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Presentation on: BANGLADESHBANGLADESH-PAKISTAN TRADE OPPORTUNITIES UNDER SAFTA BY

Saifuzzaman Chowdhury
President
Chittagong Chamber of Commerce & Industry

Importance of bilateral trade cooperation:


The much hyped change-over in global political and changeeconomic arena and its perceived fallout on national progress and security, has caused every country of the world, to pursue pragmatic policy and strategy with due emphasis on its competitive resources base and comparative prospects and potentials to attain the cherished goal of viable development. In fact, in development. a bid to ensure sustainable national progress and security, every country is or ought to be very active to harness even an iota of opportunity. But opportunity. attainment of this much coveted goal and objective, is quite often impossible for an individual country alone without the collaborative help and collective effort of other country. country.
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Multilateral, plurilateral or regional arrangements and cooperation can yield best result in this regard. But very often, regard. negotiations on multilateral, plurilateral or regional basis are of complexed nature and time consuming. It requires consuming. harmonization of lot of divergent and conflicting interests and synthesizing of varying demands of many countries, which are very difficult to address. On the other hand, negotiation between address. two countries and accommodating each others different interests is much more easy to handle. As a result, both the handle. country can early harvest their economic complementarities and competitive advantages for their shared gains and benefits. This benefits. very prospect of reaping early benefits and possibility of exploiting collective potentialities, is now encouraging many countries to enter into bilateral pact or understanding even within a regional arrangement. The is why Trade Agreement at arrangement. bilateral level, is on surge, in recent time, in international arena. arena. The phenomenon also postulates the efficacy of pursuing enhanced bilateral trade cooperation between Bangladesh & Pakistan even under the ambit of SAFTA for the mutual interests. interests.

The Evolution of SAPTA to SAFTA:


8 December, 1985: SAARC was established with formal 1985: adoption of its charter by seven members. members. December, 1988: Fourth SAARC Summit Meeting, held 1988: in Islamabad, Pakistan gave a direction to identify areas of economic cooperation towards formation of SAPTA. SAPTA. 11 April, 1993: SAARC Preferential Trading 1993: Arrangement (SAPTA) was signed. signed. 30 April, 1995: SAPTA Consolidated National Schedules 1995: of concession was approved by Fifth Session of the SAARC Council of Ministry in New Delhi, India. India. 6 January, 2004: SAFTA was signed in Islamabad, 2004: Pakistan July 2006: SAFTA came into force. 2006: force.

Comparative Intra-Regional Merchandise trade: Intra1996 (%) EU (25) 25) NAFTA ASEAN MERCOSER Adden Country SAPTA/SAFTA 43 22 22 8 <5 2000 (%) 66 46 23 21 8 <5 2002 (%) 67 46 23 14 11 <5 2004 2006 (%) (%) 67 43 24 15 9 <5 66 42 24 16 9 <5
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The above table delineates that SAARC as a regional arrangement has never been able to exploit its prospects and potentials as it was expected for. Since its inception for. intra SAARC trade was below 5% which is one of the lowest in the world as a regional pact. Myriad of reasons pact. may be attributed towards the under exploitation of our regional potentials, but each and every family member of SAARC should now be very active to pursue all means and ways to realize its collective potentials. Hence, it is very potentials. high time that these two regional brotherly countriescountriesBangladesh and Pakistan should come up fast to tighten their hands to consolidate further their mutual and equitable growth and development prospects under the spirit of SAARC and SAFTA. SAFTA.

