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ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:CurrentBarriers&Recommendationsforfutureprospects

TopStory
Issue:July,2012

ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:Current
Barriers&Recommendationsforfutureprospects
AK.M.SalimOsman

BKMEAfeelsprideinaverringthattheknitwearsectorofBangladeshis
headingtowardacourseofimmensepossibilities.Buttherealsuccess
will ultimately lie in tailoring them into realities being guided by
appropriatecapabilities.
Wehaveundertakenanarrayofactivitiesaimedatmarketexpansion
andproductdiversification.Afterstudyingtheknitwearimportvolume
ofJapan,Russia,SouthKorea,SouthAfrica,Ecuador,Malaysia,Mexico,
Brazil,Argentina,Chili,Paraguay,Venezuela,Uruguay,Portugal,Poland,
Honduras,webelievethattheseunexploredmarketscanheraldanew
eraofprosperitybyleavingamassiveboostinournationaleconomy.
SouthAfricaisahugelypotentialcountryintermsofeconomicgrowth
tendency and import value. Bangladesh has a good relationship with
SouthAfrica.WealwayslookuptoNobleLaureateNelsonMandelaand
theadministrativemechanismofSouthAfrica.
Butstillthebilateraltradebetweenthesetwocountrieshasnotreachedthepeakasexpected.Varioustradebarriershaveput
negativeimpactonthisstodgydevelopment.
AgainstthelowerspectruminbusinessdevelopmentbetweenBangladeshandSouthAfrica,wehavereasonstobehappythatin
recent times positive attitude towards doing business from both the sides has surfaced into scene. Though the total trade value
between these countries was about US$ 11.35 million in 2001, it has increased by about ten times after ten years. During the
elevenyearstimespanfrom2001to2011(mentionedbelow),SouthAfricaenjoyedtradesurplusinmanytimes.Forprosperous
mutual beneficiary trade, each country should have distinct comparative advantage in production of tradable items. In order to
explorecomparativeadvantage,thetradestructurecanbeexamined.

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ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:CurrentBarriers&Recommendationsforfutureprospects

Investigating the trade structure, it has been apparent that the export bundle of Bangladesh to South Africa differs significantly
fromthatofSouthAfricatoBangladesh.Itindicatesthepossibilitiesforexpandingmutualtradebetweentwocountries.Theexport
itemsofBangladeshincludemainlyRMG&othertextilegoods,Cotton,Ceramic,Plastics&itsproducts,Tobacco&manufactured
tobacco substitutes and Leather & Footwear etc, whereas South African export items consist of Cereals, Organic & inorganic
chemicals,Salt,Sulphur,earth,stone,plaster,limeandcement,Ironandsteel,Paper&paperboard,Vehiclesotherthanrailway,
tramway,etc.
No doubt that the domestic knitwear market of South Africa is large. Since knitwear is a common items consumed by allaged
people,thecountryimportssignificantamountoftheclothingapartfromitsownproduction.During2011,thecountryimported
US$677.43millionknitwearfromdifferentlocationsoftheworld,whereastheamountwasaboutUS$595.39millionin2010.
ChinaisthekeysupplierofthemarketfollowedbyMauritius,IndiaandBangladesh.Theknitwearimportdemandofthecountry
hasbeengrowingovertime.During2011,itsgrowthratewasabout13.78percent.

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ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:CurrentBarriers&Recommendationsforfutureprospects

