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A Report on

Economic integration in the perspective of

Bangladesh

Tazrina Farah

Assistant Professor

Department of Finance

University of Dhaka

GROUP # 06 Section: A

Batch: 19th

Department of Finance

University of Dhaka

Date of Submission: 28

th May, 2015

PREPARED FOR

PREPARED BY

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Group Profile

Serial Name ID

1 Maruf Hossain 19-013

2 Md. Niaz Mahmud Khan 19-067

3 Manjurul Ahsan 19-099

4 Md. Abdul Quyum 19-121

5 Md. Ripon Molla 19-123

6 Md. Woasiul Hamim 19-139

7 Raqib Hossain 19-157

8 Md. Ariful Hasan 19-175

9 Shibpada Barmon 19-193

10 Md. Moshiur Rahman 19-269

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LETTER OF TRANSMITTAL

May28, 2015 Tazrina Farah Lecturer Department of Finance University of Dhaka

Subject: A report on “Economic Integration in the perspective of Bangladesh “

Honorable Madam,

This is a great pleasure for us to submit the report on “Economic Integration in the perspective of Bangladesh” as a partial requirement of the BBA program in University of Dhaka.

Preparation of this report has been a great pleasure & an interesting experience. It enabled us to know about various economic knowledge more broadly than before and also their economic condition.

This report helped us tremendously to understand and to know the various term of economic integration and the condition of trade in various region.

We have undertaken our sincere effort for successful completion of the BBA program. If we have any unintentional errors and omissions that may have entered into this report will be considered with sympathy.

Therefore, we beg your kind consideration in this regard, we will be very grateful if you accept our report and oblige there by.

Sincerely,

On the behalf of members of group 06

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Acknowledgement

We would like to pay our gratitude to all of the related books, articles, journals, authors and related Web Sites that helped us a lot for the completion of this report before, during, and after the working period. At first we would like to acknowledge the Almighty, who helped us every time and was with us and gave us moral support and strength every moment. We are especially grateful to our honorable course instructor Tazrina Farah for giving us valuable suggestions and support to prepare this report. Without her advice and support, it would not be possible for us to prepare this report.

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Executive summary

International trade and finance is the most important tropic in the recent business world. Basically the world is now fully control and monitor through the terms and condition of trade. Our assigned topic is about economic integration in perspective of Bangladesh. We have tried to show our best competence in our report. From the perspective of Bangladesh economic integration we find after 1971 Bangladesh join some economic organization. In line with others, Bangladesh believes that economic integration in South Asia can be further enhanced through the adoption of various trade liberalizing initiatives. Bangladesh along with the seven other nations are all original members and no plans for expansions have been made. The Developing 8 is an economic development alliance consisting of Muslim majority states which focuses in multiple areas which are rural development, science and technology, banking, agriculture, humanitarian development, energy, environment, health and finance. On May 14, 2006 in Bali, Indonesia, Bangladesh was the only nation not to sign a preferential trade agreement. Bangladesh is currently chairman of the Developing 8 Countries. The government has participated in numerous international conferences, especially those dealing with population, food, development, and women's issues. In 1982-83, Bangladesh played a constructive role as chairman of the "Group of 77", an informal association encompassing most of the world's developing nations. It has taken a leading role in the "Group of 48" developing Countries. For make this report we have collected information from different web sites and also taking help to our senior and text book. We have tried our best to provide every possible information and try to make information easy to understand.

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Table of contents

SL. Title Page no.

1.1 Introduction 5

2.1 Discussion of economic Integration 7

2.2 Stages of Economic integration 8

2.3 Discriminatory Policies Against non-members 10

3.1 Levels of economic integration 11

3.2 Types of economic integration 11

3.3 Economic effects of economic integration 12

4.1 Bangladesh perspective 14

5.1 Conclusion 17

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Chapter: 1 Introduction

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1.1 Introduction Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration. This is meant in turn to lead to lower prices for distributors and consumers with the goal of increasing the combined economic productivity of the states. The removal of barriers to trade that prevent or hinder the flow of goods and services into or out of a nation or society. Economic integration usually implies repealing tariffs, embargos, or other punitive customs practices, and may also include extending favorable taxation rates or regulatory treatment to encourage cross-border investments.

1.2 Objective of the study

The main objectives of this report are: To gather knowledge broadly about economic integration.

To gather knowledge about different policies related with it.

Involvement of Bangladesh in different policies.

1.3 Scope of the report

The report has been prepared by collecting information from study materials and internet. The sources were relevant to the main problem of the report. Much data and sources made the report simple. The scopes of the report have very good influence to make it the perfect one.

