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FTA with India to boost investment, export

Chambers, trade bodies hope

STAR BUSINESS REPORT
A free trade deal with India may boost foreign direct investment in Bangladesh and push the exports up, said leading chambers and exporters.
Delhi's FTA accord with Sri Lanka and a bilateral trade deal with Nepal should be examined carefully before negotiating the issue with India, they observed.
Apart from enhancing prospects for higher export to India, a free trade agreement (FTA) can trigger a surge in foreign direct investment in Bangladesh, says Metropolitan Chamber of Commerce and Industry (MCCI) in an analysis on FTA.
Citing the example of Nepal whose free access to Indian market under the Indo-Nepal trade treaty led to an increase in investment, the chamber said it also resulted in a significant expansion of the Himalayan kingdom's export basket.
"Likewise, after the signing of the India-Sri Lanka Free Trade Agreement (ILFTA), there are indications that a large increase in Indian investments might take place in various resource-based industries in Sri Lanka during the next few
years."
As India maintains that ILFTA can be a model for a possible India-Bangladesh FTA, the MCCI said it can be examined with appropriate modifications, considering the least developed country status of Bangladesh.
The ILFTA is based on three separate product lists. One is for the 'fast-tract' items, on which both countries withdrew all trade barriers with immediate effect. "In case of Bangladesh, the 'fast-track' list has to be finalised carefully," MCCI suggested.
Import of some items like food grains, industrial inputs, capital goods and machinery from India should be considered 'fast-track', but India should give similar treatment to all Bangladeshi products, it added.
The second list of ILFTA contains products which have been given duty preferences. In case of an Indo-Bangla FTA, tariff barriers on such products are to be phased out over an agreed timeframe -- a short period in case of India and a longer period for Bangladesh.
The phasing out period can be fixed at two years for India and 10 years for India, the Metropolitan
chamber proposed in its analysis.
The third list under ILFTA is the negative list of products. If Bangladesh makes an FTA deal, India must be asked not to press for a negative list of Bangladeshi products though Dhaka should have such list from India, MCCI said.
Battery manufacturers and exporters think non-tariff barriers should be removed as they might hurt local industries despite having a free trade pact with India.
"Bangladesh may attract substantial amount of FDI by signing an FTA but we should not forget the issue of non-tariff barriers," Niaz Rahim, president of Bangladesh Accumulator and Battery Manufacturers Association (BABMA) told The Daily Star.
India imposed anti-dumping duty on Bangladesh lead acid battery export last year ignoring repeated requests from Dhaka to consider the issue, he recalled.
Rahim said Indian investment should not be encouraged in the areas where Bangladeshi entrepreneurs are performing well.
"Indian investment should be encouraged in the areas where we really need foreign investment. The government should consult these issues with local trade bodies and
carefully address them," he felt.
SM Nurul Hoque, acting president of Bangladesh Garment Manufacturers & Exporters Association (BGMEA) think Bangladesh's apparel exports may go up substantially if it gets duty free access to the Indian market under an FTA.
"India is a big market. We will be able to use their cheap raw materials and export apparels there," he said, adding Bangladesh need huge investment in the backward linkage industries and signing an FTA may encourage Indian investors here.
Bangladesh Textile Mills Association (BTMA) said FTA may benefit Bangladesh but we should negotiate with India carefully so that local industries are not affected.
Bangladeshi products are now facing different non-tariff and paratariff barriers to enter into the Indian market. Delhi should show a positive attitude in allowing Bangladeshi products before FTA deal, said MA Awal, chairman of BTMA.
"It is possible to export many Bangladeshi products to India. We have a number of quality products and these are competitive in prices. So, we can be benefited from FTA with India," he said.