source of gas for its own utilization in its present gas starved conditions by helping the setting up of this line.
India made proposals to use Bangladesh's ports. It is willing to even invest in the expansion of these ports and to build others for allowing the same to be partly used for the shipment of its goods. The use of Bangladeshi ports would substantially reduce transportation costs of Indian exporters and help their lead time. India, of course, would be paying well in foreign currencies to Bangladesh on a regular basis for such use of ports that would make its exporters more competitive in the external trade. Besides, it would invest in port expansion and development generating economic activities inside Bangladesh.
A long standing proposal is there from India for a free trade arrangement (FTA) with Bangladesh. Some quarters in Bangladesh fear that such an arrangement would swamp Bangladesh's markets with Indian goods hurting local industries. But they suffer from a misconception. FTA would not mean unfettered access of all kinds of Indian goods and services into Bangladesh. Even the number of goods under FTA would have to be agreed by the two countries in phases so that no swamping effect can take place .
Bangladeshi businesses generally are for an FTA. They think that under an FTA they would be able to export in far greater volumes goods from Bangladesh to India which they cannot do at the moment because of the tariff walls. FTA would mean large expansion of the formal bilateral trade between the two countries and since that trade would be transparent, both government would get revenues from the process. FTA would discourage the smuggling of goods both ways . Both governments are deprived from smuggling but under FTA both would be earning revenues from transparent expansion of the formal or legitimate trade. An FTA between the two countries is also likely to lower the production costs of certain Bangladeshi industries from the cheaper import of their raw materials from India.
The present government of Bangladesh should take a fresh look at Indian economic overtures with an open mind. Bangladesh has reasons to have misgivings from past Indian behaviour. But our leaders should look at the future and start appreciating the clearly discernible favourable changes in the outlook of the Indian government and respond appropriately and positively to the same. They should be wary in scrutinizing the proposals but there need not be any undue caution and foot dragging in respect of proposals from the Indian government that would seem to ensure satisfactory mutual benefits.