The bilateral trade volume between Bangladesh and South Korea has hit a historic high, recording $2.3 billion in 2021.
And this upward trend is continuing this year recording more than 40% increase year-on-year as of August.
The Republic of Korea's Ambassador to Bangladesh Lee Jang-Keun considers this development a very meaningful achievement as the bilateral trade volume has been stagnant for almost ten years after it reached a peak of $1.8 billion in 2011.
In an exclusive interview with Dhaka Tribune on the eve of today's National Foundation Day of Korea, Ambassador Lee said: "Despite the excellent ties we have built up together, however, there still is great potential which has not yet untapped. It was against this backdrop that, right after my arrival in Dhaka, I presented three goals or priorities which I planned to pursue during my term as Ambassador which were ‘diversification, elevation and generation (DEG.)"
"First and foremost task we are tackling is to diversify our cooperation beyond the RMG sector. While RMG cooperation is the prime success story of our bilateral business ties, it has occupied too much of our cooperation for too long. More than 70% of Korean investment is still in the RMG sector. More than 80% of Bangladesh’s export to Korea is RMG."
Even though slow in pace, the Korean envoy thinks, some noticeable and meaningful developments towards diversification are in the making in recent years, including in the electronics and automobile sectors.
In cooperation with a local Bangladesh company, Samsung Electronics is assembling and manufacturing most of its gadgets locally, from refrigerator, air conditioner, washing machine to television and mobile phones.
At the Kaliakair Hi-Tech Park, local company Fair Technology is now preparing an assembly plant for Hyundai Motors.
By the end of this year, Hyundai cars will be assembled locally, he hoped.
Ambassador Lee said: "Since Korea started allowing duty-free and quota-free access to the Korean market to the 95 percent of Bangladesh products in 2008, Bangladesh’s export to Korea has seen a steady increase and crossed $500 million in 2021."
He said, in 2021 the bilateral trade volume started to rise, recording a historic high with $2.3 billion.
Korea’s export to Bangladesh was $1.636 billion, 58% year-on-year increase, while Bangladesh’s export to Korea recorded $552 million US dollars, a 40% year-on-year increase.
"As of the end of August this year our trade volume has already reached $2.1 billion. It is highly likely that it will even break the previous record again this year. Considering the solid continued economic growth of Korea and Bangladesh, I expect the bilateral trade will further increase in the future."
Importance attached to product diversification
In order to tap the bilateral trade potential, diversifying export items to Korea is a major challenge, said Ambassador Lee Jang-Keun.
He said that currently garments and textile accounted for 83% of Bangladesh’s export to Korea.
"Bangladesh should make full use of the duty-free and quota-free access to the Korean market. In this regard, the Bangladesh government can actively encourage its companies to make the full use of cash incentives for exporting to the Korean market. As Korea is regarded as the non-traditional market, companies exporting to Korea can get 4% of cash incentives."
Also, as the BGMEA has pointed out recently, there is even a large room for increasing garment exports to Korea.
The Korean envoy said: "Even though Bangladesh’s apparel export to Korea has been steadily growing, it only takes up 4.2% of Korea’s apparel import source, while China accounts for 33.6% and Vietnam 31.2%."
He thinks, establishment of direct cargo lines between Bangladesh and Korea, both maritime and air, will boost bilateral trade.
"Considering Korea is the world’s 7th largest trading country and Korea’s Bussan Port is the second largest cargo transit port in Asia, establishing direct cargo lines should be considered with priority in increasing bilateral trade volume."
Korea fifth biggest source of Bangladesh’s FDI
Korea has continuously been one of the major foreign investors in Bangladesh, said Ambassador Lee further adding: "The accumulated gross stock of Korean FDI was $1.1 billion dollars in FY20 which grew to $1.4 billion dollars in FY22. It means that there has been more than $100 million of Korean investment every year. Korea is also the biggest foreign investor in export processing zones with 75 companies operating in the zone."
He acknowledged that Bangladesh is providing attractive conditions for investment by Korean companies, in particular in terms of competitive labor forces, thriving domestic economy and large market.
For these reasons more and more Korean companies are having interest in establishing business in the country.
However, at the same time, there are still a number of factors that should be addressed to make the country more business and investment friendly.
He elaborated: "The first and most important thing to attract more Korean investment will be addressing the difficulties and challenges that the existing investors are facing. Among them, the most frequent challenge I receive from many Korean companies is customs and tax related matters. It is not the high tax or duty rate but the increasing complexity, lack of transparency and lack of predictability of the related process and administration that are making Korean investors difficult in running business. It is not only increasing the cost of business but affecting negatively on the perception of Bangladesh’s investment environment."
Another major element, he thinks, is the discrimination of foreign investors.
In particular, foreign investors operating in the EPZs are not entitled to get the cash incentives for exports which are accorded to the local companies.
According to the Bangladesh policy, local RMG companies exporting to Korea can get 4% of cash incentives.
If it is given to the Korean companies, it will greatly help the increase of Bangladesh’s RMG export to Korea.
Bangladesh third largest recipient of Korean assistance
Ambassador Lee Jang-Keun also said that Bangladesh has been one of the priority development partner countries of Korea and at present Bangladesh is the third largest recipient of Korea’s development assistance.
ICT and technology development have been the focus of Korea’s development cooperation with Bangladesh, he added.
In addition to the establishment of ICT Training and Education Center in 2015, the Korean government has provided various assistances for digitization of government services and administration, he said.
"In 2019 a group of Korean experts prepared an e-government master plan and presented it to the Bangladesh Government which included various ideas and proposals. As a follow-up of the plan, Korea, through Koica, Korea’s development agency, is implementing a project to digitize municipal administration across the country."
"We also helped the capacity building of Bangladesh Police by establishing a cyber and digital investigation center in Dhaka and Chittagong. In the area of ICT application of transportation management, the Intelligent Transportation System is now under installation along the N8 Expressway."
"We are also assisting the establishment of a digital land management system. The Korean Embassy is also investing in start-up programs targeting the youth. Among others, the Youth Entrepreneurship Center which will be established at the Dhaka University through Koica project will help promote youth startups with the support of Korean experts."