Bangladesh-Myanmar Economic Ties: Problems and Prospects

by Shazzad Hussain     15 August 2021

Relations and interactions of states, big and small, can be three forms: conflictual; collaborative; and competitive. Bangladesh-Myanmar relations have developed through phases of cooperation and conflict. Conflict, in this case, is not meant in the sense of confrontation, but only in the sense of conflict of interests and resultant diplomatic face-offs. Myanmar is the only other neighbor that Bangladesh has on its border besides India. It is the potential gateway for an alternative land route opening towards China and South-East Asia other than the sea. Such road link has the potentiality for a greater communication network between Bangladesh and South-East Asian countries including Thailand, Malaysia, and Singapore. Historically, these two countries have geographic and cultural linkages. These two bordering countries, located in separate geopolitical regions, have huge possibilities in developing their bilateral economic relations. At the initial phase of their statehood, both countries took numerous initiatives to improve their relations. Nevertheless, different bilateral disputes and challenges troubled the entire range of cooperation. Subsequent to these challenges, Bangladesh and Myanmar have started a negotiation process on key dubious issues. The economic rationales over political tensions in Bangladesh-Myanmar relations prevail with new prospects and opportunities. Both countries have undertaken some constructive steps to rebuild their economic relations with a view to achieving economic benefits largely from bilateral trade and investment, energy cooperation, maritime trade, and regional connectivity.

Bangladesh-Myanmar relations officially began on 13 January 1972, the date on which Myanmar, as the sixth state, recognized Bangladesh as a sovereign nation. They signed several agreements on trade and business i.e. general trade agreement on August 03, 1973; border agreement in 1980 and demarcation of land section of Naaf River in 1988; and Memorandum of Understandings (MOUs) on economic cooperation in 1989. The two countries later initiated formal trade relations on 05 September 1995. Therefore, to increase demand for Bangladeshi products in Myanmar, Bangladesh opened trade exhibitions from 1995 to 1996 in Yangon, the former capital of Myanmar. However, that pleasant bilateral economic relations did not last for long, rather was soon interrupted mainly by Myanmar’s long-term authoritarian rule and isolationist economic policy. Furthermore, the unresolved Rohingya crisis between Bangladesh and Myanmar, lack of bilateral connectivity, border tension, illegal drugs and arms smuggling in border areas, maritime boundary dispute, and alleged cross border movement of insurgents hampered their bilateral economic relations. In the twenty-first century, Bangladesh-Myanmar relations are expected to move towards greater economic cooperation facilitated by two significant factors. First, the victory of Myanmar’s pro-democratic leader, Aung San Suu Kyi, in 2011 has considerably brought new dimensions in Bangladesh-Myanmar economic relations. Although this relation is now at stake since the state power has been taken over by the military. Second, the peaceful settlement of the Bangladesh-Myanmar maritime dispute in the Bay of Bengal in 2012 has initiated a new dimension in their bilateral economic relations.

Bangladesh and Myanmar don’t share a substantial volume of trade and neither is on the list of largest trading partners. Bangladesh’s total export and import with Myanmar is trifling compared to the total export and import and so do Myanmar’s. But gradually the trades between the countries are increasing and the trend is for the last 5 to 6 year is upward especially for Bangladesh; although Bangladesh is facing a negative trend in Balance of Payment. In the 2018-2019 fiscal year, Bangladesh’s total export to Myanmar was $25.11 Million which is more than double that of the export in 2011-12. Bangladesh imported $90.91 Million worth of goods and services from Myanmar resulting in a $65 Million deficit in the Balance of Payment in the 2018-2019 fiscal year. For the last six or seven years, Bangladesh’s Balance of Payment was continuously in deficit in case of trade with Myanmar. The COVID-19 and border closure for eight months have a negative impact on the trade between the countries.  Due to the recent coup in Myanmar, investment and trade security are also at stake.

Challenges for Bangladesh

Bangladesh mainly imports livestock, vegetable products including onion, prepared foodstuffs, beverages, tobacco, plastics, raw hides and skin, leather, wood and articles of woods, footwear, textiles, and artificial human hair from Myanmar. In recent years, due to India’s ban on cattle export, Myanmar has emerged as a net exporter of live animals to Bangladesh especially during the Eid ul-Adha with a cheaper rate than India. On the other hand, Bangladesh exports frozen foods, chemicals, leather, agro products, jute products, knitwear, fish, timber, and woven garments to Myanmar.

• Myanmar’s political landscape is highly unpredictable and vulnerable which possess risks for international investors;
• The majority of the population of Myanmar are Buddhists who believe that someday Muslims would become the majority and capture Myanmar. This skeptic mindset is an obstacle in a bilateral trade relationship with Myanmar since Bangladesh is a Muslim Majority country;
• The culture of Myanmar is dominated by Buddhism whereas the culture of Bangladesh is influenced by Muslims but minority people co-exist peacefully. This cultural difference sometimes acts as a barrier to establish a better trade relationship between countries;
• The shadow economy created from illegal activities including human and arms trafficking, drug dealing, and contrabands in the border region hinders formal trade relations;
• Mass people and Armed force personnel of Myanmar believe that insurgent groups like ARSA are supported by Bangladesh in terms of Arms, ammunition, and training. And this mistrust hampers the development of bilateral trade relations between the countries;
• There is a one-way flow of drugs and arms from Myanmar to Bangladesh which forced Bangladesh to enforce restrictions in the border trade;
• The mass population of Myanmar is not well conversant in English and this language barrier has a negative effect on the trade and commerce between the countries;
• The poor infrastructure system for communication between the countries is another drawback in developing the relationship between the countries;
• Myanmar may try to exploit the growing interdependence of these two countries while negotiating on bilateral trade issues;
• Unresolved issues including Rohingya issues are acting as a stumbling block to trade relations.

