Potential of UK-Bangladesh’s growing trade ties

 In the context of the global economic recession because of the post-Covid-19 Russia-Ukraine war, the recent visit of UK International Trade Affairs Minister Nigel Huddleston to Dhaka is important for several reasons. At this time, he held a meeting with the Minister of Commerce, the Prime Minister’s Adviser on Private Industry and Investment, and several high-ranking officials. In those discussions, issues such as the Rohingya refugee problem, politics, neutral elections, etc. came up, but mutual business, trade, and investment between the two countries were the most prominent. Along with trade, cooperation in education, defence, the aviation sector, etc. has gained importance.

It should be noted that Bangladesh’s relationship with the UK is warm and friendly. The UK and Bangladesh have deep political and economic ties, and trade has increased significantly over the last two decades. Bangladesh’s economy has gone through major structural shifts, with exports, including to the UK, playing a catalytic role in developing the manufacturing base. The country is also an endless export market for Bangladesh.

In the financial year 2022–23, Bangladesh exported goods worth 5.31 billion dollars to the UK. But there is huge potential to increase it further. On the other hand, Bangladesh imported goods worth 450 million dollars from the UK. The commerce minister requested the Commerce Minister of Bangladesh for more investment in the Economic Zone of Bangladesh. In response, the UK Commerce Minister said that the businessmen of that country have to face various problems and challenges. Bangladesh has assured a quick solution to the existing problem. The meeting of the Joint Working Group for the expansion of economic and trade relations between the two countries was also discussed. So that bilateral trade, economic development, and investment can be strengthened in the future.

Recently, Prime Minister Sheikh Hasina went to participate in the formal inauguration of the new King Charles III of the United Kingdom. Apart from this, Prime Minister Sheikh Hasina’s meeting with UK Prime Minister Rishi Sunak was, in a word, warm, sincere, cordial, and above all, fruitful. At one point, the Prime Minister of the United Kingdom said, ‘You are the inspiration of our family. I have been following you for years. You are a successful economic leader. Appreciating the extensive economic development and prosperity of Bangladesh, he said, “You are a role model of development”. In this context, the British Prime Minister appreciated Bangladesh’s glorious role in various international forums, including sheltering Rohingyas and climate change.

The trade balance heavily favoured Bangladesh, largely attributed to its thriving readymade garments (RMG) sector, which accounted for the lion’s share of the trade. The UK’s total imports from Bangladesh surged by 54.0% to £3.8 billion in 2022. At the same time, UK exports to Bangladesh increased by 36.7% to reach £897 million during the same period.

The UK is the second-largest foreign investor in Bangladesh. As of March 2020, UK-based companies have invested around US $2.45 billion, and there are more than 200 British companies in Bangladesh. In addition, the UK is the third-largest single market destination for Bangladesh after the United States and Germany. In 2021, Bangladesh exported goods worth £2.4 billion to the country, and at the same time, it imported goods worth £585 million.

Bangladesh is also the second-largest recipient of the UK’s development assistance, after India. Since independence, total UK assistance to Bangladesh has crossed $3 billion. The UK has been providing duty-free export facilities to the country as it is a UN Least Developed Country (LDC). However, Bangladesh’s graduation from LDC status by 2026 poses a number of challenges to its steadily growing economy. For instance, Bangladesh will no longer be eligible for official development assistance (ODA) from developed countries, including the UK. So it is time to rethink their future economic partnership.

Due to its former colonial ties and cheap foreign labour sources, the United Kingdom is the largest Bangladeshi population hub in the Western World. The diaspora, which is now around 0.6 million, remains a key link in the growing political, economic, and cultural relations. Currently, there are around 100 British-Bangladeshi councillors and four Members of Parliament (MPs) in the UK. The community operates over 10,000 Bangladeshi restaurants, worth a yearly turnover of £4.5 billion.