1.4 Methodology of the report

We took help from the study material to understand the conceptual matters.

We also followed guidance of our course teacher.

We also make analysis with the help of internet browsing.

Though the analysis in Microsoft word and Microsoft Excel we have tried to draw some

valid conclusions and findings.

1.5 Limitation of the study

Time limitation.

Lack of information.

Lack of previous experience on study on an insurance company.

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Chapter: 2

Chapter: 2

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2.1: Discussion of economic Integration

Economic integration describes a process whereby countries coordinate and link their economic

policies.

As the degree of economic integration increases, the trade barriers between countries decrease

and their fiscal and monetary policies are more closely harmonized.

2. 2: Stages of Economic integration:

Six Stages of Economic Integration:

Complete

Economic

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Preferential Trading Areas (PTA)

A PTA is a trading bloc that gives preferential access to certain products from certain countries.

This is usually achieved by reducing, but not eliminating tariffs. An example of a PTA is one

between the EU and the ACP (Africa, The Caribbean & the Pacific) countries. This is an

agreement between the EU and 71 countries in the ACP. Many of these countries were former

colonies of EU members.

It enables the EU to guarantee regular supply of raw materials and the ACP countries gain tariff

preferences and access to special funds that are used to achieve price stability in agricultural

and mining markets.

Free Trade Areas

A free trade area is an agreement made between countries, where the countries agree to trade

freely between them, but are able to trade with countries outside of the FTA in whatever way

they wish.

• An example of an FTA would be the North American Free Trade Agreement, which

comprises the US, Canada and Mexico.

• NAFTA was formally established in January 1994.

However, it was not until January 2003, that a final tariff reduction between Canada and

Mexico, achieved the ultimate goal of tariff free trade in the region (99%)

Free Trade Areas Other examples of FTAsEconomic & Monetary Union

1. European Free Trade Association

• Iceland, Norway, Switzerland and Liechtenstein)

2. South Asia Free Trade Agreement

• India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.

Custom Union

A Customs Union is an agreement made between countries, where the countries agree to trade

freely among themselves, and also they agree to adopt common external barriers against any

country attempting to import into the customs union.

• All common markets and economic and monetary unions are also customs unions.

• Therefore the EU has a customs union.

Other examples:

The Switzerland-Liechtenstein Customs Union.

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East Africa Community, comprising Kenya, Uganda, & Tanzania.

Mercosur, comprising Brazil, Argentina, Uruguay and Paraguay.

Common Markets

Examples of common markets are:

• The Carioca a single market and economy (CMSE)

• Current members are Barbados, Belize, Guyana, Jamaica, Suriname, Trinidad& Tobago,

Antigua & Barbuda, Dominica, Grenada, St Kitts & Nevis, St Lucia & St Vincent and the

Grenadines.

Montserrat is also expected to join.

Economic & Monetary Union

Economic & monetary union is a common market with a common currency.

The best example of economic and monetary union is the Euro zone, which includes the

member countries of the EU that have adopted the EU as their currency.

Note: Some countries in the EU have not adopted the Euro (Eg: Britain) and therefore are not

part of Euro zone statistics.

Complete Economic Integration

This would be the final stage of economic integration at which point the individual countries

involved would have no control of economic policy.

There would be full monetary union and complete harmonization of fiscal policy. • The advantages and disadvantages of trading blocs clearly depend to a large extent on the degree of integration

Common Markets

.

In purely economic terms, the benefits of being a member of a trading bloc are similar

to those of free trade.

• These include greater market size with the potential for a larger export market,

increased competition leading to greater efficiency, more choice and lower prices for

consumers.

The consequences may not be even, as some domestic producers are likely to gain from the

larger market while others may find themselves unable to compete.

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•There may be further stimulus for investment due to the larger market size, and foreign

investment might be attracted from the outside the bloc as a way of getting a foot in the

door of a larger market.

• There is also an argument that along with the economic gains, a trading bloc will foster

greater political stability and cooperation.

It is also possible that trade negotiations may be easier in world made up of a number of

large trading blocs, rather than among sovereign states.

2.3 Discriminatory Policies Against non-members By their very nature, trading blocs favor increased trade among members, but enact

discriminatory policies against non-members. This can be damaging to the achievements of the

multilateral trading negotiations of the WTO.

Loss of Political Sovereignty

If integration reaches the stages of customs unions, then political decisions start to be

made by a central body and this reduces the power of the domestic government of the

country.

This may not be popular with domestic politicians and also with those members of the

population who are especially patriotic.

An example is the European Parliament making decisions for EU countries.

Loss of Economic Sovereignty

Again if integration reaches the stages of a customs union, then economic decisions also

start to be made by a central body.

