Assignment On
Prepared By
Tamima Khanom Ema (0801010058) Abu Saleh Md. Maidul Islam (0801010096) Surajit Datta (0801010102) Mahin Ahmed Chowdhury (0801010110) Nazia Sharmin (0801010121)
18th Batch Department Of Business Administration Leading University, Sylhet
Date of Submission
03 May, 2011
Letter of Transmittal
May 3, 2011 To Masum Miah Lecturer Department of Business Administration LEADING UNIVERSITY, SYLHET Subject: Submission of Assignment on Trade between Bangladesh and India. Dear Sir, Here we are submitting herewith our Assignment conducted in the 9 th semester of BBA Program, for partial fulfillment of the requirements of the BBA Program. We have prepared our Assignment on Trade between Bangladesh and India on the basis of our study on the topic. We have tried our best to furnish all the things what we have learnt during the assignment on queuing analysis also to arrange it sequentially in the assignment for the betterment. We will be highly encouraged if you are kind enough to receive this assignment. Please do call for any clarification regarding the report, if required.
With regards Sincerely Tamima Khanom Ema (0801010058) Abu Saleh Md. Maidul Islam (0801010096) Surajit Datta (0801010102) Mahin Ahmed Chowdhury (0801010110) Nazia Sharmin (0801010121)
Content
LEADING UNIVERSITY..............................................................................................................................1 INTERNATIONAL BUSINESS..............................................................................................................1 INTRODUCTION..........................................................................................................................................5 HISTORICAL DEVELOPMENT OF BANGLADESH-INDIA TRADE RELATIONS........................5 IMPORTANCE OF BILATERAL TRADE WITH INDIA.......................................................................6 COMMODITY COMPOSITION OF TRADE ...........................................................................................6 UNOFFICIAL TRADE BETWEEN INDIA AND BANGLADESH.........................................................7 THE BALANCE OF TRADE BETWEEN BANGLADESH AND INDIA...............................................7 CAUSES FOR THE TRADE DEFICIT.......................................................................................................9 NON-TARIFF BARRIERS FACED BY BANGLADESH.......................................................................10 FUTURE PERSPECTIVE OF BANGLADESH-INDIA TRADE UNDER SAFTA..............................11 RECOMMENDATION TO IMPROVE TRADE CONDITION BETWEEN INDIA AND BANGLADESH ...........................................................................................................................................12 CONCLUSION.............................................................................................................................................13 REFERENCES ............................................................................................................................................14
Introduction
India has been a major trade partner of Bangladesh for long time. Moreover, these two countries also share long history of cultural and social heritage. If we intensively study the trade relations of these two countries, it can be seen that India has always been the dominating partner and Bangladesh maintained a historical trade deficit with India. Bangladesh suffers a huge trade imbalance with India. Apart from the large size of the economy, maintenance of a high protectionist trade regime by India in the forms of tariff and non-tariff barriers have contributed to this imbalance. While Bangladesh has progressed much ahead of India along with its liberalization of trade, India remains slow. Both Bangladesh and India are two major countries of the SAARC and have a long common historical past and similar cultural and social evolution. As far as trade relation is concerned, India is the 2nd largest trading partner of Bangladesh just after USA in 2003. Indias position is at the top for Bangladeshs imports from the world ( IMF: Direction of Trade Statistics, June 2004). Therefore, an analysis of current trade status between the two nations, obstacles and opportunities for mutual trade expansion is very critical for economic development of both countries, especially of Bangladesh, as Bangladesh has been suffering from historical trade deficit with India since its independence. The trade deficit has been increasing exponentially since the recent past. Official data show that compared to 1983, trade deficit in 2003 is more than 46 times higher. This growing deficit is a cause of serious concern for Bangladesh and has important economic and political implications.
