Address by H.E. Mrs.Veena Sikri, High Commissioner of India at the Seminar organized by Bangladesh Enterprise Institute on August 13, 2005 on Bangladesh-India Trade and FTAThe Bangladesh-India economic partnership as we see it today really began with the commencement of the liberalization process in both countries in the early 1990's. With both nations now recording consistently healthy economic growth rates and double-digit export growth rates, our bilateral relations are today increasingly permeated by greater economic content.
2. Our bilateral trade has grown to US$ 1944 million 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 yesterday, were US$ 1.8 billion. 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 the essential demands of the Bangladeshi people. India offers imports of international quality on cost competitive basis. The recent 20-day strike at Benapole and its impact on domestic prices have clearly demonstrated the importance of obtaining these primary products and raw materials from India in a smooth and unhindered manner.
3. At the same time, we are deeply aware of the need to increase Bangladesh 's exports to India . India , especially due to its recent healthy GDP growth rates provides excellent markets for Bangladesh 's exports. I am particularly happy to note that Bangladesh 's exports have almost trebled from US$ 50 million in 2001-2002 to US$ 144.19 million in 2004-05 (according to EPB data). Bangladesh 's exports to India have registered a remarkable growth rate of 67.44% for this fiscal year. Thus in four years Bangladesh 's exports to India have not only trebled but also have far outstripped Bangladesh 's overall export growth rate of 14%. Some 21 new items from Bangladesh entered the Indian market last fiscal. Overall, the export sections performing well were raw jute, jute twine and yarn, chemical fertilizers, leather products, ceramic tableware and jamdani saris.
4. One consequence of this rapidly burgeoning trade is that economic issues have been increasingly engaging attention of the two governments. The policy framework for this bilateral dialogue has at its apex the Joint Economic Commission (JEC), co-chaired by our respective Foreign Ministers, followed by Secretary-level talks between various ministries such as commerce and shipping. These are supplemented by various sectoral working groups such as Joint Working Group on Trade, Joint Customs Group, Banking Sub-Group, Telecom Coordination Group, etc. Unfortunately, the meetings of these forums have been highly irregular.
5. The JEC was last held in July 2003. At that point India had offered to the Bangladesh Government the conclusion of a bilateral FTA along the same lines as we have with Sri Lanka . It was agreed that this proposal would be studied by the JWG on Trade. Two meetings were held of the Joint Working Group (JWG) on Trade one in October 2003 and the second in March 2004. After that there has been a hiatus of 15 months. The third meeting of the JWG on Trade was recently held on 1-2 August, 2005. The Joint Customs Group has still not held its third meeting. We hope it will do so in September this year.
6. I am giving you this background because I have gone through some of the excellent papers prepared for your seminar and agree whole-heartedly with many of the suggestions contained therein. The crucial question is, how do we operationalise these suggestions. This can only be done through steady and regular bilateral dialogue together with the necessary goodwill on both sides.
7. During the recently held Joint Working Group on Trade (August 1-2, 2005) both sides discussed and deliberated on various issues, including perceived NTBs, mandatory testing and standards requirements, restrictions on import of certain commodities by certain modes of transport, as well as trade facilitation measures such as improvement of infrastructure at various land custom stations (LCS), operationalisation of fresh LCS, simplification of custom procedure, improvement in banking system and difficulties in payments faced by Indian exporters. On mandatory testing and standards requirements, we have demonstrated our sincere intentions by resolving the issue of certification for Bangladesh cement exports. During the August 1-2 meeting itself, our experts visited various laboratories in Dhaka . They have identified three labs for food products, two for textile products and one for leather products for further inspection and accreditation in case they can meet the norms since at present, none of the labs are implementing the ISO 17025 specifications. I must also say that product-by-product certification is highly cumbersome and it would certainly be better if the BSTI and BIS could sign an MOU, the draft of which has been under consideration of the Bangladesh Government for over two years.
8. We also discussed further facilitation of bilateral trade through measures such as
• expanding infrastructural facilties at Petrapole/Benapole as well as other LCS, operationalization or further facilities for LCS such as Phulbari/Banglabandha ( West Bengal ), Kuliang (Meghalaya), Sabroom (Tripura) and Demagiri and Kawrpuichhuah (Mizoram)
• permitting movement of containerized traffic through rail and riverine routes
• operationalisation of direct shipping links between Haldia and Chittagong .
We have also brought to the notice of the Bangladesh Government, that in follow up of earlier discussions and BEI initiative, authorization has been given to 33 bank branches (SBI and UBI) in the North Eastern Region to handle foreign exchange transactions independently. This issue would be further reviewed in the forthcoming banking sub-group meeting which we hope will be held soon in Dhaka .
9. One disturbing development, which we brought to the notice of the Bangladesh side, was 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 about two weeks ago. I certainly hope that this issue can be resolved expeditiously. The high cost of formal trade due to poor working of the current L/C system is clearly brought out in one of the papers dealing with the trade financing. This only promotes informal trade with its own adverse consequences of loss of revenue for the governments and criminalization of our borders.
