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Address by H.E. Mrs.Veena Sikri, High Commissioner of India, at
Luncheon Meeting hosted by Foreign Investors’ Chamber of Commerce and
Industry (FICCI) in Dhaka
on 25th September, 2005
President
of FICCI, Janab Mahbub Jamil,
Secretary of FICCI Janab M.A. Matin,
Members of FICCI,
Ladies
and Gentlemen,
It is an honour to be invited to speak to this distinguished
gathering of eminent businessmen, members of the Foreign Investors’
Chamber, who are present here today.
2.
Foreign investors continue to play a defining role in the ongoing
economic growth and development of Bangladesh.
Many of your Chamber members have a large presence in India as
well. Both Bangladesh and
India have, since the early 1990s, made significant strides in
liberalizing their trade and economic regimes as part of our individual
efforts to benefit from globalisation in order to attain a speedier
upliftment in the standards of living of our peoples.
Yet, as we continue to accept the inexorable realities of
globalisation, we are increasingly realizing that regional cooperation
and economic integration is of crucial importance if we are to meet the
challenges posed by globalisation and derive the full benefits from it.
Regional cooperation is in turn based on developing bilateral
synergies and complementarities to the mutual interest and benefits of
both countries. Therefore, the theme of my address today is how strengthening
bilateral trade and economic cooperation between Bangladesh and India
can benefit our two governments and peoples as well as the foreign
investors community in Bangladesh.
3.
In the last few years, the world’s attention has been drawn to
the consistently high growth rate maintained by the countries in South
Asia. There is a unanimous
view that South Asia holds considerable potential for sustaining rapid
economic growth well into the foreseeable future and that it will be one
of the engines of global economic development.
India’s
emergence as an economic power is now the focus of much attention and
debate in the international community.
In PPP (Purchasing Power Parity) terms, India is already the
world’s 4th largest economy.
According to a report by Goldman Sachs, India’s GDP will reach
US $ 1 trillion by 2011, US $ 2 trillion by 2020 and US $ 27 trillion by
2050, to make India the world’s third largest economy by 2050.
According to a recent report ‘Mapping the global future’ by
the American National Intelligence Council, the Indian economy, even
when GDP is measured in US $ rather than Purchasing Power Parity, is
expected to overtake Italy by 2014, France by 2020, and Germany by 2022.
These trends hold immense significance not only for our
foreign trade with other countries, but most importantly for
intra-regional trade in SAARC and bilateral trade between India and
Bangladesh.
4.
Countries across the world from USA, Japan, Russia, China and the
EU see India as an indispensable economic partner with whom they would
like to develop mutually beneficial economic, commercial and service
sector linkages. We ask
Bangladesh too to recognize the opportunity for their own prosperity
that better relations with India offers them.
We would like Bangladesh to consider furthering their own growth,
security and development in cooperation with India.
India offers to Bangladesh and all foreign investors here a vast
productive hinterland that would provide you far greater opportunities
for growth than if you were to rely exclusively either on domestic
markets in Bangladesh or on markets much further away.
5.
India is keenly aware that our own peace and prosperity is
inextricably linked with that of our neighbours. We are as committed to
our own sustained economic development and welfare of our people as we
are to partnering our neighbours on a mutually agreed basis in their
economic development. WE
are prepared to make our neighbours full stake-holders in India’s
economic progress. As
the largest country in the South Asia region with the strongest economy,
India accepts a greater responsibility in developing bilateral
relationship with our neighbours. In
this context, India has readily accepted the principles of
non-reciprocity and positive asymmetry.
That we are prepared to give much more has been amply
demonstrated through the free markets that India has already established
with Sri Lanka, Nepal and Bhutan and in the bilateral FTA that we have
offered to Bangladesh.
6.
I am glad to see that an increasing number of Indian companies
are now members of your Chamber. With
its liberal trading and investment regime, Bangladesh has become an
attractive trade and investment destination for Indian companies. Indian
companies have invested substantially in Bangladesh in the textiles and
readymade garments sectors as well as in pharmaceuticals, power, IT and
other service sectors. The modern state-of-the-art Apollo Hospital in Dhaka,
is a symbol of such beneficial cooperation in the services sector.
Sun Pharmaceuticals from India has made a large investment in the
pharma sector. In addition,
a number of buying houses in Bangladesh are owned by Indian companies.