textiles and books. This agreement provided for a system of Balanced Trade and Payment Arrangement (BTPA) and most favored nations treatment to each other. The desired level of trade between the two nations was not achieved by the agreement of 1973, and trade imbalance increased in the very first year. Rupee trade was found to be a barrier in the bilateral trade, and thus abolished rupee trade from 1 January 1975 by a Protocol signed on 17 December 1974. It was decided that trade would be conducted in free convertible currency. India and Bangladesh signed another trade Protocol on 12 January 1976 for higher volume of trade and long-term arrangements for trade of coal and newsprint. BTPA between Bangladesh and India was extended for another three years till 27 September 1979 on 5 October 1976. On 4 October 1980, the third trade agreement was signed between these two nations initially for three years. By mutual consent, this agreement was extendable for another 3 years. On 8 November 1983, Bangladesh and India renewed a Protocol on trade of 1980 for further three years. In May 1986, the trade agreement of 1983 was extended for another three years till 3 October 1989. Subsequently this agreement was renewed a number of times. Based on available information, this agreement was valid up to 3 October 2001.
Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Export Import Deficit Exports (Millions of (Millions of (Millions of Percentage of US$) US$) US$) Imports 23.3 114.8 91.5 20.3 0.4 82 81.6 0.5 5.3 83.3 78 6.4 7.1 58.5 51.4 12.1 0.6 55.2 54.6 1.1 2.3 43 47.7 5.4 12.1 40 27.9 30.3 8 55.6 47.6 14.4 20.2 64 43.8 31.6 20.3 43.3 23 46.9 6.9 37.9 31 18.2 28.3 60.1 31.8 47.1 29.6 64.9 35.3 45.6 7.7 57.2 49.5 13.5 11 74.4 63.4 14.8 8.7 90 81.3 9.7 10.7 120.7 110 8.9 22 170 148 12.9 23 189 166 12.2 4 284 280 1.4 13 380 367 3.4 24 467 463 5.1 36 994 958 3.6 20 1138 1118 1.8 37.2 795.6 758.4 4.7 55 1178.8 1123.8 4.7 49.5 1023.8 974.3 4.8 50.1 945.5 895.32 5.3 60.8 1195.5 1134.7 5.1 39.3 1145.8 1106.5 3.4 52.9 1488.7 1435.9 3.6 89.3 1598.4 1509.1 5.6 143.7 2009.1 1865.4 7.2 242 1850.9 1609 13.1 289.4 2227 1937.6 13 358.1 3384.3 3026.2 10.6 276.6 2839 2562.4 9.8 Table: The Balance of Trade of Bangladesh with India (1973-2009)
2. Customs Valuation/Classification
Arbitrary decisions of the Customs authority of India on valuation/price of imported products for assessment are sometimes imposed on the importers of Bangladeshi products. Exporters also face difficulties in customs classification of products from Bangladesh. Therefore, the customs authority sometimes refuses to give customs concessions, available under SAPTA for different items, by classifying the exported products under different product-heading, where there are no SAPTA concessions. Frequent occurrence of these types of incidents creates vulnerability of Indian importers to make long term commitments for marketing Bangladeshi products.
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(India). The Banglabandhu Fulbari route is especially important for facilitating trade with Nepal, Bhutan and North Eastern States of India. Bangladesh Government has already developed a land port at Banglabandha and requested India to develop adequate facilities at their Fulbari Customs Point.
1. Agro-based Industries
Bangladesh has a vast supply of raw materials for the agro-based industries. The commodities includes- fresh fruits and vegetables, cooked semi cooked food items, canned juice, dairy and poultry, and livestock and fisheries. Alluvium soil, no snowfall, adequate rainfall and water supply and abundance of cheap labor are some of the main factors that have blessed this sector.
2. Textile Industry
Bangladesh has a competitive advantage in the region for textiles and garments because of low cost labor, preferential trade status and beneficial global market access. Moreover, Bangladeshs RMG industry has earned strong competitiveness as a global standard RMG source. Bangladesh imports yarn and cotton, which is a major input from India. So through exchange provision under SAFTA Bangladesh can export large amount of RMG to India.
