Bangladesh-Indonesia PTA Can bring Economic Stability in the Region


As per Tipu Munshi, the minister of commerce, Bangladesh and Indonesia, the fifth-largest economy in Asia, is about to execute a PTA, or preferential trade agreement. During a courtesy visit to the ministry office at the Secretariat, Indonesian Ambassador Heru Hartanto Subolo echoed the commerce minister’s optimism about the trade agreement and stated that progress had been made in this region. 

To carry out this deal, the two nations have established a ‘Trade Negotiations Committee,’ which has already met three times. The minister stated that Indonesia would host the fourth gathering the following month. The negotiations are expected to end after this round. 

Bangladesh and Indonesia currently have a significant trade relationship. According to statistics from the Bangladesh Bank, Bangladesh imported goods from Indonesia worth about $2.5 billion in the fiscal year 2021–22. According to the Export Promotion Bureau, only $78.5 million worth of goods were exported to the Southeast Asian nation during that time. While the whole world is experiencing an economic downturn due to the Ukraine war and Covid-19, these two economies marked steady growth throughout the global crisis. Hence, a PTA between them will further pave the way for both developments while the region will also be a beneficiary. 

Tipu Munshi advocated for greater access of Bangladeshi products to the Indonesian market, including readymade clothing, leather goods, and pharmaceuticals, to reduce the trade deficit and balance the two countries’ trade relations. He also called for greater business collaboration between the two nations to find profitable investment opportunities and increase trade possibilities. Besides, the Indonesian ambassador consented to help in this respect after the minister stressed the signing of a memorandum of understanding between the top trade bodies of both nations.

The Indonesian ambassador praised Bangladeshi Prime Minister Sheikh Hasina for guiding Bangladesh’s transition from a least developed to a developing nation, adding that there are now enormous investment possibilities in Bangladesh. He stated that Indonesian companies wanted to build palm oil refinery facilities in Bangladesh.

About streamlining the visa application process, Tipu Munshi said that relations between Indonesia and Bangladesh are extremely cordial and that both nations have promising tourism futures. The minister added that by simplifying the visa application process, citizens of both nations could satisfy their wanderlust while also boosting their respective national budgets.

The signing of a PTA between Bangladesh and Indonesia has the potential to significantly affect the economies of both nations and regional economic cooperation. This agreement may contribute to developing stronger commercial ties between Southeast Asia and South Asia, two historically separate regions. In this essay, we’ll look at some possible effects of the PTA on Bangladesh’s economic development, its implications for South Asia and Southeast Asia, and how it might help Bangladesh establish itself as a regional trading hub.

The PTA’s elimination or reduction of tariffs on specific goods between Bangladesh and Indonesia is one of its most direct effects. As a result, trading between the two nations will be simpler and less expensive, potentially increasing bilateral commerce. 

Bangladesh, which has been looking to diversify its export markets beyond its established allies in Europe and North America, may find this especially advantageous. Bangladesh’s exports to Indonesia will probably increase due to the PTA. This could be especially important for the nation’s apparel sector, which is a major source of foreign exchange earnings. 

Millions of workers, mostly women, are employed in Bangladesh’s textile and apparel industry, one of the biggest in the world. The PTA could aid in boosting the nation’s textile and apparel exports to Indonesia, which has a sizable and expanding customer market.

It’s crucial to remember that the PTA’s scope extends beyond clothing and fabrics. The agreement includes a variety of commodities, including machinery, chemicals, and agricultural products. As a result, there might be chances for other Bangladeshi economic industries to enter the Indonesian market. For instance, Bangladesh is a significant jute producer, and the PTA might enable it to ship more of this good to Indonesia.

The diversification of export markets for both countries may benefit from the expansion of bilateral commerce between Bangladesh and Indonesia. Bangladesh has historically relied heavily on a few select export commodities, primarily textiles and clothing, which generate most of the nation’s export revenue. Bangladesh could lessen its reliance on these goods and markets and strengthen the resilience of its economy to outside shocks by increasing its exports to Indonesia and other nations in the region.

Increasing regional economic cooperation between South Asia and Southeast Asia may benefit the PTA. These two regions have historically had little commerce and investment flow between them and have been comparatively isolated. However, the PTA could assist in expanding and integrating the market for products and services, which would benefit businesses and customers in the region.

For instance, by lowering trade barriers, the PTA could facilitate increased commerce between South Asian and Southeast Asian nations. Businesses in both regions might be allowed to expand into new markets. As a result, fostering job growth and economic growth. Additionally, as businesses look to seize new opportunities, the PTA might encourage greater investment flows between the two regions.

The PTA may also open the door to more collaboration between South Asia and Southeast Asia on problems like connectivity and infrastructure growth. For instance, the agreement may promote spending on transportation facilities like ports, railroads, and roads, increasing trade and investment flows between the two regions.

The PTA might also aid Bangladesh in luring foreign capital. With improved access to the Indonesian market due to the deal, Bangladesh may become a more alluring location for foreign investors. This might encourage economic expansion and employment creation in the nation.

And finally, the PTA might help Bangladesh become more of a regional trading centre. Bangladesh has the ability to develop into a significant trading hub in South Asia and Southeast Asia thanks to its advantageous location and expanding economy. The PTA with Indonesia may help open the door for greater economic integration and cooperation within the region, strengthening Bangladesh’s status as a regional hub for trade and investment.

In conclusion, the ratification of a preferential trade agreement between Indonesia and Bangladesh has the potential to have a substantial impact on the economies of both nations and the integration of the regional economy. The agreement may contribute to developing stronger economic links between South and Southeast Asia and open the door for Bangladesh to develop into a significant regional trading hub. 

However, further investments in infrastructure, human capital, and changes to the business climate are necessary to realise the agreement’s maximum potential.

– Syed Raiyan Amir is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in The Financial Express [Link]