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Trade agreements

Bangladesh and Nepal to Sign Preferential Trade Agreement

Strategic Insights

— 2 min read

Bangladesh and Nepal are set to strengthen their trade relations by signing a Preferential Trade Agreement (PTA) to mitigate a growing trade deficit. Nepal's Ambassador to Dhaka, Ghanshyam Bhandari, announced the development in a roundtable discussion organized by the Centre for Policy Dialogue (CPD) on Monday. The ambassador highlighted the vast potential for increasing trade between the two countries, citing existing partnerships between Bangladeshi companies such as Pran, Akij, and pharmaceutical firms operating in Nepal. Discussions are also underway regarding electricity imports, with plans to bring in 40 MW of electricity from Nepal, potentially increasing to 9,000 MW in the future.

Key Takeaways:

  • Bangladesh and Nepal are set to sign a Preferential Trade Agreement (PTA) to strengthen trade relations and address a growing trade deficit.
  • Nepal's Ambassador to Dhaka, Ghanshyam Bhandari, announced the development in a roundtable discussion organized by the Centre for Policy Dialogue (CPD) on Monday.
  • Pran, Akij, and Bangladeshi pharmaceutical companies are already operating in Nepal, with a huge potential for increasing trade between the two countries.
  • Discussions are underway regarding electricity imports, with plans to bring in 40 MW of electricity from Nepal, potentially increasing to 9,000 MW in the future.
  • Bangladesh will import 9,000 MW of electricity by 2040 from Nepal, as per the energy pact signed in 2018.
  • The benefits of the quota-free market will decrease for both countries as they graduate from the Least Developed Country (LDC) status by 2026.
  • Regional and bilateral trade must be increased to mitigate the challenges posed by graduation from LDC status.
  • India's help will be needed for Bangladesh to increase electricity imports from Nepal by using the Indian grid and India's transit.
  • There is a need to diversify exports by increasing exports to neighboring countries due to a rise in tariffs globally.

Statistics:

  • Exports to Nepal rose sharply from $20 million to exceeding $100 million by 2021, signaling strong trade ties.
  • Exports to Nepal drastically fell to $40 million in 2024.
  • Imports from Nepal peaked in 2008, accounting for $66.5 million.
  • Imports from Nepal declined significantly, accounting for only about $6 million in 2024.
  • Bangladesh will import 40 MW of electricity from Nepal by June 2025, with plans to increase it to 9,000 MW by 2040.

Sources:

  • "Bangladesh, Nepal discuss Preferential Trade Agreement" by The Financial Express
  • Presentation by Aman Pant, senior fellow, Nepal Economic Forum (NEF), and Afrin Mahbub, Program Associate (Research), Centre for Policy Dialogue (CPD)
  • Statement by Nepal's Ambassador to Dhaka, Ghanshyam Bhandari, in a roundtable discussion organized by the Centre for Policy Dialogue (CPD)
  • Energy pact signed in 2018 between Bangladesh and Nepal

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