Bangladesh has the potential to become an economic powerhouse by more than doubling its trade in the South Asian region, boosting the country’s growth and creating more employment, a new World Bank report says.
The report – A Glass Half Full: The Promise of Regional Trade in South Asia – unveiled in Dhaka shows the gap between current and potential trade in South Asia and provides a roadmap for deepening regional trade.
“Bangladesh can become an economic powerhouse by deepening regional and global integration in trade, connectivity, energy and investment,” Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan, and Nepal, said at the launch of the report on Wednesday.
The report noted Bangladesh’s trade with South Asia accounts for only 9% of its global trade. “Bangladesh needs to focus on improving its trade policy regime, which has a strong anti-export bias,” Fan said.
South Asia’s intra regional trade volume remains one of the lowest in the world, at $23 billion. However, the report notes that curtailing the existing man-induced trade barriers could almost triple this, to $67 billion.
The World Bank identifies four critical regional barriers: tariffs and para tariffs, real and perceived non-tariff barriers, connectivity costs, and a broader trust deficit.
Lack of trust
Sanjay Kathuria, World Bank lead economist and lead author of the report, said trust between countries is in short supply in South Asia.
“Border haats (special markets along the border) between Bangladesh and India, aimed at recapturing the once thriving economic and cultural relationships, are now changing cross-border relations,” he said.
“South Asian policymakers can aim to reinforce the virtuous circle between trade and trust.”
The report recommended targeting sensitive lists, which comprise goods not included under South Asia Free Trade Area (SAFTA) tariff liberalization.
More than one-third of the intra regional trade falls under sensitive lists, while in the case of Bangladesh, they account for nearly 46% of its imports from South Asia.
The report also called for action on para tariffs and a multi-pronged effort towards addressing nontariff barriers, focusing on information flows, procedures, and infrastructure.
The Bank says South Asian countries are yet to reap the benefit of shared land borders, because of deficiencies in border regimes, including limited information flows on non-tariff measures, and inadequate use of modern clearance procedures.
Limited air connectivity also makes regional trade and investment costlier.
As such, the report suggests policymakers draw lessons from the India-Sri Lanka air services liberalization experience, where liberalization was gradual and incremental, but has paid off through policy persistence.
The World Bank’s Bangladesh office jointly organized Wednesday’s event with local private think-tank Policy Research Institute (PRI).
Finance Minister AMA Muhith was the chief guest at the report launching ceremony which was also attended by PRI Chairman Dr Zaidi Sattar.
