MoUs with an eye on post-LDC life
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FRIDAY, JANUARY 27, 2023
MoUs with an eye on post-LDC life

Panorama

Sheikh Rafi Ahmed
25 March, 2021, 12:30 pm
Last modified: 25 March, 2021, 12:33 pm

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MoUs with an eye on post-LDC life

The overall purpose of these MoUs and discussions is clear. Bangladesh is looking for increased regional cooperation, ensuring the safety and employability of Bangladeshi migrants, reduced cost for trade, preferential trade agreements, increased exports of its pharmaceutical products as well as developing the tourism and fisheries industries

Sheikh Rafi Ahmed
25 March, 2021, 12:30 pm
Last modified: 25 March, 2021, 12:33 pm
Collage photo of Sri Lankan Prime Minister Mahinda Rajapaksa (L), Maldives President Ibrahim Mohamed Solih (M) and Nepalese President Bidya Devi Bhandari (R) Photo: Collected
Collage photo of Sri Lankan Prime Minister Mahinda Rajapaksa (L), Maldives President Ibrahim Mohamed Solih (M) and Nepalese President Bidya Devi Bhandari (R) Photo: Collected

With the ongoing celebration of the birth centenary of Bangabandhu Sheikh Mujibur Rahman, as well as the golden jubilee of Bangladesh's independence, foreign leaders from South Asian countries (e.g., Maldives, Nepal, Sri Lanka, India) have been visiting Bangladesh starting on the 17th of this month.

The one to arrive first was the President of Maldives- Mr Ibrahim Mohamed Solih, followed by the Sri Lankan Prime Minister- Mahinda Rajapaksa and the President of Nepal Mrs Bidya Devi Bhandari, respectively. 

Apart from celebrating these historic occasions, Dhaka also sat for bilateral diplomatic discussion and signed several MoUs (Memorandum of Understanding) with all three countries: four with Male, six with Colombo and another four with Kathmandu. 

Bangladesh signed on for cultural exchange programmes with all three of the countries until the year 2025 to facilitate the influx of foreign students to Bangladesh as well as Bangladeshi migrants to these countries. 

More importantly, bilateral talks with all three of the countries prioritised increased trade, reducing the cost of trade as well as developing some form of preferential trade agreements.

MoUs are usually non-binding and are generally considered as a token of goodwill between the involved parties. Despite being non-binding, they might have important economic as well as foreign policy implications for Bangladesh. 

So, what are the implications for these MoUs or bilateral instruments in terms of strengthening the geopolitical as well as economic position of Bangladesh, particularly keeping the upcoming LDC graduation in the backdrop?

First, let's talk about the bilateral agreements and MoUs signed with the Maldives. 

According to a UN report from 2020, Maldives has the largest proportion of migrants- about one-third of its population; most of them belonging to Bangladesh. However, a large chunk of these migrants remained undocumented and thereby, vulnerable to exploitation. 

According to a Human Rights Watch report from 2020, Bangladeshi migrant workers have been subjected to harsh treatment in the Maldives during the Covid-19 pandemic that left them vulnerable to abuse, let alone being affected by the coronavirus. 

In fact, there have been periods during which the ratio of Bangladeshi migrants catching Covid-19 was much higher than the Maldives residents themselves; a phenomenon allegedly attributable to unhealthy living and working conditions for these workers. 

On top of that, Bangladeshi migrants are often victims of labour rights violations that constitute, deceptive recruitment practices, wage theft, passport confiscation, excessive workload etc. 

Quite understandably, the bilateral discussions between the two parties prioritised the safety of migrant workers and cooperation between the tourism industries. 

The four MoUs signed between Dhaka and Male were, MoU on the Establishment of Joint Commission for Comprehensive Cooperation (b) MoU on the Establishment of Bilateral Foreign Office Consultations (FOC) (c) MoU on Cooperation in the Field of Fisheries and Pelagic Fishing; and (d) Cultural Exchange Programme (CEP) for 2022-25.

Maldives President Ibrahim Mohamed Solih greets Prime Minister Sheikh Hasina during his Dhaka visit on Wednesday, 17 March, 2021. Photo: PID
Maldives President Ibrahim Mohamed Solih greets Prime Minister Sheikh Hasina during his Dhaka visit on Wednesday, 17 March, 2021. Photo: PID

The Joint Commission as well as the Bilateral FOC is aimed at improving bilateral trade between the two nations with a focus on developing a Preferential Trade Agreement between the two countries as well as consulting regarding the welfare of migrants in the Maldives. Bangladesh as a part of this commission will most likely keep pushing for legalising the undocumented Bangladeshi migrants currently residing in the Maldives.

