Bangladesh and Cambodia are likely to sign a free trade agreement (FTA), which will mainly offer Dhaka an opportunity to grab a bigger share in Phnom Penh's $1 billion pharmaceutical market, according to local businesses.
At a bilateral meeting on the sidelines of the 77th United Nations General Assembly in New York on Thursday, Prime Minister Sheikh Hasina expressed her interest for an FTA with Cambodia, and her Cambodian counterpart Hun Sen agreed to the proposal, Foreign Minister AK Abdul Momen told reporters.
To deal with possible challenges stemming from its graduation to a developing nation, Bangladesh has been negotiating with 17 countries, including India, Nepal, Bhutan, Malaysia and Vietnam, to strike FTAs, but it is yet to sign it with any, while Cambodia already has FTAs with 14 countries, including China.
If the FTA is signed, both the countries will enjoy duty-free trade facilities between them.
Cambodia with a population of around 2 crore has no large drug-making factories and the country meets 55% of its demand for drugs through imports. So, Bangladesh has good potential to enhance its export to the country with its high-quality, affordable medicines with duty-free market access after the signing of an FTA with it, say drug manufacturers.
Currently, Indian and Chinese companies control Cambodia's pharmaceutical market. Bangladesh exported $9.76 million worth of medicines to the country in FY22.
SM Shafiuzzaman, general secretary of the Bangladesh Association of Pharmaceuticals Industries, told The Business Standard, "Without special facilities, we cannot increase our medicine exports to Cambodia by competing with China and India. If an FTA is signed with the country, our exports will get a boost."
Leather and agro-processed products also have good demand in the Cambodian market.
Bangladesh now exports medicines, tableware, textiles products, seafood, tea, jute goods, spice, light engineering goods, knitwear items, etc to Cambodia while its imported goods include cotton, edible oil, fertiliser, staple fibre, etc.
In FY22, exports to the country stood at $18 million – the pharma sector accounts for more than 53% of it, while imports amounted to over $6 million, according to the Export Promotion Bureau.
Sources at the commerce ministry say it is possible to sign an FTA with Cambodia soon once a political decision comes from the heads of states of the two countries.
The bilateral trade between Bangladesh and Cambodia began following a meeting between foreign ministers of the two countries in 2006. Later in 2014, a joint commission was formed to further expand the area of trade cooperation.
Yet, Bangladesh is lagging behind when it comes to gaining a foothold in the Cambodian market owing to no FTA and China's monopoly of the market, commerce ministry officials noted.
They think that signing an FTA with Cambodia will help to enhance exports to the country.
Seeking anonymity, an official at the commerce ministry's FTA Cell told TBS that since 2000, China has taken hold of the Cambodian market with duty-free facilities. So, no other countries do well in the market without an FTA.
"The FTA with the country will not bring many benefits to Bangladesh as there is no demand for our main export product, readymade garments, there," he said.
Echoing him, Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association, said there are 600-700 garment factories in Cambodia. As they have their own raw materials, they are quite advanced in apparel production. Their position in the European market is also very good.
"So, we hardly have any chance to enter the market with our apparel products," he added.
Dr MA Razzaque, chairman of Research and Policy Integration for Development (RAPID), told TBS, "If we can use Cambodia as a gateway to joining the world's largest trading bloc, the Regional Comprehensive Economic Partnership and the Association of Southeast Asian Nations [Asean], the signing of an FTA with the country will be beneficial."