ASEAN has become a vital market for Bangladesh due to its immense size and more so keeping in mind Bangladesh’s upcoming LDC graduation, which would shorn the country of the current trade privileges that it enjoys. As per estimates, post the LDC graduation, Bangladesh is likely to lose around US $ 7 billion worth of export earnings annually.
The ASEAN bloc, experts maintain, holds a lot of promise towards minimising the adverse implications in terms of export loss that Bangladesh might suffer, keeping in mind which Bangladesh has reportedly started negotiations with ASEAN to ink an FTA.
“I signed the negotiation letter today and sent it to the Foreign Ministry to open formal negotiations with the ASEAN headquarters, so that we can sign an FTA with this major trade bloc,” stated Commerce Secretary Md Jafar Uddin even as President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Dr. Rubana Huq stated by 2030, ASEAN as a bloc would be the 4th largest economy in the world and to enter that market, Bangladesh should negotiate signing an FTA with a Rules of Origin clause favourable to the ASEAN.
The southeast Asian nations are also an important source of raw materials for Bangladesh’s garment sector and other industries.
Bangladesh is expected to join the big league of developing nations soon. However, post the LDC graduation, the country is likely to lose around US $ 7 billion worth of export earnings annually, a Government report estimates. The report said Bangladesh could lose the export market, especially in the European Union (EU), Canada, Australia, Japan, India and China.
These are the projections that were reportedly made at the newly framed Perspective Plan 2021-2041 (PP2041). The state-run General Economics Division (GED) prepared the vision paper where Bangladesh wants to be a developed nation by 2041.
Based on the simulation results from the global dynamic general equilibrium model, the plan said: “The loss of preferences in the markets of EU, Canada, Australia, Japan, India and China in 2024 might lead to an annual reduction in the total export of Bangladesh by 11 per cent or equivalent to around US $ 7 billion given the current projection of export growth.”
The vision paper further said that although the graduation as non-LDC would improve Bangladesh’s image and rating for attracting foreign direct investments, there will be a number of risk factors while adding that Dhaka would lose its preferential trade benefits in the EU market — according to the country’s Export Promotion Bureau (EPB), Bangladesh earned US $ 18.70 billion, 51 per cent of total US $ 36.6 billion earnings, making shipment of goods and services to the European markets in the fiscal year 2019-20 — the largest business destination of the local garment and textile products.
In light of the developments, experts have suggested strong action plans and policy reforms for tackling the losses and protecting the export growth. And going by latest reports, Bangladesh seems to have already started parleys pertaining to trade agreements with a host of individual countries as well as the Association of Southeast Asian Nations or ASEAN, which is a regional intergovernmental organisation comprising ten countries in Southeast Asia.
The ASEAN bloc in particular, experts believe, can save Bangladesh from adverse implications. Their observations are not without reasons! As per reports, in 2016, the combined size of the GDP of the ASEAN nations rose to US $ 4,034 billion from US $ 2,373 billion in 2007, and the trade bloc is now set to become the world’s fourth-largest by 2030. Also, if experts are to be believed, Bangladesh’s export volume can reach up to US $ 1.2 billion within four years from the present US $ 60 million to ASEAN countries if technical and non-tariff barriers are addressed.
According to Dr. Selim Raihan, Professor of Economics Department of Dhaka University, Bangladesh stands to gain significantly through integration with the Southeast Asian countries which will allow Dhaka to focus on export-oriented manufacturing strategy and encourage export diversification.
“Our trade will grow significantly if we join the ASEAN,” reportedly underlined Rubana while addressing an event organised by the Dhaka Chamber of Commerce and Industry (DCCI), and went on to add that in Bangladesh’s context, joining the ASEAN would be greatly beneficial also from the perspective that a number of its member nations have turned into good destinations for raw materials sent to and from the country.
Hence, keeping the prospects in mind, Bangladesh has formally initiated negotiations with the ASEAN to sign a free trade agreement to enjoy greater market access in the bloc after graduating from the least developed country grouping.
First, because the ASEAN is a big market where Bangladesh can do well, second is to safeguard the duty privilege after graduation and third, if Bangladesh can sign an FTA with the ASEAN, it does not need to sign any bilateral agreement with any of the 10 member countries of the bloc.
“Otherwise, we have to sign either a Preferential Trade Agreement (PTA) or FTA with the ASEAN member countries like Indonesia or Malaysia so that we can exploit the business opportunities of this major trading bloc,” explained the Commerce Secretary while adding that
Bangladesh has been a member of the ASEAN Regional Forum since 2006, which is expected to play to its advantage during the negotiations.
According to a study titled ‘Bangladesh: A Story of a Phoenix’, ASEAN has a huge consumer base of 642 million people and a burgeoning middle-class with newfound spending capabilities, which further added that booming cities in the ASEAN member countries account for more than 65 per cent of the region’s collective GDP, while a further 90 million people will be added to the market by 2030 when there will be 163 million households of ‘consuming’ class even as the region’s total expenditure on clothing and footwear totalled US $ 51.2 billion in 2017.
Its digital economy generated US $ 150 billion in revenue every year and will add an estimated US $ 1 trillion to the regional GDP in the next 10 years, the study maintained while adding the ASEAN currently has 200 million digital consumers and 230 million online customers, but this is expected to expand by an average annual growth of 7.3 per cent to reach US $ 721.7 billion in 2022.
Understandably so, the importance of ASEAN as a market has become very vital for Bangladesh considering its immense size and future prospects while also taking into consideration the fact that Southeast Asian nations are also an important source of raw materials for Bangladesh’s garment sector and other industries.
Hence, even if Bangladesh is said to be negotiating with 11 other countries and trade blocs like Australia, Japan, China and Canada for PTAs, ASEAN holds a significant position for Bangladesh for sure and the country would do good to ink a trade deal with it soon.