Exporters pin big hopes on Bhutan

Bangladesh's exports to Bhutan would get a huge boost once the two sides sign the proposed preferential trade agreement, said exporters and experts yesterday.

They say the move would create new trading opportunities between the two countries. The PTA will ensure duty-free access to major trading items of both countries.

For instance, Bangladesh will enjoy duty benefits on the shipment of garments and clothing accessories, jackets and blazers, plywood, particle boards, mineral and carbonated water, green tea, orange juice, pineapple juice and guava juice.

The Bhutanese goods that will be eligible for the preferential treatment include milk, natural honey, wheat, jams, fruit jellies, marmalades, food preparations of soybeans, mineral water and carbonated water, wheat bran, quartzite, cement clinkers, portland cement, soap, wooden particle boards, ferrosilicon, iron bars and rods or non-alloy steel and wooden furniture.

"We have started a new journey by approving the PTA with Bhutan," said Commerce Minister Tipu Munshi by phone after the cabinet approved the agreement.

Once signed, this would be Bangladesh's first bilateral trade agreement with any country.

More than 100 Bangladeshi-origin goods will come under the PTA to be signed within the next month. Bangladesh will allow duty-free import of 34 Bhutanese goods, he said.

Business leaders and exporters were equally elated.

Ahsan Khan Chowdhury, chairman and CEO of Pran-RFL Group, said his company has been performing strongly in Bhutanese markets for years because of the high demand of goods the local conglomerate produces. The company mainly exports plastic goods for household purposes, noodles, confectionery items, juices, beverages, biscuits and energy drinks to Bhutan.

"If my company enjoys duty-free benefits on the exports, the shipments will grow," Khan told The Daily Star.

Pran-RFL Group ships $2.5 lakh worth of products to Bhutan every month. "I hope my business will grow faster to Bhutan due to this PTA," he said.

Bhutan can also be a good source for processed fruit juice. The Himalayan nation produces a lot of orange and kinnow. Bangladesh can import a lot of citric fruits to process and re-export as juice to other countries or sell in the domestic markets, he said.

"I welcome the move," Khan said.

The two-way trade between Bangladesh and Bhutan was $57.9 million in fiscal 2018-19.

Bangladesh exported more than $300,000 worth of garment items to Bhutan at 30 per cent duty, Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association.

"We see opportunities everywhere, especially when it's within our South Asian region."

Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry, said the Bhutanese market might be smaller compared to its South Asian peers, but it still is an important market for exports and imports.

He said Bangladesh is heavily dependent on garment items, so the planned agreement can create opportunities for both countries to trade agricultural products.

Some selected sectors like plastic goods, light engineering and electronic goods will immensely benefit from the PTA, he said.

MA Razzaque, research director at the Policy Research Institute of Bangladesh, said Bhutan is important both as a trading partner and as a strategic partner. Mahmud suggested the government strike deals with countries in Africa and Latin America so that local manufacturers do not face any lean period in exports.

In Bangladesh, the garment sector, the main foreign currency earner, faces a lean season in June, July and August because of a lack of work orders from North American and European retailers and brands.

"If Bangladesh can sign deals with African and Latin American countries, local manufacturers will be able to keep their factories up and running throughout the year," he said.

Razzaque said Bangladesh needs to ink trading deals with important partners like the European Union, the UK, the members of the Association of South-East Asian Nations and China for the continuation of zero-duty benefits even after the graduation from the group of the least-developed country (LDC) to a developing country by 2024.

He said Bangladesh should demand duty-free benefits on exports to India under the South Asian Free Trade Area (SAFTA)'s Article 12 as New Delhi has extended such preferential treatment to all goods coming from the Maldives under the clause although the Island nation became a developing country in 2011.

The clause mainly guarantees zero-duty access to Indian markets even after the graduation.

India has already proposed to sign a Comprehensive Economic Partnership Agreement (CEPA) with Bangladesh.

However, the PRI research director prefers SAFTA's Article 12 to the CEPA as there is a precedent in the Maldives.

India is a very important and a big source for industrial raw materials and other basic commodities for Bangladesh.

The signing of the PTA with Bhutan will encourage Bangladesh to sign big deals with major trading partners in future, Razzaque said.

"I am hopeful of signing more free trade agreements and PTAs with some other potential trading partner countries within the next few years," said Tipu Munshi. 

Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said once Bangladesh moves out of the LDC, the country's market access to many countries would come to an end.

"So, we will have to sign bilateral FTAs and CEPAs to deepen economic ties and secure preferential market access."

The trade economist said Bangladesh would gradually have to move from PTAs to more comprehensive FTAs and CEPAs.

"Bilateral relationship is not only about trade in goods. There should be CEPAs, which would include investment, logistics and trade in services apart from trade in goods."

Economic agreements being signed these days around the world are mostly CEPAs, Rahman said. 

"Bangladesh's negotiating capacity has to be improved because deals would have to be signed with larger countries in the coming years."