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The Daily Star, Dhaka, February 19, 2006

Bangladesh's Look East Policy

Harun ur Rashid
The genesis of 'Look East Policy' emanates from the existing asymmetrical economic
relationship between Bangladesh and the wealthy industrialised countries. Bangladesh
wants to shift from this imbalance to develop robust economic ties with countries in
South Asia, Southeast and North Asia to optimise its benefits for economic development.
The policy constitutes the main plank of economic diplomacy of the country. Economic
diplomacy is the formulation and advancing of policies relating to production, movement
or exchange of goods, services, labour and investment. It is essentially a bread and
butter policy of Bangladesh that has to be developed to its full potentials on the basis of
South-South cooperation.
Unhealthy existing pattern of trade
At present, more than 80 percent of the volume of trade of most developing countries are
with the US and European Union. In case of Bangladesh, its exports to the European
Union stood at 50.12 per cent and to the US, 45.5 percent during the year 2002-03
(according to Bangladesh Export Statistics, released by the Export Promotion Bureau in
2004). It means that more than 95 percent of Bangladesh's exports go to the West.
Such total dependence of exports on the EU and the US is not healthy because any
disruption on exports to these countries will seriously affect the economy of Bangladesh.
Exports are one of the ingredients of economic security of a country that in turn is a part
and parcel of national security. One of the aspects of national security is to avoid dangers
or threat to economic security.
Popular Revolution in Georgia, Ukraine, Kyrgyzstan owes its origin to economic slump
of their national economy. As President Clinton once said, It is the economy, stupid,
that always has been an overarching factor in national stability. Even in Europe, the
people of France and the Netherlands rejected the EU constitution because of the weak
economy of these countries.
It is imperative and prudent that trade should be diversified to as many countries as
feasible. There is a saying that one should not put all the eggs in one basket. This is
especially true in respect of trade.
What does Look East Policy mean?
The debt crisis, the collapse of some of the commodity prices and growing protectionism
in the industrialised countries have demonstrated that the existing relationship between
developing countries and the West needs to be restructured.

Furthermore the enormous and increasing difference in economic power between

developing countries and the West is a reflection of the current inequitable division of
labour internationally.
That means that the Western countries constitute the core of the world economy and
developing countries exist in the periphery of the global economy. Developing
countries provide raw materials at cheap prices, while manufactured products made of
raw materials are exported to developing countries with much higher prices.
The current system of division of labour needs to be broken. The sustained development
of developing countries including Bangladesh necessitates a fundamental shift to Look
at the East policy for trade, finance, and technology.
A central need is to set up arrangements where Bangladesh needs to make greater use of
its resources with the countries in the East. The challenge is to mobilise and deploy its
resources more effectively with resources of countries in the East, to energise
development, draw strength from joint undertakings, and collectively obtains economic
gains in the regional and global market.
While trade liberalisation is important, joint action to promote investments and stimulate
industrial and agricultural production in Bangladesh is necessary to unlock the full
potential of economic growth.
With the advances made by many countries in South Asia and in the East, there is now
more scope for joint undertakings at private sector level. There is ample scope for joint
ventures in, for example, agro-processed industry, the fertiliser and capital goods
industries, as well as in the manufacture of basic consumer goods. The joint production of
generic drugs in common use could lower health service costs in most countries.
Services sector is another area that should be pursued vigorously. Bangladesh has abundant
supply of cheap labour and South East Asian and North Asian countries may fully exploit the
cheap human resources in setting up industries in the country. It is noted that Bangladesh stands
between India and ASEAN and it could be a springboard for export of some of the manufactured
products to India, ASEAN and beyond.
The Look East policy found its expression in the formation of BIMSTEC (The Bay of Bengal
Initiative for Multi-sectoral Technical and Economic Cooperation), launched in June 1997 (it
includes Bangladesh, India, Myanmar, Sri Lanka and Thailand).
Challenges Foreign Investment
Foreign direct investment (FDI) contributes to financing sustained economic growth over the
long period. Private capital flows from foreign countries are vital complements of national
development efforts. It is particularly important for its potential to transfer knowledge,
technology, create jobs, boost overall productivity, and enhance competitiveness and
Bangladesh is one of the most open economies among developing countries in Asia. In recent
years it has taken appropriate steps, in reducing the size of the public sector, to almost free

