Sri Lanka and Bangladesh must sign a Free Trade Agreement (FTA) and, if needed, a Preferential Trade Agreement (PTA) to boost trade and connectivity, writes Pathik Hasan for South Asia Monitor
Sri Lanka and Bangladesh should sign a Free Trade Agreement (FTA) as soon as possible. Both countries share common economic platforms including the SAARC Preferential Trading Arrangement (SAPTA) and South Asian Free Trade Area (SAFTA). The two countries are also part of the Global System of Trade Preference (GSTP), Asia-Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
But Sri Lanka and Bangladesh need at least a bilateral Preferential Trade Agreement (PTA) to boost trade and connectivity. This will mark major progress in trade and investment between them.
Benefits of FTA
Dhaka has always expressed a keen interest to sign an FTA with Colombo to exploit the huge trade potential. If FTA takes a long time to come through, the two countries can agree on a PTA. The PTA will begin with a shortlist of products that could open up opportunities for expanded trade, investment and tourism. Bhutan and Bangladesh signed a PTA in December 2020.
Bangladesh and Sri Lanka can increase cooperation in various fields including pharmaceuticals, IT, agriculture, maritime security and disaster management. Dhaka has expressed keen interest to provide training to Sri Lankans in paddy production, climate adaptation, disaster management and IT and urged Colombo to extend training programmes for Bangladeshis on marine fisheries and nursing.
According to 2019 data of the Export Promotion Bureau, the annual trade volume between the countries is about $ 130 million. Of this, Sri Lanka exported goods worth $ 98.6 million and Bangladesh’s exports totalled $ 37 million. This volume could be increased easily if they sign a trade agreement. Sri Lankan investors can invest more in Bangladesh’s special economic zones, industrial parks as well as high-tech parks.
Bangladesh can share with Sri Lanka its experiences in agriculture (particularly in rice farming and freshwater fisheries), emergency response, disaster management, climate adaptation and mitigation. Bangladesh can obtain technical knowhow from Sri Lanka in coastal, aquaculture, marine culture and deep-sea fishing. In the education sector, both countries should have more institutionalized cooperation in capacity building, vocational training and skill development.
In the health sector, Bangladesh can put emphasis on the core training of its nurses and other professionals in Sri Lanka. Colombo may benefit immensely by importing Bangladeshi pharmaceutical products and medical devices in greater quantities. Bangladesh also makes garments, cement, paper, electrical items and jute goods, which are in high demand in Sri Lanka. Investors from both countries should come forward to exchange experiences.
It is expected that a FTA will enable Bangladesh and Sri Lanka to overcome tariff and non-tariff barriers that exist. In 2017, both countries discussed an FTA but it did not come through.
To some extent, a FTA deal is difficult. Some issues, including revenue losses, have been involved. Bangladesh and Sri Lanka have signed six MoUs to increase bilateral cooperation. Now it is high time for them to sign a PTA on the path to FTA.
Sri Lanka is in an advantageous position in the value-added apparel industry, shipping lines and deep-sea port, financial services, ICT and skilled technical people in different sectors. Bangladesh enjoys advantages in the apparel sector, skilled workforce in the garment sector, farm products, processed foods as well as migrant workers. Bangladesh will benefit from a FTA as a portion of its exports and imports are done through Colombo port.
(The writer is a Bangladesh-based NGO activist and researcher-writer on international relations. The views expressed are personal. He can be contacted at firstname.lastname@example.org)