Bangladesh decides to join largest trade bloc

[Bilal9]

I remember that India and Bangladesh did not join RCEP. Actually, I prefer the Vietnamese way.

Bangladesh HAS decided to join RCEP. From the first post on this thread.

"Bangladesh has decided to join the world's largest trading bloc, the Regional Comprehensive Economic Partnership (RCEP), to stay eligible for duty-free trade facilities in the markets of nearly one-third of the global economies after it graduates to a developing nation in 2026.

The commerce ministry will send a formal proposal to the RCEP headquarters, conveying the country's interest in availing a membership to the bloc, as decided in a meeting on Sunday, Hafizur Rahman, additional secretary to the ministry, told The Business Standard.

With the trading alliance of 15 economies, including China and Japan, entering into force at the beginning of 2022, Bangladesh's exports to the RCEP nations will not face much trouble until 2026 when the country's duty-free access to these two major markets will end, according to commerce ministry officials.

The country is getting duty-free facilities in New Zealand and Australia too. But after the LDC graduation, such facilities will no longer be available.

Besides, if Bangladesh does not join the RCEP or sign free trade agreements separately with those countries by 2026, it will lose its competitive edge in apparel export destinations, especially in China and Japan, while its competitor Vietnam as an RCEP signatory will enjoy duty-free access there after the deal takes effect. In this way, ministry officials think, Bangladesh might lose its market share to Vietnam.

That is why, keeping in mind possible losses of trade benefits in RCEP member countries, Bangladesh has decided to enter the trade association, they said."

 

[Bilal9]

Bangladesh currently has majority exports duty free access to China, Korea and Japan. The latter (Japan) I am not so sure about. However Bangladesh exports enjoy duty free access to Korean market on many items.

 

[Indos]

I remember that India and Bangladesh did not join RCEP. Actually, I prefer the Vietnamese way.

Vietnam become so good at exporting due to MNC companies that uses Vietnam as basis. You can see Vietnam electronics export that is so large and dominated by Samsung.

At the other hand, Vietnam import is so huge as well, almost similar with their export. This shows many input of the exports comes from import and also Vietnam domestic industry get huge challenge by imported goods.

BD at this time is not seen by MNC they way they see Vietnam. The question is if this keep continuing while BD opens their domestic market, it can be a disaster.

BD plan to diversify their export base from textile will also get hurdles. It is because by opening their market, other BD industry sectors will have to face products made by China and ASEAN. So far both China and ASEAN 5 has quite efficient in their birrocracy and governance and has made many structural reform that make their domestic industry get much stronger and become destination to FDI as well.

ASEAN FDI also comes from Far East Region as the region is closer to each other while BD actually should be better used by investors to penetrate Indian and other South Asian nation.

BD should make FTA with US and European countries as they are BD main exports destination.

 

[Viet]

It seems that there is a big gap between Bangladesh and Vietnam.
Bangladeshis lack the courage of Vietnamese. I think Vietnam's economy will soon be significantly ahead of Bangladesh.
There is little difference in industrial level between Bangladesh and Vietnam, but Vietnamese have signed RCEP, TPP, UKVFTA, AFTA, VN-EU FTA, EFTA..... Almost all free trade agreements. This courage and confidence doomed the Vietnamese to success.

If you do not overcome the fear of failure, if you lack the courage to fight back with all you have in a desperate situation, you will hardly succeed.
The Vietnamese dare to put themselves in the crocodile pool, which is why they will succeed.

This is the philosophy from Sun Tzu's <art of war>: 投之亡地而后存，陷之死地然后生。

https://www.infoplease.com/primary-...ligion/art-of-war/sun-tzu-art-warby-sun-tzu-1

Vietnamese people think that way we do it because we have nothing to lose.

Bangladesh currently has majority exports duty free access to China, Korea and Japan. The latter (Japan) I am not so sure about. However Bangladesh exports enjoy duty free access to Korean market on many items.

China has dropped garments and textiles from the 5y plan. That is your opportunity. Only if you do it right.

 

[Bilal9]

Didn't BD join RCEP? @MH.Yang so why are you saying they have given up a good opportunity?

I think they are quite right on this. At first, BD will find they are less competitive but like you said, hopefully that also means they find their niche faster and become competitive. It could make or kill economies.

Competition is nothing new to Bangladesh exporters. They just exceeded Vietnam's exports in apparel to gain 2nd place globally, again.

They have been exporting to the US and winning orders repeatedly - without any GSP or special quota favors. No FTA with USA either, and none with EU yet.

So I don't see them having issues exporting to quality conscious Japanese and China markets, and basic items like T-shirts and undies should be cakewalks, walks in the park.