For many years now, Indian companies have been actively involved
in building critical infrastructure projects in Bangladesh such as power
generation and transmission, road, railways and IT projects.
India’s leading group, the Tatas, have proposed to make the
largest-ever investment in Bangladesh amounting to around US $ 2.5
billion in iron and steel, fertiliser and power generation sectors.
Other large Indian business groups such as Essar, Reliance, Mittal and
Birlas, too, are considering investments in Bangladesh.
7.
There are several hundred Indian professionals working in a wide
range of industries in Bangladesh, ranging from hotels, textiles,
banking, fashion design, hospitals and IT. Their professional expertise
and managerial skills are highly valued in Bangladesh and this is
leading to closer links and cooperation with Indian companies.
8.
Bangladesh-India bilateral trade has grown to US$ 2.174 billion
in 2004-05 from US$ 900 million in 1999-2000.
It is true that the bilateral trade is overwhelmingly in
India’s favour. India’s exports, according to EPB data released
recently, were US$ 2.03 billion in the last fiscal year.
Nonetheless, it is important to note that nearly 70% of India’s
exports to Bangladesh consist of commodities and raw materials such as
yarn, chemicals, petroleum products and construction materials or
essential items such as rice, wheat and sugar.
Thus, most of the imports from India either add to Bangladesh’s
export and manufacturing competitiveness or fulfill essential demands of
the Bangladeshi people. India
offers imports of international quality on cost competitiveness basis.
9.
India is Bangladesh’s single largest source of imports. The
advantage of geographical proximity allows these items of import, which
meet the most exacting international standards, to be available cheaply,
rapidly and with minimum transport costs. This, in fact, is a great
advantage in strengthening Bangladesh’s small and medium enterprises (SMEs)
rather than affecting them adversely. Most of the products imported from
India are value added here locally thus generating employment and
contributing as inputs into Bangladesh’s manufacturing and export
sectors. As such, imports
from India contribute to the growth of Bangladesh’s GDP and to
strengthening the global competitiveness of Bangladesh’s economy.
10.
Simultaneously, we are deeply conscious of Bangladesh’s
concerns and sensitivities regarding their adverse trade balance with
India. We are fully
committed to working jointly with the Government and the people of
Bangladesh as partners in boosting Bangladesh exports to India.
Indeed, I consider this as an important priority in my work here.
I am particularly happy to note that Bangladesh’s exports have
almost trebled from US$ 50 million in 2001-02 to US$ 144.19 million in
2004-05. Bangladesh’s exports to India have registered a remarkable
growth rate of 67.44% for this fiscal year, 2004-05. This far outstrips
Bangladesh’s overall export growth rate of 14%. Some
21 new items from Bangladesh entered the Indian market last fiscal.
Overall, the commodities performing well were raw jute, jute twine and
yarn, chemical fertilizers, leather products, ceramic tableware and
jamdani saris.
11.
To further strengthen market access for Bangladesh exports to
India, we have offered, over two years ago, to conclude a bilateral FTA
with Bangladesh. Bilateral
Working Groups on Trade and Customs were set up in August 2003, which
were expected to meet regularly every three months in an effort to
dispel all differences on the so-called non-tariff and para-tariff
barriers and to expedite discussions on the bilateral FTA. The first two
meetings were held more or less on time and actually achieved positive
results by way of regularizing cement exports from Bangladesh and
resumption of lead acid battery exports to India. However, for almost 18 months, there was a breakdown in the
dialogue process, with its own negative consequences for perception
among the business community about the process.
I am glad to report that the Working Group Trade met again last
month and the dialogue has resumed. We hope that the Working Group on
Customs will also meet soon enough.
12.
The bilateral FTA we have proposed is asymmetric, in that it
would enable Bangladeshi firms to have access to the Indian market
immediately, while Indian goods would get access only after 8-10 years.
No matter what pattern of market access is envisaged, a Rules of
Origin (ROO) Agreement would need to be finalized between our two
countries. The Bangladesh
Government has now informed us that it is appointing a consultant to
study the FTA issue further. We
do hope that Bangladesh will decide quickly to engage India earnestly on
the issue, as Bangladesh risks losing out by not responding.
FTAs are becoming the norm for trade liberalization globally,
whether it is in South Asia, Asia-Pacific or other parts of the world.
