Diplomacy to break trade barriers | The Daily Star
12:00 AM, April 05, 2011 / LAST MODIFIED: 12:00 AM, April 05, 2011

Diplomacy to break trade barriers

HSBC official talks to The Daily Star on the ways to increase potential


In recent years, commercial diplomacy has become a new growth point. It helps remove barriers to trade and investment, and find new export markets and foreign investment. Also, the diplomacy is required to resolve policy conflicts arising from the globalisation of the world economy.
Mahbub-ur-Rahman, head of corporate banking of the Hongkong and Shanghai Banking Corporation (HSBC), who was interviewed by The Daily Star last week at the bank's new headquarters in Tejgaon, said trade diplomacy is going to be a crucial factor in the days to come.
How will the latest GSP benefit us? Or, will it hurt our textile millers for relaxation in the rules of origin for fabrics? Can we supply RMG to the global retailing giants flocking in China and India, instead of going to the US or Europe?
What are the benefits for us if Bangladesh allows foreign investments into the readymade garment sector and what will be the problems if we don't allow that investment into the RMG? What will happen if Bangladesh allows or does not allow its entrepreneurs to set up businesses abroad?
Diplomacy is required even to make the foreign buyers of Bangladeshi RMG products understand that local manufacturers need more prices in the wake of rising yarn, fabrics and wage costs.
These are the few among dozens of areas Rahman mentioned where Bangladesh needs to launch diplomacy and lobbying to reap the maximum benefit. There is hardly any area where trade lobby and diplomacy do not work.
“Diplomacy is also needed to boost intra-regional trade and remove barriers,” he said.
The tools of diplomacy include negotiation, creating operational documents, public and private communication, analysis and research (especially in the fields of economics, law and social relations), and coalition building. According to analysts, Bangladesh lags in trade diplomacy compared to its competitors such as India, China and Vietnam.
Rahman was talking to The Daily Star soon after the bank made an announcement to award exporters for the second time.
The banker focused on trade diplomacy at a time when the world is rapidly becoming dependent on external trade. International trade is now well over 40 percent of the world's gross domestic product (GDP). Bangladesh's international trade also stands at 38 percent of its GDP worth slightly over $100 billion.
Of the total international trade Bangladesh does, HSBC alone handles almost a tenth.
Bangladesh is a trade deficit country as its imports exceeded exports by over $7 billion (nearly Tk 50,000 crore) in fiscal 2009-10.
The banker dreams one day Bangladesh will be a trade surplus country. Though there is every potential to make this happen, Rahman believes it is a gigantic task.
“Widening the export basket is the primary task to be done to reduce the trade gap,” he said. “We could not develop a single product other than RMG that can earn $1 billion from export.”
“We've to go for developing indigenous products to expand the basket,” said Rahman. Jute, shoe and leather could be the prospective sectors, he added.
The banker said a lot of economic challenges are waiting for Bangladesh in the wake of increasing pressure on the balance of payments and foreign exchange reserve. Remittance, which helps the country cushion its much-needed foreign currency, is on a challenge following the growing unrest in Middle East countries. Already over 30,000 expatriate Bangladeshi workers have returned home from Libya.
“So, the importance of exports has been growing,” said Rahman. He sees a lot of opportunities also.
“Bangladesh's exports income could reach $25 billion in just three years,” he said.
HSBC, which has presence in 87 countries, is known as a trade facilitation bank. It is the only bank in Bangladesh that has offshore banking services in all seven export processing zones. The bank has set a target to increase its share to 10 percent of Bangladesh's total external trade from present 8 percent.
More value addition could also reduce the country's trade gap, Rahman said.
But he emphasised reducing the lead-time, especially for the woven garments, to boost exports.
On the energy crisis that is looming over the country's industrialisation, Rahman said entrepreneurs have to think about the alternatives and accordingly negotiate with the buyers.
He feels that the entrepreneurs here now should go for large-scale factories to make their products cost-effective.
Poor skills and infrastructure are two major challenges for Bangladesh, he said. Developing Dhaka-Chittagong highways is also vital to increase trade.
Replying to a query, the banker said exporters should be supported more by foreign currency financing and hedging mechanism.
“Also, Bangladesh can think of a sovereign bond,” Rahman added.


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