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WINDOW ON ASIA

Border Trade: Bruises or Bonanza

Shahed Latif
IF liah rice Mid chkken Mr elwaprr In India then ■■uugglHig of ihrar com modiiMa to Banglsdssh will .ihvays lake plate On the other hand hliaha hah and jadidanl aareea Mr hardly available In lialta No unieaa allowed thro ugh legal channel* aniugghng ol these Items to Italia would remain a profitable business Mut h lorrea ol supply and de niaial ultunatelv determine the value ul our t urrency vto-a vis any oilier currency
Our total demand for numerous Italian goods and serviced far exceeds Indian de inand tor our limited range of products like jamdani saree or hliaha hah Therefore regard k-ss ol tiow rm hange rales are influenced by Bangladesh Bank al ihc border with Italia the flow ol'merctoandiae trade (Ijoth legal and illegal or formal atul informal) would determine the strength of our currency
Abai lias brm the impart of Indian exrtiange rale policy on Bangladesh economy? There has been increasing lamour to devalue Bangladesh Taka so that our cost of production remain competitive vis a vis India The cgiposing view if there Is any Is to maintain an over valued Taka so that Im pone lend to be cheaper whose benefits should ultimately reach the ordinary con sumers
First of all the stigma of smuggling attached to the bnr der trade should lie removed In an open market regime and free floating exchange rates whal should be considered is trade pure and simple, with malice towards none Once te gallty of trade has l>e*n estab 11 shed we must find out If suc h border trade Is bruising or liringlng in lag bonanza lor t lie overall national economy of Bangladesh - notwithstanding isolated cases ol collapse of local business>i factories due to I ria bill tv to withstand comjieti Hon
The pan ol the border trade - carried out legally and therefore records are main tamed — shows that the value of our exports to India is less
than 5 per cent of the import value of goods and services from India Al the face of it. the situation seems to be alarming However, given ex change rale stability. I suspect that a large part of our exports to India goes through informal channels and not reflected In the public books of accounts — although exerting Its due inOu ence on the Taka rupee ex change rates This is because ol lbe nature of these goods whK h ire often imported pro due I ' not available In India or higlib differentiated (expiai -d later) from similar local products
Secondly. I also suspect that the formal recorded mer chandise trade mostly covers the trade across the western borders with West Bengal while informal experts of all sorts of products from Bang ladesh meet varieties of needs of the relatively remote north eastern slates of India rrvr ring Dasani Meghalaya Nagaland Arunarhal and Tripura These are never reflected In ofTklal records and constitute so 'ailed smuggling
(ompKihvr-Manufacturing Bui even if adjustments are made to belter reflect true volume of merchandise trade across the border balance of trade would still remain very much in favour of India This Is because compared to vast size of Indian manufacturing sec tor we are too small and econotniee of scale are yet to lie achieved In many instances Although market size is a fx tor to be reckoned with the fact still remains that we haw Io be efficient in llw pruduc lion of our farm produce as well as manufactured goods like textile and bscycie Some time baek our Finance Mints
ler was absolutely right when he said that if Indian eggs were sold al Taka 3. there was no reason why we could not produce and sell eggs at the same price In fact within the textile sector handloom wea vtng of Grameen Check or Tangall Sarees can now very well compete with Indian weavers We must strive hard since without competitive manufacturing even If borders are effectively sealed we will fall to achieve sustainable gro wth of Bangladesh eccmomy
At the same time, difficulties of achieving competitive manufacturing should be ap
predated by all concerned This la because we are practically at the tall end of a vast Indian economy and the so called smuggling along Indo Bangladesh border hardly af fen that giant economy while our nascent poultry farms or weaving factories fare an uphill task to withstand the rompeti tfon
In spite of all the problems and constraints the border trade can Indeed be a bonanza It need nm bruise Bangladesh economy — as Indeed the common perception stands today First, the exchange rate policy should lie reexamined If devaluation should assist the manufacturing export sector, we must not Iwsitatr Io bring about desirable changes Se cond fiscal anomalies which increase coal ol production sbouid be rempved Taxes on raw materials auxh as raw > ot tori or animal feed -luff would
