Trading with Australia

Justin Lee

Bangladesh's exports to Australia have shot up on the back of duty-free and quota-free (DFQF) benefits awarded by Canberra.
The shipments soared 176 percent to AU$119 million (Australian dollars) or US$98 million in 2008-09 from AU$43 million (US$35 million) a year ago -- the highest since Bangladesh had got the DFQF facility in 2003.
Another high in the last six years was at AU$51 million in 2004-05. [1 AUD=0.830222 USD]
The global financial crisis that rattled Bangladesh's two major export destinations – Europe and the US -- has pushed the exporters into diversifying markets. Clothing items led the latest surge in exports to Australia.
“It's good to see that's finally been taken up,” says Justin Lee, Australian high commissioner to Bangladesh.
Even after getting the DFQF facility, Bangladesh's exporters showed a little interest in Australia whose total imports stood at US$191 billion in 2008.
There was a lack of knowledge among Bangladeshi exporters about the potential in Australia. Also, the Australian buyers had a tendency to shop from other countries in Asia.
These destinations such as China are becoming expensive, leading the buyers, including those in Australia, to explore cheap sources.
The Australian envoy says Bangladesh is becoming a strong competitor in the region.
“That's why the Australian buyers are now coming here,” says Lee.
To Lee, it is a sign of rising awareness among the businesses of both the countries.
“So it really means that at the moment there is a good opportunity to increase bilateral trade and good opportunity for Bangladesh to increase exports.”
However, according to the high commissioner, there is still something to do for building confidence among the Australian buyers who do not have much knowledge about Bangladesh's supply.
Lee says the key factor that raises the doubt is power and energy crisis as it eats into the whole manufacturing capacity of the country.
“The Australian buyers coming to Dhaka have asked whether the electricity and energy shortages in Bangladesh might affect manufacturing and the ability of Bangladesh producers to fulfil orders from overseas and expand into new markets,” he says.
The diplomat is aware of Bangladesh's export performance in the leading markets.
But the question the buyers in the new markets have is whether Bangladesh will be able to keep expanding production into new markets given the infrastructure constraints, Lee says.
“So I really think that the ball is in Bangladesh's court in some way to look at how they can further increase manufacturing capacity here.”
He says Bangladesh will be able to increase manufacturing capacity by addressing the energy and electricity crisis, which in turn will boost confidence among the buyers and help grow bilateral trade.
Data provided by the Australian high commission shows the bilateral trade rose to AU$495 million in 2008-09 from AU$281 million in 2007-08, with Australia enjoying a trade surplus amid continuous rise in its exports.
Australia's major exports include vegetables, wheat, milk and cream as well as industrial raw materials such as cotton.
“You don't import laptop computers, cars and consumers goods. We sent to Bangladesh products that are good for Bangladesh economy.”
However high tariffs and taxes on Australian items such as milk and dairy, fresh fruits and LPG (liquefied petroleum gas) continue to be disincentive.
Lee says products like milk are not luxurious goods rather essentials to promote nutrition and good health. Tariffs can also be reduced on fresh foods, he says.
The high duty and taxes have made the market of the milk products limited to the wealthy consumers, the envoy says.
Also non-tariff barriers act as deterrent to import of food items from Australia due to time consuming certificate and clearing procedures.
“We would argue that we could get an increase in trade if some of those tariffs and non-tariff barriers are lowered or reconsidered,” says Lee. These measures will facilitate further rise in the two-way trade.
One of the critical issues to strengthen bilateral trade is how Bangladesh can increase its exports to Australia.
He says the DFQF facility will be helpful in accelerating exports if awareness raising campaign and promotion continue.
“But I think if Bangladesh can increase the capacity here and make sure that they fulfil the orders then people will be coming to Bangladesh.”
Lee also points to the need for diversification of the export products.
Presently, garments account for three-fourth of export earnings at US$15.56 billion.
Some other sectors such as pharmaceuticals and shipbuilding are emerging with promises to fetch more income from exports.
Lee says one of the ways to increase bilateral trade could be to form joint ventures with Australian companies, which will facilitate marketing back in Australia.
Now investment of Australian companies is low with bulk of the investment being made in energy and farm sectors.
“I think there could be efforts to facilitate more investment that would help trade as well.”
The Australian diplomat says the Bangladeshi businessmen should look at what other countries are selling to Australia so they can think of exporting those to Australia.
According to Lee, Bangladesh is becoming more competitive compared to other countries in the region.
And if Bangladesh diversifies its manufacturing base, it will yield positive results.
“Starting point is getting infrastructure right so that it can support broad manufacturing. Then try to diversify the manufacturing base,” says Lee.
“Because basically whatever Bangladesh produces cheaply, reliably and cost effectively, people from other countries including Australia are going to purchase.”

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