Bangladesh should emphasize joining in bilateral and regional agreements and South-South cooperation amid ongoing realignments of the old global trade regime in the context of Russia-Ukraine war, two veteran economists have suggested.
They said continuous weaponisation of global trade cooperation by the West is pushing the rest of the world to create a new world order where the growth centre is in Asia.
Speaking in a session styled 'Rowing against Tide' at SANEM annual conference in Dhaka on Saturday Professor Rehman Sobhan and Professor Wahid Uddin Mahmud said in this new scenario economic diplomacy should take front seat to reap the best fruit.
The South Asian Network on Economic Modelling organised the sixth Sanem Annual Economists' Conference (SAEC) 2023 at the Brac Centre Inn in Dhaka.
Professor Rehman Sobhan said rise of Asia and the progressive depreciation in the economic strengths of the West are major structural changes now taking place in global economy.
"It seems that the West is seeing this as grave threat to their future, including the security," he told the cutting-edge function on the economic front.
He said the key problem of Russia-Ukraine war is weaponisation of the global trading system.
"USA and EU have chosen to weaponise the global trade system and economic interaction," he said, adding that this new kind of economic war impacted not only Russia but also all other countries of the world.
Mr Sobhan said they are actually using the pressure of economic sanctions to control behaviour of a great majority of a country, which is not acceptable at all.
"Now this means we are not participating in the traditional global regime where globalization was operating through the market forces, as it supposed to be."
He expressed the hope that next G20 meeting would address the issue of weaponisation of global trade to get back to a situation where countries can trade and cooperate freely without being exposed to strategically driven pressure by some of the global powers.
The economist pointed out the implication of changing restructuring of the global system where new drivers of growth and new centres of growth dynamics are now located in Asia, particularly centered in Bangladesh's two giant neighbours.
As, fortunately or unfortunately, Bangladesh's main export market is the US and the EU, he said as per common sense and economic logic, Bangladesh must put emphasis on both diversifying export baskets and market.
"We need to correspondingly plug in to value chains of Asia and South East Asia where China and India have already joined in," he said.
Replying to a question, Mr Sobhan said the power-purchasing agreement from Adani should be reviewed.
Prof Wahid Uddin Mahmud noted that due to the Russia-Ukraine war, there is realignment in the global geopolitical arrangements.
"This means we are not going back to pre-crisis global economic order anymore," he said.
He feels that Bangladesh definitely needs to reemphasize South-South trade-cooperation arrangements.
Though countries like India, Bangladesh have the similar lists of potential export items, there is still much unexploited potential for intra-sectoral trade, he told the meet.
"Within the similar export items, there may be potential for developing regional supply chain," he said.
Mr Mahmud said Bangladesh needs to consider decline in the global economic governance and rise of regional trade agreements.
"Bangladesh has not done yet much on this whereas Vietnam has stepped in more than 30 regional and bilateral trade agreements," he said.
Exploiting whatever potential is in regional cooperation should be remaining important.
He said the country can potentially benefit from being strategically positioned in the neighbourhood of two economic powerhouses- India and China.
"But it has to negotiate its way cleverly so that we don't be sandwiched by the opposing pressure coming from those two giants," he said.
"Clearly in the new realigned global economy, economic diplomacy has to take a front seat now," he suggests.
He said Bangladesh would hardly have needed to go for a sudden hike in fuel prices last year had the government waived value-added tax (VAT) on petroleum.
"VAT is in principle a tax on consumption and is imposed on intermediate goods only as matter of expediency…. but a universal intermediate input like fuel should not be a major source of VAT revenue collection," he said.
He observes that the sudden hikes in international high fuel prices have been the trigger for the current global economic crisis.
The eminent economist said the problem arises if the government has to rely heavily on fuel taxes for revenue purposes, as is the case in Bangladesh, where VAT on fuel is an important source of revenue income.
The economist, mentioning global food prices, said the present crisis has been a reminder that there should be renewed emphasis on food security in terms of investments in agricultural research and extension, food storage and public food-distribution programmes, he said at the event.
He also suggests Bangladesh should strengthen institutional capacity to cope with shocks like Covid and Ukraine war.
Sanem Executive Director Prof Selim Raihan moderated the session where, Centre for Policy Dialogue Chairman Rehman Sobhan also spoke.
