Online Desk:  Eying a free-trade agreement (FTA) in the future, Bangladesh and South Korea are now advancing to a memorandum of understanding (MoU) that focuses on boosting bilateral trade and investment, according to officials.

Currently, Bangladeshi products enjoy duty-free and quota-free access to the South Korean market.

However, Bangladesh is due to graduate to developing-country status in 2026, which will result in the loss of various trade benefits with wealthier nations.

After graduation, trade officials warn that Bangladeshi exports will lose their competitive edge and face tremendous challenges due to higher general duties replacing the current lower rates.

To minimise these post-graduation challenges, Bangladesh is actively seeking to sign free trade agreements with key trading partners.

Since FTAs are complex and time-consuming to negotiate, Bangladesh and South Korea have opted to begin with a MoU, which could pave the way for a future FTA.

A senior commerce ministry official told The Financial Express that South Korea proposed the MoU as a stepping stone towards a future FTA.

The Ministry of Commerce recently held an inter-ministerial meeting to review the draft MoU.

Noor Md Mahbubul Haq, additional secretary of the FTA Wing at the ministry, said at the meeting that South Korea is an important trading partner for Bangladesh. The two countries have multilateral trade and economic relations.

“The proposed MoU would be helpful for signing a Bangladesh-South Korea FTA in the future,” he said.

The meeting decided to seek written opinions from relevant ministries to prepare a strategic position paper for Bangladesh before further discussions with South Korean officials.

The draft MoU outlines a desire from both sides to strengthen trade relations for economic development, expand investment opportunities and recognise the need for human resource development and technological advancement.

The MoU also includes provisions for facilitating cooperation in trade and investment promotion, human resource development, technology, research and innovation.

Besides, both sides will cooperate to increase the participation of the private sector, including small and medium enterprises (SMEs), in both countries.

This will involve the exchange of expertise, collaboration on trade facilitation matters, effective implementation of the WTO trade agreement and streamlining customs clearance procedures with minimal documentation.

A joint investment promotion council will also be established, comprising the Bangladesh Investment Development Authority (BIDA) and the Korea Trade-Investment Promotion Agency (KORTA).

Bilateral trade between Bangladesh and South Korea reached $3.035 billion in 2022. Bangladesh’s exports to South Korea amounted to $678 million, while imports were $2.357 billion.

Bangladesh mainly exports apparel items such as sweaters, tee shirts and non-knit men’s suits to South Korea. South Korea, on the other hand, exports refined petroleum, pesticides and coated flat-rolled iron.