Rationale of Bangladesh-Pakistan increased Trade Cooperation: Bangladesh-

Cultural homogeneity and mutual acquaintance Same historical tradition Economic complementarities Huge market of about 300 million people Almost similar social structure and family bondage Homogenous consumer behaviour and buying pattern Existence of similar distribution system and selling strategy Almost symmetric economic development state Similarity in life style and standard of living Scopes to exploit each others competitive advantages

General Benefits of augmented bilateral trade cooperation:

Greater market access of each others products Attainment of more economies of scale More FDI attraction in both the countries Promotion of bilateral investment Facilitation of joint venture as well as technology transfer Greater consumer satisfaction with low price index Better exploitation of each others economic complementarities Infusion of dynamism and impetus to holistic economic development effort

Conspicuous Benefits of enhanced trade cooperation:


Bangladesh has been granted duty and quota free market access by EU, Norway, Canada, Japan, Australia and New Zealand and also preferential access by many other developed and higher developing countries. Pakistani entrepreneurs can easily countries. exploit this opportunity through increased economic cooperation with Bangladesh. Bangladesh. Bangladesh enjoys a strategically advantageous geographic location linking SAARC and ASEAN at the middle. Pakistani middle. entrepreneurs can avail of this opportunity if economic cooperation with Bangladesh is consolidated further. further. Bangladesh can use Pakistan as a Springboard for the markets of Afghanistan, Central Asia, Iran and Gulf countries. countries. Both the countries can exploit their economic complementarities. complementarities. For example Bangladesh has huge domestic and overseas apparel markets and Pakistan has raw material and competence in textile sector, which can be good combination for collective growth of both the economies. There are also economies. other fields for such mutually beneficial cooperation. cooperation.

Bilateral trade and economic relations between Bangladesh and Pakistan:


(Figures in Million US$)

Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Export to Import from Trade Balance Pakistan Pakistan 32.08 28.60 31.50 45.11 63.12 57.74 61.06 95.22 67.32 68.68 112.70 138.92 150.11 181.40 (-) 63.14 (-) 38.72 (-) 37.18 (-) 67.59 (-) 75.80 (-) 92.37 (-)120.34

* Galloping trade balance is always skewed to Pakistan.

Other Economic Relations:


FDI from Pakistan to Bangladesh registered with BOI goes to the tune of about 100 million US dollar 6 Pakistani companies are currently operating in Bangladeshs EPZs Altogether more than 50 Pakistani companies are operating in Bangladesh Pakistan has offered Bangladesh duty free access of raw jute and upto 15000 metric ton of Tea per annum. annum. Bangladesh has also submitted a list of 73 items under nine categories to Pakistan for duty free access. access. Existence of agreement for avoidance of double taxation

Major Export Import Items:


Sl# 1 2 3 4 5 6 Major Items Exported to Pakistan from Bangladesh Raw Jute Tea in bulk Jute manufactures Cut flower Pharmaceuticals Others: Others: Shrimps, terry towel, plastic hanger, zipper, P.V.C. bags, dry food, Bamboo Poles, Other Mfd. Goods, soap Mfd. toilet, leather, iron chain, ball pen etc. etc. Major items Imported into Bangladesh from Pakistan Textile & textile articles Vegetable products Prepared foodstuffs Machinery. Machinery. Chemical and allied products Others: Others: animal products, base metals and articles of base metal, wood and articles of wood, Raw hides, Plastic And articles thereof, footwear, articles of stone, glass and glassware, pearls etc. etc.

Most prospective sectors for Joint Venture:


IT Textile Leather Goods Agrobased Industry Light Engineering

Deterrents to accelerated bilateral trade and economic cooperation:


Perceived political uncertainties of both the countries Absence of direct shipping links between the two countries Lack of frequent interaction and exchange of required information between our businessmen Absence of cargo flights and enough passenger flights Lack of exchange of frequent private sector delegations Failure to participate in each others trade fairs Absence of required cooperation at Government level Myopic views of the business community on each others prospects and competitive edges

Areas to be given more importance to tap economic opportunities:


Strengthening and expanding technical cooperation Enhancing cooperation in fisheries and livestock Creating a Joint Fund to undertake investmentinvestmentpromotion activities and linkages among export processing agencies of the two countries. countries. Cooperation in Agriculture Cooperation in Tourism Cooperation in export Promotion and Signing of bilateral FTA Agreement at the earliest

