Home ›› 16 Apr 2023 ›› Opinion
The core mantra of Bangladesh’s foreign policy is is ‘friendship towards all, malice towards none’. Recalling the foreign policy principle, Bangladesh is steadily developing its relations with different nations in the world. Bangladesh has so far developed long-term relations with the countries that recognized Bangladesh as an independent country in the early days after its independence.
It is incumbent upon Bangladesh to maintain a long-lasting relationship with its friendly countries. The Republic of Korea is one of those countries. The 12th largest economy in the world, South Korea, is willing to provide support Bangladesh in improving its economy.
Republic of Korea is one of the nations that recognized Bangladesh as a sovereign country on 12 May 1972. It is important to note that diplomatic relations between Bangladesh and the Republic of Korea began on 18 December 1973.
The Republic of Korea, widely known as South Korea, is not only our trusted friend but has also emerged as one of the key development partners. Decades-long diplomatic relations between the two nations began to boom after Prime Minister Sheikh Hasina’s visit in 2010. Afterwards, the Prime Minister of South Korea, Lee Nak-yon visited Bangladesh in 2019. The purpose of the visit of the two premiers is to take existing bilateral relations further ahead by creating comprehensive economic partnerships. The past five decades had been seeing bilateral collaboration in the areas of trade, investment, education, ICT, defence, human resource development and cultural exchange.
Bangladesh deeply recalls South Korean contribution in respect of assisting in the establishment of the apparel industry. The first apparel industry was initiated with the cooperation of South Korea in 1978. Now, the ready-made garment (RMG) sector has become the key source of bringing foreign currency mostly in the form of the greenback. The RMG sector accounts for 83 per cent of total export earnings in Bangladesh thanks to South Korean assistance seen in the beginning.
Bangladesh’s economy needs external support in the form of loans. To address the budget deficit, the loans are now being sourced from high profile donor agencies. In the affairs of loans, Bangladesh is one of the largest recipients of South Korean soft loans as a priority partner. Besides, the crucial issue concerning foreign direct investment is being observed in South Korea. South Korea is the fifth largest FDI source for Bangladesh signalling that Bangladesh highly benefited from getting South Korean FDI. Now, FDI amounting to $ 1.3 billion has already been registered by South Korean entrepreneurs. Korea is the fifth biggest source of FDI for Bangladesh. Currently, the inflow of FDI is a growing trend.
What needs to be stressed is that currently there are 150 Korean companies in Bangladesh. Korean companies deal with leather and leather products, consumer electronics, mobile phones, home appliances, automobiles, ICT, and infrastructure. In the beginning, Korean investment was made in the field of the clothing industry. In the times to come, South Korea might have been engaged in many sectors. International businesses between the two nations had been stagnant for long ten years. Now, the two nation’s trading is rising significantly. According to the South Korea International Trade Association (SKITA), bilateral trade recently reached $ 3.035 billion- the highest since the establishment of relations between the two countries.
Bangladesh normally seeks loan support from global lenders on the condition of taking it in the form of a soft loan. Lower or minimal interest rate is provided on soft loans. According to a media report, Bangladesh had been availing of soft loans granted by South Korea since 1993. Basically, the soft loans come from the Economic Development Co-operation Fund ( EDCF) created by Korea in 1987 which is widely known as Korea’s aid fund. The fund is given to developing countries for the development in the area of socio-economic, infrastructure and ICT sectors.
Bangladesh has so far completed 16 projects by taking finance from EDCF. Bangladesh is likely to get $ 1.31 billion in assistance from EDCF as per the commitment made earlier. It is important to tell that Bangladesh is now the third largest recipient of Korean assistance. Recently, the two nations signed an agreement for soft loans amounting to $ 3 billion in a bid to implement new mega projects. Previously, $ 700 million was sanctioned for sustainable economic recovery, improving transportation and health services.
It is widely known that Bangladesh’s graduation as a developing nation takes place in 2026. Bangladesh is set to face lots of challenges on many sides centring on the graduation issue. Considering probable challenges, Bangladesh is being observed to take preparations for battling with challenges. South Korea is thinking about the LDC graduation challenges Bangladesh might face. Another loan window of Korea styled ‘Economic Development Promotion Facility (EDPF)’ has been designed to support large-scale infrastructure projects. Bangladesh wishes to get $ 7 billion from EDPF in the next. A total of 11 projects have been selected where the EDPF loan will be utilized. EDCF loans are cheaper than EDPF. The interest rate on EDPF loans is 1.0 per cent while interest is charged between 0.01 per cent and 0.05 per cent for EDCF loans. The message is that the EDPF loan is cheaper than loans taken from any donor agencies except Japan which disburses loans with its own currency. Korea gives out loans in US dollar currency. South Korea has so far disbursed $ 1.34 billion in EDCF concessional loans for Bangladesh for 27 projects.
Foreign remittance sent by Bangladeshi expatriates is considered the second vital source for reserve next to export earnings. The demand for Bangladeshi people in South Korea as workers are rising. If the Korean government assists in taking workers from Bangladesh, Bangladesh will be benefited much. Currently, there are 10,000 Bangladeshi workers in Korea which are insignificant in number. Hopefully, Korea takes into account receiving Bangladeshi people as workers.
To increase bilateral trade, there is no alternative to diversifying demand-driven products. Bangladeshi products-home textiles, jute, non-leather footwear and jute products- have huge demand in South Korea. Bangladesh needs to export summer fruits to South Korea. Bangladesh will have to take the chance of a duty-free and quota-free facility provided by Korea since 2008. In respect of humanitarian assistance, South Korea is one step ahead compared to other countries.
Korea provides around $ 5 million in support for Rohingyas yearly. Korea has the potential diplomatic capacity regarding taking the Rohingyas back to Myanmar. Korea’s support in this regard is eagerly expected for the greater interest of Bangladesh. The Bangladeshi finance minister, in the meantime, sought $ 100 million in budgetary support from the Korean government indicating that Korea’s support is being noticed everywhere.
The writer is an economic affairs analyst. He can be reached at : mazadul1985@gmail.com
