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Experts: Bangladesh must utilize China's extended duty-free market access

  • Published at 03:13 pm July 23rd, 2020
Bangladesh China flags
Representative picture of ties between Bangladesh and China. BIGSTOCK

Recently, the Chinese government granted duty-free access to 97% of Bangladeshi products to its market effective from July 1, 2020

Economists and trade leaders on Thursday urged the government and exporters to take advantage of China’s extended duty free market access as Bangladesh can earn an additional $1.4 billion with the current export supply capacity.

Recently, the Chinese government granted duty-free access to 97% of Bangladeshi products to its market effective from July 1, 2020.

They made the call at a virtual workshop titled “Covid-19 and International Trade Issues: Policy Options for Promoting Bangladesh’s Exports” organized by the Economic Reporters’ Forum. 

Commerce Minister Tipu Munshi joined as chief guest, while Dhaka Chamber of Commerce and Industry (DCCI) President Shams Mahmud and Chairman of Business Initiative Leading Development (BUILD) Abul Kashem Khan, attended as guests of honour.  

“China’s extended duty free market access is a golden opportunity for Bangladesh. We should make use of the opportunity right now, as LDC graduation will mean the discontinuation of duty-free market access in China," said Mohammad Abdur Razzaque, research director at Policy Research Institute.

China is the second largest economy with a $14 trillion domestic market, which will reach $30 trillion soon. There are huge market prospects for Bangladesh as only about 30% export potential in China is currently utilized, said the economist.

"Bangladesh can earn an additional $1.4 billion using the current export supply capacity. On the other hand, if we can increase our market share by 1%, an additional $25 billion worth of export is possible, he added.

In the last fiscal, Bangladesh's exports to China were $600 million.

He also argued that no other LDC country has the capacity like Bangladesh and we can gain the most from this offer.

The government is working to tap the opportunity, said the commerce minister.

“After the Covid-19 pandemic, the US-China trade war has become more prominent. While Japan and European Union are also thinking about reducing dependency on China, we have to take advantage,” said Tipu Munshi.

"We are focusing on what will help to increase export and employment generation," said the minister.  

FDI crucial to tap opportunity

In the post-Covid world, investors will relocate businesses and their investment from China due to supply security, and also to cut dependency on China for sourcing goods and raw materials, said Abul Kasem Khan.

"Bangladesh has to rethink its policies to adjust to post-Covid world trade and economic issues. We have to create a supply base for raw materials," said Kasem.

"In these areas, attracting foreign direct investment is very crucial and this should be done without delay. If we miss the opportunity, the other competitors will snatch the opportunities," he added.

“Use the duty-free market access to attract diverted investment,” said Razzaque.

Since China has a big domestic market everyone wants to enter the market and duty free market access from Bangladesh will encourage foreign investors to invest here to take advantage of zero tariff, he added.

After Chinese president Xi Jinping’s visit in 2016, Chinese state-owned enterprises (SoEs) pledged to invest almost $28 billion but since then managed to disburse only $986 million.

In the last year, Bangladesh received $2.87 billion FDI, of which $625 million came from China, the single largest investors.

However, the Commerce Minister said: “To attract FDI, we have changed lots of things and offer opportunities which are being offered by our competitors.     

Bangladesh call for deferment of LDC review in 2021

Bangladesh should appeal for deferment of review for LDC to be conducted in February 2021.   

With the existing data taken before the pandemic, Bangladesh will qualify but it would not reflect the real picture in context of post-Covid, said Razzaque.  

If the 2021 review takes place, by taking a leadership role Bangladesh could also request the UN not to recommend any country for graduation based on the 2021 review. 

Bangladesh could ask for a proper review later may be in 2024 by when the impact of Covid-19 could be clear.

Given this unprecedented situation, Bangladesh could consult with all other LDCs to postpone all graduation until 2030 by when LDCs are aiming to realize the SDGs, he said, adding that Bangladesh can request for the deferment of its own graduation.

Bangladesh to lose $9 billion in FY20

Covid-19 impacts are transmitted through two channels, global recession and weak demand and supply side shocks. In economic value-added terms, $9 billion to $21 billion could be lost until June 2020, said the economist.

In addition, the remittances are under pressure although June 2020 receipts were much stronger than expected, while poverty impacts of Covid-19 have been subject matters of intense discussions, he added.

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