India, Bangladesh keen on joint ventures across sectors

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: The bilateral trade agreement between India and Bangladesh first signed on October 4, 1980 is valid until March 31, 2009. This agreement provides for expansion of trade and economic cooperation, making mutually beneficial arrangement for the use of waterways, railways and roadways, passage of goods between two places in one country through the territory of the other, exchange of business and trade delegations and consultations to review the working of the agreement at least once a year.

The fifth meeting of the Joint Working Group on trade between India and Bangladesh was held on November 5-6, 2007 in Dhaka, Bangladesh wherein two sides had detailed discussion on enhancing bilateral trade and improving trade imbalance of Bangladesh with India.

Bangladesh’s merchandise trade with India increased nearly 2.5 times between 2001-02 and 2006-07 from $1 billion to $2.5 billion. The bilateral trade has been overwhelmingly tilted in favour of India. Consequently, Bangladesh’s trade deficit with India increased from nearly $1 billion in 2001-02 to $2 billion in 2006-07. Also notable is that while Bangladesh’s imports from India stabilised since 2004-05, its exports to India nearly doubled between 2004-05 and 2006-07. Bangladesh’s import-export ratio declined from as high as 20 in 2001-02 to 8 in 2006-07.

In 2006-07 India’s major exports to Bangladesh were cotton, cereals, edible vegetables, sugar, vehicles and parts thereof. India’s major imports in the same year included inorganic chemicals, other vegetable textile fibres, fertilisers and seafood.

The most important capital goods imported by India from Bangladesh was electric accumulators whose imports went up from $ 0.5 million in 2004 to $ 12.7 million in 2006, signifying a modest diversification of Bangladesh’s exports to India. Studies undertaken by the author have shown that India’s preferences to Bangladesh under

South Asian Preferential Trade Agreement (Sapta) did not result in any increase in its share of imports either in relation to world or in relation to its bilateral imports from that country. The principal reason is that India’s top preferential imports from Bangladesh are products such as jute and other textiles, for which Bangladesh is currently India’s sole supplier. Hence, the scope for further imports for such products is highly constrained. Only a handful of products that responded positively to preferences were electric accumulators, yarn of jute, twine, cordage, ropes and frozen fillets.

Following Sapta, the Saarc member countries launched a South Asian Free Trade Agreement, which became operational since July 2006. One year ahead of schedule, India agreed to reduce duty on imports from Least Developed Countries (LDCs) to zero from January 2008, barring products under its sensitive list. In March 2008, the commerce and industry minister, Kamal Nath announced that India was considering reducing its sensitive list for LDCs from the present level of 744 products to 500.

Besides, India’s decision to import eight million pieces of apparel from Bangladesh in one calendar year without any duty and conditionality of sourcing of fabric or port restrictions would go a long way in providing improved market access for its north-eastern neighbor. A MoU on procedural arrangements was signed in Dhaka in September 2007 and customs notification issued by Indian Department of Revenue on April 21, 2008.

As per a statement made by the Union minister of state for commerce and industry, Jairam Ramesh, this would enable Bangladesh to earn an additional $ 50-70 million a year. Bangladesh’s long-standing demand for improved market access to the Indian market has centered on its perceived high incidence of tariff, non-tariff and para-tariff barriers on its exportable products. A notable development to initiate action on this aspect has been the signing of MoU between Bureau of Industrial Standards (BIS) and Bangladesh Standards Institution (BSTI) in June 2007.

According to MoU provisions, BSTI and BIS would standardise quality controls to allow BSTI to perform tests and certify Bangladeshi goods export to India in contrast to the present practice of testing such goods by BIS laboratories in India.

In November 2007, Government of India has removed the prohibition on investment into India by citizens or entities of Bangladesh. A total of 181 foreign direct investment and joint-venture investment proposals from India worth $435 million have been registered with the Board of Investment in Bangladesh in sectors such as agro industry, textiles, chemicals, and engineering industries.