Bilateral trade between Bangladesh and Korea hits historic high
Bilateral trade volume between Bangladesh and South Korea hit an all-time high of $2.3 billion in 2021, and continuing to see a 40% year-on-year increase in august.
The Republic of Korea’s Ambassador to Bangladesh, Lee Jang-Keun, considers the development a significant achievement, as bilateral trade volume has stagnated for nearly a decade after peaking at $1.8 billion in 2011.
In an exclusive interview with the Dhaka Tribune on the eve of Korea’s National Foundation Day on Monday, Ambassador Lee said, “Despite the excellent ties we have built together, there is still great potential that does not exist. has not yet been tapped in. It was in this context that, immediately after my arrival in Dhaka, I presented three goals or priorities that I planned to pursue during my tenure as Ambassador – Diversification, Upliftment and Generation (DEG. )
“The first and main task we are tackling is to diversify our cooperation beyond the RMG sector. While RMG cooperation is the main achievement of our bilateral business relations, it has occupied too much of our cooperation for too long. More than 70 % of Korean investment is still in the RMG sector Over 80% of Bangladesh’s exports to Korea are RMG.
Although slow, the Korean envoy believes there have been notable and significant moves towards diversification in recent years, particularly in the electronics and automotive sectors.
In cooperation with a Bangladeshi company, Samsung Electronics locally assembles and manufactures most of its gadgets – from refrigerators, air conditioners, washing machines to televisions and mobile phones.
At Kaliakair Hi-Tech Park, local company Fair Technology is preparing an assembly plant for Hyundai Motors. By the end of this year, Hyundai cars would be assembled locally, the envoy hoped.
“Since Korea began allowing duty-free and quota-free access to the Korean market for 95% of Bangladesh’s products in 2008, Bangladesh’s exports to Korea have steadily increased and exceeded 500 million dollars in 2021,” said Ambassador Lee.
He said that in 2021, bilateral trade volume had started to increase, registering an all-time high of $2.3 billion.
Korea’s exports to Bangladesh were $1.636 billion, a 58% year-on-year increase, while Bangladesh’s exports to Korea recorded $552 million, a 40% increase year over year.
“As of August this year, our trade volume has already reached $2.1 billion. It will likely break the previous record again this year. Considering the continued strong economic growth of Korea and Bangladesh, I am expect bilateral trade to increase further in the future.”
Importance given to product diversification
In order to tap the bilateral trade potential, diversification of export products to Korea is a major challenge, Ambassador Lee said.
He said currently, garments and textiles account for 83 percent of Bangladesh’s exports to Korea.
“Bangladesh should take full advantage of the duty-free and quota-free access to the Korean market. In this regard, the Government of Bangladesh can actively encourage its companies to take full advantage of the cash incentives to export to the Korean market. As Korea is considered the non-traditional market, companies exporting to Korea can get 4% cash incentives.”
Moreover, as the BGMEA pointed out recently, there is even a large margin to increase garment exports to Korea.
The Korean envoy said, “Even though Bangladesh’s garment exports to Korea have been growing steadily, they account for only 4.2 percent of Korea’s garment import source, while China accounts for 33. 6% and Vietnam 31.2%”.
He believes that establishing direct freight lines between Bangladesh and Korea, both sea and air, will boost bilateral trade.
“Since Korea is the seventh-largest trading nation in the world and Korea’s Busan port is the second-largest cargo transit port in Asia, the establishment of direct cargo lines should be considered as a priority to increase volume of bilateral trade.”
Korea, Bangladesh’s fifth source of FDI
Korea has always been one of the top foreign investors in Bangladesh, Ambassador Lee said, adding, “The accumulated gross stock of Korean FDI was $1.1 billion during the fiscal year. 20, which increased to $1.4 billion in FY22. This means that there have been more than $100 million in Korean investment every year. Korea is also the largest foreign investor in export processing zones with 75 companies operating in the zone.
He acknowledged that Bangladesh offers attractive conditions for investment by Korean companies, especially in terms of a competitive workforce, a thriving national economy and a vast market.
For these reasons, more and more Korean companies are interested in establishing themselves in the country.
However, at the same time, there are still a number of factors to consider to make the country more conducive to business and investment, Ambassador Lee said.
“The first and most important thing to attract more Korean investment will be to solve the difficulties and challenges faced by existing investors. Among them, the most frequent challenge I receive from many Korean companies concerns the customs and tax issues.It is not the high rate of tax or duty, but the increasing complexity, lack of transparency and predictability of the related process and administration that makes it difficult for Korean investors to manage This not only increases the cost of doing business but negatively affects the perception of Bangladesh’s investment environment,” he clarified.
Another major element, according to him, is the discrimination of foreign investors.
In particular, foreign investors operating in EPZs are not entitled to obtain cash incentives for exports that are granted to local companies.
According to Bangladesh policy, local RMG companies exporting to Korea can get 4% cash incentives.
If granted to Korean enterprises, it will contribute significantly to increase the export of RMG from Bangladesh to Korea.
Bangladesh, third largest recipient of Korean aid
Ambassador Lee says Bangladesh is one of Korea’s priority development partner countries. Currently, Bangladesh is Korea’s third largest development aid recipient.
He added that ICT and technology development have been at the center of Korea’s development cooperation with Bangladesh.
Besides establishing the ICT Training and Education Center in 2015, the Korean government has provided various aids for the digitalization of government services and administration, he said.
The envoy added, “In 2019, a group of Korean experts prepared an e-government master plan and presented it to the government of Bangladesh, which included various ideas and proposals. As a follow-up to the plan , Korea, through Koica — the Korea Development Agency — is implementing a municipal government digitalization project across the country.
“We have also contributed to building the capacity of the Bangladesh Police by establishing a cyber and digital investigation center in Dhaka and Chittagong. In the ICT application of transport management, intelligent transport system is currently being developed. installation along the N8 highway.
“We are also helping to set up a digital land management system. The Korean Embassy is also investing in start-up programs targeting young people. Among others, the Youth Entrepreneurship Center, which will be established in the University of Dhaka under the Koica project, will help promote young startups with the support of Korean experts.”