A mutual opportunity

Sujata Mehta, Indian Ministry of External Affairs Secretary (Multilateral and Economic Relations), is expected to be in Bangladesh from April 5 to 7. Mehta is expected to discuss the ongoing development partnership and economic cooperation with Bangladesh. She is also scheduled to meet different ministers and hold discussions with Economic Relations Division of Bangladesh as well. 

The visit has provided an opportunity to focus on a few issues of economic cooperation (and others) such as review of the implementation of projects under Indian supplier's credit and ways to reduce the huge trade deficit of Bangladesh. Bangladesh is also likely to focus on the status of the second line of credit (LoC) support from India as repeatedly requested by the Foreign Minister of Bangladesh at the joint consultative meeting with his Indian counterpart last year.

After the visit of Prime Minister Sheikh Hasina to New Delhi in 2010, cooperative efforts continue from both sides to implement many programmes in economic, social and infrastructure, especially under the supplier's credit of $1 billion loan to Bangladesh by India (out of which $200 million was later converted into grants to be used for construction of Padma Bridge).

Bangladesh has reportedly received only $173.58 million out of the $800 million Indian Line of Credit (LoC). In the last four and a half years, seven out of fifteen projects were reportedly completed with two more projects nearing completion. Both sides apparently blame each other for the slow process of completion. Bangladesh is not happy at the progress of implementation of the projects, but at one stage Indian authorities had reportedly expressed dissatisfaction over the slow rate of implementation of four projects and had urged the Bangladesh government to expedite the implementation.

According to the progress report, the total cost of implementation of these 15 projects is $986.95 million, of which $751.95 million will be allocated from LoC, and $235.00 million will be funded by the Government of Bangladesh. However, two projects out of the fifteen have been revised and the project costs too have increased. In order to meet the additional cost of the two projects, the total figure of the LoC may exceed $800 million. In the last LoC Review Meeting held in Dhaka on February 22 of this year, the Indian side assured Bangladesh of extending the ongoing LoC up to $862 million.

With regard to trade deficit, during 2013-14, Bangladesh imported goods worth $6.2 billion from India via official channels, while Bangladesh exported goods worth about $456.63 million (much less than previous years). In addition, unofficial imports from India are reportedly about 1.5 times more than official imports. (Moreover, it has been reported that in 2013, Indians in Bangladesh officially repatriated about $5 billion to India and continue to do so).

Researchers in both countries have found that Bangladesh has a potential export market of $2 billion in India. Although India has granted Bangladesh duty free access to all items except tobacco and liquor, there exist several types of state duties that discourage Indian importers to buy goods from Bangladesh. Furthermore, Bangladeshi exporters often face serious problems because of the non-acceptance of test certificates issued by Bangladesh Laboratory for certain products like soaps, jamdani sarees, and RMG and food products. In the absence of testing facilities in the locality, the samples are sent to far away laboratories (even to Chennai) and such lengthy processes impede the growth of Bangladesh's trade with India.

To reduce the trade gap, researchers have made some suggestions: (a) India should recognise the principle of asymmetry and non-reciprocity in trade with Bangladesh (b) there should be liberal rules of origin (c) removal of para-tariff and non-tariff barriers, and (d) export quality Bangladeshi products should not be in India's negative list. This will hardly dent its $450 billion import basket in 2013-14.

Furthermore, trade complementariness can be developed by vertical specialisation through production sharing and gradual integration of Bangladesh's economy with that of northeastern states of India. For better business cooperation, India and Bangladesh may sign an Investment Promotion and Protection Agreement and Double Taxation Avoidance Agreement. 

It is hoped that given the state of existing bilateral relations, India will take concrete steps to strengthen further economic cooperation with Bangladesh for the mutual benefit of both countries.
 

The writer is a former Ambassador of Bangladesh to the UN, Geneva.