A vibrant South Asian Free Trade Area (Safta) is crucial for Bangladesh to increase trade with India after its graduation from a least developed country (LDC) to a developing one in 2024, said the BGMEA president yesterday.
"Bangladesh could miss out on grabbing a bigger slice of the Indian market after graduation due to high tariffs alongside the non-tariff and para-tariff barriers between the two countries," said Rubana Huq.
Bangladesh currently enjoys duty-free access to promising Indian markets under its LDC status but the country will face a 10 per cent tariff on apparel shipments following its graduation.
The president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) made these remarks during a panel discussion titled "how can regional cooperation support South Asia's Covid-19 recovery" on Wednesday.
The event, organised by World Bank, was moderated by the international lender's director for regional integration and engagement of South Asia, Cecile Fruman.
Various diplomats, researchers, businesspeople, World Bank officials, political, economic and trade analysts and policymakers from member countries of the South Asian Association for Regional Cooperation (Saarc) participated in the discussion.
A trust deficit is prevalent in the entire region, Huq said, adding that any single country can never act alone. For instance, India practices isolationism but not to an extreme extent.
"And this cannot be allowed to take place as the para-tariffs and non-tariff barriers impede the growth of bilateral trade in this region," she continued.
The trade deficit between Bangladesh and India heavily favours the latter.
Since gaining independence, Bangladesh has spent $8.6 billion on imports from India against its $1.1 billion in exports to the neighbouring nation, leaving a $7.75 billion trade deficit between the two countries, according to the BGMEA president.
With an average annual growth rate of about 18 per cent, the total market size for apparel products in India stands at about $60 billion but since local manufacturers are unable to fully cater to the domestic demand, Bangladesh can be considered as a major supplier.
Trade between Bangladesh and India is 45 times greater than it was 10 years ago, indicating great potential for more trade in the future despite the fact that the unit price of Bangladeshi shipments to India declined by 1.62 per cent in the same period.
Bangladesh has also been considering the Association of South East Asian Nations (Asean) as another promising market for the country's products, Huq said.
Meanwhile, personal protective equipment (PPE) has turned into a major export item for Bangladesh amid the ongoing coronavirus pandemic and India could be a big source for the fabrics used in these specialised products, she added.
Greater collaboration between the numerous industries and governments of South Asia is also needed to further trade within the region.
The BGMEA president went on to question that if energy could be traded bilaterally, then why could countries not collaborate towards protecting the environment or manufacturing processes.
While speaking on the current condition of cottage, micro, small and medium enterprises in Bangladesh, Huq said more than 400 garment factories shut down as a result of the Covid-19 fallout.
"If the land ports between Bangladesh and India do not operate well, bilateral trade will fall into trouble," Huq said.
South Asia has a lot of potential for e-commerce markets as the number of people linked to the internet in this region continues to increase exponentially.
"So, an online marketplace can be formed among the South Asian nations," she added.
Regional integration, cooperation, and engagement can produce significant gains across South Asia. For instance, intra-regional trade stands at only a third of its potential with an estimated gap of $23 billion, according to data from the World Bank.
Cooperation in the energy sector between Bangladesh, Bhutan, India, and Nepal could lead to savings of $17 billion, it said.
Transporting goods across the region can cost up to 50 per cent more for countries under the Organisation for Economic Co-operation and Development.
As South Asia grapples with the economic impact of Covid-19, it has an opportunity to strengthen regional institutions, improve infrastructure and connectivity, advance trade policy, and develop cross-border solutions for shared problems.
The One South Asia webinar series is part of the World Bank's updated regional integration, cooperation, and engagement strategy for South Asia that focuses on enabling economic connectivity, reducing vulnerabilities, and investing in human capital, the World Bank said in statement.
Shyam Saran, former Indian foreign secretary and current senior fellow at the Centre for Policy Research, said once the Covid-19 vaccine arrives, it would be difficult for India to produce huge quantities of it for its 1.5 billion people.
The government and non-government organisations should collaborate in this regard to ensure widespread vaccine production for such a large population, Saran said.
When normalcy in the economy is restored, a resilient supply chain is needed not only for India, but also other countries.
There needs to be greater regional cooperation for social and economic recovery in the South Asian region during the post-pandemic period.
However, there is rising confrontation in this region. For example, the relationship between Bangladesh and India is very positive but political tension exists between India and Nepal.
It is also not possible for India to clean up the plastic pollution present in the Bay of Bengal all alone. "Therefore, regional cooperation is needed here," he said.
Swarnim Wagle, chairman of the Institute for Integrated Development Studies (IIDS) and former vice-chairman of the National Planning Commission of Nepal, said India and other Saarc members need to share their pharmaceutical competency to ensure the availability of coronavirus vaccines in the region.
The Serum Institute in Pune, India produces 500 doses of various vaccines per minute but other states in this region do not have the same level of competency and so it is vital to make Covid-19 vaccine a public good, Wagle said.
The IIDS chairman suggested Saarc members continue holding meetings via video conferencing amid the coronavirus crisis in a bid to ensure speedy economic recovery while also removing non-tariff and para-tariff barriers.
Financial cooperation with regard to the provision of loans under the Line of Credit Scheme and strengthening the Saarc food bank for food security is also necessary for this region.
Financing should be a new area of cooperation among Saarc nations alongside amendment of the old industrial policies and reduction of costs in trade, he added.
Hartwig Schafer, vice-president of World Bank for the South Asian region, said an exemplary cooperation among the South Asian nations was needed.
For instance, 70 years ago Germany and France started their regional cooperation which went on to inspire other countries. Later, other European countries joined them to form the existing European Union.
Schafer urged for increased energy trade among the South Asian nations. Energy trade among the Central Asian nations is very common, he said, adding that stronger supply chain management was needed in the region to increase trade.