Economic Synergy: The Growing Partnership between Bangladesh and Thailand

Amidst diplomatic protocol and ceremonial gestures, the visit of Bangladesh's Prime Minister to Thailand serves as a tangible expression of the lasting ties between the two nations.

Beyond the formalities lies a narrative of shared aspirations and the potential for fruitful collaboration across various sectors. With one Letter of Intent, three Memorandums of Understanding (MoUs), and one agreement inked between the countries, the trajectory of their relationship stands poised for transformation. These deals hold the potential to reshape the future landscape of their collaboration. Delving into the implications of these agreements unveils a spectrum of opportunities and challenges that lie ahead for both nations.

Documents Signed

On the 26th of April, 2024, Dhaka and Bangkok solidified their commitment to enhanced collaboration by signing several significant agreements:

1) Letter of Intent on the Commencement of Thailand -- Bangladesh FTA Negotiations, that can elevate bilateral trade and partnership; 2) the Agreement on Visa Exemption for Holders of Official Passports, which will foster greater diplomatic engagement and cooperation; 3) an MoU on Energy Cooperation, which will help materialise benefits from energy cooperation; 4) an MoU on Cooperation and Mutual Assistance in Customs Matters, which will lead to effective border control mechanism and anti-smuggling operations; and 5) an MoU on Cooperation in the Field of Tourism, which will allow the exchange of knowledge, experiences and best practices in this area.

Thailand-Bangladesh FTA negotiations

A Letter of Intent (LoI) has been signed, signalling the preliminary stage in the negotiation process for a Free Trade Agreement (FTA) between Thailand and Bangladesh. Typically utilized in international relations, an LoI is a formal declaration, outlining the initial terms and conditions of a prospective partnership. While the FTA itself is yet to be finalized, once the preconditions outlined in the LoI are met, both parties are expected to proceed with the signing of the FTA. This prompts the pertinent question: do Thailand and Bangladesh truly need an FTA?

Current bilateral trade stands at $1.18 billion. Of which, Thailand’s exports to Bangladesh are nearly $1.09 billion. Bilateral trade saw a decrease of 5.48% from 2022. Due to tariff, and other barriers bilateral relations are yet to reach its potential. The top export items of Thailand to Bangladesh are Electronics, Cement, Refined Petroleum, Propylene Polymers, etc., whereas Bangladesh exports Processed Crustaceans, Knit T-shirts, and other RMG products. These products are not a seasonal demand rather both countries need the products for regular use. Thus, signing an FTA will not undoubtedly increase trade. boost bilateral trade and improve the relation for both the countries.

To get benefit of the facilities provided through FTA, the counties need to ensure direct shipping route. Currently, the products are exchanged through Sri-Lanka port. The prevalent route to Thailand via Singapore and Colombo takes approximately 20 to 22 days for shipping. This becomes costly as well. Thus, there were talks of increasing maritime connectivity between Thailand and Bangladesh since November 2015. Finally, an MoU was signed between the Port Authority of Thailand (Ranong Port) and the Chottogram Port Authority of Bangladesh on 20 December 2021. However, nothing has been implemented yet. The new direct shipping route is expected to reduce the transit time to merely 3 to 4 days.

According to Reuters, the annual trade volume of Bangladesh and Thailand will increase four times to $4.8 billion by the next five years if both countries can establish direct coastal shipping links by the end of the year. To fully utilize the benefit of FTA, the MoUs reviously signed needs to be implemented.

Along with the importance of infrastructural development and connectivity, The PM of Thailand, Srettha Thavisin, emphasised elevating cooperation in agriculture and food security, especially in halal and processed food items. He encouraged the Bangladeshi side to provide investment promotion schemes and ease of doing business, which would facilitate and attract more Thai investors. To this end, Dhaka is considering allocating land to establish a special economic zone for Thailand. Bangladesh should try to attract Thai investors for the agro-processing industry, hi-tech manufacturing. To continue the friendly relation and exchange of expertise, share of knowledge, FTA needs to be signed soon.

Thailand's approach to Bangladesh prioritizes fostering friendship and cooperation, recognizing Bangladesh's strategic importance as a neighbor to ASEAN and a potential bridge between Southeast and South Asia. Both nations participate in regional frameworks like BIMSTEC, IORA, and ACD, offering avenues for joint growth and development and addressing common challenges such as climate change and the Rohingya crisis.

Bangkok and parts of Bangladesh face similar threats from rising sea levels due to low elevation, emphasizing the shared imperative for sustainable development. Thailand's Bio-Circular-Green (BCG) economy model aligns with Bangladesh's climate initiatives like the Mujib Climate Prosperity Plan, paving the way for a collaborative "green partnership" focused on renewable energy and environmental sustainability.

The instability in Myanmar, a shared neighbor of Bangladesh and Thailand, reverberates across their borders. Both countries have grappled with the consequences of the Rohingya crisis since 2017, originating from Myanmar. Addressing this humanitarian crisis necessitates collaborative efforts with other influential nations and international organizations. Fortunately, both Bangladesh Prime Minister Sheikh Hasina and Thai Prime Minister Shretha Thavisin have expressed their willingness to collaborate on finding solutions to the Rohingya crisis, underscoring the importance of regional cooperation in resolving complex issues.

Certainly, the full potential of the bilateral relationship between Thailand and Bangladesh can be realized through the implementation of a Free Trade Agreement (FTA). With the activation of an FTA, the benefits extend beyond mere trade transactions, allowing both nations to enhance their standing within the regional context. Thailand stands to leverage Bangladesh's strategic location as a gateway to South and Southeast Asia, while Bangladesh can capitalize on Thailand's influential position within ASEAN. Through intensified diplomatic interactions, trade pacts, and cultural collaborations, Bangladesh and Thailand can pave the way for fresh opportunities in economic expansion, prosperity, and the promotion of regional stability.

Sent- In by: Anik Dey

Author's Bio: Anik Dey has completed his BBA and MBA from Department of Finance, University of Dhaka.

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