Experts expect four times rise in exports to SAARC countries after SAFTA

The country's exports to South Asian nations could rise by up to four times once the regional free trade accord, SAFTA, takes effect on the new year, analysts said. "Bangladesh's export may rise by three to four times when the SAFTA takes effect on January 1, 2006," Ananya Raihan, Executive Director of the Development Research Network (D.Net), told BDNEWS.

Raihan, whose prediction was based on one of his studies, 'SAFTA and Beyond,' said Bangladesh would be the top gainer among the LDCs in the region as it has the ability to offer more products for trading regionally than countries like Nepal, Bhutan and the Maldives.

Mustafizur Rahman, Director, Research, of the Centre for Policy Dialogue (CPD), however, said a major growth in export cannot be expected without raising the capacity to maintain steady supply of products to a bigger regional market. "I don't think our export will increase four times in short run," he told BDNEWS, adding the duty-free export facility under SAFTA may raise exports in the medium term.

He said the country needs increased local and foreign investment to exploit the potential of SAFTA. Raihan however said the local producers are very much capable of competing with Indian products in the regional markets.

Export of products, such as apparels, ceramic, cosmetics, recycled plastic, melamine tableware, toiletries, dry cell, automobile batteries, cement and wooden furniture, would increase significantly after the SAFTA, or South Asian Free Trade Agreement, becomes operational, he added. He also said export to India, in particular, would multiply leading to a decline in Dhaka's trade deficit with New Delhi.

Bangladesh's export to India was worth US$ 144.19 million in fiscal 2004-05 against imports worth more than $2.0 billion, according to official statistics.

On prospect of growth in India's export to Bangladesh, he said Bangladesh's tariff level is already lower than that of India. A major growth in India's export to Bangladesh may not be possible, as Dhaka is already importing most of the required commodities from India, he added.

Imports from India may rise to a level of around $3.00 billion in short term, he predicted.

Raihan said Bangladesh's exports would rise mostly to India, Nepal and Sri Lanka, and a growth in export to Pakistan may not be expected as a result of the SAFTA accord.

Bangladesh currently enjoys a trade surplus over Sri Lanka and Maldives. "Our export will rise. But it depends largely on the outcome of SAFTA talks, which were not yet made public," Kutubuddin Ahmed, outgoing President of the Metropolitan Chamber of Commerce and Industry (MCCI), told BDNEWS.

He said Indian middle class could be the main clients of Bangladesh's low-graded garment products, which would be competitive in the regional markets.

But if the rules of origin under SAFTA require more than 25 percent local value addition, the expected growth in garment exports to regional market would not be possible, he noted.

Fazlul Haque, President of the Bangladesh Knitwear Manufacturers' and Exporters Association (BKMEA), said: "Our products are competitive both in terms of price and quality. We will be able to compete in the regional market."

The SAARC Chambers of Commerce and Industry (SCCI) earlier predicted that intra-regional trade could rise to 50 percent of the total international trade by the region from the present 4.0 percent once the SAFTA becomes effective.

The total intra-regional trade amongst SAARC countries is less than $ 7 billion as against the combined international trade of $350 billion carried out by the region.

SAFTA is expected to increase the size of the regional market to $ 610 billion in the near future.