Trade between Pakistan and Bangladesh
The two wings of Pakistan, during the years prior to 1971, had what was aptly called a “complementary” economy. After the trauma of 1971, there was a gray period when there was hardly any trade between Pakistan and Bangladesh.
Many other countries moved in to fill the resulting void. Then, because of the natural phenomenon of “supply” and “demand’ a slow trickle developed through third countries, notably Singapore, into quite a trade volume, before good sense prevailed upon the two governments and a direct relationship was opted for.
Countries of the Third World like Pakistan and Bangladesh have a perennial problem about their exports. This is further complicated by the “protectionist” tendencies among the countries of the developed world which want to export out to you but take almost nothing in return. Our exports to them are rationed by quotas. At best they want to take out raw material rather than the finished goods, which in any case, for the most part, can compete in price but not in quality. Instead of narrowing the trade gap due to industrialisation, it is becoming an ever widening chasm, pulling the Third World countries, mired in foreign debt, inflation, into an economic abyss.
In such circumstances, it becomes increasingly important to further develop and augment trade on bilateral basis between developing countries. By finding markets for our finished goods and raw material amongst our Third World partners, Pakistan and Bangladesh would take the pressure off ourselves to some degree. This is accomplished by barters which is anathema to the IMF. The IMF forbids barters between member countries. But bilateral trade arrangements can opt for Memorandums of Understanding (MOUs) or better still, Countertrade arrangements in order to force-feed some products of interest into our own relative economies from each other in order to develop an economical volume.
Because of the special nature of the economies of Pakistan and Bangladesh and a history of close cooperation already present, all factors are favourable for a very fair and desperately needed increase in the volume of trade between the two countries. However at this precise point, both the countries are standing at the crossroads of economic history because of various developments within and without their respective countries.
We call it an economic crossroad because if some sort of special review is not done immediately, existing trade between Pakistan and Bangladesh will only be limited to the following:
a. From Pakistan — raw cotton, some finished textiles, rice (some times)
b. From Bangladesh — raw jute and tea.
This is a terrible state of affairs compared to what really was and is the potential between the two countries, both in the private effective collaboration of both, where and when needed.
Let us first discuss what Pakistan can realistically export to Bangladesh, depending upon Bangladesh’s requirements:
a. Raw cotton
b. Finished textiles
c. Pig iron
d. Hark coke
e. Light engineering products, like irrigation pumps, road rollers, power looms, etc.
f. Heavy engineering, like sugar plants, cement plants, etc.
g. Ocean going vessels
h. Slag and clinker
j. Dolomite and gypsum
k. Rock salt
l. Lubricating oil.
Imported from Bangladesh by Pakistan consist of the following:
a. Raw jute
b. Tea
c. Jute goods
d. Newsprint
e. Paper
f. Jute batching oil
g. Telephone cables
h. Hardboard
j. Bamboo pulp.
The recipients of these goods in Pakistan will be within the public and private sectors. Here lies the ultimate paradox, how to coordinate “supply” and “demand” between the public and private sectors. This is further complicated by the inherent jealousy between the public sector corporations themselves.
A year ago, RECP actually stonewalled a 100000 MT rice deal with Bangladesh because the transaction emanated from TCP. No matter that RECP decided that they would either sell to Bangladesh directly (without the help of the TCP) or would not sell at all. After the whole matter fizzled out and Bangladesh, on an Islamic Development Bank Loan, had bought rice from Thailand and Burma, some official in RECP had the audacity to call Bangladesh, a “non-traditional” market for rice! The new Chairman, a very welcome change indeed, Mr. Salim Abbas Gilani, would do well to put his house in order and rid himself of these chronic stonewallers whose only purpose in life is to block all deals till it has their personal stamp on it. Similarly HMC, Pakistan Steel, PECO etc — the list goes on and on, a history of losing substantial contracts on integrated machinery, pig iron, hard coke, low level lift pumps, etc, because of jealousy between the public sector corporations resulting in refusal to cooperate even when the country’s interests are concerned. Not that Bangladesh was far behind in refusing TCP, the lowest bidder in a contract for hard coke, in which the specifications were actually higher than that tendered for.