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3. Frozen Food
The frozen food export is the second largest export sector of the country. After some initial difficulties in terms of quality achievement, exporters have earned credibility and trustworthiness in the global market (Graph 13: section 9.2.13). This export orient industry can also be a good export item to India under SAFTA. The sub sectors are hatcheries, feed meals plants, processing unit for value added products, etc.
4. Ceramic Industry
Bangladeshs ceramic tableware has a good status to the international market like North American and EU countries. Moreover, Bangladesh has achieved technical expertise on ceramic tableware manufacturing. Historically, tableware industries were labor-intensive and Bangladesh has skilled manpower in this sector. In addition, clean gas required for this industry is a great competitive advantage that Bangladesh possesses. So, this commodity can well be a good export earning item for Bangladesh in trading with India, under SAFTA.
6. Leather Industry
The labor-intensive leather industry is well suited to Bangladesh having low cost and being labor abundant country. Bangladesh has a good supply of quality raw materials, as hides and skins are a by-product of large livestock industry. Bangladesh leather industry is dominated substantially by the domestic investments that are mostly export oriented. Bangladesh can well expand their capacity and can increase export of leather goods to India under SAFTA.
Recommendation to Improve Trade Condition between India and Bangladesh
Bangladesh govt. along with the individual business people must take corrective action to enhance the countrys productivity and capacity of the industrial sector. There are no alternatives than to increase productivity and the capacity of the countrys growing sectors. Because, if the productivity does not increase no matter what kind of regional integration we enter into that will serve no good for the country. Government can give
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various kinds of financial (like decrease the import duty of the inputs) and non financial incentives to the growing sectors of the country, so that they come up and prove themselves. In addition, a competitive and open economic environment must also be created and promoted through which the most efficient sectors can be identified and promoted as such they can export their goods beyond the regional boundary. Moreover, recent and updated production technology must also be used, because the output in turn would be low cost and would be able to meet the world standard. And, also to improve the quality of the of the human resources better education, job specific training, and teaching the workers with high quality foreign expertise will convert the human resources of the country very valuable and they in turn as well will enhance the countrys capacity to produce quality products and face the competition with the Indian producers. It is important to note that one can not expect a dramatic reduction of trade deficit between these countries in a short span of time, even though required policies and designs are implemented. But, by having sustainable policies it is quite possible to reduce this gap in years to come.
Conclusion
The trade deficit of Bangladesh in the recent past has increased exponentially. And the factors being identified for these imbalances are productivity factor, limited product base, in efficient human resources, infrastructural obstacles etc. Recently, as Bangladesh move towards the implementation of SAFTA in a more useful manner, the country needs to improve its positions by removing all the obstacles that it is facing and improve the trade balance of with respect to India. Improving the position is utmost necessary because the economic conditions of Bangladesh which is heavily dependent on the trade position and relation with India as India accounts most of Bangladeshs imports and they are the major trading partner of Bangladesh in the SAARC region. So, if Bangladesh can improve its trade relation with India, it will generate many employments, increase the competitiveness of its local goods and most importantly will increase the economic and social welfare of the country. In addition, a special focus also need to given on the Non tariff barriers, because that is the part most of the Bangladeshi exporters complain about. All these obstacles need to be removed to gain from the bilateral trade with India. Thus, if Bangladesh cant improve the situation now, the country will merely become a market for Indian products, trade status will worsen and country will not be able to exploit the window of opportunities arising from the regional integration SAFTA.
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References
http://eprints.usq.edu.au/6061/2/Rahman_ETSG2005_AV.pdf http://www.ierb-bd.org/wp-content/uploads/2010/03/India-Bangladesh-TradeRelations.ppt www.ierb-bd.org/wp.../03/India-Bangladesh-Trade-Relations.ppt www.scribd.com Research Business & Economics www.scribd.com/.../Bangladesh-India-Relation-Bangladesh-India-Relations http://mezbahuddin.files.wordpress.com/2008/04/submittedfinalcopy.pdf
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