Why the US-Bangladesh economic diplomacy is growing day by day

The US ambassador said, at a news conference held recently on the eve of the three-day 28th annual trade expo in Dhaka (which began on October 27), that there is enormous potential for future growth of business between the two countries. Because the US dollar’s ongoing appreciation against the Bangladeshi taka is putting severe inflationary pressure on the economy, Bangladesh is in critical need of enormous amounts of foreign investment.

It is known that the US Trade Show, which is being co-sponsored by the American Chamber of Commerce in Bangladesh (AmCham), would feature the goods and services of about 40 US businesses at the event’s location, a nearby hotel. The fact that this event is being held this year, which also happens to be the 50th anniversary of Bangladesh’s diplomatic relations with the United States, is noteworthy. It was hoped that this trade show would mark the beginning of improved bilateral ties between the two countries in the area of trade and commerce.

The two-way commerce between Bangladesh and the US was US$10.64 billion in 2021 and US$9 billion in 2019, making Bangladesh the US’s 46th largest commercial partner, as stated by the US ambassador to Bangladesh, Peter D. Haas, at the press conference. Given that it was little about US$1.0 billion in 1992, this is unquestionably impressive.

The largest source of foreign direct investment (FDI) in Bangladesh, with cumulative investments of US$4.43 billion as of 2021, has undoubtedly been US businesses. This represents 20% of all FDI in Bangladesh.

The US market is where Bangladesh exports the majority of its goods. For instance, exports to the USA this year have already reached $7.6 billion, compared to $8.3 billion in exports last year (2021). (2022). According to the statistics, Bangladesh’s exports to the US have been increasing over time. However, given that the US is the largest economy in the world, it is impossible to say that the expansion of Bangladesh’s commerce with it throughout the years has been at the level that was anticipated. If some of the current trade restrictions could be lifted, such as Bangladesh’s exclusion from the US’s Generalized System of Preference (GSP), the volume of trade between the two nations may increase even more.

The export of ready-made garments (RMG) to the US, which accounts for the majority of Bangladesh’s total exports abroad, increased by more than 53.50% in just eight months (from January and August in 2022) in comparison to the same period the previous year (2021). However, this growth was only achieved over a small portion of this year. The tendency simply suggests that, in the post-pandemic era, a particular sector of Bangladeshi export goods to the US market may see future increase.

The tendency simply suggests that, in the post-pandemic era, a particular sector of Bangladeshi export goods to the US market may see future increase. It goes without saying that the export volume would be far higher than it is presently if this category of goods could enter the US market duty-free under the GSP.

It can be hoped that the USA, as always, will support Bangladesh in its efforts to achieve its objective of being a middle-income country by 2026. That would necessitate increased US investment in the energy and technological sectors in addition to unrestricted US market access for Bangladeshi goods.

Despite the harsh tone of the United States on various issues in Bangladesh, the economic relations between the two countries have now reached a new height. The direct economic-trade relationship between the two countries has now exceeded 12 billion (1 thousand 200 crore) dollars, which is higher than at any time in the past. At the moment, the United States is the top export market of Bangladesh as a single destination. The US is also the top source of foreign direct investment (FDI) in the country. The country also ranks second as a source of remittances. The economic partnership between the two countries has almost doubled in the last five years.

The United States now has the softest power (commercial, intellectual or cultural influence) in the country’s economy in terms of exports, FDI and remittances. In 2016, the United States imported goods worth 591 million 1 million dollars from Bangladesh. According to data from the US Census Bureau, last year it stood at about 833.36 million dollars. As a result, the country’s import of goods from Bangladesh has increased by more than 40 percent in five years. In the first three months of this year (January-March), the country’s expenditure on importing goods from Bangladesh has reached close to 3 billion (3 billion) dollars.

USA is now the biggest source of FDI in Bangladesh. At the end of 2021, the contribution of US companies to the country’s total FDI was 20 percent. At the end of December, the stock of FDI from the United States stood at 432 crore 89 lakh 90 thousand dollars. According to Bangladesh Bank’s calculations, the largest investments have come in the energy, oil and gas, banking and insurance and power generation sectors. US giant Chevron meets more than half of the country’s total gas demand. The company claims itself as the biggest foreign investor in Bangladesh.

The United States is now second only to Saudi Arabia as a source of remittances. According to the data of the Central Bank, in the last fiscal year (2020-21), about 3.5 billion dollars (about 3.5 billion) remittances came to Bangladesh from the United States. In the first quarter of this year (January-March), 16.28 percent of the total remittances in the country came from the United States. The flow of remittances from the United States has increased by more than 100 percent in the last five years on a fiscal basis.