For Bangladesh, the UK has been one of the top sources of remittances. In the last fiscal year 2020–21, the UK was the 4th largest source of remittances, amounting to US $2023.62 million.

Clothing emerged as the driving force behind this growth, representing a staggering £3.3 billion, or 91.9%, of all UK goods imported from Bangladesh. Other top goods imported from Bangladesh were textile fabrics (£74.7 million or 2.1%), fish and shellfish (£45.7 million or 1.3%), mechanical power generators (£38.7 million or 1.1%), and road vehicles other than cars (£33.9 million or 1.0%).

On the flip side, the UK’s top exports to Bangladesh featured metal ores and scrap, amounting to £317.2 million, or 57.0% of all UK goods Bangladesh imported. Mechanical power generators (intermediate) followed closely behind, with exports valued at £32.5 million, or 5.8%. Aircraft (£29.1 million or 5.2%), General industrial machinery (capital) (£23.3 million or 4.2%), and Electric motors (capital) (£22.4 million or 4.0%) completed the list of top exported goods.

Bangladesh’s growing prominence in the UK’s trade landscape is evident, with the nation becoming the UK’s 50th largest trading partner in 2022. Accounting for 0.3% of total UK trade, which signifies the mutual benefits derived from their robust economic ties.

In addition to trade, foreign direct investment (FDI) between the two nations has also been noteworthy. In 2021, the UK’s outward stock of FDI in Bangladesh reached a substantial £816 million, reflecting the confidence of British investors in the country’s potential. However, due to data disclosure limitations, information regarding the inward stock of FDI from Bangladesh to the UK in 2021 remains unavailable, according to the UK’s Department for Business and Trade.

In 2021, the total UK FDI abroad was £1.8 trillion. In 2021, the top destination for UK FDI was the United States, accounting for 26.1% of the total UK outward FDI stock, followed by the Netherlands (8.8%) and Luxembourg (7.2%).

The total UK market share in Bangladesh was 1.1% in 2021 for goods and services. This is a decrease of 0.2% from 2020. The UK’s market share in Bangladesh was 0.8% in 2021 for goods only. This is an increase of 0.2% from 2020. The UK’s market share in Bangladesh was 2.6% in 2021 for services only. This is a decrease of 2.5% from 2020. In 2021, around 1,000 UK VAT-registered businesses exported goods to Bangladesh, and around 1,100 UK VAT-registered businesses imported goods from Bangladesh.

According to the UK’s Department for Business and Trade report, Bangladesh and the UK’s trade balance in 2013 was £2.4 billion. In 2014, it dropped to £2.2 billion and then increased again in the following two years to £2.6 billion and £2.9 billion, respectively. In 2017, the trade value crossed the $3 mark to reach £3.6 billion. From 2018 to 2021, the figures consistently stayed above $3 and were respectively £3.5 billion, £4.0 billion, £3.1 billion, and £3.1 billion. In 2022, the trade volume saw a jump to hit a record of £4.7 billion.

A recent study by Research and Policy Integration for Development (RAPID) says that by 2030, UK apparel exports will be worth $4.5 billion. Meanwhile, exports of other products outside the apparel sector will increase from 0.7 billion to 1.3 billion dollars.

It is to be noted that the United Kingdom has previously agreed to provide duty-free and quota-free market facilities to Bangladesh until 2027, as it has been promoted from an LDC to a middle-income country by the United Nations. At the same time, the country is particularly interested in increasing cooperation in the private education sector with more investments in various sectors in Bangladesh. Bangladeshis, especially Sylhet people, are contributing a lot to the economic development and progress of the country. Furthermore, with Brexit taking effect, the UK has naturally become more interested in trading and investing with other countries around the world. The UK is the third-largest destination for Bangladesh’s exports. The UK is also the second-largest investor in Bangladesh. In that case, the country’s GSP benefits until 2027 will inevitably have an impact on the European Union, the United States, and elsewhere. This is definitely a great achievement for Bangladesh.