Governments and citizens in any given country may be reluctant to give up rights to

make decisions about economic matters.

An example of this would be the European Central Bank, making decisions relating tinterest rates. Loss of Economic Sovereignty

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Integration into a common market may `force` a country to change its economic

policies.

If there are greater tax benefits in one country and factors of production are free to

move from one to another, then the government in the country with higher taxes may

have to lower them in order to discourage such movement.

The greater the level of economic integration the move member countries will lose control

over political and economic affairs.

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Chapter: 3

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3.1: Levels of economic integration There are three level of economic integration. The economic integration has been a

predominant feature of the contemporary global economy. The econ integration brings

together countries based on collaboration, flexibility, risk and cost, shared interest and

objectives. The econ integration has led to a relocation of resources across sectors and space.

Global: trade liberalization by GATT or WTO

The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. This

agreement was designed to provide an international forum that encouraged free trade

between member states by regulating and reducing tariffs on traded goods and by

providing a common mechanism for resolving trade disputes.

The World Trade Organization (WTO) came into being in 1995. It is the successor to the

GATT. Now it is the only global international organization dealing with the rules of trade

between nations. At its heart are the WTO agreements, negotiated and signed by the

bulk of the world’s trading nations and ratified in their parliaments. The goal is to help

producers of goods and services, exporters, and importers conduct their business.

– Location-Geneva, Switzerland

– Members—153 countries

Regional: preferential treatment of member countries in the group

– NAFTA

Bilateral: preferential treatment between two countries 3.2: Types of economic integration

Groups or countries are coming together all over the world with the idea of defending

themselves economically against the incursions of other blocks in the area.

1. FTA (free trade area)—free and open trade among members No internal tariffs

among members, but each country imposes its own external tariffs to the third country.

– NAFTA (North America Free Trade Agreement) • 1994; free trade area among the US, Canada and Mexico.

– AFTA (ASEAN Free Trade Area)

• Signed in 1992 Singapore; originally 6 countries

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– EFTA (European Free Trade Area)

• 1960, Austria, Denmark, Norway, Sweden, Portugal, Switzerland and UK

2. Customs Union

No internal tariffs and common external tariffs

– Mercosur (Southern Common Market)

• Formed in 1991 by Brazil, Argentina, Paraguay and Uruguay

– CACM (Central American Common Market)

• 1960, Guatemala, El Salvador, Honduras, Nicaragua

– CARICOM (Caribbean Community and Common Market)

3. Common Market:

• free movement of products and factors (resources), which is customs

union plus factor mobility

• EU (European Union – previously Euro Econ Community)

4. Economic union

• common market plus common currency

• coordination of fiscal and monetary policy

Economic integration brings significant benefits, more efficient allocation of resources

Static effects: Short-term effects

– Better use of existing resources

– Trade creation: production shifts to more efficient member countries from

inefficient domestic or outside countries.

– Specialization, comparative advantage

Dynamic effects: Long-term effects

– Cost reduction due to economies of scale

– Cost reduction due to increased competition.

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Both producers and consumers benefit from more efficient allocation of resources as a result of

integration.

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Chapter: 4

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Bangladesh perspective

In line with others, Bangladesh believes that economic integration in South Asia can be further

enhanced through the adoption of various trade liberalizing initiatives. Bangladesh as part of

economic integration joined Commonwealth, United Nations, on-Aligned Movement, OIC,

SAARC, BIMSTEC and WTO. Also Bangladesh played a vital role as chairman of the "Group of

77", an informal association encompassing most of the world's developing nations. It has

taken a leading role in the "Group of 48" developing countries.

Common wealth of Nations

Bangladesh, which was part of British India until 1947, joined the Common wealth of Nations

in 1972 after its establishment as an independent nation in 1971.[1] It has actively

participated in the Heads of Government conferences that take place bi-annually.

United Nations

Bangladesh was admitted to the United Nations in 1974[2] and was elected to a Security

Council term in 1978-1980[3] and again for a 2000-2002 term. Foreign Minister Choudhury

served as president of the 41st UN General Assembly in 1986.

In recent years, Bangladesh has played a significant role in international peace keeping

activities. Nearly 10,000 Bangladeshi military personnel are deployed overseas on peacekeeping

operations, making it a large contributor to the UN peacekeeping forces. Under UN auspices,

Bangladeshi troops have served or are serving in Somalia, Rwanda, Mozambique, Kuwait,

Bosnia and Herzegovina, and Haiti, and units are currently serving in Kuwait and East Timor.

Bangladesh responded quickly to U.S. President Bill Clinton's 1994 request for troops and police

for the multinational force for Haiti and provided the largest non-U.S. contingent. As of

December 2012, Bangladesh is the largest provider of UN peacekeepers.

