Annual trade between Bangladesh and India has the potential to reach $16 billion if the former improves its ease of doing business and completes all connectivity developments, according to Indian High Commissioner Vikram K Doraiswami.
“With the exception of 25 specific products, including alcohol, India has allowed all Bangladeshi exports duty free access since 2011 in a bid to help reduce the trade gap,” he told reporters at a “Seminar for Business and Economic Journalists”, organised by the Indian high commission at its premises yesterday.
Bangladesh is no longer dependent on a single exportable good, such as garments, and instead, it has a diversified export basket that includes plastic, processed food, and leather, he added.
However, Doraiswami went on to suggest that ensuring cheaper transportation and quality products would enhance Bangladesh’s competitiveness in the neighbouring market.
“Besides, the bilateral trade situation is still in India’s favour but it is improving for Bangladesh as the country’s exports are increasing every year,” he said.
The Indian envoy said his country was Bangladesh’s top Asian export destination with about $1,279 million worth of goods sent in fiscal 2019-20, followed by Japan with $1,183 million.
“Is this enough? No, we want to expand bilateral trade more and more as Bangladesh is our largest development partner,” Doraiswami said.
However, there are difficulties and challenges which need to be addressed beforehand in the interest of both parties.
According to a World Bank report released in March this year, intraregional trade in South Asia accounted for barely 5 per cent of the region’s total trade, just a fraction of the 25 per cent for the ASEAN region.
Bilateral trade between Bangladesh and India represents only 10 per cent of the former’s foreign trade and one per cent of India’s, as per the report styled, “Connecting to thrive: challenges and opportunities of transport integration in eastern South Asia”.
A key factor for the low trade volume is sub-optimal transport integration in the region. Transport integration agreements in South Asia are therefore crucial for creating cross-border integrated transport markets.
A motor vehicles agreement signed by Bangladesh, Bhutan, India, and Nepal in 2015 is a cornerstone of that integration. If implemented in full, it could lead to seamless movement of passenger, personnel and cargo vehicles across the South Asian countries, the report said.
Regarding connectivity and its benefits, Pramyesh Basall, second secretary (commercial) to the Indian high commission, said a free trade agreement could increase Bangladesh’s exports to India by 182 per cent and India’s exports to Bangladesh by 126 per cent.
Similarly, improving transport connectivity could increase exports even further, yielding a 297 per cent increase in Bangladesh’s exports to India and 172 per cent increase in India’s exports to Bangladesh.
Basall also said seamless transport connectivity between the two nations could increase national income by as much as 17 per cent for Bangladesh and 8 per cent for India.
Basall sees huge potential in the export of Bangladeshi construction materials like cement and steel to the northeastern states of India as huge infrastructure development works are ongoing there.
According to him, Bangladesh could use river routes as well as the Sabroom land port in south Tripura, bordering Ramgarh of Bangladesh’s Khagrachari, to transport products to the northeastern states at a cheaper cost.
Regarding foreign direct investment (FDI), he said Indian investors, including 353 Indian companies, put in $3.55 billion in different sectors of Bangladesh till date.
He also said Indian and Bangladeshi companies signed agreements worth nearly $10 billion for Indian investment, mainly in the power and energy sectors, during a visit of Prime Minister Sheikh Hasina to India in April 2017.
And with Indian economic zones coming up at Mongla and Mirsarai, the amount of FDIs from the neighbouring nation is bound to increase manifold, he added.
However, the second secretary raised some issues, including high customs duty of up to 400 per cent and a lack of infrastructure at dry ports.
He also pointed out that para-tariffs, supplementary, regulatory and customs duties, advance income tax and value added tax increased the cost of doing business.
Regarding an anti-dumping duty imposed on Bangladeshi jute products by the Indian government, he said the Bangladesh government was addressing it with a subsidy on the export of jute products.
Anita Barik, railway adviser of the Indian high commission, suggested using the railways to reduce transportation costs.
Pointing out that rail connectivity between Bangladesh and India had remained suspended during the 1965 India-Pakistan war, she said India was helping Bangladesh develop its rail connectivity to reduce the trade gap.
“We are emphasising on reconnecting all previous alignments between the two countries to make bilateral trade cheaper,” she noted.
Binoy George, deputy high commissioner, and Priyanshu Tiwari, resident representative of the Exim Bank of India, also addressed the seminar.