Bangladesh's Look East Policy
Harun ur Rashid
The genesis of 'Look East Policy' emanates from the existing asymmetrical economic relationship between Bangladesh and the wealthy industrialised countries. Bangladesh wants to shift from this imbalance to develop robust economic ties with countries in South Asia, Southeast and North Asia to optimise its benefits for economic development.
The policy constitutes the main plank of economic diplomacy of the country. Economic diplomacy is the formulation and advancing of policies relating to production, movement or exchange of goods, services, labour and investment. It is essentially a “bread and butter” policy of Bangladesh that has to be developed to its full potentials on the basis of South-South cooperation.
Unhealthy existing pattern of trade
At present, more than 80 percent of the volume of trade of most developing countries are with the US and European Union. In case of Bangladesh, its exports to the European Union stood at 50.12 per cent and to the US, 45.5 percent during the year 2002-03 (according to Bangladesh Export Statistics, released by the Export Promotion Bureau in 2004). It means that more than 95 percent of Bangladesh's exports go to the West.
Such total dependence of exports on the EU and the US is not healthy because any disruption on exports to these countries will seriously affect the economy of Bangladesh. Exports are one of the ingredients of economic security of a country that in turn is a part and parcel of national security. One of the aspects of national security is to avoid dangers or threat to economic security.
“Popular Revolution” in Georgia, Ukraine, Kyrgyzstan owes its origin to economic slump of their national economy. As President Clinton once said, “ It is the economy, stupid,” that always has been an overarching factor in national stability. Even in Europe, the people of France and the Netherlands rejected the EU constitution because of the weak economy of these countries.
It is imperative and prudent that trade should be diversified to as many countries as feasible. There is a saying that one should not put all the eggs in one basket. This is especially true in respect of trade.
What does Look East Policy mean?
The debt crisis, the collapse of some of the commodity prices and growing protectionism in the industrialised countries have demonstrated that the existing relationship between developing countries and the West needs to be restructured.
Furthermore the enormous and increasing difference in economic power between developing countries and the West is a reflection of the current inequitable division of labour internationally.
That means that the Western countries constitute the “core” of the world economy and developing countries exist in the “periphery” of the global economy. Developing countries provide raw materials at cheap prices, while manufactured products made of raw materials are exported to developing countries with much higher prices.
The current system of division of labour needs to be broken. The sustained development of developing countries including Bangladesh necessitates a fundamental shift to “ Look at the East” policy for trade, finance, and technology.
A central need is to set up arrangements where Bangladesh needs to make greater use of its resources with the countries in the East. The challenge is to mobilise and deploy its resources more effectively with resources of countries in the East, to energise development, draw strength from joint undertakings, and collectively obtains economic gains in the regional and global market.
While trade liberalisation is important, joint action to promote investments and stimulate industrial and agricultural production in Bangladesh is necessary to unlock the full potential of economic growth.
With the advances made by many countries in South Asia and in the East, there is now more scope for joint undertakings at private sector level. There is ample scope for joint ventures in, for example, agro-processed industry, the fertiliser and capital goods industries, as well as in the manufacture of basic consumer goods. The joint production of generic drugs in common use could lower health service costs in most countries.
Services sector is another area that should be pursued vigorously. Bangladesh has abundant supply of cheap labour and South East Asian and North Asian countries may fully exploit the cheap human resources in setting up industries in the country. It is noted that Bangladesh stands between India and ASEAN and it could be a springboard for export of some of the manufactured products to India, ASEAN and beyond.
The Look East policy found its expression in the formation of BIMSTEC (The Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation), launched in June 1997 (it includes Bangladesh, India, Myanmar, Sri Lanka and Thailand).
Challenges Foreign Investment
Foreign direct investment (FDI) contributes to financing sustained economic growth over the long period. Private capital flows from foreign countries are vital complements of national development efforts. It is particularly important for its potential to transfer knowledge, technology, create jobs, boost overall productivity, and enhance competitiveness and entrepreneurship.
Bangladesh is one of the most open economies among developing countries in Asia. In recent years it has taken appropriate steps, in reducing the size of the public sector, to almost free convertibility of currency, in trade liberalisation by reducing tariffs and in encouraging 100% percent foreign investment and joint ventures with sufficient tax incentives.
To assure the foreign investors, Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA), International Centre for Settlement of Industrial Disputes (ICSID) and a member of the World Intellectual Property Organisation (WIPO).
All these initiatives will help countries from the East to invest in Bangladesh. It has however to be recognised that there are certain inadequacies in power, transport and communication sectors in the country and they need to be addressed urgently. Port facilities need to be vastly improved. Several foreign envoys stationed in the country have spoken frankly about some of the impediments to foreign private investment in the country.
Free Trade Agreements
Regional trade blocs are created to boost trade and economic opportunities through Free Trade Agreements (FTA). FTAs exist in 45 countries in Africa, 26 in Europe, 32 in the Americas, and 13 each in the Middle East and Asia-Pacific regions.
Bangladesh may enter into FTAs, subject to the speed at which trade restrictions are removed in Bangladesh that could be adjusted by local industries. Although it is called Free Trade Agreement, it is a misnomer because trade of all commodities and products are not free. The devil of FTAs is in the details.
How extensive will be the coverage of FTA? How large, the negative list of commodities that will be exempt from FTA, is going to be? Are there items on which only partial liberalisation is undertaken? Are tariffs and non-tariffs barriers simultaneously eliminated or reduced? These issues are crucial in determining the structure of FTAs.
Mobility of Labour
A policy of mobility of labour to countries of the East needs to be discussed on a political level. The issue seems to require the resolution of a number of issues, such as period of stay, level of skill, and the type of contract for the imported labour. The period of stay and the level of skill must be consistent with domestic labour market considerations. It is doubtful whether unskilled/semi-skilled labour would be contracted for unless they are employed in agricultural or labour-intensive industries. As regards the period of stay, it could be for a few months or a year.
Political leaders are fully conscious of embarking on this policy to the East. Visits to Southeast and North Asian countries have been a feature of economic diplomacy.
The policy of the East offers tremendous opportunities. The countries in the East have to be effectively mobilsed for regional cooperation. A regional summit with Southeast and North Asian countries may be organized so that countries are aware of each other's potential and comparative advantage in manufacturing products through economic cooperation.
There is however a perception in overseas of political instability of Bangladesh and it tends to dampen foreign investment and joint ventures in the country. One German businessman who has been doing business for some time in Bangladesh told, “ Ruling and opposition politicians appear unaware of the harm they do to the image of Bangladesh abroad by the way they sometime act in domestic politics.” (Weekly Holiday, February 21, 2004).
The “Look East Policy” is not a rhetorical statement. It is a serious policy shift and needs to be pursued vigorously both at the governmental and non-governmental levels. Bangladesh's exports on average have increased in recent years by 15 per cent annually and there is potential of Bangladeshi entrepreneurs to take risks and succeed.
To achieve the goal, Bangladesh is required to make efforts at political, bureaucratic, private sector and media levels to project image of Bangladesh as “can do” country on a sustained and well-disciplined way to the countries in the East.
The author is a former Bangladesh Ambassador to the UN, Geneva.