In the wake of the changing political landscape in Bangladesh, the bilateral relationship between Pakistan and Bangladesh is set to be normalised once again, after being strained since 2008. In this direction, numerous initiatives have already been taken by both sides to fully exploit the existing potential and foster a cooperative and sustainable relationship in various economic and industrial sectors, including trade and investment, both in scope and magnitude.
In the wake of the changing political landscape in Bangladesh, the bilateral relationship between Pakistan and Bangladesh is set to be normalised once again, after being strained since 2008. In this direction, numerous initiatives have already been taken by both sides to fully exploit the existing potential and foster a cooperative and sustainable relationship in various economic and industrial sectors, including trade and investment, both in scope and magnitude.
A significant step in this process was taken last month when a 35-member delegation of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) visited Bangladesh to promote bilateral trade relations. An agreement/MOU was signed to establish a Joint Business Council. The Trading Corporation of Pakistan (TCP) also signed an agreement in Dhaka on January 14 for the export of rice to Bangladesh.
In another development, the Trade Development Authority of Pakistan (TDAP) is organising a trade delegation visit to Bangladesh in April to explore export possibilities for selected Pakistani products. Bangladesh has also recently announced that direct passenger and cargo flights between the two countries will commence within the next few months. Another milestone was achieved in November 2024 when a cargo ship sailed directly from Pakistan to Bangladesh for the first time in decades. These measures indicate a strong commitment toward accelerating multi-sectoral cooperation with Bangladesh.
Currently, bilateral trade stands at approximately $700 million annually, which is far below its true potential. In recent years, there has been nominal growth in Pak-Bangladesh trade, with an average annual rate of below five per cent. During FY2023-24, Pakistan’s exports to Bangladesh amounted to $661 million, while its imports from Bangladesh stood at $57 million, compared to over $90 million in 2021. In real terms, Pakistan’s exports to Bangladesh have been consistently declining -- from $839 million in 2022, the highest in the past decade, to the present level. During the first five months of the current fiscal year (July to November 2024), Pakistan exported goods worth $314 million to Bangladesh, while Bangladesh’s exports to Pakistan stood at $31 million.
The projected trade volume between Pakistan and Bangladesh is expected to reach $3 billion within the next three years. However, achieving this target will require several strategic measures, such as concluding a Free Trade Agreement (FTA) or a Preferential Trade Agreement (PTA) between the two countries, expanding into new trade areas, and improving transportation to facilitate smooth trade flows. Both tariff and non-tariff barriers need to be addressed to enhance trade. It is noteworthy that in 2024, Bangladesh’s total global exports amounted to over $50 billion, while its imports stood at $70 billion, reflecting a substantial opportunity for Pakistan to expand its trade share in Bangladesh’s growing market.
There are several identified opportunities for the export of Pakistani machinery and equipment for sugar, cement, and chemical plants, as well as for railways in Bangladesh. Various light engineering goods such as tractors, agricultural implements, automotive parts, irrigation pumps, power transformers, electricity transmission towers, boilers, mining equipment, and air-conditioning systems are also in demand.
Pakistan, with its well-established industrial base, is in a strong position to supply these engineering products to Bangladesh. Over the years, Pakistani industries have developed products that meet international standards and are competitively priced for both domestic and global markets. Historically, Pakistan has supplied railway coaches, equipment, and rolling stock to Bangladesh, and there is an opportunity to revive and expand such cooperation.
Pakistan possesses immense potential to strengthen its bilateral trade with Bangladesh. If the prevailing strong political will continues, trade and industrial cooperation between the two nations is poised for significant growth. However, realising this potential requires a proactive approach and strategic engagement with Bangladesh, focusing on key sectors with high growth prospects
Bangladesh’s economy depends heavily on the sugar industry for employment and agricultural support. Currently, the country has 15 sugar mills, all of which are in the public sector. Pakistan has previously supplied and installed two sugar mills in Bangladesh -- the Natore Sugar Mills and the Pabna Sugar Mills -- each with a daily cane-crushing capacity of 1,500-2,000 tons on a turnkey basis. These mills have been operating at higher capacities and outperforming regional competitors. The current state of Bangladesh’s sugar industry presents a lucrative opportunity for Pakistan to re-enter the market, as Bangladesh is planning large-scale investments and modernisation of its sugar sector. Bangladesh’s sugar market is projected to reach $2.29 billion by 2030, offering significant prospects for Pakistani exports of both machinery and raw and refined sugar.
The construction industry in Bangladesh is experiencing rapid growth, supported by government initiatives, urbanisation, industrialisation and its status as the second-largest economy in South Asia, despite current challenges. The cement industry, in particular, is expected to grow at an annual rate of approximately nine per cent, reaching a market size of $46 billion by 2030. This will require large quantities of cement, building materials, and construction machinery.
Bangladesh’s cement industry, with 42 plants and an installed capacity of 78 million tons per annum (MTPA), is dominated by the private sector but faces challenges such as outdated equipment, financial constraints, and under-utilisation of installed capacity to meet future demand. This situation presents an opportunity for Pakistan to establish joint ventures in Bangladesh’s cement sector to modernise machinery and technology. Pakistan has previously supplied machinery and equipment to Bangladesh’s cement industry, notably installing a cement grinding and packing plant with a capacity of 65 tons per hour at the Mongla Cement Factory.
Pakistan’s traditional exports to Bangladesh include textiles, mineral products, industrial machinery, and chemical products. Imports from Bangladesh primarily consist of jute, textile fibres, raw tobacco and scrap vessels. In addition to these, Pakistan has the potential to export rice, cement, sugar, steel, ceramics, marble, coal, sports goods, and surgical instruments in larger quantities. Conversely, Bangladesh can supply Pakistan with leather goods, plastic products, tea, and other commodities. Moreover, there is a strong potential for joint ventures in IT (information technology), cement, pharmaceuticals and the chemical industries, which could significantly enhance bilateral cooperation.
Pakistan possesses immense potential to strengthen its bilateral trade with Bangladesh. If the prevailing strong political will continues, trade and industrial cooperation between the two nations is poised for significant growth. However, realising this potential requires a proactive approach and strategic engagement with Bangladesh, focusing on key sectors with high growth prospects. It is also critically important to reactivate the Pakistan-Bangladesh Joint Economic Commission (JEC) at the government level, which has remained inactive for a long time.
Existing regional trade agreements and frameworks such as the Agreement on South Asian Free Trade Area (SAFTA) and the Developing-8 Countries for Economic Cooperation (D-8) should also be revived and optimised to maximise economic, industrial, and trade opportunities with Bangladesh. By implementing these measures, Pakistan and Bangladesh can pave the way for a mutually beneficial partnership that fosters economic growth and regional stability.
The writer is a retired chairman of the State Engineering Corporation and former member (PT) of the Pakistan Nuclear Regulatory Authority.