I foresee a lot of Chinese apparel producers setting up shops in Bangladesh just to export back to their own home market as well as to other markets. Bangladesh will increase exports in Pharma and IT too - but Apparel will not reduce in volume much. Too much invested in the infra, skills, money and expertise.

 

[serenity]

Competition is nothing new to Bangladesh exporters. They just exceeded Vietnam's exports in apparel to gain 2nd place globally, again.

They have been exporting to the US and winning orders repeatedly - without any GSP or special quota favors. No FTA with USA either, and none with EU yet.

So I don't see them having issues exporting to quality conscious Japanese and China markets, and basic items like T-shirts and undies should be cakewalks, walks in the park.

I foresee a lot of Chinese apparel producers setting up shops in Bangladesh just to export back to their own home market as well as to other markets. Bangladesh will increase exports in Pharma and IT too - but Apparel will not reduce in volume much. Too much invested in the infra, skills, money and expertise.

Possibly producers may think of using Bangladesh. That already takes place in smaller scale. I think China wants to move to automation production for things like fabrics which may be possible soon to increase automation. As China's population ages and retires. However China definitely wants to keep onto any industry no matter how unimportant it may seem. So whatever happens on this end is totally shaped by politics and balancing it with the economics. Maybe like many other products, China will produce its own and also buy a certain amount from others as part of the political maintenance.

Bangladesh may be competitive in a few fields within ASEAN and become competitive in certain fields but the trade agreements is like some members say, a potentially harmful thing for Bangladesh. They however have failed to mention that it is both about efficiency or competitiveness as it is also about politics. So I think if well managed by Bangladesh, there would be more benefits than risks since risks are up to Bangladesh and member countries to decide what rules to apply.

It then becomes simply opportunity that remain.

 

[Bilal9]

Vietnamese people think that way we do it because we have nothing to lose.

China has dropped garments and textiles from the 5y plan. That is your opportunity. Only if you do it right.

I see Bangladesh initially exporting a lot of basic apparel (like t-shirts and undies) back to China, unlike Vietnam. I don't know Vietnam apparel labor cost however I feel that it is probably a lot higher than that of Bangladesh, so Vietnamese factories will export more higher value-added apparel items.

For Bangladesh wages lately have been a lot less than minimum wage published by the govt., somewhere around $0.95 an hour PPP rate for 60 hour week, while for Cambodia 3,500 riels (the equivalent of $2.53 PP) and for India - an hourly rate of 39.68 rupees (the equivalent to $2.27 PPP). Covid really put a damper on the wages but the real rate and PPP rates are different.

Garment Worker Diaries Reveal Working Conditions, Wages in Bangladesh, India, Cambodia | Sustainable Brands

A first-of-its-kind research project led by Microfinance Opportunities (MFO) in partnership with Fashion Revolution and C&A Foundation gives the most com...

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[Bilal9]

Possibly producers may think of using Bangladesh. That already takes place in smaller scale. I think China wants to move to automation production for things like fabrics which may be possible soon to increase automation. As China's population ages and retires. However China definitely wants to keep onto any industry no matter how unimportant it may seem. So whatever happens on this end is totally shaped by politics and balancing it with the economics. Maybe like many other products, China will produce its own and also buy a certain amount from others as part of the political maintenance.

Bangladesh may be competitive in a few fields within ASEAN and become competitive in certain fields but the trade agreements is like some members say, a potentially harmful thing for Bangladesh. They however have failed to mention that it is both about efficiency or competitiveness as it is also about politics. So I think if well managed by Bangladesh, there would be more benefits than risks since risks are up to Bangladesh and member countries to decide what rules to apply.

It then becomes simply opportunity that remain.

New Bangladeshi factories had to innovate on ecological front (Carbon Neutral as well as LEED certified) to satisfy European needs and requirements. According to BGMEA (our Apparel industry association), at present 135 LEED green garment factories certified by the U.S. Green Building Council (USGBC). Nine out of the world's top ten green garment factories are in Bangladesh. 500 more factories are in the process of getting LEED certification.

Bangladesh: Factories on the run for LEED certification - Asia Green Buildings

www.asiagreenbuildings.com

They also had to invest in individual or collective effluent treatment plants for the same reason, European safety mandate compliance.

So - point is, Bangladesh is uniquely positioned to export to EU and US. I don't know if these are requirements for Chinese markets.

 

[bluesky]

Bangladesh decides to join largest trade bloc

BD has the right to wish for something. But, will the RCEP board accepts the BD application to join this trade block remains a question that only the future can answer.

There must be many terms and conditions that must be met by BD before RCEP can decide on BD joining it.

 

[mb444]

Yes, you are right. Below is an excerpt to support what you wrote:

"The following product groups represent the highest dollar value in Bangladesh’s import purchases during 2019. Also shown is the percentage share each product category represents in terms of overall imports into Bangladesh.

