Bangladesh is poised to graduate from its status as a least-developed country (LDC), creates a “post-LDC dilemma” for its trade due to the expiration of duty-free, quota-free (DFQF) access to approximately 95% of its products in South Korea. For continuing benefit, both nations are eager to sign an Economic Partnership Agreement (EPA) that will offer tariff cuts in a wide range of areas, including goods, services, investment, and labour, helping to overcome post-LDC challenges. However, Bangladesh must be strategic in safeguarding its interests.
According to the notes of Commerce Secretary Mahbubur Rahman, this EPA covers duty rationalisation, investment, regional value addition, trade in services, and other components, present it as a “trade and investment promotion framework.” Hence, in practical implementations, Bangladesh can bargain for not only zero tariffs but also binding rules on investment protection, service-sector market access, and cooperation clauses. Korean delegates are eager to foster infrastructure and industry projects in Bangladesh for Korean firms. They also emphasized the electronics and digital industries. South Korean Ambassador Park Young-sik is expected to increase Bangladesh’s RMG-related imports to South Korea and hopes to spur Korean FDI in Bangladesh during the EPA period.
Now it’s time to witness a data snapshot of South Korea-Bangladesh trade relations. In 2022, bilateral trade reached $3.035 billion, 38.7% higher than in 2021. By 2023, Bangladesh had imported $1.62 billion from Korea and exported $649 million, resulting in a significant trade deficit. Bangladesh places a high emphasis on the textiles and RMG sectors for its exports. Yet, Bangladesh’s RMG market share in Korea remains low (around 5%), indicating room for expansion. Except for these, demand persists for non-leather footwear, home textiles (e.g., sheets, towels), and jute and jute goods.
South Korea offers machinery, electronics, petrochemicals, and refined oil products to Bangladesh. In 2022, South Korea’s diesel exports to Bangladesh surged by steel, pesticides, cars, textile machinery, and electronic components. South Korean Ambassador Park advised the EPA to tap the untapped potential and to increase Bangladesh’s exports to South Korea. From 2008 to 2024, about 34,000 Bangladeshi workers (primarily low-skilled labour) have gone to South Korea, unlocking new chances for skilled nurses and IT engineers through a successful EPA. In this step, we should witness an example to conceptualize practical outcome for Bangladesh from the economic agreements.
Let’s examine Vietnam to gauge the potential outcome for Bangladesh. Vietnam is a striking example of the possible outcome of a successful agreement. Vietnam’s bilateral FTA with Korea streamlined duties on approximately 11,679 Vietnamese products, resulting in a significant surge in trade. Their bilateral trade rose from $2 billion in 2010 to $86.5 billion in 2022, during which Vietnam exported $15.8 billion worth of goods to Korea and imported over $70 billion from Korea. Bangladesh’s mere 5% share in South Korea’s garments market is far below that of Vietnam.
Though we have potential chances to turn this EPA into a tangible benefit, but we must concentrate on several issues and urge South Korea to consider. Firstly, rules of origin (ROO) are a critical risk factor for Bangladesh. For example, under the APTA, Bangladesh must ensure that at least 35% of the value of products is domestic. Authority should recognize mutual lab testing or simplified documentation for originating goods. Bangladesh should also negotiate to impose easy rules for garments and footwear that allow third-country inputs to a high share.
Secondly, non-tariff barriers and regulations are another hurdle. South Korea places a high value on safety, sanitation, and technical standards. But Bangladesh’s small firms, account for approximately 90% of the country’s industrial units and 80% of industrial employment, contributing nearly 30% to 32% of Bangladesh’s GDP, may struggle to fulfil these demands.
Third, not only Bangladeshis confront customs delays and roadblocks to conducting business, but also Korean investors face these challenges, requires immediate measures.
Fourth, asymmetric pressures may produce critical hurdles between Bangladesh and South Korea due to an imbalance in trade. Bangladesh should seek protection for its emerging and sensitive sectors through sensitive lists or a safeguard clause. Bangladesh needs to scale up its potential through Korea’s technical support, joint venture business collaboration, capacity building, technology transfer, and human capital development. Without addressing these issues, only the EPA can guarantee equitable market access.