Table of Contents

Foreign Trade .................................................................................................................................. 2

Need and Importance of Foreign Trade .......................................................................................... 2
Bangladesh–Malaysia relations ...................................................................................................... 3
Bangladesh-Malaysia Bilateral Trade Statistics ............................................................................. 4
Labor issues .................................................................................................................................... 5
Economic relations.......................................................................................................................... 6
Bangladesh GDP ............................................................................................................................. 6
Imports of Bangladesh from Industrial and Developing Countries ................................................ 8
Limitations of foreign trade in Bangladesh .................................................................................... 8
Conclusion .................................................................................................................................... 10
Reference ...................................................................................................................................... 11

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Foreign Trade

Foreign trade is nothing but trade between the different countries of the world. It is also called as
International trade, External trade or Inter-Regional trade. It consists of imports, exports and
entrepot. The inflow of goods in a country is called import trade whereas outflow of goods from a
country is called export trade. Many times goods are imported for the purpose of re-export after
some processing operations. This is called entrepot trade. Foreign trade basically takes place for
mutual satisfaction of wants and utilities of resources.

Need and Importance of Foreign Trade

1. Division of labor and specialization: Foreign trade leads to division of labor and specialization
at the world level. Some countries have abundant natural resources. They should export raw
materials and import finished goods from countries which are advanced in skilled manpower. This
gives benefits to all the countries and thereby leading to division of labor and specialization.

2. Optimum allocation and utilization of resources: Due to specialization, unproductive lines can
be eliminated and wastage of resources avoided. In other words, resources are channelized for the
production of only those goods which would give highest returns. Thus there is rational allocation
and utilization of resources at the international level due to foreign trade.

3. Equality of prices: Prices can be stabilized by foreign trade. It helps to keep the demand and
supply position stable, which in turn stabilizes the prices, making allowances for transport and
other marketing expenses.

4. Availability of multiple choices: Foreign trade helps in providing a better choice to the
consumers. It helps in making available new varieties to consumers all over the world.

5. Ensures quality and standard goods: Foreign trade is highly competitive. To maintain and
increase the demand for goods, the exporting countries have to keep up the quality of goods. Thus
quality and standardized goods are produced.

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6. Raises standard of living of the people: Imports can facilitate standard of living of the people.
This is because people can have a choice of new and better varieties of goods and services. By
consuming new and better varieties of goods, people can improve their standard of living.

7. Generate employment opportunities: Foreign trade helps in generating employment

opportunities, by increasing the mobility of labor and resources. It generates direct employment in
import sector and indirect employment in other sector of the economy. Such as Industry, Service
Sector (insurance, banking, transport, communication), etc.

8. Facilitate economic development: Imports facilitate economic development of a nation. This is

because with the import of capital goods and technology, a country can generate growth in all
sectors of the economy, i.e. agriculture, industry and service sector.

9. Assistance during natural calamities: During natural calamities such as earthquakes, floods,
famines, etc., the affected countries face the problem of shortage of essential goods. Foreign trade
enables a country to import food grains and medicines from other countries to help the affected
people. 10. Maintains balance of payment position: Every country has to maintain its balance of
payment position. Since, every country has to import, which results in outflow of foreign
exchange, it also deals in export for the inflow of foreign exchange.

Bangladesh–Malaysia relations

Bangladesh–Malaysia relations refers to the relations between the two countries. Both enjoy strong
fraternal relations. Malaysia has a high commission in Dhaka and Bangladesh has a high
commission in Kuala Lumpur. Both nations are members of the Commonwealth of Nations, the
Organization of Islamic Cooperation, the Developing 8 Countries and the Non-Aligned
Movement. Malaysia was one of the first countries to recognize the independence of Bangladesh
in 1971. Two-way trade between the two countries stood at US$1.19 billion in 2018. Malaysia is
also one of the largest foreign investors in Bangladesh.

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Bangladesh-Malaysia Bilateral Trade Statistics

Value in million Tk.