convertibility of currency, in trade liberalisation by reducing tariffs and in encouraging 100%

percent foreign investment and joint ventures with sufficient tax incentives.
To assure the foreign investors, Bangladesh is a signatory to the Multilateral Investment
Guarantee Agency (MIGA), International Centre for Settlement of Industrial Disputes (ICSID)
and a member of the World Intellectual Property Organisation (WIPO).
All these initiatives will help countries from the East to invest in Bangladesh. It has however to
be recognised that there are certain inadequacies in power, transport and communication sectors
in the country and they need to be addressed urgently. Port facilities need to be vastly improved.
Several foreign envoys stationed in the country have spoken frankly about some of the
impediments to foreign private investment in the country.
Free Trade Agreements
Regional trade blocs are created to boost trade and economic opportunities through Free Trade
Agreements (FTA). FTAs exist in 45 countries in Africa, 26 in Europe, 32 in the Americas, and 13
each in the Middle East and Asia-Pacific regions.
Bangladesh may enter into FTAs, subject to the speed at which trade restrictions are removed in
Bangladesh that could be adjusted by local industries. Although it is called Free Trade
Agreement, it is a misnomer because trade of all commodities and products are not free. The devil
of FTAs is in the details.
How extensive will be the coverage of FTA? How large, the negative list of commodities that will
be exempt from FTA, is going to be? Are there items on which only partial liberalisation is
undertaken? Are tariffs and non-tariffs barriers simultaneously eliminated or reduced? These
issues are crucial in determining the structure of FTAs.
Mobility of Labour
A policy of mobility of labour to countries of the East needs to be discussed on a political level.
The issue seems to require the resolution of a number of issues, such as period of stay, level of
skill, and the type of contract for the imported labour. The period of stay and the level of skill
must be consistent with domestic labour market considerations. It is doubtful whether
unskilled/semi-skilled labour would be contracted for unless they are employed in agricultural or
labour-intensive industries. As regards the period of stay, it could be for a few months or a year.
Political Strategy
Political leaders are fully conscious of embarking on this policy to the East. Visits to Southeast
and North Asian countries have been a feature of economic diplomacy.
The policy of the East offers tremendous opportunities. The countries in the East have to be
effectively mobilsed for regional cooperation. A regional summit with Southeast and North Asian
countries may be organized so that countries are aware of each other's potential and comparative
advantage in manufacturing products through economic cooperation.
There is however a perception in overseas of political instability of Bangladesh and it tends to
dampen foreign investment and joint ventures in the country. One German businessman who has
been doing business for some time in Bangladesh told, Ruling and opposition politicians appear
unaware of the harm they do to the image of Bangladesh abroad by the way they sometime act in
domestic politics. (Weekly Holiday, February 21, 2004).