10. Finally, in the JWG, we had only a brief discussion on FTA, where we were informed that the Bangladesh Government is in the process of appointing a consultant to study this question further.
11. I am delighted that many of the issued deliberated during the JWG on Trade are being discussed in detail during your Seminar. I hope that this seminar will be able to prepare a roadmap that takes into account the need for bringing in modern systems, practices and technologies in order to facilitate and upgrade our bilateral trade.
12. For instance, there are strong economic reasons why we should encourage increasing containerization of our bilateral trade, through both the rail as well as riverine routes, since this is cost effective, efficient and tamper-proof. It will permit 24-hour uninterrupted transport of goods and reduce smuggling and duty evasion. To give an example, 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 our common riverine transportation, this will cost only US$ 500 and take just 5 to 6 days. This will also relieve Petrapole/Benapole of the present congestion. Similarly, if Ashuganj can be declared a port of call under our bilateral Inland Water Trade and Transit Protocol with multi-modal facilities, goods from India can be offloaded there (instead of at the nearest LCS) for either local consumption or onward transportation. This will both facilitate our bilateral trade and greatly further the development of the truck transportation industry of Bangladesh . Similarly, rail-based container movement should also be encouraged between the two countries, to begin with between Sealdah and Joydevpur.
13. I read with great interest the paper “Quantifying Transport, Regulatory and other costs of India-Bangladesh Trade”. Having personally visited many of the land customs stations including Petrapole, I completely agree with the findings that at Benapole/Petrapole, the cumulative loss of time in loading at Kolkata, transportation, unloading at Benapole, parking, customs and crossing of border, etc is 99 hours as against the ideal time of 29.6 hours. It is also difficult to imagine the reality that the two customs houses have no mode of communication between them, even while our proposal for establishing a hotline continues to lie unanswered with the Bangladesh government. The first and foremost task therefore is to improve the infrastructure of the LCS, especially Benapole/Petrapole, in a coordinated manner, as they are our gateways of trade. This would include the provisions for improving approach roads, providing banking and communication facilities, construction of warehouses, etc. Here I would like to inform you that the Government of India is in the process of full-scale modernization of the Petrapole LCS that will take care of many of these concerns.
14. However, the delays associated with the customs, loading, unloading, at the LCS can be resolved should the two countries conclude a comprehensive Commercial Motor Vehicles Agreement which would allow trucks from both sides to enter into each other's territory. This would allow truck movement, say, between Cossipore ICD in Kolkata to Dhaka ICD thus obviating the need for transshipment of goods at the border. Similarly trucks can also go directly from Dhaka to Siliguri through Banglabandha without transshipment. This is similar to the practices being followed in the EU and the ASEAN and would allow seamless transport connectivity within the region.
15. Coming to the issue of informal trade touched upon by one of the papers, I would suggest that 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. During the recently held Foreign Office Consultations we have again proposed to the Bangladesh side the opening of border trade under the provisions of the bilateral trade agreement.
16. Finally, I would like to speak on the issue of bilateral FTA. Let us first take the example of India-Sri Lanka FTA. Let me inform the distinguished gathering that Sri Lankan exports to India in 2000-2001 were US$ 45.00 million, much less than those for Bangladesh during the same year. In 2003-2004, the Sri Lankan exports to India had grown to US$ 194.78 million. The annual growth rate of Sri Lankan exports to India is also increasing. While in 2001-02 the exports grew by 49.71% compared to previous year, in 2003-2004 export grew by over 114% over previous year! The balance of trade which favoured India 15 to one when the agreement was signed has also come down to five to one. After the FTA was operationalised, India has also emerged as Sri Lanka 's third largest investor with nearly 30% of Sri Lankan exports to India accounted for by Indian investments. The two countries are now discussing a Comprehensive Economic Partnership Agreement (CEPA), which will not only expand the list of goods covered under the FTA, but also promote cooperation in services, investment and trade facilitation.
17. It is in the light of our excellent experience with Sri Lanka-India FTA that the proposal for bilateral FTA was made to Bangladesh to take into account Bangladesh 's desire for duty free access to Indian market. In our view the FTA provides a structured framework under which various issues such as rules of origin, harmonization of HS code and custom procedures, and negative lists, can be addressed by the two countries. FTAs are fast becoming the norm for trade liberalization, as we have seen with the Pakistan- Sri Lanka FTA now having become operational.
18. I would now conclude by thanking the Hon'ble Commerce Secretary for his kind presence here. I would also like to express my gratitude to Amb. Farooq Sobhan, President, BEI, for giving me an opportunity to be in the midst of such a distinguished gathering. Finally, my deep appreciation to all the participants in this Seminar as well as invitees and members of media for their presence here today.