According to EPB statistics, the export of goods from Bangladesh to the United States increased by more than 52 percent in the first 10 months (July-April) of the current fiscal year. Garments mainly made in the country are exported the most. Entrepreneurs of the garment sector are talking about China-centric geopolitics as the reason for the strengthening of commercial relations with the country.

According to them, the US wants to reduce its dependence on China for import trade. For this reason, the country is considering Bangladesh as one of the most likely options as a source of product import. In the past, the US tried to create such options in African countries or Vietnam. However, Washington has turned away from those countries on the China issue. Among the rest of the countries, the country’s trade sector stakeholders see relatively more potential in Bangladesh.

Rising Group has been exporting garments to the United States for a long time. The company is exporting about 40 percent of its products to the US market. Dialogue was the major aspect of the development of relations between the two countries in the last five years. The dialogue that needs to happen to improve the relationship is happening now. For example, the country is asking to remove the obstacles faced in the cotton export to Bangladesh. On the contrary, we are saying that the tariff benefits should be ensured if the garments made from American cotton are exported to the United States. Overall, the field of economic diplomacy of the two countries has become much stronger.

Despite the deepening of the economic relations between the two countries, the possibilities related to this have not yet been properly utilized. The US is the world’s largest single market. The trade facilities available under GSP in the country have been suspended. Competing countries are increasing exports of various products to the US market under GSP. Bangladesh has not achieved the desired growth here, although the growth in the United States as the largest market for apparel products is good. In this direction, competing countries Vietnam and India are also moving forward. The total annual imports of the United States are more than 2 trillion (200,000,000) dollars. Bangladesh’s participation in this is very little. Currently, the US companies doing business in Bangladesh are not able to do business in peace. The laws of the country are very unclear. Profit is the most important thing for US investors. US companies do large amounts of business throughout Asia. Compared to that, the country’s business in Bangladesh is very inadequate.

Bangladesh needs to pay more attention to the amount of systemic development needed to attract new ones as well as retain the big US companies. One should think about eliminating things like tax complications. And the fields of thought must be more aggressive. Business processes need to be simplified. Areas of trade dispute settlement should be more transparent. All in all, it is necessary to understand the country more to improve relations with the country. They need to better understand their strategic priorities. The two countries have a multi-dimensional economic relationship or communication. We have to understand these things. Together we can create integrated systems. Then an economic relationship many times larger than the existing relationship is possible.

Entrepreneurs involved in bilateral trade between the United States and Bangladesh say that the relationship between the two countries has improved in many indirect ways. The foundation of bilateral relations is now very solid. US companies are now focusing on increasing investment in Bangladesh, which is expected to increase in the coming days.

Exports and FDI may be visible. But Bangladesh’s relationship with the US has also improved in less visible areas, such as knowledge sharing. Procter & Gamble has recently started production sharing with Pran group. It is basically knowledge and technology sharing. Bangladeshi businessmen have been very cautious about relations with the United States over the past five years. USAID also provides a lot of assistance to Bangladesh in terms of technology transfer. India did not get the Pfizer vaccine from the US, but Bangladesh did. Overall, trade relations have had a positive impact on many issues. Bangladesh is in a very good position with the US in economic diplomacy. There is also a geopolitical context. Bangladesh is gaining importance in the Indo-Pacific strategy. Five years ago, the pace of economic diplomacy was much slower than it is now.

Bangladesh has shown incredible success in all fields for more than the last five years. Economic relations with almost all friendly countries have increased a lot. But in the last five years, the place of economic diplomacy with the United States has become much stronger. The economic relationship has been strengthened, basically we can sell products at affordable prices, so. Our products are delivered on time. For these reasons, the United States is leaning towards Bangladesh. The basic thing is that the United States has needs, which Bangladesh is able to meet. Earlier, the country did not buy medicines and medical equipment. Forced to take PPE and medicine during covid. They are leaning towards Bangladesh out of necessity. It’s a win win situation. The US is also benefiting. Bangladesh is also benefiting. We are liberal, so economic relations with the United States will increase. The US can also invest in 100 emerging economic zones in the country. We welcome entrepreneurs from the country to relocate their factories.

Samina Akhter
Samina Akhter
Samina Akhter is a Dhaka, Bangladesh based activist, analyst, writer and columnist.