The Look East Policy is not a rhetorical statement. It is a serious policy shift and needs to be
pursued vigorously both at the governmental and non-governmental levels. Bangladesh's exports
on average have increased in recent years by 15 per cent annually and there is potential of
Bangladeshi entrepreneurs to take risks and succeed.
To achieve the goal, Bangladesh is required to make efforts at political, bureaucratic, private
sector and media levels to project image of Bangladesh as can do country on a sustained and
well-disciplined way to the countries in the East.
The Daily Star, July 7, 2005
Look East policy: Strategic imperative or imbroglio?
Md Mozahidur Rahaman
In a world of shifting economic and political geography, foreign policy for a small country like
Bangladesh should be guided by pure opportunity. We should meticulously assess the tectonics of
geo-political and economic forces in order to forge a visionary foreign policy doctrine that is
futuristic, opportunistic, and most important of all, flexible but attainable. The relevance of any
foreign policy doctrine has to be seen in the context of an evolving global and regional power
structure and our capacity to alter that power equilibrium. Given our small size, no economic
power but strategic importance, our foreign policy should be aligned with those of the great
powers of our time. But this has to be done with an eye on the contemporary flux as well as the
future evolution of geo-political and economic power structure. "Look East" policy is a noble
attempt towards that direction, but a myopic one. This note argues why.
Through the rise and fall of great powers, three distinct features define the greatness of powerful
nation. A great nation of a time has to be the economic powerhouse of the world, with the
mightiest military and most important of all, with a stable decentralised political system.
Although the variables are in a constant flux, a punctuated equilibrium is reached when the
correlation of these three variables takes a nation to the zenith of power, pride and prosperity.
Undoubtedly, in today's world the culmination of that equilibrium is the United States of
America. And the economic and foreign policy of every nation of today's world is formulated
with that geo-political set up in mind.
However, at least one of the sources of great power seems to be shifting once again. China has
overtaken the United States in the consumption of basic agricultural and industrial goods. It is
now the world's biggest consumer of grain, meat, coal, and steel. Only in oil does the US
consume more. China is well ahead of the US in the consumption of goods such as television sets,
refrigerators, and mobile phones. The Washington-based Earth Policy Institute says that China is
now an emerging economic superpower. However, per capita consumption in China, the world's
most populous country, remains far below that of the US. According to the report: 64 million tons
of meat were consumed in China in 2004 compared to 38 million tons in the US, 258 million tons
of steel were used in China in 2003 compared to 104 million in the US, China's factories and
homes burned 40 percent more coal than in the US, the number of PCs in China is doubling every
28 months.
China's economy, the sixth-largest in the world, has expanded by a breakneck 9.5 percent during
2004, faster than predicted and well above 2003's 9.1 percent. China's eclipse of the United States

as a consumer nation is another milestone along the path of its evolution as a world economic
leader. China is no longer just a developing country; it is an emerging economic superpower.
Along with Japan and other newly industrialised Asian economies, China is writing a new Asian
economic history.
Look East policy is a natural response to that emerging Asian century. But the foreign policy
mechanists of the ruling coalition have been very myopic in their noble attempt and failed in at
least two aspects. First, the Look East policy doctrine lacks in defined objective and articulated
vision. And second, it has discounted another sleeping giant from the future power dynamics, i.e.
India. No wonder, our relation with our neighbour is at historic abyss.
Look East policy was initially a brain child of Malaysian Prime Minister Mahathir Mohammad.
In July 1981, Mahathir Mohamad became the Prime Minister of Malaysia, and after six months in
his office, he announced an initiative to learn from the experiences of Japan (and Korea) in the
nation-building of Malaysia. He considered that the secret of Japanese success and its remarkable
development lay in its labour ethics, morals, and management capability. He felt a programme
enabling young Malaysians to learn in Japan would contribute to the economic and social
development of Malaysia. For this purpose, Malaysia decided to dispatch their students to Japan,
to study not only academics and technical know-how but also to learn the labour ethics and
discipline of the Japanese people.
This initiative is called Look East policy. The programme consists of two parts. The first is to
send Malaysian students to Japanese universities and institutes of technology. The second is to
send trainees to Japanese industries and training institutes.
These programmes are funded by the government of Malaysia, and the government of Japan
supports these programmes by sending Japanese teachers to Malaysia and also by sharing a part
of its costs.
However, the well advertised Look East policy of the ruling coalition has failed to generate
critical discourse from the intelligentsia and hence failed to articulate a clear vision for the future
of the country. Without a clear vision, any policy doctrine eventually breeds lassitude and lack of
sincerity, commitment, and optimism from the masses. Look East policy, unless critically
discussed and renovated will be destined to that fate.
Perhaps the more dramatic failure on the part of the ruling coalition is to be ostentatiously
oblivious to the rise of India as a global economic powerhouse.
India is brimming with self confidence. It boasts the largest skilled workforce of 472 million in
the world, most of them are literate and English speaking; the second largest pool of scientists; a
hi-tech medical sector, already attracting more than 100,000 foreign patients a year; a solid
manufacturing base, turning out, among other things, the world's largest outputs of motor bikes
and three-wheelers; the largest railway network in the world, including a just opened, indigenous
$2 billion subway in New Delhi; an information technology sector, which has grown 40 times in a
dozen year to $20 billion a year and is poised to cut into the coming boom in the software
services, from the $650 billion world-wide today to $3 trillion in five years.
With an annual growth rate of 7 percent a year, India is among the world's top 10 growing
economies. In purchasing power -- what your money can buy -- India is fourth behind only
America, the EU, and China. The US National Intelligent Council in its long term growth forecast