Year Export Import Trade Ratio

2005-06 791.00 22285.00 1: 28

2006-07 1167.30 23071.70 1: 20

2007-08 1662.90 30936.70 1: 18.60

2008-09 2160.20 47761.00 1: 22.10

2009-10 4287.77 85235.1 1: 19.87

2010-11 3122.23 125717.2 1:40.27

2011-12 4439.09 110688.6 1:24.93

2012-13 8000.79 152325 1:19

2013-14 10542.56 161981 1: 15.36

2014-15 10881.18 100929.8 1:9.28

2015-16 14951.96 74932 1:5.01

2016-17 7403.86 19018 1:2.57

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 180000

160000

140000

120000

100000

80000

60000

40000

20000

Series 1 Series 2 Series 3

Labor issues

In 2007, Malaysia has banned the imports of Bangladeshi workers into the country after hundreds
of them were stranded at an airport because their employers has failed to collect them promptly.
This ended with a demonstration in Kuala Lumpur by Bangladeshi workers demanding payments
and better conditions but later resolved by both governments. The Malaysian government also
placed a similar restriction in 1999 but lifted the ban in 2007 by approving an initial intake of
300,000 workers. There is also some issue relating to socials with the workers, which has causing
a trouble in Malaysia with a number of them have involved in crime mainly on rape and some
theft. Between (2009–2012), Malaysia had stopped hiring workers from Bangladesh but there are
still many of the labors enter the country illegally. Until 2013, there are around 320,000
Bangladeshis working on many sectors in the country.

In 2014, the Malaysian cabinet decided to open all sectors apart from plantations in the Malaysian
economy for Bangladeshi workers to work.

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Economic relations

The bilateral relations between the two countries also enhance in the sector of economic. In 2012,
a memorandum of understanding has been signed by both countries for collaboration in the
construction of the Padma Bridge which has been consider as the largest bridge in Bangladesh
once it finished. Much more, a free trade agreement also has been proposed for both countries to
boost the pharmaceutical, garment and tourism sector of Bangladesh, while Malaysia would
benefit immensely from future infrastructure projects dished out by the Bangladeshi government.
Malaysia also consider as the third largest investment partner in Bangladesh after India and
Pakistan with the Malaysian companies invests in the sectors of telecommunications, power
generation, textile and financial sectors which worth around MYR558.86 million. Since 2010, all
the Bangladesh workers in Malaysia had sent home a total of MYR3 billion, which is the highest
compared with other workers from Indonesia (MYR2.9 billion), Nepal (MYR1.9 billion), India
(MYR625 million) and the Philippines (MYR561 million).The top 5 exports of Malaysia's
products to Bangladesh are such as refined petroleum products, palm oil, chemicals products, iron
and steel and electrical and electronics products while the major import of Bangladeshi's are
textiles and apparel, refined petroleum products, vegetables, processed food, seafood and also
electrical and electronics products.

Bangladesh GDP

The Gross Domestic Product (GDP) in Bangladesh was worth 249.72 billion US dollars in 2017.
The GDP value of Bangladesh represents 0.40 percent of the world economy. GDP in Bangladesh
averaged 49.21 USD Billion from 1960 until 2017, reaching an all-time high of 249.72 USD
Billion in 2017 and a record low of 4.30 USD Billion in 1960.

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Bangladesh Trade Last Previous Highest Lowest Unit
Balance of Trade -193.40 -148.60 0.00 -209.80 BDT Billion
Current Account -1354.00 -2694.00 1852.00 -2989.00 USD Million
Current Account to GDP -3.60 -0.60 3.70 -4.40 percent
Exports 271.93 233.67 271.93 0.05 BDT Billion
Imports 465.30 382.25 465.30 0.57 BDT Billion
Terms of Trade 87.10 87.10 104.70 80.01 Index Points
Capital Flows 0.17 5.72 679.50 -12.72 BDT Billion
Remittances 1202.85 1180.44 1504.98 856.87 USD Million
Gold Reserves 14.00 14.00 14.00 3.29 Tonnes
Foreign Direct Investment 1706.00 1285.00 1726.00 276.00 USD Million
External Debt 28.57 26.31 28.57 16.17 USD Billion
Crude Oil Production 3.00 3.00 6.00 1.10 BBL/D/1K
Terrorism Index 5.70 6.18 6.48 4.10

Fig: Current Bangladesh GDP

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Imports of Bangladesh from Industrial and Developing Countries

