– SBS Bangla
IN Australia, Bangladesh is seen as an impoverished and aid dependent country that is repeatedly subjected to natural and man-made disasters, such as cyclones, floods and building collapses due to poor building standards. In reality, however, the country has made impressive strides in its development journey, and this picture needs to be refreshed.
Bangladesh recorded an annual growth of nearly 6% of GDP from 2000 to 2019 and officially recorded a growth rate of 3.5% in 2020, ravaged by Covid-19, bringing the country’s GDP to nearly 320 billions of dollars. Before Covid-19 2019, the economy grew by 8%. A per capita GDP of around $ 2,000 – for a population of around 160 million people – means the country is on the verge of graduation from least developed country status in the coming years.
Indeed, Bangladesh could be described as Asia’s lesser-known and fastest growing economy. In recent months, it has exceeded India’s per capita income and has even provided foreign exchange aid to Sri Lanka. In terms of recent growth rates and the size of its economy, Bangladesh has many similarities to Vietnam, a country that receives much more attention in Australia.
The conclusion of the Trade and Investment Framework Agreement between Australia and Bangladesh on September 15 is therefore timely and could provide the necessary impetus for a more meaningful economic relationship. While TIFAs are seen as primarily symbolic and full of good intentions, they signal an injection of commitment and ambition. TIFAs do not guarantee the growth of trade and investment, but there are examples where instruments such as TIFAs have foreshadowed the establishment of wider economic links between countries. One example is the Trade and Investment Cooperation Forum agreement between the United States and Bangladesh that was signed in 2013; in 2019, bilateral merchandise trade between the two countries had increased by almost 50%. In this specific case, TIFA also points out that the breadth of Australia’s opportunities in South Asia goes beyond India.
The current bilateral trade relationship is modest. The latest figures from the Department of Foreign Affairs and Trade show that Bangladesh is Australia’s 30th partner, with bilateral trade of around $ 2 billion. Almost half of this relates to Australian textiles and clothing imports and cotton exports. From this weak base and combined with Bangladesh’s good prospects for a post-Covid recovery, there should be room for growth. Bangladesh’s large, young and increasingly urbanized population and growing middle class should appeal to a range of Australian exporters and investors.
An important opportunity is liquefied natural gas. The supply of cheap domestic gas to Bangladesh has contributed to its successful development. As depleted, Bangladesh quickly turned to LNG imports, starting in mid-2018 and reaching four million tonnes per year in 2020. Forecasters expect LNG imports will reach twenty million tonnes per year by 2030, a fivefold increase in less than a year. decade.
Australia was the world’s largest exporter of LNG in 2020, just ahead of Qatar. Australia’s LNG production facilities in the north of the country are among the closest to the already operational and planned LNG import facilities in Bangladesh. On paper, Australia should be able to be a competitive supplier to the country due to the lower shipping costs.
To date, Bangladesh’s long-term LNG contracts have been concluded under so-called “government-to-government” agreements, namely with Qatar and Oman. TIFA could provide a means by which the prospects for a sustained LNG business relationship could be developed, including by the two governments, ensuring that Australian LNG producers are able to compete on a level playing field.
For this to happen, Australian LNG producers, and indeed suppliers of other commodities, will also need to be convinced of the value of trade diversification and adopt more innovative approaches. Learning to deal with new clients in Bangladesh will require patience and creativity.
Australian producers have traditionally benefited from the custom of buyers from North East Asia (Japan, China, Korea and Taiwan), who have always been ready to offer attractive terms. If price is part of the equation, it is also the good creditworthiness of these clients and their readiness to share risks and obligations. To gain the comfort of dealing with less experienced and lower rated buyers, Australian producers will need to consider ways to manage higher perceived risks or in fact develop an appetite for higher risk, like sellers in other countries. did so to develop new markets like Bangladesh.
It will also require a long-term commitment from Australian producers to gain a deep understanding of the country and develop lasting relationships. This is easier said than done because Australian companies can be expected to focus their efforts on markets that promise the best returns. Their willingness to do things differently in Bangladesh will likely depend on their perception of whether they can continue to rely on North East Asia as their market of choice.
Bangladesh’s success has attracted many other partners and the landscape is competitive. The Australian government, notably through Export Finance Australia and Austrade, should consider some of the policies that other countries have already used to develop market share in Bangladesh to increase Australia’s presence.
Although it has important structural issues to resolve, many observers are cautiously optimistic that Bangladesh will be able to move up the ranks of the manufacturing value chain. Australia is well positioned to provide the country with natural resources and value-added inputs, as it has done elsewhere in the region as countries industrialize. Australia is also well positioned to provide a greater range and level of service, as has been done in the education sector where Australia has an established brand in the country.
Bangladesh understands the need to both attract new investment and diversify its economy in order to reduce its dependence on the ready-to-wear sector, remittances from its large diaspora and certain industries. lightweight manufacturing. The country has been increasingly active in finding ways to attract the necessary investment, both to help this drive for diversification and to modernize its infrastructure. Australian investors, especially those with an appetite and experience investing in Asian infrastructure, should take note.
Australia’s ever-increasing challenges with China have led political leaders to stress the need for greater trade diversity. Bangladesh should feature high in the list of countries that can potentially provide this additional bandwidth. The two countries share historically important relations: Australia was the fourth country to recognize independence from Bangladesh in 1971 and has been a committed development partner. People-to-people connections are considerable, with more than 40,000 Bangladeshi-born people living in Australia, according to the 2016 census. The English language and cricket offer good cultural commonalities.
The two countries also fear being dominated by larger, more assertive neighbors. And Bangladesh is gaining in importance as a potential partner on strategic issues in the region. Although there are tensions between Bangladesh and India, the relationship is strong and increased cooperation between Bangladesh and Australia in this area should not anger Quad’s partner India.
TIFA is an indicator that in the rapidly changing geopolitical and geoeconomic environment, Australia and Bangladesh have many real interests in common, and they can and should work much more closely together. Ultimately, however, unless the business communities and political leaders of both countries seize the opportunity, TIFA will end up being symbolic and left on the shelf of unfulfilled expectations.
Australian Institute of International Affairs, September 24. Brendan Augustin spent 15 years at the Ministry of Foreign Affairs and Trade, carrying out diplomatic missions to Indonesia, Malaysia, Brunei and France. He was elected president of the Australian Institute of International Affairs Western Australia.