The FTA would also encourage more Indian investment and enable
trade to be balanced.
13.
The FTA we have offered to Bangladesh is patterned on the one
already concluded by us with the Government of Sri Lanka.
It is relevant to note that after the FTA with Sri Lanka, not
only have Sri Lankan exports to India quadrupled in four years, but the
trade surplus India enjoyed at 15 to 1 in its exports to Sri Lanka has
now come down to 5 to 1. India
has also emerged as Sri Lanka’s 3rd largest investor and
Indian investors now account for 30% of Sri Lanka’s exports to India!
The preferential tariffs offered by the FTA are the key factor
attracting the Indian investment. Based on the highly successful experience of their bilateral
FTA, India and Sri Lanka are now in the process of finalizing a
Comprehensive Economic Partnership Agreement (CEPA), which will further
expand the investment and improve trade facilitation.
I feel sure that Bangladesh enterprises and foreign investors in
Bangladesh would similarly benefit once the Bangladesh-India FTA is
finalized.
14.
To give just one example, once the proposed Tata investment in
Bangladesh is finalized and implemented, it is expected to result in
annual exports of over US$ 1 billion from Bangladesh to India.
15.
Side by side with the FTA, I would accord equally high priority
to the need for improving, modernizing and streamlining the physical and
financial infrastructure for trade and investment between Bangladesh and
India. There is a Banking
Sub-group that has been set up to facilitate contacts between our two
Central Banks but its meetings are few and far between. As a result,
routine bureaucratic issues assume the dimension of problems and are
described as non-tariff or para-tariff barriers. Thus, several bank
branches in North-East India earlier lacked authorization to handle
foreign exchange transactions independently.
This was delaying opening of LCs by Bangladesh exporters, a
problem which has now been remedied by 33 bank branches of State Bank of
India and United Bank of India being given such authorization.
16.
Another disturbing development, which we have brought to the
notice of the Bangladesh Government, is the increasing incidences of
non-payment of export bills of Indian exporters.
Concrete instances have been provided to the Bangladesh
Government and to the Bank of Bangladesh by the visiting delegation of
the Federation of Indian Export Organisations (FIEO) that was in Dhaka
in early August. We certainly hope that this issue can be resolved
expeditiously. The high
cost of formal trade due to poor working of the current LC system only
promotes informal trade with its own adverse consequences of loss of
revenue for the governments and criminalization of our borders.
17.
Informal/illegal trade of non-narco commodities between India and
Bangladesh is both a problem in itself and a symptom of the bigger
issues, namely the non-integrated nature of the two economies and the
constraints to formal trade. Several
measures such as tariff rationalization, more regional integration,
better policing, and fencing of the border, will surely help in
arresting this illegal trade. One
important initiative that both the countries can take to discourage the
illegal trade is through opening of border trade at various additional
points along the India Bangladesh border, including setting up of border
haats or markets.
18.
The governments, businessmen and media of our two countries need
to focus on removing all the obstacles and limitations to the growth of
our bilateral trade and economic interaction. This will greatly benefit
the foreign investors’ community and domestic entrepreneurs on both
sides. At present, over 70% of our official bilateral trade is conducted
through Petrapole/Benapole LCS, creating inordinate delays and pressure.
The first and
foremost task therefore is to improve the infrastructure of our Land
Customs Stations in a coordinated manner beginning with Benapole/Petrapole.
Since, as they are our primary gateways of trade. This includes
provisions for improving approach roads, providing banking and
communication facilities at the LCS, construction of warehouses, and
above all, stream-lining procedures for exports and imports. Recent
studies have shown that at Benapole/Petrapole, the cumulative loss of
time in loading at point of origin in India, transportation, unloading
at Benapole, parking, customs and crossing of border, and re-loading is
99 hours as against the ideal time of 29.6 hours. It may be difficult to imagine, but the reality is that at
our borders the Bangladesh and Indian Customs houses have no mode of
communication between them. India’s
proposal for establishing a hotline between our major Customs Posts
continues to lie unanswered with the Bangladesh government. I am happy
to inform you that the Government of India is undertaking the full scale
modernization of the Petrapole LCS, that will soon lead to reduced
formalities and faster clearance of goods.
19.