IfthesovereigndebtcrisiscontinuestobeworseningwithabroadsurgeinriskpremiaandspilloversacrossEuropeancountries,
SouthAsiaandotherdevelopingcountriesspeciallyBangladeshcouldbeseriouslyaffectedthroughtradeandfinancialchannels.As
asafeguardmeasure,wehavelookedoutfornewerdestinationstoexportourKnitwearitems.Wehavesomeuniquefeaturesthat
havemadeBangladeshthesecondlargestknitwearexporterintheworldafterChina.
WhatmakesBangladeshclassapartfromothercompetitorsisweexportatcompetitivepriceseventhansupersupplierChina.In
SouthAfricanknitwearmarket,Bangladeshexportedabout4.54%ofwhatChinaexportedin2010,thoughBangladeshsuppliedat
most competitive prices in the market. Per piece Bangladeshi knitwear item was exported to South Africa by about US$ 1.66,
whereasChinaexportedatUS$1.85.TurkeyandFranceareanothertwohighcostproducingcountriesbutmajorsuppliersinthe
knitwearmarket.
Itissurprisingtomanythatwhylowcost,butqualityknitwearproducingcountryBangladeshdidntattainlargermarketsharein
theknitwearmarketofSouthAfrica?WEhavethefollowingobservations
Bangladeshsexport,especiallyRMGfaceshightariff&othernontariffbarriers.
Differenceinbankingregulationsandimplementationmethodology.
AbsenceofSouthAfricanmissioninBangladeshareasonwhyBangladeshitraderscannotvisitSouthAfricaeasily.
Lackofeffectivecommunicationbetweenbusinesscommunitiesofbothcountries.
Geographical distance between Bangladesh & South Africa and not being acquainted with multidimension factors of
BangladeshKnitwearSector.
TheModusOperandiofBusinessasexistingintheSouthAfrica(HindrancestothewayofTradeFacilitation)
*Intheageofliberalizedandfreetradeglobaleconomy,SouthAfricabeingtheeminentmemberofBRICSappearstobeahigh
tariffbarriercountryrestrictingLDCslikeBangladeshtoaccessfreelyinhermarket.
*Thehightariffspectrumismostlyapplicableformostfavorednations(MFN)anaverageof40.78%(WTO,2011)forclothing
goodsmakingitthehighestamongalltarifflinesandallBRICSmember.
*Incontrast,theNonMFNpartnersmostofwhichareadvancedeconomiesenjoyingwithaccesstoeitherzerooranaverageof
17.78%dutiesowingmuchtothefreetradeagreement(FTA)ofSouthAfricawithEU27andEFTA.
*Besides,itsregionaltradingblocsincludingSADCandSACUhavealsoallowedLDCslikeLesotho,Angola,Malawi,Mozambique,
Tanzania,ZambiaandDRCongotoaccesspreferentiallytothelargesteconomyinAfrica.

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ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:CurrentBarriers&Recommendationsforfutureprospects

Thetaxstructure&otherblocksforBangladeshtoenterintoSouthAfricanMarket
Bangladeshiknitwearfacesprimarilyabout41%tariffbarriersforaccessingtothemarketandthen14%asVAT.Inadditionto,
other nontariff barriers along with these financial barriers hinder the competitiveness of Bangladeshi knitwear at South African
retailmarket.
The Nearest mission of South Africa located at Sri Lanka maintains a diplomatic connection with Bangladesh. Bangladeshi
businessmenhavetocollectvisafromSriLankaratherthantheirmainlandfortravelingSouthAfrica.
SinceSriLankaislocatedfarawayfromthecountry,soitistimeconsumingaswellasassociatedwithadditionalcostforcollecting
visa.BusinessmenarenotmuchinterestedtostayatleastcoupleweeksinSriLankaforcollectingvisa.Thesemayhinderfrom
continuouscommunicationbetweenbusinesscommunitiesofbothcountries.
The government level initiave should have been much more intensified given the favorable facilities existed for expansion of
businessbetweenthesetwocountries.
WhyShouldSouthAfricachoosetoimportfromBangladesh?
QualityProductswithchicandelegance
Mostcompetitivepriceintheworld
Strongbackwardlinkagefacility(Corestrengthincottonitems)
About20percentcumulativeaveragegrowthrateoverlastdecades
ThecapabilityofBangladeshKnitwearsectorwithastaggeringshareof41%inthenationalexportearnings.
ExcellentFDI(ForeignDirectInvestment)facilities
Reliability,ontimeshipmentcommitmentandcompliantfactories
Governmentalassistancetohelpdevelopbusinessenvironment
AgoodnumberofBangladeshiarelivinginSouthAfrica
ExcellentportmanagementofBangladesh
BKMEAsincessantendeavortohelpthefactoriesdevelopwithsupermodernproductionmechanism.
To enhance the business with South Africa, we seek the following policy support. (The recommendations are twofold in nature
though)

OursolicitationtotheSouthAfricanDelegation(Short&mediumterm)
WithdraworreductionoftarifffromRMGpermanentlyoratleasttemporarily.
ThevisaissuingservicesforatleastbusinessmenshouldbeprovidedfromBangladesh.
OfficialSittingforcustomizingbankingfacilityandregulations
Promotingprivatesectordialoguesbetweenthetwocountries.
Organizingyearlybusinessdialoguebetweenthetwocountries
InitiationofafavorablebusinesspolicyBySouthAfricanGovernmentforBangladesh.
Longterm
SouthAfricanmissionshouldbeextendedtoBangladeshpermanently.
Strengtheninganeffectivelinkbetweenbothcountriesbankingsystems.
Ifpossible,tosignuptradeagreements(ifnotanyyet)forexportofknitwearitemsundereasierconditionsandguidelines
ThewriterisPresident,BKMEA&canbereachedatbkmea@bangla.net

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ThescenarioofbilateraltradebetweenBangladesh&SouthAfrica:CurrentBarriers&Recommendationsforfutureprospects

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