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Preferential trade arrangement: How it should be approached?

Bangladesh is the 3rd largest garment exporting country of the world in terms of value and in terms of volume it is the 2nd largest. The country exported more than 12.5 billion USD worth apparel product and forecast to export considerably higher amount (USD 16.0 billion) in this fiscal year 2010-2011. Amid acute product price hike globally the country has kept its growth well. In BATEXPO 2010 a top level think tank panel has got the scope to see the countries situation especially through RMG sector analysis.

Preferential trade arrangement will undergo huge changes

The seminar held on 26th November was titled as implication of trade liberalization for Bangladesh. As a keynote speaker Joint Chief of Bangladesh Tariff Commission Dr. Mostafa Abid Khan focused some points those are going to be the challenges for future of the country. He indicated to the changing environment in multilateral trading systems and figured out the position of the country in terms of preferential trading, bilateral and multilateral agreements, export support measures and barriers for export growth. As Bangladesh’s strength in RMG industry is a proved issue and the country expect to increase its RMG exports significantly, the preferential trading scopes that have been used by Bangladesh may change its pattern. As a LDC Banglsdeshi RMG is enjoying duty free access to many countries like EU, Canada, Australia, Japan, New Zealand, China, India etc.

Bangladesh expects to graduate to Middle Income Country from LDC status within coming 5-10 years. In that perspective and huge pressure in the WTO rounds for preference erosion, preferential tariff negotiation pattern is going to be changed. When Bangladeshi RMG export will increase more countries like USA will not give duty free access to Bangladesh as now also it is not giving any preference.  Bangladesh need to prepare for those days and the speakers in the seminar suggested focusing more on the Regional Trading Arrangements (RTA).  They also figured out that the competitors of Bangladesh are doing proliferation of FTAs more smartly and enjoying improved market access. Currently roused Disproportionately Affected Countries (DAC) issue may give more benefits to some of the major competitor of the country Pakistan & Sri Lanka in Bangladesh’s is not addressed properly in those places. Increasing Technical Barrier to Trade (TBT) and SPS should be addressed carefully to ensure minimum effect of those barriers in the trade. As per the speakers in the seminar, Bangladesh should emphasize more to trade by liberalizing and building necessary infrastructure and facilities realizing the limited resources of the country. They suggested that Trade GDP ratio should increase to at least 70% percent while now it is around 40% to make Bangladesh a country like Malaysia, Singapore and Hong Kong.

Bangladeshi investors should invest outside the country!

The seminar was being chaired by BGMEA president Mr. Abdus Salam Murshedy and Mr. Muhammad Faruk Khan, Minister of Ministry of Commerce was present as the chief guest. Md. Saiful Islam Mohiuddin, Vice President of BGMEA was the moderator of the seminar. At his speech Mr. Faruq Khan was insisting Bangladeshi investors even to invest outside the country to take the advantage of preferential trade arrangements where it is available. He told that we don’t need any foreign investment in garment sector now rather we can invest now in foreign countries. As a moderator Mr. Mohiuddin informed that now Bangladesh is not the country of cheapest labour. Bangladesh is paying more than Cambodia. Now Bangladesh is paying 34 cents and Cambodia is paying 32 cents per hour. Indicating to that data Mr. Faruk Khan encouraged investing in Africa, Cambodia etc. to get benefit from AAGWA and other preferential initiatives for those countries. As per the industry experts the point is being as the country now has current account and Balance of Payment (BOP) surplus and has crisis in energy. Some of those type initiatives may reduce the possibility of inflation in the financial structure but still employment generation issue also should be addressed properly, industry experts suggested.

Interest rate issue

The country is undergoing a sluggish investment situation caused by global recession, local political instability and acute energy crisis. Due to some positive signs over those main issues, the industrialists are trying move a bit with their investment plans. But most of them expressed their frustration about the interest rate and financial costs of the banking system. While current situation reduce cost of capital globally Bangladesh could not reduced that significantly. Mr. Mohiuddin informed that the businessmen are paying 13% interest which becomes 15-17% after adding different financial charges. He and other leader present over their urged government to take initiative to reduce that.

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