Op-Ed

A lot to gain by all from deeper connectivity
Sayed Kamaluddin
25 Oct,2015

Ministers, policy makers and economists attending the three-day South Asia Economic Conclave in New Delhi have succinctly pointed out on Tuesday last that South Asian countries must remove ‘non-tariff’ (NTBs) and ‘para-tariff’ barriers (PTBs) and improve connectivity to boost regional trade and investment. World Bank’s lead economist Sanjay Kathuria has pointed out at the meeting that trade and foreign direct investment (FDI) go together and “If Bangladesh can increase trade, the other will follow.”

While this was not discussed, knowledgeable circles feel that this is one problem – (NTBs and PTBs) –  which was being strictly followed by India that has plagued all efforts by other small neighouring countries to improve mutual trade relations. One would like to believe that India, being the biggest economy with relatively developed technology and industrial might, could have naturally become the epicenter to emerge as a regional hub and all economic activities would have gravitated around it. India cannot meet all its domestic needs produced locally and therefore, has to offer its vast market for others for mutual benefit and create a win-win situation. Unfortunately that did not happen because of its close mindset based on the cult of protectionism.

Blueprint for prosperity

Bangladesh Commerce Minister Tofail Ahmed while attending the Conclave, took the advantage of demanding: “We must now revive old linkages in the region to help bring a dramatic change to the entire region. So, all non-tariff and para-tariff barriers must be removed.” However, he being the past and present commerce minister with years of experience in dealing with Indian leaders and trade negotiators should know that it is easier said than done. Ahmed spoke at a plenary session on Tuesday at New Delhi and the theme was: “The power of 1.6 billion: A blueprint for prosperity”.

The three-day conclave was jointly orgnised by the World Bank and the Confederation of Indian Industry (CII) began on Monday.  In fact, according to CII, the trade amongst the eight-member Saarc countries accounts for only $28 billion or five percent of their total global trade. Members of other regional bodies have much larger trade volume amongst the member countries. World Bank’s Sanjay Kathuria felt at the meeting that with deeper intra-regional cooperation, Saarc can increase its volume to $100 billion in five years. Potentials for such development are indeed immense.

Likewise, intra-regional foreign direct investment (FDI) in South Asia accounts for a mere four percent of total inward FDI. According to the organizers of the event, experts discussing issues have highlighted how unshackling regional trade and investment opportunities could be one of the main sources of sustainable economic growth. Analysts, however, suggests that the unshackling of the regional opportunities will need strong political will on the part of the leaders of all the Saarc countries and more so of the Indian leaders who have a much larger role to play based on evolving a ‘give and take’ policy. 

In this context, what a senor Bangladesh Commerce Ministry official commented is interesting. Recently he told a Dhaka daily that despite granting of duty-free entry of a large number of Bangladesh goods into India, the country’s exports have suffered because of imposition of non-tariff and para-tariff barriers from the day one.

The mischief of PTBs/NTBs

While it is true, the commerce ministry official said, Bangladesh’s exports to India has been increasing at a modest rate of over 12 percent annually since the country was accorded the benefit of duty-free entry into India, but the rate could have been much higher but for the non-tariff and para-tariff barriers and at time the growth were comparable to a roller-coaster ride. For example, during FY2008-09, Bangladesh’s exports were $313 million; in FY2009-10 it dropped to $254 million; up again in FY2010-11 to $466 million, in FY2011-12, it was $585 million while in FY2013-14 it dropped to $484 million and rose again in  FY2014-15 to $609 million. The last year’s Indian exports to Bangladesh amounted to over $5.5 billion and the informal trade, euphemism for smuggling, accounts for a few more billion dollars.

However, he said that the exports to India should have crossed beyond the $1 billion mark by now taking the advantage of the duty-free access into the Indian market. But the non-tariff and para-tariff barriers have prevented that to happen. Long-drawn negotiations, requests and pleas as well as long-drawn negotiations with the Indian government and concerned ministries failed to yield any tangible results. The loudly repeated intentions of the Indian government at every high level meeting that took place periodically to reduce the yawning bilateral trade gap to Delhi’s advantage only ended in whimper. So, the promised duty-free access and opening up markets for Bangladeshi products into India and reform measures to boost mutual trade relations continued to be a one-way traffic of sort.

Meanwhile, Kathuria assured that regional cooperation will result in a 250 percent hike in intra-regional trade and the South Asian countries would have to position the whole region as a gateway between East and Central Asia and the Middle East; create a fully functional South Asia Free Trade Area, tackle non-tariff barriers and encourage private and intra-regional investment.

Bangladesh is unique: WB expert

Singling out Bangladesh, the World Bank economist opined that it stands to gain substantially from greater economic integration with South Asian neighbours. He said: “For Bangladesh, there are massive opportunities for trade and foreign direct investment.”

Explaining his reason for this optimism, he said, the country has very competitive labours and no country in South Asia does mass manufacturing as efficiently as Bangladesh. “You will not find factories of Bangladesh’s size anywhere else in South Asia – 5,000 people working under one roof? That’s unique to Bangladesh,” he added.

Bhutan’s Economic Affairs Minister Lyonpo Norbu Wangchuk outlining the strong point for his country said that there is huge hydropower potential in his country from which both Bangladesh and India can benefit. But he pointed out that the agreements will have to be a win-win situation for all countries. While no participant in the meeting articulated any problem for reaching such an agreement by the neighbouring countries, but past experience posed a vexed question whether New Delhi will stand in the way of reaching such an agreement as it did many times in the past.
Analysts say that no amount of the bonhomie and comradeship, abundantly showered during the three-day moot, would not help catapult them into reaching an agreement such as sharing of hydro power in Bhutan. It would call for hard bargaining and negotiating skill of the participating countries. Which country will benefit more would naturally depend on the negotiating capacity of the respective country. However, whatever has happened in the past, it is generally felt that all countries would benefit from the South Asian integration. We will have to wait and watch.

-weekly holiday