The Delegation of the European Union to Bangladesh: Trade and Investment

Bangladesh has pursued a policy of trade liberalisation since the early 1990s. Export diversification and import liberalisation received increased attention. As a result, a considerable reduction in tariff and non-tariff barriers was achieved.

Although in recent years exports in key areas such as garments, knitwear, shrimp, leather and household textiles goods have performed well, they have not kept up with the economy's demand for imports of essential commodities such as fuel and food grains, resulting in a growing trade deficit and pressure on the foreign exchange reserve. There have also been some difficulties in meeting quality and standards required for access to the EU market, especially in the frozen food sector.

As a Least Developed Country (LDC), Bangladesh enjoys quota- and duty-free access to the EU under the 1986 Textile Agreement and General System of Preferences (GSP) respectively. The "Everything But Arms" initiative of 2001 assured the continuation of GSP for an indefinite period for all LDCs. However, Bangladesh's trade capacity presently relies on a very limited number of export products. There is, therefore, a need for a profound diversification of the country's export range.

The EU is the biggest export destination of Bangladeshi products, accounting for 56% of the country's total exports in 2007. The main items Bangladesh exports to the EU are readymade garments (90%), frozen food (6%), leather, jute and tea.

Bangladesh's main imports from the EU consist of machinery and mechanical appliances (55%) and chemical products (14%). In 2008 the EU's exports to Bangladesh amounted to €1.1 billion, compared with €5.5 billion Bangladeshi exports to the EU.

Since the beginning of the 1990s, Bangladesh's economy has developed as a result of significant shifts in trade, fiscal, industrial, agricultural and financial policies.

The economy has grown at an average rate of 5-6% over the last decade, supported by the service sector, export-oriented manufacturing, inward remittances and foreign direct investment (FDI).

Total FDI stock in Bangladesh at end-2008 was reported by the Bangladesh Bank to be $4.8 billion, primarily in the gas and petroleum sector ($1.2 billion), telecommunications ($1.0 billion), textiles ($0.9 billion), and banking ($0.7 billion). In recent years the telecommunications sector has seen the strongest foreign investments.

Close to one-third of this FDI is from EU companies, principally from the United Kingdom (25%) and the Netherlands (5%).