There is a reverse trend of the Bangladesh’s imports with regard to the sources over time. While
industrial countries were the major source for Bangladesh’s imports during the 1970s, these
countries became a minor source for Bangladesh’s imports during 1980s and 1990s. Instead,
developing countries are now a major source for Bangladesh’s imports. While industrial countries
constitute 51.4% of Bangladesh’s total imports in 1978, their share in 2018 was only 25.4%. On
the other hand, developing countries’ contribution to Bangladesh’s imports increased to 63.2% in
2002 from 27.3% in 1978. Asian developing countries dominate as sources for Bangladesh’s
imports, raising its share from 14.6% in 1978 to 55.1% in 2002. Annual growth rates of
Bangladesh’s imports, in 1998 and 2018, are 3.4% and –12.9% from the world, -6.2% and –12.8%
from industrial countries, 6.7% and –7.7% from developing countries, and 8.7% and –7.4 % from
Asian developing countries.

Limitations of foreign trade in Bangladesh

Legal constraints

The first and the foremost problems in foreign trade operations arise due to legal constraints.
Foreign trade indicates exchange of goods and services between two countries. However, each
country has its own laws, rules and regulations, which are different from other countries. So,
problems arise in foreign trade operations. Suppose, an exporter of Bangladesh receives an L/C
from the importer of England, in which the goods are to be shipped via an American ship and
delivered to China. However, according to which country’s law the dispute, if arise, should be
settled, is a problem.

Geographical location

From the geographical viewpoint, Bangladesh is not located in such a place to trade vigorously.
India encompasses Bangladesh from three sides. Also, India enjoys a strong industrial base
compared to Bangladesh. Due to economy of scale, India can produce the same quality products
at a cheaper price. This is a problem in Bangladesh’s foreign trade operation.

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Limited skilled manpower

Foreign trade related jobs involve proper communication with clients, as well as with local and
foreign banks. Performing the foreign exchange activities is a sensitive and difficult job by
nature. A single error can cost thousands of dollars. Bangladesh lacks adequately skilled
workforce who fully understand and are well capable to handle foreign trade dealings.

Limited export base

Bangladesh has a very limited export base. It does not have the sufficient supply of raw materials
needed to use in the production process. Unfortunately, the country has to import the raw
materials required in various production processes. As a result, production cost increases and
consumers have to spend more to avail that particular product.

Lack of stable policy

Policy and structure are an integral part of any kind of operation. It suggests how to perform the
operations properly. It is not easy to plan and perform foreign trade operations properly, if the
policy continues to change frequently. Change of Government in Bangladesh often comes with
new policies, which is very difficult to cope with. Business organizations and businessmen find it
difficult to settle their businesses. Change in policy make them deviate from the old track and
run after the new track.

Political instability

Political stability is essential for smooth foreign trade operations. Instability in politics has been
a major problem to conduct foreign trade business in Bangladesh.

Problems in ucpdc guidelines

According to the Article 4 of the Uniform Customs and Practices for Documentary Credit
(UCPDC), all parties concerned with L/C must deal with documents not with goods. This may
cause problem, as the bank must have to make payment after the presentations of necessary
documents, whether or not the goods are delivered to the importer.

Absence of policy, rules and regulations of foreign exchange operations as per islamic
sharia

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There is no international Policy, Rules and Regulations of Islamic Banking regarding Foreign
Exchange Operations, so the Islamic Banks has to face problems in foreign exchange operations

Conclusion

As we don’t have a balance trade with Malaysia. Government should give impasses on different
promotion activities. The export-GDP ratio, import –GDP ratio and trade-GDP ratio have
increased over the years. The growth rate of export- GDP ratio of Bangladesh was the highest
during 1980-2002 among the SAARC countries. However, the balance of trade of Bangladesh
remained in deficit. The country also had trade deficits with all SAARC countries while the
trade deficit with India is huge.

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Reference

1. https://wits.worldbank.org/CountryProfile/en/Country/BGD/Year/2013/TradeFlow/EXPI
MP/Partner/MYS/Product/all-groups
2. https://tradingeconomics.com/bangladesh/exports-by-country
3. https://notesonliberty.com/2015/09/07/migration-from-bangladesh-causes-and-
challenges/
4. http://www.bdtips.com/limitations-problems-foreign-trade-bangladesh/
5. https://prezi.com/qhildyntpvvd/problems-of-foreign-trade-in-bangladesh/

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