Bangladesh needs free trade agreement with the UK

The UK is Bangladesh's third-largest export destination with last year's shipments amounting to nearly $3.5 billion, of which garment items accounted for more than 93 per cent.

In fiscal 2018-19, Bangladeshi exports to the UK totalled $4.8 billion. However, the ongoing coronavirus pandemic has disrupted trade between the two countries.

Aside from being a major export destination, the UK acts as a hub for Bangladeshi shipments to other parts of Europe.

Besides, the UK provides a considerable about of foreign direct investment (FDI) for Bangladesh as more than 200 British companies currently have $2.5 billion invested in the country.

It is for these reasons and the significant historical relationship between the two nations that the UK is an integral part of Bangladesh's global trade.
More than seven lakh Bangladeshis now reside in the UK for education or business-related purposes if not as naturalised citizens.

Subsequently, a large number of citizens of Bangladeshi origin are involved in important business and political procedures in the UK and so, the island nation has turned into a very important trade partner for Bangladesh.

Since the Bangladeshi population in the UK is quite considerable, the demand for local food items like rice, fruits and fish has risen there.

And so, the time has come to sign an FTA with the UK so that Bangladesh can take full advantage of any potential business deals when Britain exits the EU trade bloc at the end of the year.

Although the British government has already assured that Bangladesh will continue to enjoy zero-duty benefits even after Brexit due to its status as a least-developed country, local businessmen want the two nations to sign an FTA to secure future benefits.

"We have to diversify our exports to the UK. Pran has been active in the UK and other foreign markets for many years now," said Ahsan Khan Chowdhury, chairman and chief executive officer of Pran-RFL.

The demand in the UK for his company's products such as bread, biscuits and other locally produced food items is on the rise due to the massive ethnic diversity present there.

Moreover, Bangladesh is the highest bicycle supplier to the UK, he said, adding that Pran-RFL exports 40,000 units to the UK every month.
"Therefore, we need signing an FTA with this vital market," he said at a virtual discussion on 'exploring trade and FDI opportunities with the UK', organised by the Dhaka Chamber of Commerce and Industry (DCCI).

Faraaz A Rahim, executive director of Rahimafrooz Storage Power Business, relayed his company's success story of exporting batteries to the UK.
"We have enough scope to widen our exports to the UK. Apart from apparel items, my company's success in exporting batteries is an example. So, we need to form a strategic partnership with the UK soon."

Besides, creating a platform for battery manufacturers and trading partners of Bangladesh and the UK is essential to increasing outgoing battery shipments.

As it stands, the global market for batteries is currently worth more than $59 billion, which leaves plenty of room for Bangladesh to grab a greater share, Rahim added.

Very few local companies export pharmaceutical goods to the UK even though the demand for cheap medication is very high there, said Abdul Muktadir, chairman and managing director of Incepta Pharmaceuticals.

Similar to other products, the UK could act as a bridge for Bangladeshi pharmaceuticals to reach other European countries as the country's Medicines and Healthcare products Regulatory Agency (MHRA) is well recognised in the region.

If Bangladesh's pharmaceuticals companies are registered with the MHRA, it will take Bangladesh's drug manufacturing sector to new heights.
After Incepta was registered with the MHRA, buyers in the UK paid $11 per pack for the same medicine that buyers from the UAE offered $3 for, Muktadir said.

Most of the generic medicines available in the UK is produced in India.

Therefore, Bangladesh could also benefit from the UK market if it builds a strong relationship with the country, he added.

Apart from apparel products, Bangladesh could export a lot of other items like jute goods, pharmaceuticals and footwear to the UK, said Hossain Khaled, managing director of the Anwar Group of Industries.

The UK's imports amounted to $692 billion in fiscal 2019-20 and so, as a leading export nation, Bangladesh can grab a greater share of this market.
Khaled also urged British entrepreneurs to invest in Bangladesh's automotive industry while adding that the country needs to improve its ranking on the World Bank's Ease of Doing Business Index.

In fiscal 2019-20, 13 per cent the country's total software exports were destined for the UK, said Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS).

While third in terms of overall export, the UK is the second-largest export destination for locally developed software.

But still, Bangladesh can export 10 times more than the existing trend to the UK.

Kabir also asked the government to provide British investors with the scope to establish industrial robotic software companies at the high-tech parks in Bangladesh.

Asif Ibrahim, a director of the Bangladesh Garment Manufacturers and Exporters Association, urged British investors to relocate their businesses to Bangladesh and establish more man-made fibre textile factories.

Investors from the UK could invest in Fintech, a listed financial services company of Bangladesh, he added.

Seeing as Bangladesh enjoys duty-free benefits with China, British investors could take advantage by setting up their factories here, said Abul Kasem Khan, chairman of the Business Initiative Leading Development.

This is why signing an FTA is very important for Bangladesh, he added.

Bangladesh needs to find out whether signing an FTA is indeed crucial at this juncture as the country already enjoys preferential duty privileges with several developing and developed countries due to its classification as a least developed country, said Sharifa Khan, additional secretary (FTA) to the commerce ministry.

Besides, these facilities will continue until 2027, the final year of Bangladesh's graduation to a developing country. The UK government also previously announced that tariffs would be cut substantially next year.

The existing import tariffs will come down from a maximum of 20 to 10 per cent to 5 or 2 per cent depending on the product's nature.

"So, we need to take advantage of this change," Khan said.

The country has tremendous potential to do business with the UK, said Robert Chatterton Dickson, the British high commissioner to Bangladesh.

However, there is a wider issue at hand: Bangladesh's need to improve its ease of doing business ranking, he added.

In 2018, FDI from the UK to Bangladesh stood at $370 million, which is 10 per cent of the amount that flew in that year, said Selim Raihan, executive director of South Asian Network on Economic Modelling, while presenting a keynote paper.

Although FDI from the UK to Asia totalled £186.46 billion in 2018, Bangladesh's share of that amount was just 0.37 per cent, Raihan said.

Some of the obstacles for the country to attracting FDIs from the UK are its narrow export basket, inadequate policies and strategies, weak collective action from non-garment sectors, weak enforcement of intellectual property rights, high cost of doing business and slow implementation of infrastructural projects.

The chambers of commerce in Britain are not aware of Bangladesh's potential as a supplier, said Saida Muna Tasneem, Bangladesh's high commissioner to the UK.

She went on to call for the establishment of strong trade and investment-related relationship with the UK to address the issue as Bangladesh has the opportunity to export light engineering products and other value-added garment items to the market.

The UK is the second-largest foreign investor in Bangladesh, registering accumulated an FDI stock of about $2.45 billion as of March, said DCCI President Shams Mahmud, who moderated the discussion.

He also asked the concerned agencies of both the countries to undertake the necessary steps and dialogues to sign an FTA with a focus on comprehensive economic integration.

Md. Shahriar Alam, the state minister for Foreign Affairs, said that his government will soon form a Bangladesh UK (BG UK) Commission for holding a day-long business dialogue every year in a bid to boost trade and investment between the two countries.    

Source: The Daily Star