1. Machinery including computers: US$5.8 billion (11.5% of total imports)
2. Cotton: $5.4 billion (10.8%)
3. Mineral fuels including oil: $4.4 billion (8.7%)
4. Electrical machinery, equipment: $3.2 billion (6.4%)
5. Iron, steel: $2.9 billion (5.8%)
6. Plastics, plastic articles: $2.2 billion (4.4%)
7. Vehicles: $1.7 billion (3.5%)
8. Manmade staple fibers: $1.6 billion (3.2%)
9. Manmade filaments: $1.42 billion (2.8%)
10. Knit or crochet fabric: $1.35 billion (2.7%)

Bangladesh’s top 10 imports represent about three-fifths (59.7%) of the overall value of its product purchases from other countries.

Iron and steel posted the fastest growth in cost among Bangladesh’s top 10 import categories, up by 4.8% from 2018 to 2019. The other top product category to appreciate year over year was manmade filaments, due to its 1.8% increase.

Leading the decrease among the top 10 Bangladeshi imports was cotton via its -21.3% drop year over year, ahead of the 21% decline for imported electrical machinery and equipment".

The point here is trade deficit is not a bad thing depending on why it exists.

A case in point is perhaps lebanon which for reasons unclear to me runs a massive trade deficit because it buys food and basic necessities. They produce not a lot in their country leading to the bizzare situation they find themselves in.

The opposite position is the case of china that runs a trade deficit of 187%, or vietnam that BD is often compared to at almost 50%.

Top industrial countries such as Japan and Germany maintains large trade defict....why it is because they buy in inputs for their economy. They off course have capacity to turn these inputs into finished goods and add massive values. Here BD lags behind but the basic similarities and causes of the deficit is the same.

Some information on leading economies and their trade deficit (scroll to the bottom of the page)

https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html

The pattern of BDs trade imbalance can be found in the link below. It has increased in parallel with BDs GDP growth and also massive infrastructural projects.

https://www.statista.com/statistics/438371/trade-balance-of-bangladesh/

I would not claim it is not of concern because it is. BD must progress up the value chain, but with continuing GDP expansion our deficit will be managable.

I am hopeful that projects like the padma barrage, digitisation of the economy, maturity of the political, social and legal order along with expansion of education will continue to propel economic growth.

BDs greatest asset is its fiscal maturity and Conservative long term policies irrespective of who is in charge. It has served us well and long may it continue.

 

[Viet]

I see Bangladesh initially exporting a lot of basic apparel (like t-shirts and undies) back to China, unlike Vietnam. I don't know Vietnam apparel labor cost however I feel that it is probably a lot higher than that of Bangladesh, so Vietnamese factories will export more higher value-added apparel items.

For Bangladesh wages lately have been a lot less than minimum wage published by the govt., somewhere around $0.95 an hour PPP rate for 60 hour week, while for Cambodia 3,500 riels (the equivalent of $2.53 PP) and for India - an hourly rate of 39.68 rupees (the equivalent to $2.27 PPP). Covid really put a damper on the wages but the real rate and PPP rates are different.

Garment Worker Diaries Reveal Working Conditions, Wages in Bangladesh, India, Cambodia | Sustainable Brands

A first-of-its-kind research project led by Microfinance Opportunities (MFO) in partnership with Fashion Revolution and C&A Foundation gives the most com...

sustainablebrands.com

People in Vietnam don’t get much money when working in garment factories. Do google then you will see minimum wage is something $150 per month, average wage something $300 per month. Not a big money.

 

[casual]

Vietnam become so good at exporting due to MNC companies that uses Vietnam as basis. You can see Vietnam electronics export that is so large and dominated by Samsung.

At the other hand, Vietnam import is so huge as well, almost similar with their export. This shows many input of the exports comes from import and also Vietnam domestic industry get huge challenge by imported goods.

BD at this time is not seen by MNC they way they see Vietnam. The question is if this keep continuing while BD opens their domestic market, it can be a disaster.

BD plan to diversify their export base from textile will also get hurdles. It is because by opening their market, other BD industry sectors will have to face products made by China and ASEAN. So far both China and ASEAN 5 has quite efficient in their birrocracy and governance and has made many structural reform that make their domestic industry get much stronger and become destination to FDI as well.

ASEAN FDI also comes from Far East Region as the region is closer to each other while BD actually should be better used by investors to penetrate Indian and other South Asian nation.

BD should make FTA with US and European countries as they are BD main exports destination.

you need to open up your markets or your products will never become competitive. It hurts in the short term yes but if the country have labor advantage and decent infrastructure then manufacturing will come. The type of industries will be low level at first and gradually move up the value chain.