Bangladesh eyes preferential trade with Nepal for 140 products

Bangladesh government plans to sign a preferential trade agreement (PTA) with Nepal for 140 products, including agro-processed food, dairy, ready-made garment, footwear, and electronics and home appliances.

Consulting the stakeholders last month, the Bangladesh Tariff Commission prepared the list of 140 "potential products", said Md Mayen Uddin Molla, assistant chief of the commission.

The other major products primarily identified include motorcycle, plastic, mineral water, lead-acid accumulator, glass and glassware, liquid dielectric transformers, static converters, and steel.

Following a request from the commerce ministry, the commission prepared the list, prioritising products – with an average export value of above $1 million – that Nepal imported from the global market in the last three years.

Commission officials said Bangladesh currently exports 52 out of these 140 products to Nepal.

"The commission will be able to finalise the product list within the next week," said Dr Mostafa Abid Khan, member of the statutory organisation.

Earlier, both countries expressed their interests in signing a PTA regime during the fourth meeting of the Nepal-Bangladesh commerce joint-secretary level technical committee held in Kathmandu during October 22-23, 2019.

They decided that Bangladesh would exchange a product request list with Nepal, seeking duty benefits.

Earlier in 2016, Bangladesh prepared a request list of 56 products and an offer list of 108 Nepalese products for preferential market access to Bangladesh; but it failed.

According to the South Asian Free Trade Area (Safta), the Himalayan country now maintains a sensitive list of 998 products for the least developed countries (LDCs) and 1,036 products for non-LDCs that are not entitled to preferential trade benefits.

Bangladesh has been maintaining a list of 987 products for the LDCs and 993 products for non-LDCs as sensitive products.

The government also assessed the products' prospects for future export based on the analysis prepared by the Bangladesh Embassy in Nepal.

Some products have a high demand in Nepal such as processed food, electrical and electronics products, motorcycle, furniture, ceramic, melamine, ready-made garment, bicycle, and construction materials, according to the embassy. 

"The PTA will not allow duty-free market access but it may provide zero-duty facility to some products and lowered duty to some others," Ali Ahmad, chief executive officer of the Bangladesh Foreign Trade Institute, told The Business Standard on Thursday.

He said after graduation from the LDC club in 2024, Bangladesh would lose duty-free and quota-free market access across the globe, except for the European Union (EU). 

The EU's market access facility will be over by 2027, Ali added.

As the preparation for that time, the government wants to sign some PTAs, free-trade agreements and a Comprehensive Economic Partnership Agreement with some countries that are important and potential export destinations for Bangladeshi products, he explained.

The signing of a PTA with Nepal would be beneficial for Bangladesh and a milestone for signing more of such agreements, Ali elaborated.

Electrical and electronics product manufacturer Walton's Executive Director Uday Hakim told The Business Standard that the company is exporting home appliances including air conditioner, television and refrigerator to Nepal, paying duty.

"If the government can sign such an agreement with Nepal, it would help boost bilateral trade," he said.

Furniture giant Hatil's Manager of international marketing Shamim Razib said, "We have opened an outlet in Nepal with a local partner, who imports our furniture paying 11.25 percent duty."

However, the government has not considered furniture in the proposed list for the PTA as the item is now out of Nepal's sensitive list under Safta.

Within the agreement, pharmaceutical products are also getting market access for duties ranging from 0 percent to 14 percent as it is also out of Nepal's sensitive list.

Duty slabs under Safta

Under the phased tariff liberalisation programme (TLP) of Safta, the non-LDCs are supposed to cut their tariffs to 20 percent in two years, and the LDCs to 30 percent.

The non-LDCs will have to cut their tariffs to 0-5 percent in five years (Sri Lanka in 6 years), while the LDCs will have to do so in eight years.

The non-LDCs will cut their tariffs for LDC products to 0-5 percent in 3 years. This TLP covers all tariff lines except those kept in the sensitive list by the member states. 

Trade surplus with Nepal 

Nepal is the only country in South Asia with which Bangladesh has a trade surplus. According to the Export Promotion Bureau, Bangladesh exported goods worth $38.04 million to Nepal during 2019-2020.

The major exporting items of Bangladesh to the land-locked Nepal include agricultural products, jute and jute goods, engineering products, pharmaceutical products, paper and paper board, cotton, chemical products, plastics and plastic articles, specialised textile, furniture, bedding, mattress, cushions and similar stuffed furnishing, knitwear, woven garments, frozen food, headgear and parts, home textile, man-made filaments and staple fibres, ceramic products, glass and glassware, clocks and watches and parts.

Bangladesh mainly imported vegetable products, prepared foodstuffs, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes, zinc and articles, products of the chemical or allied industries, sulphur, lime and cement, man-made staple fibre, soyabean oil and its fractions, brooms and brushes from Nepal.