Non-Aligned Movement

Bangladesh was selected to provide the next chairman of NAM at the summit scheduled for

Dhaka 2001; however it was later decided to host the summit at an alternative venue. As a

member of the Non-aligned Movement Bangladesh never took any position in line with bi

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However it parted with its principle by voting at the United Nations against North

Korea, under pressure from Japan, in December 2008.

OIC

In 1974, then Prime minister Bangabandhu Sheikh Mujibur Rahman, lead a Bangladeshi

delegation team consisting Kamal Hossain, Enayet Karim, Ataur Rahman Khan, Taher Uddin

Thakur, Tofail Ahmed and Shah Azizur Rahman under him,[4] to the international meeting

of the Organization of the Islamic Conference (OIC, now the Organization of Islamic

Cooperation) held in Lahore. Following this participation Bangladesh was admitted as a

member of OIC. In

1977, President Ziaur Rahman amended the Constitution of Bangladesh, including a clause

stating that " the state shall endeavor to consolidate, preserve and strengthen

fraternal relations among Muslim countries based on Islamic solidarity ".[5] Since then, an

explicit goal of Bangladeshi foreign policy has been to seek close relations with other Islamic

states. In 1980, President Ziaur Rahman was included in a 3 member "Al-Quds" summit

committee to attend the summit at Morocco.[6] In 1983, Bangladesh hosted in capital Dacca

the foreign ministers meeting of the OIC. At the OIC headquarters at Jeddah, Bangladesh is

represented in the capacity of one of the Director Generals.

South Asian Association for Regional Cooperation

The government also pursued the expansion of cooperation among the nations of South

Asia, bringing the process—an initiative of former President Ziaur Rahman—through its

earliest, most tentative stages to the formal inauguration of the South Asian Association for

Regional Cooperation (SAARC) at a summit gathering of South Asian leaders in Dhaka in

December 1985. Bangladesh has served in the chairmanship of SAARC and has participated in

a wide range of ongoing SAARC regional activities.

Centre on Integrated Rural Development for Asia and the Pacific

An intergovernmental and autonomous organization, the organization consists of fifteen

members:- Afghanistan, Bangladesh, Fiji, India, Iran, Indonesia, Laos, Myanmar,

Malaysia, Nepal, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam. The area of

cooperation is primarily focused on agriculture, regional relations and the development of

the region.

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Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation An international organization which includes South Asian and Southeast Asian nations. The member nations of this group are: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. The organization focuses on regional economy, regional development and trade

Developing 8 Countries

Bangladesh along with the seven other nations is all original members and no plans for

expansions have been made. The Developing 8 is an economic development alliance

consisting of Muslim majority states which focuses in multiple areas which are rural

development, science and technology, banking, agriculture, humanitarian development,

energy, environment, health and finance. On May 14, 2006 in Bali, Indonesia, Bangladesh

was the only nation not to sign a preferential trade agreement.

Asia Pacific Trade Agreement In 2005, Bangladesh signed the APTA agreement which would enable it to reduce trade gaps

between itself and other nations such as China, South Korea and its neighbour India. Another

aspect of the agreement is to be given duty-free access to its products.

World Trade Organization Bangladesh is an active member of the World Trade Organization (WTO). Bangladesh has a

permanent mission in Geneva to look after matters relating to multi-lateral trading

system under the WTO regime since mid-1990s. World Customer Organization Bangladesh is an active member of the World Customs Organization (WCO). Bangladesh has a

permanent representative to WCO which has its headquarters in Brussels. Others Bangladesh is currently chairman of the Developing 8 Countries. The government has

participated in numerous international conferences, especially those dealing with population,

food, development, and women's issues. In 1982-83, Bangladesh played a constructive role as

chairman of the "Group of 77", an informal association encompassing most of the world's

developing nations. It has taken a leading role in the "Group of 48" developing countries.

Bangladesh also participates in these international organizations: ARF, AsDB, BIMSTEC, CP,

FAO, IAEA, IBRD, ICAO, ICC, ICCt (signatory), ICRM, IDA, IDB, IFAD, IFC, IFRCS, IHO, ILO, IMF,.

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Conclusion:

Economic integration is the unification of economic policies between different states

through the partial or full abolition of tariff and non-tariff restrictions on trade taking place

among them prior to their integration. There are varying levels of economic integration,

including

preferential trade agreements (PTA), free trade areas (FTA), customs unions, common markets

and economic and monetary unions. The more integrated the economies become, the

fewer trade barriers exist and the more economic and political coordination there is

between the member countries.