One important limitation in our bilateral, economic and
commercial exchanges is the lack of containerization, either for road,
rail or riverine transport. Most goods are now transported through open
trucks in a disorganised manner. The
process of unloading, weighing and re-loading not only cause tremendous
delays but is and becoming in itself a cause of corruption and other
mal-practices. Containerization can greatly enhance efficiency, reduce
smuggling, and ensure security of goods moving in either direction.
I am told that at present a container between Kolkata and Dhaka
(via Singapore) costs US$ 2,500 and takes over 15 days, while through
using our common riverine transportation, this cost can be reduced to
just US$ 500 5 or 6 days. This will also relieve Petrapole/Benapole of
the present congestion.
20.
The capability already exists for containerized goods to be moved
by road, rail and river transport between Bangladesh and India.
If our two countries conclude a comprehensive Commercial Motor
Vehicles Agreement, this would allow Bangladesh trucks to carry goods
right upto Indian ports or Inland Container depots. This would allow
truck movement, say, between Cossipore ICD in Kolkata to Dhaka ICD thus
obviating the need for trans-shipment of goods at the border. Similarly
trucks can also go directly from Dhaka to Siliguri through Banglabandha
without trans-shipment. This
is similar to practices being followed in the EU and ASEAN and would
allow seamless transport connectivity within the region.
Such moves will greatly further the development of the truck
transportation industry of Bangladesh. Rail-based container movement can
be facilitated by restoring old rail links. This issue is currently
being discussed between Container Corporation of India and Bangladesh
Railways. We are awaiting a
response from Bangladesh for a trial run of the service.
21.
The cheapest and most cost effective mode of transportation
between our two countries is the use of riverine routes. India has
proposed that Ashuganj (with multi-modal facilities) and Fenchuganj be
declared ports of call under the bilateral Inland Water Trade and
Transit Protocol, by which goods from India can be offloaded there
(instead of at the nearest LCS) for either local consumption or onward
transportation. It has been 4 years since the last meeting of the
Standing Committee on IWTT was held.
India has repeatedly requested for improvement in night
navigation facility and intensifying of dredging operations. Besides, we
have also requested for the need to consider additional river routes,
which can enhance trade between our States of Mizoram, Tripura and
Bangladesh.
22.
In a rapidly modernizing and globalising world, connectivity is
the key to more regional trade and cooperation.
Bangladesh enjoys a strategic geographical location and can be
the bridge between South Asia and South East Asia.
It can be the regional hub of transportation for eastern India,
North East India, Nepal, Bhutan and ASEAN countries, if it can
capitalize its location advantages.
Bangladesh needs to look at the issue of transit and
transshipment facilities not simply as a bilateral issue with India, but
rather as a first step towards making it a bridge towards South East
Asia. A small beginning can
perhaps be made by enabling North Eastern States of India to have access
to Chittagong Port.
23.
There is limited exposure for Bangladeshi products in India due
to inadequate participation in Indian trade fairs and exhibitions. This
holds good for products of joint ventures and foreign investors and
entrepreneurs as well. We were greatly encouraged to note that when, for
the first time in many years, 25 Bangladeshi companies participated in
the India International Trade Fair in New Delhi in November, 2004, these
companies secured on the spot orders worth US $ 2 million. And when 26
Bangladesh companies participated in the Guwahati International Trade
Fair in February/March, 2005, they obtained US $ 2.5 million of
immediate orders. There is a definite market in India for most
Bangladesh products and we would urge the business community, including
the FICCI, to organize
regular participation in trade fairs and exhibitions in India.
24.
Investment, trade and other economic linkages between Bengladesh
and India are the true drivers in strengthening our friendship and
bilateral relations. During his recent visit to Bangladesh in August
2005, the Hon’ble External Affairs Ministers of India, H.E. Mr. K.
Natwar Singh had pointed out that ‘a stable, prosperous, secular and
democratic Bangladesh is not just in the interest of its people, but
clearly in the interest of India and the region as a whole’.
There is a broad consensus across the spectrum of political
parties, business community and public opinion in India which supports a
deeper, mutually beneficial, cooperative relationship with Bangladesh
and our other neighbours. What we need now is sustained dialogue and
continuous engagement to evolve mutually beneficial, win-win solutions
on all issues. We look forward to the active cooperation and partnership
of the business community, including members of FICCI, in bringing this
about.
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