Salient Features of the proposed FTA: If bilateral trade between Bangladesh and Pakistan is to increase to 1 billion dollar mark, an FTA agreement should be signed. The FTA should have signed. following features: features: Early Harvest Approach: The two countries can Approach: implement an Early Harvest Programme to deliver benefits to their private sector ahead of FTA as well as to provide impetus for an early conclusion of FTA negotiation. negotiation. Under this programme Pakistan should grant immediate duty free access to 73 Bangladeshi products under 9 categories as requested for. for. Pakistan can also provide a list of products under this programme. programme. Contd..P/2 Contd..P/2

Recognition of Special and Deferential Treatment for Bangladesh: Bangladesh: Pakistan should recognize the LDC status of Bangladesh and provide the Special and Deferential (S&D) Treatment to it. As an LDC, Bangladesh is the legitimate it. claimer of the facility. facility. Tariff reduction schedule: Under SAFTA Agreement, Pakistan schedule: is to reduce their tariff to 0-5% for Bangladeshi products within 3 years beginning from the date of coming into the force of the Agreement. Under the bilateral FTA, Pakistan Agreement. should reduce its tariff to 0-5% for Bangladesh with effect from coming into force of this bilateral FTA Agreement. On Agreement. the other hand, as an LDC, Bangladesh should be allowed to comply with its obligations as it is under SAFTA. SAFTA. Sensitive List: FTA should be more liberal than SAFTA. As an List: SAFTA. LDC, any item having export interest of Bangladesh, should be excluded from the sensitive list. At the same time, it should list. be allowed to maintain a wider negative list. Any products list. already under preferential treatment should not be included in the sensitive or negative list. list. Contd..P/3 Contd..P/3

Rules of Origin: Rules of Origin under the proposed FTA, Origin: should be more flexible than that of SAFTA. It should be SAFTA. based on simple value addition criteria and not on Heading or SubSub-Heading change criteria or combination of both of them. them. For getting preferential access to Pakistan market, value addition for Bangladeshi products should be less than or equal to 25% as the percentage is 30% in SAFTA. A derogation in 25% 30% SAFTA. value addition criteria for RMG and other labour incentive goods of Bangladesh should be allowed and it would not be more than 20%. 20% Recognition of Testing Institutes and Laboratories for Conformity Assessment: Conformity assessment certificates Assessment: on technical regulations and product standards, to be issued by the respective designated national agencies, should be accepted until mutual recognition Agreement is reached between the two countries. Non-acceptability of conformity countries. Nonassessment certificates of any product, if and when arise, should be resolved by mutual cooperation and discussion Contd..P/4 Contd..P/4 without restricting the flow of trade. trade.

Imposition of Restrictive Measures: Exports from Measures: Bangladesh should be exempted from antidumping, countervailing and safeguard measures on non-reciprocal nonbasis until Bangladeshs export share reaches more than 10% 10% and the combined LDC share reaches more than 25% 25% of total market share of Pakistan for that particular product. product. Settlement of Disputes: All disputes relating to any Disputes: transaction should be referred for settlement to an arbitration body to be mutually agreed upon by both the countries, unless both parties agree to settle the dispute in any other peaceful manner. manner. Negotiations on trade in services and investment: Trade investment: in Services and investments should be expedited by negotiations between the two countries on the basis of respective offers and requests on preferential basis taking into cognizance of the varying development state of both the countries. countries.

Formation of a joint trade facilitating Committee:


A joint trade facilitating committee should be set up consisting of the officials of the concerned agencies and representatives from the private sector to identify and remove trade barriers and facilitate mutual trade and investment. investment. The recommendations of the joint trade facilitating committee made from time to time should be the basis for regulatory framework and trade policy formulation between the two countries. countries.

Areas for joint efforts to reap benefits of bilateral Trade Opportunities Cooperation:
Harmonization of H.S. Codes of both the countries. countries. Simplification and harmonization of customs procedure. procedure. Mutual recognition of certifying and testing institutes. institutes. Establishment of direct shipping and air links Establishment of an active network of Government and private sector agencies related to trade and economy. economy. Fostering frequent interaction and building rapport between the businessmen of both the countries. countries. Making the Government functionaries responsive to the needs and problems of the private sector of both the countries. countries. Regular exchange of information on bilateral trade, commerce and investment

THANK YOU