The Government is planning to launch a joint feasibility study with its Bangladeshi counterpart for a Free Trade Agreement (FTA) between the two countries. This is a positive effort that should be supported as the two countries have many synergies that would benefit growth.
Bangladesh spearheading integration in South Asia is all the more impressive given its start and the focus of policymakers in using the 160-million-strong population to maximise economic returns by focusing on demographic dividends.
Bangladesh has become one of Asia’s most remarkable and unexpected success stories in recent years. Once one of the poorest regions of Pakistan, Bangladesh remained an economic basket case—wracked by poverty and famine—for many years after independence in 1971. In fact, by 2006 conditions seemed so hopeless that when Bangladesh registered faster growth than Pakistan, it was dismissed as a fluke. Yet that year would turn out to be an inflection point.
Since then, Bangladesh’s annual gross domestic product (GDP) growth has exceeded Pakistan’s by roughly 2.5% points per year. And this year its growth rate is likely to surpass India’s. Bangladesh has emerged on the global stage as one of the fastest growing economies in Asia, marking its presence next to powerhouses such as China, India and Indonesia.
Bangladesh will overtake Pakistan in terms of per capita GDP in 2020, even with a correction for purchasing power parity. All this has happened with relatively little notice from other countries in South Asia but a few years ago several Sri Lankan companies spotted opportunities in Bangladesh and moved with commendable speed to invest.
At a recent event to encourage more local businesses to follow suit, Bangladesh High Commissioner Riaz Hamidullah spoke enthusiastically about how well Sri Lankan companies were doing in his country. According to the diplomat, Kumarika has become the most popular hair oil in Bangladesh, Hayleys is growing pickles to be processed for Pizza Hut, LTL Holdings has set up two power plants and has applied to list on the Dhaka Stock Exchange while top Sri Lankan apparel companies are working to create new jute products.
The potential in sectors such as apparel, education, tourism, IT, pharmaceuticals and financial services to name but a few is mindboggling. To top it all Bangladesh is bullish about a Free Trade Agreement (FTA) with Sri Lanka and wants to begin negotiations as early as next month. Bangladesh government officials are already complaining of the high trade tariffs prohibiting trade between South Asian countries and want to connect Sri Lanka and Bangladesh through better air, road and shipping networks. Testimonials from local companies doing business in Bangladesh have been so positive as to be almost gushing and the stage appears to be set for growing engagement. Prime Minister Ranil Wickremesinghe was invited for a state visit to Bangladesh last month and the prognosis for deeper relations appears rosy.
Bangladesh’s enthusiasm for integration, complete with trade deals, comes at a time when Sri Lanka is struggling with low growth and facing criticism from many local professional organisations fighting against integration. Bangladesh’s story shows clearly how growth does not happen in isolation but requires concentrated efforts to work with other growing economies to synergise complementary traits. Bangladesh opening its economy and actively seeking investment through FTAs is a lesson Sri Lanka would do well to learn from if it wants to create its own magical growth story.