A high-level meeting at the Commerce Ministry suggested caution about signing free trade area (FTA) deal with China, keeping in mind the revenue issue, interest of the domestic industry and possible Chinese investments, officials said.
The suggestion came at a recent meeting, which was convened for conducting the joint feasibility study on the FTA between Bangladesh and China, they said.
Additional secretary of the ministry of commerce (MoC) Shafiqul Islam presided over the meeting, attended by representatives of the ministry of foreign affairs, industries, the National Board of Revenue, Bangladesh Tariff Commission (BTC), Bangladesh Investment Development Authority (BIDA), and Bangladesh Foreign Trade Institute (BFTI).
People familiar with the situation said the meeting was told that China was the largest trading partner of Bangladesh. The annual import amounts to US$ 12 billion from which the country earns a significant amount as import duty.
After signing of the proposed FTA, income from Chinese import can go down significantly, lowering the overall revenue collection.
They also discussed the interest of local industry, which can face tough competition since the imported Chinese goods are cheaper.
However, the meeting discussed the possible investment from China to Bangladesh in the aftermath of FTA deal.
The meeting was told that production cost in China is increasing gradually and they are relocating factories.
There is a possibility that a large volume of investments can be shifted to Bangladesh from China.
"Even China may invest in Bangladesh and buy back goods to meet its domestic demand," said an official about the possible scenario.
The state-run Tariff Commission conducted a feasibility study on the Bangladesh-China FTA deal in 2016 based on the data of 2014.
The study focused only on trade in goods while the trade in services and trade in investment remained unexplored.
The ministry's meeting has asked the Commission to conduct a full fledged study focusing on goods, investments and services, since the FTA with China will be a comprehensive one, the people said.
Contacted over phone on Friday, Mr Islam told the FE the Commission has been asked to conduct a full-fledged study in collaboration with BIDA, BFTI, and Bangladesh Bank.
Distinguished fellow of the Centre for Policy Dialogue (CPD) Dr Debapriya Bhattacharya had earlier told the FE there is no problem in exploring the FTA possibility with China.
But during the study, some issues have to be kept in mind so that Bangladesh can benefit from the deal, he said.
Dr Bhattacharya said Bangladesh needs to examine whether it will get preferential tariff reduction and whether products having export potential can be included in the list.
"The amount of revenue loss from the FTA needs to be calculated and removing non-tariff barriers has to be addressed," he said.