Bangladesh-Myanmar relations are yet to blossom in full shape. However, the following recommendations are made to revamp the bilateral relationship between the countries-

• In 2011, Prime Minister Sheikh Hasina signed an agreement to establish a Joint Commission for bilateral cooperation between Bangladesh and Myanmar. It can be proactive for enhancing trade and solving disputable issues;
• People to people contact should be increased for building mutual confidence and trust. Frequent visits by business delegates, civil society, military, and civil administration delegates may be organized to and from both the countries;
• Bangladesh should explore Myanmar’s economic potential and interest and address some common interests where both countries should strengthen their cooperation. Both countries should ease visa restrictions and deregulate currency restrictions;
• Myanmar and Bangladesh may develop shipping, air, and improved road connectivity immediately to boost trade and economic cooperation. Coastal shipping especially cargo vessels should be operational between Chittagong and Sittwe to support trade and tourism. Besides the establishment of a smooth channel of financial transactions would also facilitate trade between the countries;
• Bangladesh Armed Forces (BAFs) should offer a greater number of military training courses for Myanmar Armed Forces (MAFs) personnel for enhancing trust and mutual confidence. BAFs should continue to have regular staff talk with MAFs;
• Bangladesh can expand trade and investment by utilizing the Memorandum of Understanding on the establishment of a Joint Business Council (JBC) between the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI);
• Bangladesh and Myanmar should establish a “Point of Contact” to facilitate first-hand information exchange for greater openness with regard to each other’s activities;
• Bangladesh can proceed with Myanmar in joint investment to build a hydroelectric project from where electricity could be supplied to Bangladesh. It can also set up a fertilizer plant under a joint investment where Myanmar might supply natural gas;
• Bangladesh and Myanmar should try to sign a Preferential Trade Agreement (PTA) within the ambit of which potential export items from both countries would be allowed to enter duty-free;
• Due to Rohingya issues, Myanmar’s political turmoil, and Sanctions by the west, Myanmar’s currency is highly devaluated for a long time. At present, 1 Taka is equal to 18.38 Kyat (on 03 May 2021) and Bangladesh should use this opportunity to increase its trading volume;
• In recent year, India had taken many unilateral decisions, such as restrictions on cattle export; the onion crisis, etc., that affected Bangladesh economically. Myanmar can serve as an alternative import source of crops and animals for Bangladesh to reduce dependence upon India;
• Recently, Myanmar has decided to extend its land tenure system from 30 years to 70 years of ownership rights which creates opportunities for Bangladesh to start contract farming in Myanmar. Under the contract, Myanmar farmers can offer their land and labor, while Bangladesh entrepreneurs may provide know-how and necessary supervision, supply of required inputs, furnish a buy-back guarantee ensuring recovery of the cost of production and provision of profit for the farmers which would be mutually agreed upon.
• These two countries can bolster their local economy in border areas by establishing border haats. It is envisaged that border haats improve the relationship among the local people by creating business opportunities and interactions between people on two sides of the border;
• As Bangladesh is experiencing an upward trend in export to Myanmar during the last six years, it should use this momentum to increase exports to avoid a negative balance of payment;
• Bangladesh can make the best use of this growing interdependence to resolve bilateral issues such as border tensions, illegal drugs, and arms issues, and Rohingya repatriation;
• As Bangladesh is emphasizing on “Blue Economy”, cooperation with Myanmar can be a source of great strategic advantages mainly by exporting marine goods and services;
• The peaceful settlement of maritime boundary disputes will add a new dimension in improving trade relations between these two countries mainly by increasing frequency in cargo exports;
• Bangladesh may export machinery and boilers; pharmaceutical products; animal residues and skins; cereal, flour, and milk preparations; cotton; electrical and electronic equipment; RMG and materials for RMGs such as Yarn, fabrics; plastic products, etc. to Myanmar.

With the start of a new phase in Bangladesh-Myanmar relations, which has put the bilateral relations on an upswing, it is only natural that both sides should try to give a boost to bilateral trade. Bilateral trade is not challenge-free but the issue is far easier to resolve than many others. At the same time, closer economic ties could also help in resolving other bilateral issues. Though Bangladesh and Myanmar don’t share a large trade volume between them, it is time to bolster the bilateral trade relations. For Bangladesh, it is a good opportunity to use the momentum and minimize trade deficits. And for Myanmar, as they are facing currency devaluation and losing market, it will be beneficial for their economy also. In order to extend the economic relations, both countries should strive to overcome the challenges. However, extended economic relations will also help Bangladesh in the long run in reducing dependency on any specific country.