Whereas it is an accepted norm that what brings nations together are common interests, starting with religion, culture language etc, the glue that binds nations together must be economic. It is trade ties more than anything else which will increase the bonds between any two nations. See Europe after the establishment of the Common Market; true, there are disagreements but agreements are the rule and disagreements the exception. Every nation ultimately falls back on its own national interests but trade does give an opportunity to “give and take” and so it should be with Pakistan and Bangladesh. If our relations have to be built up realistically then it is important for us to re-adjust our “demands” to fit the other’s “supply” potential.
A framework for Countertrade does exist in the form of an MoU between the Trading Corporation of Pakistan (TCP) and the Trading Corporation of Bangladesh (TCB). If only the Commerce Ministers of both the countries would read this far-sighted document signed in 1983 and stopped almost dead in its execution by low level bureaucrats with irrelevant and inane objections. If this document ever sees the light of day and is made more binding as has been envisaged in the long drawn out Minutes of subsequent Ministerial level trade meetings, it can be put into execution.
We believe that Pakistan must export to Bangladesh goods and commodities worth about US$ 150 million annually and take back approximately US$ 125 million or so in the form of Bangladeshi goods and commodities. One area which may be of concern to Bangladesh is the export of jute goods to Pakistan (a main Bangladeshi export earner). Because of proliferation of jute mills in Pakistan, which grows a negligible quantity of raw jute, the import of jute goods has been reduced to next to nothing. Whereas it did make economic sense to have 7 or 8 jute mills, providing for 60-70% of the country’s demand for jute goods, does it make any economic sense to go into competition with Bangladesh in the world jute goods market, given the fact that Pakistan depends upon Bangladesh for most of its raw jute at the present time ? And does it really save foreign exchange? A ten-year-old boy with a calculator can prove otherwise. Even if the source of raw jute were to be diversified, what would be Pakistan’s gain, except for the value added for labour, at the expense of critically needed power, water and foreign exchange for the installation of machinery and its subsequent maintenance? This money and effort could easily have been diversified into areas of critical importance. However, now we have the fourth largest jute goods industry in the world and have to learn to live with it at the expense of reduction of imports from Bangladesh. Simultaneously this will result in the reduction of exports to Bangladesh, from sectors of our economy where the raw material is of Pakistan origin to start with. Similarly, given the amount of raw material for cement production present in Pakistan, Bangladesh should have long-term arrangements with Pakistan for supply of clinkers and should not attempt to put up a cement plant which cannot be based on adequate supply of raw material. This “protection” to Pakistan’s export should extend to our cotton and rice. Reciprocally, our Pakistani newspapers should sacrifice some quality and accept newsprint mill in the Islamic world. Pakistan imports about 50,000 MT newsprint annually, whereas Bangladesh can export a total of only 30,000 MT annually. Is it not possible to pick up at least 50% of this quantity in the largest interest of bilateral trade?
We have illustrated the two cases to point out the many areas where our planners can sit down and arrive at a solution for mutual benefit. Given the size and demand of the public sectors, in both the countries not only have to lead the way, but must also fully involve the private sector in its workings, because the ultimate consumers in both the countries will be from the private sectors.
Many years of residual bitterness were wiped out by the visit of President Zia to express the heartfelt condolences of the Pakistani people on the devastating cyclone, which recently hit Bangladesh. It was indeed a giant step for friendship and accomplished in 24 hours what 15 years had failed to erase between the two nations. Great hopes were aroused in the hearts of the peoples of Pakistan and Bangladesh by this singular act of statesmanship. A reservoir of mutual goodwill was tapped and has been found to be full. But where do we want to go from here, if indeed we want to go anywhere? Do we lose the initiative to vested interests and recalcitrant bureaucrats, or do we build upon the momentum created by the President’s visit by strengthening our ties, not by platitudes and paper agreements, but by forceful implementation of trade ties that will bind us together.
Without question, a lot has been accomplished by the MoU between the TCP and TCB since December 1983, but it has been a sorry history of bureaucratic infighting and foot dragging on both the sides. What is needed is to reinforce the MoU by direct and positive action by the two governments to bring the recalcitrants in each others camps into line. The elected representatives owe it to their own constituents and to history to make the MoU into a more binding and effective document. It is for the elected Government to build upon this base and set an example in Countertrade for Pakistan that can be emulated by Pakistan with other countries in the region and elsewhere.
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