Can Bangladesh gain from China, India on the value added chain?

Can Bangladesh gain from China, India on the value added chain?

Goutam Das,

In September last year, a dialogue on ‘Bangladesh- India Relations: Progress and Challenges Ahead’, was organized in Dhaka by the Institute for Policy and Governance Advocate (IPAG) and the leading English newspaper The Daily Star. The dialogue was attended by Indian and Bangladeshi businesspersons, diplomats, government representatives and academicians.

Economist and chairman of the think-tank CPD (Centre for Policy Dialogue) presented the key address. He has been advocating for a corridor to be granted to India since the 2007 caretaker government regime, rationalizing this as transit and connectivity. He was one of the pioneers in promoting this issue.

The major aspect of export-oriented global economy is that it encourages a country to reach beyond its limited local market and design its economy accordingly. It allows others to enter the domestic market while entering the markets of others. However, this exchange is anything but free. It will happen only after compliance with the dominant economic forces and all-powerful states. In this reality, we can still control our product quality and take advantage of cheap skilled labor and competitive pricing to enter the market that will give most benefit.

Globalization has an antithetical relationship with conservative nationalism. Some might color it as a form of liberalization. The best feature of globalization is one exchange system that includes every person in the world. It can create integrated market and trading for any commodity. Theoretical aspects of globalization were first introduced in Bangladesh in the beginning of eighties, during a time when the military had seized power and started a reform program.  At that time an aphorism quickly became popular at the academic level which only considered the positive side of the globalization, overlooking any negativity. The saying went something like this, imagine each state or group of people became most efficient in producing certain goods, and there is a system to exchange those goods among everyone, then this unrestricted exchange can benefit all. Everyone will possess skilled workforce and achieve production efficiency. It will open the way to global market and with global trading a revolution named “globalization” can take place where everyone will thrive. Opposing the conservative national capitalists, the idea of global capitalism would change everything.

In the dialogue on ‘India-Bangladesh Relations’ last year, Rehman Sobhan focused on the qualitative characteristics of globalization and proposed the concept of creating a ‘Value Addition Chain’. He was discussing why China was successful where India failed. Let’s suppose several parts of a product made in different countries come to China for final assembly, where every party involved added value to the final product.  That means China alongside a few neighboring countries created a value addition chain which enabled them to export the final product with relative ease. As a result, the economy of all involved turns interdependent and grows together, benefitting all equally. He praised China for building up such a relationship with its neighbors.  In retrospect, he slightly criticized India for not being able to create this value addition chain with Bangladesh and others. He criticized the fact that India didn’t involve Bangladesh in even 0.2 percent of their huge 390-billion-dollar import business. Bangladesh has duty-free access to our immediate neighbor, he said, but still we have such a deficit. To put it in a comparison he gave an example, “Countries like Sri Lanka, Malaysia, Indonesia, and even Myanmar have larger exports to India than Bangladesh. None of these countries have free trade agreements with India”. In essence, Rehman Sobhan is a critic of India in the “Value Addition Chain” stance. His logic is legitimate here, although we haven’t heard the value addition criteria is his campaign for transit/connectivity with India which stated back in 2007. Now being a critic, he will have much less liability when it comes to the present state of India-Bangladesh relations.

Even after Rehman Sobhan turned critic, many people still have the old stance of flattering and applauding India as before. One of them is the former diplomat Farooq Sobhan. He is the president and chief executive of research firm and US-funded think tank “Bangladesh Enterprise Institute”. In an interview with the daily Prothom Alo on 26 December 2016, he mentioned four improvements in Bangladesh-India relations.The first and most important is the success of cooperation in the electricity sector. But in simpler words it is actually the transit of electricity to India. But he said the country’s electricity infrastructure has been developed to sell electricity to Bangladesh. If in future Nepal or Bhutan decide to export electricity, Bangladesh can purchase it easily now. That’s success according to him.

The second point is, Bangladesh is enjoying the benefits of quota-free market and tariff-free exports to India. Even the barriers in non-tariff exports have been removed. But we learn the real scenario from Rehman Sobhan’s quote mentioned earlier.

A few days ago, in a meeting with the leaders of Dhaka Chamber, Commerce Minister Tofail Ahmed said India has awarded Bangladesh duty- and quota-free access of all products except alcohol and tobacco to its market, but now anti-dumping duties are imposed on jute and jute products. So, the question is, what is the real benefit for Bangladesh? He also mentioned that he spoke with the Indian side on this issue and will discuss it again on his next visit to India.

The third and fourth points Farooq Sobhan mentioned is about Bangladesh allowing port transit to India and consequently opening northeast India for business. After analyzing the tax proposal from port transit, Bangladesh’s advantage can be calculated. On the other hand, India’s northeast being open for Bangladesh seems to have an opposite effect. With transit in place, India’s other regions gain advantage in the northeast rather than Bangladeshi products. Also, he didn’t explain how exactly Bangladesh is improving by allowing India to use two ports for transit with almost no duty or fee. There are other aspects of India-Bangladesh relations he did not include in that interview.



Writer: Political Analyst