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Friday, March 24, 2006

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OPINIONS & VIEWS
 
Look East Policy with Thailand as focal point
Moazzem Hossain
3/24/2006
 

          THE bilateral economic relations between Bangladesh and Thailand have been expanding over the years. High-level political contacts and understanding at the government-to-government level have provided a boost to such bilateral partnership and cooperation. Business-to-business exchanges of views and visits have also deepened between the two sides.
It is noteworthy that the government of Bangladesh GOB) has actively been pursuing "Look East Policy" with its thrust having been placed on efforts for strengthening and widening relations with the countries of South East Asia and the Far East. In this prospective, Thailand suits well for becoming a focal point for reaping the benefits from this 'Look East Policy'.
Thailand and Bangladesh are number-countries of the BIMST-EC regional economic cooperation grouping. At the governmental level, there is a strong common desire to enhance trade and investment cooperation between the two countries. This desire is amply reflected in a number of steps taken in the recent years for strengthening multi-faceted bilateral cooperation, followed up by other actions to widen the sphere of such cooperation regionally as well. This makes a strong economic sense in the context of the changes in the world economic and trade scenarios.
While the operational framework for widening the areas of bilateral cooperation between Bangladesh and Thailand does already exist, the result-oriented actions are still awaited. In this context, the private sector in the two countries will need to take the catalytic role. There is no denying that the businesses are the main players in to-day's globalised economy. They have to join hands together in developing new products and creating new markets for such products. New investment activities that are trade-creating in nature, on the basis of comparative advantage of each country, can open up new opportunities for mutual advantages.
A Joint Task Force -- formed in the year 2005 -- has been working to identify the requirements of the businesses of Bangladesh and Thailand in areas of cooperation for enhancement of bilateral trade and investment. Here, concrete operational results do need to come sooner than later. We have so far heard quite a lot from both sides about strong possibilities of joint ventures and technical collaborations in areas of agriculture, industry, information and communication technology, construction, infrastructure development, tourism etc. What are then holding back progress, at the desired pace, on translating such possibilities into realities? That is a question that the representatives of the businesses in the two countries are only competent to answer.
Meanwhile, the issues relating to accessing the Thai market effectively merit consideration in the backdrop of measures announced for facilitating the entry of more Bangladeshi products to Thailand. The Royal Thai government declared, quite sometime back, duty-free access to 229 items of Bangladeshi products to enter Thailand. At the same time, it reduced tariff rates for many other items manufactured in Bangladesh. These facilities have been given in pursuit of, what the Royal Thai Government said, its supportive policy action for facilitating "two-way business interactions" between Thailand and Bangladesh and for promoting business relations between the two countries.
It is worthwhile to consider how far Bangladesh has so far been able to take advantage of such facilities. The available trade data would show that no substantial progress could so far be made with regard to boosting Bangladesh's exports to Thailand. The situation calls for a careful consideration by all concerned. Are the items for which Thailand announced duty-free market access or reduced tariff rates for the purpose irrevalent to the capacity of Bangladesh to produce or market. Are then such measures an eye-wash? Or, is it because of supply-side constraint that Bangladesh has not been able to export more to Thailand? Why has not been an effective supply-side response to the new opportunities for trade that have been sought to be created by the afore-mentioned facilities? Why have not investments been taking peace to help create capacities on the supply-side? Have the efforts to export more to Thailand been constrained by other factors? Have the businesses in Bangladesh been handicapped otherwise to export effectively to Thailand? If so, what are those handicaps? Only the actual business operators can answer such questions in the light of the practical circumstances facing them.
A review of Bangladesh-Thailand bilateral trade relations shows that although the total volume of bilateral trade has been increasing, Bangladesh has been suffering from a persistent trade imbalance. This imbalance has been increasing over the years. The trade deficit rose from $171.94 million in 2000-01 to $290.83 million in 2004-05.
Exports from Bangladesh to Thailand consist mainly of raw jute, jute goods, leather, chemical fertiliser, frozen foods, readymade garments etc. Over the five-year period between 2000-01 and 2004-05, Bangladesh's annual exports to Thailand rose from $29.30 million to $35.07 million.
Imports by Bangladesh from Thailand have, on the other hand, increased from $201.24 million in 2000-2001 to $326.00 million in 2004-05. Such imports mainly consist of textile & textile articles, plastic goods, mineral products, chemicals, base metals, prepared foodstuff, beverage, iron and steel, animal /vegetable fat and oil etc.
On their part, Bangladesh and Thailand signed in July, 2002 a Memorandum of Understanding (MoU) on Account Trade Arrangement. There are also a Joint Committee on Trade and a Joint Economic Commission between the two countries. But effectiveness of these bodies in pursuit of trade and investment promotion goals has so far been limited.
The General Trade Agreement between the two countries was signed as far back as in August, 1977. It was initially valid for one year with provision of automatic renewal by a further period of one year thereafter, unless terminated by either contracting party.
Meanwhile, the scope for attracting foreign direct investment (FDI) from Thailand to Bangladesh merits attention. The Thai economy has otherwise been performing quite well. Boosted by increased consumption, high investment spending and strong expert growth, it has been growing well over 6.0 per cent in recent years, barring last year in the aftermath of the Tsunami in late December 2004. With a well-developed infrastructure, a free-enterprise economy and pro-investment policies, Thailand has, thus, been one of the best performing South East Asian economies in the post-1997 Asian financial crisis situation. It has an expanding export-oriented manufacturing base and its farm output has also been increasing. Furthermore, the $180.9 billion Thai economy has benefited from preferential trade agreements that Bangkok has been pursuing particularly with regard to a variety of partners to boost exports and maintain high growth.
In this context, it is also noteworthy that the Thai private sector has also been making efforts to expand overseas. Being a close neighbour, Bangladesh is otherwise well-poised to attract FDI flows from Thailand. It is important to make the Thai investors aware of the investment opportunities in Bangladesh, particularly in the context of policies that the Government of Bangladesh (GoB) has been pursuing to encourage and facilitate the flow of FDI. The geographical locational advantage of Bangladesh as the bridge between South East Asia and South Asia is an additional point for consideration here.
Furthermore, new developments concerning South Asian Free Trade Area (SAFTA) that are expected to provide easy and preferential access to a market of 1.4 billion people in South Asia from the investment locational advantage in Bangladesh that also enjoys duty-free access as a least developed country are the pluses that deserve consideration by the Thai investors.
The modalities of the SAFTA have been finalised in the last meeting of the Committee of Experts (CoE) held in Kathmandu late last year as per the political will expressed in the last SAARC summit in Dhaka. That being the cases, the businesses in both Thailand and Bangladesh do need to make an objective assessment of the implications of the outcome of the SAFTA negotiations. Specific product lines for possible joint ventures and FDI investments can be identified in the light of such an assessment to facilitate expansion of bilateral economic relation between the two countries in a win-win situation. More investments can create more trade and help forge strong cooperative linkages for mutual advantages of both sides.
In this context, trade promotion organisations (TPOs) like the Bangladesh-Thai Chamber of Commerce & Industry (BTCCI) and the Thai-Bangladesh Business Council (TBBC) can play useful roles, true to the purposes for serving which these TPOs have been established.
This is an edited version of a paper presented by the writer at a recent seminar held in Dhaka

 

 
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