Dhaka seeks comprehensive strategic partnership with Seoul
Dhaka Tribune | 29 August 2023
Dhaka seeks comprehensive strategic partnership with Seoul
State Minister for Foreign Affairs Md Shahriar Alam on Tuesday sought a "comprehensive strategic partnership" with South Korea and Seoul’s consideration for further expanding duty-free coverage for Bangladeshi products and continuing tariff concession benefits beyond 2026.
This was to address the growing trade imbalance and thereby facilitate sustainable and healthy growth in bilateral trade, he said while speaking at a seminar in celebration of the 50th anniversary of diplomatic relations between Korea and Bangladesh.
The Embassy of the Republic of Korea, the Korea Trade-Investment Promotion Agency (KOTRA) and the Korea-Bangladesh Chamber of Commerce and Industry (KBCCI) jointly organized the seminar styled “Korea-Bangladesh Economic Cooperation - Sharing Development Experience and Exploring Opportunities.”
Bilateral trade surpassed the $3 billion mark last year. The Korean government allows preferential market access of about 95% – that is 4,000+ Bangladeshi products – to their market through the Asia-Pacific Trade Agreement (APTA) and WTO arrangements since 2008.
The Bangladesh government is now negotiating with different countries as well as blocs, including Australia and the EU, to expand market access beyond 2026, when it graduates from the least-developed countries status.
Japan has already extended duty-free access for Bangladeshi products beyond 2026.
"We feel that the two countries should explore the possibility of signing a bilateral agreement on preferential trade in the post-graduation period to boost bilateral trade and investment cooperation and to make up for the loss of preferential trade facilities after LDC graduation," the state minister told Korea.
"South Korea’s continued support may allow preferential market access for Bangladeshi products until such an agreement is signed and comes into force," he said.
State Minister for ICT Zunaid Ahmed Palak and Korean Ambassador Park Young-Sik spoke at the event.
Prof Dr Hyeok Jeong, from the Graduate School of International Studies, Seoul National University, spoke on South Korea’s economic development as an opportunity for Bangladesh, while Dr Dongsoo Kim, executive director of the Center for International Industry and Trade at the Korea Institute for Industrial Economics and Trade (KIET), spoke on the core industries of Korean development and implications for Bangladesh.
Dr Jaehan Cho, senior research fellow at the Industrial Innovation Policy Division, KIET, spoke on how to use the potential of Smart Bangladesh.
Bangladesh and South Korea have enjoyed friendly relations since the establishment of their diplomatic relationship on December 18, 1973.
Korean entrepreneurs came to Bangladesh to set up garment factories, many of which are still active.
A World Bank development report suggests that initial training from the Korean Daewoo Corporation in 1979 contributed to the boom of Bangladesh’s readymade garment industry, its main export item. The corporation joined forces with Bangladesh’s Desh Ltd and trained up its 130 newly recruited employees who later left Desh to start their own clothing businesses, making the industry flourish.
Electronics, automobiles, telecommunications, shipbuilding, chemicals and steel are the largest industries in South Korea now. Samsung Electronics is a household name in Bangladesh, and South Korea is the world’s largest producer of semiconductors.
Comprehensive strategic partnership
The state minister said Bangladesh admired South Korea’s success in transforming itself into a developed country within a generation, and the success was inspiring Bangladesh in its endeavour to steer the nation towards development and prosperity.
"Recognizing the huge prospect for mutually beneficial collaboration we need to foster a comprehensive strategic partnership based on common priorities with long-term perspectives," he said.
"We appreciate the Republic of Korea for being a significant trade partner of Bangladesh," he said, adding that Bangladesh needed to keep up the pace of its progress and development.
"We have created a very high aspiration in the last 14 years. Expectations in the next 20 years will be even higher," he said, as the country aims to be a smart one by 2041.
"A continued economic collaboration with Korea on the agriculture and logistics sector will be a great effort to diversify Bangladesh’s export basket to Korea as well as to reduce the existing bilateral trade deficit."
South Korea is currently the fourth major investor in Bangladesh with an accumulated gross stock of $1.458 billion as of December 2022.
South Korea is also the biggest foreign investor in Bangladesh’s export processing zones with 75 companies operating in the EPZs employing more than 80,000 local workers.
Seoul also increased EDCF (Economic Development Co-operation Fund) loans for Bangladesh to $3 billion from $700 million for a period of five years from 2023.
The Korean government also considered Bangladesh for the new window for concessional loans to fund large-scale infrastructure projects.
Litmus test
Ambassador Park Young said Seoul wanted "to become an important partner in Bangladesh’s infrastructure development as we have done in the past in the RMG industry."
He said the Meghna Bridge project on Bhulta-Araihazar-Bancharampur Road (R-203) and the supply of treated water from the Meghna River to Bangabandhu Sheikh Mujib Shilpa Nagar (BSMSN), which are being discussed through the mechanism of Joint PPP Platform meetings, can become a "litmus test" for Korean companies to consider further investment.
Before Bangladesh’s LDC graduation in 2026, the ambassador said, the Bangladesh government needed to pay attention to consolidating the foundation and increasing the productivity of the manufacturing sector.
In this regard, he emphasized the need to change two policies.
"Firstly, as you know, more than 50% of mobile phones are currently being smuggled. This smuggling causes a massive tax loss for the Bangladesh government.
"The companies manufacturing mobile phones in Bangladesh suffer greatly from smuggling, which prevents further investment. Restricting the PIN registration of smuggled mobile phones with telecom companies is one of the ways to minimize the damage caused by smuggling.
"Secondly, approximately 85% of imported cars are reconditioned, while fewer than 15% of new cars are imported or produced in Bangladesh. Compared to other countries, Bangladesh imposes high tariffs on imported raw materials and auto parts.
"These two elements lead to a loss of competitiveness and discourage additional investment. Mongolia, Cambodia and other countries are already implementing the policy of banning the import of second-hand cars regardless of the name of used or reconditioned," said the ambassador.
"Banning the import of second-hand cars will boost the domestic production of new cars by bringing in foreign capital. This policy will also lead to the reduction of greenhouse gas emissions."
