Following the fall of the Awami League government amid the student-public uprising on August 5, an interim government took office on August 8, leading to shifts in Bangladesh’s relations with various countries, including India and Pakistan.

In this context, Dr Khandaker Golam Moazzem, Research Director at the Center for Policy Dialogue (CPD), discussed strategies to strengthen trade relations with Pakistan while maintaining strong ties with India. In an exclusive interview with Banglanews24.com at the CPD office, he said that Pakistan’s market is currently not ready for Bangladesh. However, if the long-neglected South Asian Association for Regional Cooperation (SAARC) framework is fully implemented, Bangladesh could facilitate trade with Pakistan via India.

Q: What major shifts do you see in Bangladesh’s relations with Pakistan, India, China, Russia, and the United States after August 5?

Ans: The political transition on August 5 brought a qualitative change to Bangladesh’s governance, leading the interim government to redefine its global relations. The international community is also reassessing its stance on Bangladesh. The United States, under Joe Biden’s administration, has shown a supportive stance toward the interim government. However, with Donald Trump’s return, policies may shift under his America First approach, which could impact bilateral relations worldwide. Signs of this shift are already emerging.

Q: Indian media reports suggest that Bangladesh’s relations with the US might face strains under Trump’s leadership. Please share your opinion on it.

Ans: I won’t comment on India’s perspective, but globally, US foreign policy shifts could have both positive and negative impacts on Bangladesh’s economy. For instance, if the US imposes additional tariffs on Chinese goods, American buyers may seek alternative sources, potentially creating new trade opportunities for Bangladesh. At the same time, China might look to strengthen trade with emerging markets, further opening investment avenues for Bangladesh.

However, Bangladesh’s political and economic ties with India remain crucial. While India had strong ties with the previous government, these relations were sometimes over-leveraged for India’s own interests. India remains Bangladesh’s second-largest import source, with trade volumes reaching $13–14 billion. Bangladesh also ranks among India’s top export destinations. Given the advantages of land-based trade routes, maintaining stable economic and commercial ties with India is essential. Political challenges with India must be managed carefully to ensure economic stability.

Q: Can Bangladesh strengthen its economic and trade relations with other countries bypassing India? For instance, some Bangladeshi exports are now routed through Maldivian ports instead of Indian ones.

Ans: Under the previous government, Bangladesh's economic engagement with other South Asian countries, particularly Pakistan, was minimal, though there is potential for growth. Bangladesh now imports goods worth $780 million from Pakistan while exporting around $230 million. In contrast, our trade volume with India is much higher, with exports of $2 billion and imports of approximately $13 billion. Finding alternative markets for such a large trade volume is crucial.

The key challenge lies in demand. While India remains a major market for Bangladeshi products, similar demand does not yet exist in Sri Lanka or Pakistan. On the import side, our trade relationship with China is already well established. In some cases, importing from Hong Kong is more cost-effective than from India, so China is not necessarily a new source. However, Bangladesh is unable to fully utilize China’s zero-duty facilities due to insufficient domestic value addition, which needs to be at least 35–40%. Without increasing value addition, simply changing trade routes will not be beneficial.

Additionally, trade logistics pose a challenge. Large-scale imports and exports require stable shipping cycles. Currently, ships from Karachi arrive in Chittagong every 28 days, which is not frequent enough for consistent trade. Instead of completely bypassing India, Bangladesh should focus on increasing trade with Pakistan and other countries while maintaining stable commercial relations with India.

Q: What steps can Bangladesh take to enhance trade ties with China?

Ans: Bangladesh is now pursuing two major trade initiatives with China. One is the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among 12 Asia-Pacific nations, including China, New Zealand, and Australia. Bangladesh is seeking membership, which would allow us to import goods at lower tariffs.

The second approach is negotiating a comprehensive bilateral trade partnership with China. Despite enjoying zero-duty benefits, Bangladesh’s exports to China remain below $1 billion due to strict domestic value addition requirements of 35–40%. Many of our products struggle to meet this criterion. A comprehensive trade agreement covering trade, investment, and services could help overcome these barriers and boost exports.

Q: How do you see Bangladesh’s role in China’s Belt and Road Initiative (BRI)?

Ans: Several BRI projects are already underway in Bangladesh, including infrastructure, energy, and road development. Progress is steady, but we seek greater Chinese investment in our renewable energy sector through the Asian Infrastructure Investment Bank (AIIB).

Additionally, Bangladesh should encourage China to shift some of its advanced manufacturing to our local industries. If China establishes solar equipment manufacturing plants in Bangladesh, it could significantly boost domestic production capacity and create new economic opportunities.

Q: Pakistan has expressed interest in importing medicines from Bangladesh. What is your view on this?

Ans: The export of medicines to Pakistan is certainly a positive step. Bangladesh's pharmaceutical industry is well-developed, supplying medicines to 101 countries, with an annual export revenue of around $600 million. However, large-scale exports are still limited. Recently, we have started exporting to Sri Lanka while expanding to Pakistan could be another promising initiative.

Trade routes need a sufficient volume of goods to be cost-effective. A direct trade route for pharmaceuticals alone is not viable. Instead, shipping through Dubai to Karachi would be a more practical and economical approach. This is why trade hubs exist—Dubai and Sri Lanka serve as important transit points.

More importantly, regular trade agreements and logistics must be well-structured so that economic relations are not affected by political tensions, as seen under the previous government. Additionally, SAARC presents a significant yet underutilized opportunity. The organization has been largely ineffective due to political conflicts between India and Pakistan. A proposed SAARC Motor Vehicle Agreement, which remains in draft form, could facilitate land-based trade between Bangladesh and Pakistan via India if implemented.

Q: The Pakistan High Commission has said direct air traffic between Bangladesh and Pakistan may resume by March. How will this benefit Bangladesh economically?

Ans: There are no direct flights between Bangladesh and Pakistan now, requiring passengers to transit through Dubai, which increases travel costs. A direct air route would reduce expenses and improve connectivity.

However, for a direct flight route to be sustainable, there must be strong trade, investment, and passenger movement between the two countries. At present, trade and economic exchanges with Pakistan are relatively limited. The key question is whether demand will justify regular flights. Airlines will not operate routes that are not commercially viable. Initially, there may be one or two flights per week, similar to the limited services provided by EgyptAir. Pakistan could follow a similar model.

Q: The government has printed Tk 22,500 crore to address the liquidity crisis in weak banks, yet customers are still struggling to withdraw money. The dollar price has also risen. Was printing money the right decision?

Ans: The government must take a firm and principled stance on the banking sector. There is no alternative but to shut down some failing banks. No matter how much liquidity support is provided, these banks are unlikely to recover as they are deeply in debt.

Supporting them by printing money is not a sustainable solution. These banks have effectively become bottomless pits. However, before closing them, the government must ensure that depositors' funds are safeguarded and that their money is returned. A structured approach to consolidating weak banks and protecting depositors is critical to restoring confidence in the financial sector.

BDST: 1444 HRS, JAN 21, 2025
SMS