only increase cost of weaving or poultry products beyond tolerable limits Third high cost of energy, tn spite of ns local availability should be brought down The system loss la the villain in this respect and If it cannot be brought down, alternative private sec tor captive power generation* and distribution within Indus trial estates — sort of energy autonomy for the manufacturing sector — should be planned and vigorously pursued
The abow three suggestions are imptemAitable in the short run. very much known to the government and being impk
mented as well in many re sjert A tong term strategy to enhance our export to India should be worked out and the first Issue in thio respect is product differentiation for (ompetltive manuf^-turing. Take for example jamdani sa ree. which In the textile cate gory Is a typical differentiated product and Its demand pro vlded prices are correct can only Increase In India So the strategy should be to aim at the manufacturing of those textile products and garments which are highly differentiated from similar Items made In India and are sought after by Indian consumers particularly those who belong to the up scale rnarkn
I may further venture to suggest that textile Industries in noth India and Pakistan are based on cotton since It Is Coduced on a large wale In th the countries Therefore.
K may not be prudent to set up cotton textile Industries in Bangladesh since we do not enjoy benefits of local cotlm. cultivation and also it might be difficult to compete with long established textile manufactur ers of India
The strategy should therefore be to concentrate on care fully selected categories of synthetic yarn and specialized textiles made therefrom which would enable Indian consumers to favourably different; ate Bangladeshi textile prod ucts from those made In their own country If this is feasible both textile industry and trade in textile will expand simulta neouslv
Competitive Advantage
In international trade, competition is inevitable but we haw to exploit competitive advantages that already exist and also create new ones to our advantage Jamdani saree is a case of competitive advantage that already exists while the «ugge«'ed synthetic and spec I Mi sed textile is an advantage we must create
In terms of trade I find that the five north eastern stales of India constitute a for gotten part of the subcontinent Same is true In case of Arakan province of Myanmar bordering the extreme south east corner of Bangladesh I will urge the readers to took at the map and find out . that B-rnglsdesb enjoys a potential tor at tonal advantage to pro mote the international trade of these parts of India and Myan mar through the ports nf Chi itagong and Mongla We should Initiate these new trade routes far mutual benefit■ At the next stage, economic cooperation ran be promoted lurthw through expanding the sale of our
tzaoUactured prxluera and in exmange, importing thgjr raw siaLenals such as Umber luueszone frutu etc fa the process the tea industry of Ban^adesh can be rejuvenated because our tow quaMy tea should find a ready market in inzha where the thtcfc fofuer of Sylbet lea afaouM be preferred while the high quality Aaoaoi tea can fetch a better price in the ultemanonal market par-ucuiarty after tea exports from Aaskzn is faohtaied through C hiuagpng port.
The ordinary consumer goods such as pfawtx products, shoes, crockery fabrics, lefe vts*on. in fact thousands of such products should find • ready market m the above mentioned parts of India and Myanmar since manufacturing sector has hardly developed there and from the factories of Bangladesh truckloads of manufactured goods can reach the destinations, east and north-east of Bangladesh within a few hours. The ease of access within a few hours, unlike the transport of the same goods from Calcutta, is the significani competitive advantage we should develop
The opportunities in northeast India can be abundant. Even export of iodized salt can be a fairly Mg business The region to deficit tn rtce also, dry fish should have a good mar het These are a few of at least a thousand opportunities waiting to be explored through trade and investment generating substantial mutual benefits i am quite convinced that the present day suspicions and misgivings against Bengali speaking peoples In those parts of north east India can be removed throu^i trade and other forme of economic cooperation People must interact at the market, suspicions would then find very little scope to survive
The border trade should be conceived in new directions ■nd In new products and com modules zOnly then, it would be a bonanza - bruises if any will hardly matter