The other bilateral instruments will most likely increase the exports of Bangladeshi pharmaceutical products to the Maldives accompanied by an increased influx of medical students from the Maldives. 

In fact, bilateral discussions with both Maldives and Sri Lanka focused on enhancing exports of cheap pharmaceutical products from Bangladesh. This proves that the GOB will be relying on the pharmaceutical sector as a driver of exports as well as foreign reserves, accompanied by RMG and remittances. 

Prime Minister Sheikh Hasina with Sri Lankan Prime Minister Mahinda Rajapaksha at the prime minister's office on March 20, 2021. Photo: PID
Prime Minister Sheikh Hasina with Sri Lankan Prime Minister Mahinda Rajapaksha at the prime minister's office on March 20, 2021. Photo: PID

The diplomatic talks with Sri Lanka on the other hand were focused on developing a Preferential Trade Agreement, promoting and protecting the bilateral investment, and enhancing the exports of pharmaceutical goods to Sri Lanka. 

Other than that, six MoUs were also signed which focused on strengthening youth development, cooperation in agricultural research, improving the efficacy of vocational education, cooperation in training nurses and health care workers from both countries as well as establishing exchange programmes for 2021-25. 

Finally, Bangladesh signed four Memorandum of Understandings with Nepal that focused on reducing the cost of transit, an amendment to designate the Rohanpur-Singabad railway route as an additional transit route, cultural exchange programmes and cooperation in tourism and sanitation. 

Nepal President Bidya Devi Bhandari meets with Prime Minister Sheikh Hasina at the InterContinental Hotel Dhaka on Monday, 22 March, 2021. Photo: PID
Nepal President Bidya Devi Bhandari meets with Prime Minister Sheikh Hasina at the InterContinental Hotel Dhaka on Monday, 22 March, 2021. Photo: PID

The overall purpose of these MoUs and discussions is clear. Bangladesh is looking for increased regional cooperation, ensuring the safety and employability of Bangladeshi migrants, reduced cost for trade, preferential trade agreements, increased exports of its pharmaceutical products as well as developing the tourism and fisheries industries. 

Bangladesh is scheduled to graduate from the LDC category in 2026, as recommended by the Committee of Development Planning. Currently, Bangladesh heavily relies on its RMG exports and remittances for a thriving economy and remains well-protected through preferential treatment agreements like the EBA initiative (Everything But Arms) where the tariff for Bangladeshi exports is very low.

With the graduation of Bangladesh from the LDC category, Bangladesh will most likely lose these benefits and will face tariffs like other countries. These increased tariffs may be a huge blow to Bangladesh, given Europe is the destination for the largest amount of Bangladeshi exports. 

On top of that, there remains a considerable trade imbalance among the South Asian countries. For example, the trade deficit between India and Bangladesh can be around $2 billion per year, in favour of India if unofficial trades are included. There also exists a severe trade deficit between Bangladesh and Nepal as well. The persistence of these circumstances can significantly hurt Bangladesh after it graduates from the LDC category in 2026.

Therefore, to prepare itself for these challenges, Bangladesh needs to diversify its exports by developing the pharmaceutical sector, the tourism and the fisheries industry as well as increase exports to its South Asian counterparts, provided a lower tariff rate under the guise of PTAs. 

This is probably the underlying reason for Bangladesh to be pushing for preferential trade agreements with the Maldives and Sri Lanka as well as developing its poorly performing tourism industry with collaboration from all three of the countries. 

When other Asian, East-Asian and Australasian countries have joined the RCEP (Regional Comprehensive Economic Partnership), many economists suggested that Bangladesh should partake in as many bilateral trades with its regional counterparts if it wants to survive the increased competition it will face from Vietnam, Cambodia and other LDCs, who are also beneficiaries of the RCEP. 

Bangladesh seems to be pursuing that goal with all the MoUs signed with Nepal, Sri Lanka and the Maldives. However, these are still only MoUs and not bilateral treaties and therefore it is too soon to forecast the actual outcomes of these discussions. 

However, Bangladesh and the Ministry of Foreign Affairs should keep pushing for the establishment of preferential trade agreements with its South Asian counterparts if it wants to tread well against the wintry winds of LDC graduation.

Analysis / Top News

LDC graduation / LDC / Bangladesh LDC Graduation / LDC status / MoU / MoU analysis / Memorandum of Understanding / Birth Centenary of Father of the Nation Bangabandhu Sheikh Mujibur Rahman / birth centenary of Bangabandhu / South Asian countries / South Asian Association for Regional Cooperation / Bangladesh foreign policy

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