puts India right behind China. But it is more optimistic about India because India has a
decentralised political system that can evolve with the increasing domination of free enterprise.
Shrouded under the economic indicators, a new consumer culture is emerging in India.
Conspicuous consumption is replacing the traditional values of thrift and savings. About 1.6
million mobile phones are sold every month and 300,000 motor cycles. Auto makers cannot cope
with the demand. Banks lend $15 billion a year for housing. India and China Inc. are firing on all
This prompted Craig Barrett, CEO of Intel Corporation, the world's largest computer chip maker
saying: "I worry for the US and I worry for my grandchildren." China and India, two mighty
giants, are out to eat America's lunch.
Look East policy recognises the place of China and other newly industrialised and emerging
Asian economies in the future economic and political order. But it is oblivious to the emergence
of India as a global economic powerhouse. Look East policy is a strategic imperative, but
discounting India from the future power dynamics would be a serious miscalculation. Unless the
ruling coalition improves ties with our neighbour, the loss in economic trickle down from the
shared prosperity with India might be too high price to pay for the generations to come.
Economic progress through shared prosperity follows the laws of gravity. The pull factor is
always greater than the push factor and the geographic distance of the foreign country tends to be
negatively associated with the propensity to trade with that foreign country. Although the
technological leap in transportation is defying the forces of gravity, a good and prosperous
neighbour is always economically more beneficial for a poor country like Bangladesh.
Economic trickle down at the country level is happening all over the world. A relatively large and
developed open economy like Canada has more than 80 percent of its trade with its neighbour, the
giant US. A relatively small open economy like Malaysia has a very prosperous trade relationship
with its richer neighbour Singapore. I am not quite sure how much we have gained from being the
neighbour of an emerging economy like India, and Indian prosperity in the IT industry is having
virtually no trickle down effect in Bangladesh. This partly has to do with our own failure and
partly with India's attitude to treat us as a poor relation rather than a partner in shared prosperity.
But in today's world of foreign policy, the rule of the game is not ideology but opportunity. As a
small player in that game we should tap into every possible opportunity to push forward our
national interest. Given our geo-political set up, it is a strategic imperative that we build a
strategic partnership based on shared prosperity with the great powers, but also cut into the future
economic powerhouses by clearly defining the flexible but attainable foreign policy doctrine to
align our national interest with that of the future global power structure. In that sense, Look East
policy is a strategic imperative, but without a clear vision and understanding of shared prosperity
with our neighbour, India, it is indeed a strategic imbroglio.
The economic and political geography of the world is constantly changing. So are we. We have
150 million mouths to feed, but we also have 300 million strong hands. China and India Inc. are
oozing cool confidence that each child is born not only with an empty stomach but also with two
strong hands. We have to turn our 300 million hands into iron fists and start collecting the
bounties of the shared progress in the new Asian century. A silent takeover is under way;
unfortunately we are yet to wake up.