India to import garments from Bangladesh to reduce trade gap; may allow investments

Mumbai: India has offered to reduce its trade surplus with Bangladesh by importing eight million items of garments every year from that country, which are currently in the sensitive list. India also indicated that it might allow investment from Bangladesh on a selective basis, but after necessary security checks.

"An MoU to give effect to these imports by India is now awaiting final approval by Bangladesh and I hope it can be signed very soon," minister of state for commerce Jairam Ramesh said at the launch of the India-Bangladesh Chamber of Commerce and Industry.

"It is true that at present India prohibits FDI from Pakistan and Bangladesh for security considerations. We have been reviewing these restrictions with a view to enabling FDI from Bangladesh into India on a case-to-case basis, subject to security clearance," he added.

India''s offer to import garments could mean additional annual earnings of $50-70 million for Bangladesh, the minister said in an official release.

He assured Bangladesh that the Government of India was ready to remove some barriers to imports from Bangladesh to reduce a yawning trade gap but asked Bangladesh to make reciprocal measures.

The India-Bangladesh trade meeting, opened by President Lajuddin Ahmed in Dhaka, was attended by business leaders from both the countries.

Annual trade between the two South Asian neighbours is more than $2 billion of which Bangladesh''s exports constitute only $250-$270 million. Bangladesh blames it on tariff and non-tariff barriers imposed by India and the lack of market access for its ducts in India.

Abdul Matlub Ahmed, president of the India-Bangladesh Chamber of Commerce and Industry (IBCCI), wanted India to remove existing trade barriers like land custom stations, mandatory standards and banking regulations in order to ease Bangladesh''s exports to India.

He said lifting these trade barriers could lift Bangladesh''s exports to India to $1 billion annually.

"The barriers stand in the way of our exports. …These are mainly testing requirements, inadequate physical facilities at land customs stations in India, special labelling requirements, mandatory standards, banking difficulties, chemical tests (of goods) etc.," he said.

"We are firmly committed to it, in spite of the fact that one member continues to deny us most-favoured nation (MFN) status, which is the very basis of WTO and international trade," he said.

Ramesh said India would advance the deadline for reducing import duties to zero for least developed countries in South Asia to December 2007 from the original date of December 2008 on its own.

Besides Bangladesh, this would benefit Maldives, Bhutan and Nepal. India will also prune the sensitive list for such countries, he said. Beginning January 1, 2008, almost 86 per cent of Bangladesh''s tariff lines will not attract any import duty by India.

"India is firmly committed to seeing and assisting in the emergence of an economically strong and prosperous Bangladesh. We have set up a task force to remove those barriers that distort free and fair trade," Ramesh said.

"India must be prepared to give more than what she gets," Ramesh said.

He said the Bureau of Indian Standards had already signed a deal with its Bangladesh counterpart and had identified six laboratories in Bangladesh "for purposes of testing and certification in textiles and consumer products".

But he told the meeting that Bangladesh also had a number of non-tariff barriers. "Bangladesh is unwilling to improve connectivity, and many of our proposals to deepen commercial ties have been pending with you for a long time," he said.

Ramesh said Bangladesh should allow Indian investment and resolve many long-standing issues as part of efforts to balance trade.

"If Bangladesh wants to reduce the trade deficit ... you consider the long-standing issue of granting of transit rights to India and give it access to New Mooring terminal at Chittagong Port," he said.

Bangladesh has put on hold an Indian proposal made long ago to use Bangladesh territory to send food and other stuffs through train to its land-locked northern states, because of perceived political sensitivity.

Ramesh also mentioned an existing proposal by the Tata group to invest in Bangladesh''s energy, steel and fertiliser sectors, on which the Bangladesh government has so far failed to make a decision.

"Tata has proposed to invest about $3 billion in Bangladesh ... and it will help to increase Indian imports by at least $1 billion every year," Ramesh said.

"We are setting up a 1,110-megawatt power plant outside Agartala, which could supply electricity to the deficit regions of Bangladesh as well," Ramesh said.

He said along with access to Chittagong port, India would like the notified but non-functional land customs station at Sabroom-Ramgarh to be made operational.

"We would like additional land customs stations to be opened. We are planning a station at Suterkhandi in Assam and to make this meaningful, we need Bangladesh to develop the corresponding inland port at Sheola," he said.

The construction of a 13-km long Agartala-Akhaura railway link would be useful in transporting goods between Chittagong port and northeastern states of India, he added.

Bangladesh business leaders said they were enthusiastic over the Indian proposals but would not be over-optimistic about the results.

Ramesh also said that India was committed to SAFTA, which is proceeding forward on schedule.