Reducing trade imbalance with South Korea

The Republic of South Korea (ROK) provides a fascinating story of rapid economic development and living standard for its people. From a poverty-stricken nation, it transformed itself into a formidable economic power in just four decades. According to the World Bank, South Korea's real gross domestic product (GDP) growth averaged 10 per cent annually between 1962 and 1994.

Ever since ROK recognised independent Bangladesh on May 12, 1972 and opened its diplomatic mission in Dhaka in March 1975, it emerged as an important trade and development partner. The relationship is being strengthened by high-level exchanges and proactive strategic engagements.

South Korean Prime Minister Lee Nak-yeon paid an official visit to Bangladesh from July 13 to 15 to further explore and strengthen cooperation in trade and investment and cultural relations.

Prime Minister Lee Nak-yeon attended a bilateral meeting with his Bangladesh counterpart, PM Sheikh Hasina, at her office. Following the meeting, three deals were inked to reinforce cooperation in the fields of trade and investment, diplomacy and cultural exchange.

The deals are: (a) A memorandum of understanding (MoU) between Bangladesh Investment Development Authority (BIDA) and Korea Trade-Investment Promotion Agency (KOTRA); (b) a MoU on cooperation between the Korea National Diplomatic Academy of the Ministry of Foreign Affairs, South Korea and the Foreign Service Academy of the Ministry of Foreign Affairs, Bangladesh, and (c) an instrument on cultural exchange programme for the years 2019-2023.

While meeting with Bangladesh President Md Abdul Hamid, PM Lee affirmed that his country will support Bangladesh to materialise its visions for 2021 and 2041 as a development partner.

Lee attended a Korea-Bangladesh business meeting sponsored by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and Korea International Trade Association (KITA). In his keynote speech, he indicated that his country is keen to invest in Bangladesh, particularly in energy, infrastructure, and ICT sectors.

During 2017-2018 fiscal year, South Korea's export to Bangladesh stood at $1240.70 million and Bangladesh's export to South Korea amounted to $258.84 million. Thus Bangladesh has a huge trade deficit with South Korea. In order to lessen trade deficit, South Korea needs to invest more in the country and remove trade restrictions such as, duties and quotas. Similarly, Bangladesh needs to diversify its export products.

In October 1978, South Korea established its trade centre in Dhaka to promote and facilitate trade and investment. A MoU on recruitment of Bangladeshi workers through state mechanism was signed in June 2007.

South Korea looks for skilled workers from other countries who are particularly gifted with language competence. At present, over 15,000 Bangladeshis are working in South Korea, mainly in the manufacturing sector.

The bilateral relationships witnessed new momentum through greater engagements following the official visits of South Korea's former prime ministers to Bangladesh in September 1994 and November 2002 and Bangladesh PM Sheikh Hasina's visit to South Korea in May 2010. During the visit, PM Hasina described South Korea a "special friend."

South Korea has been supporting Bangladesh's socio-economic development through grants, loans and technical cooperation. Hyundai Engineering Company and Daewoo International Corporation helped build a 225 megawatt power plant in Ashuganj. South Korea provided US$3.5 million for an integrated community development project in Cumilla district aimed at income generating support for about 65,000 farmers.

In view of low-cost labour supply, as well as fiscal and monetary incentives, over 200 South Korean companies have already invested in readymade garments, textiles, electronics, telecommunications, energy, tannery and footwear factories-- mainly in the Export Processing Zones (EPZ) of Bangladesh.

The key conglomerates such as Youngone Corporation, Hyundai Engineering Company and Daewoo International Corporation, SK Group, Samsung, LG, KIA Motors are running business enterprises in Bangladesh. Korean companies have engaged over 80,000 local workers.

Notably, South Korea was the first country to invest in the readymade garments sector in Bangladesh. At present, South Korea is the 6th largest investor in Bangladesh.

To sum up, as the world's 15th largest economy, South Korea remains the biggest source of Foreign Direct Investment (FDI) in the textile and garments sectors of Bangladesh. It has been facilitating job creation, economic growth, and long term prosperity of Bangladesh.

PM Lee's Dhaka visit signals that Seoul is keen to further deepen economic partnership by expanding trade and investment, and also to increase diplomatic interaction and cultural collaboration.

Dr. Kamal Uddin Ahmed is a former Professor and Chairman, Department of Political Science, University of Dhaka. [email protected]