The shifting political sands in Bangladesh are set to reshape the landscape of Pakistan-Bangladesh relations, with both nations taking decisive steps towards normalising ties after more than a decade of strain. This thawing of relations, marked by a flurry of diplomatic and economic initiatives, has the potential to reshape trade and industrial cooperation between the two countries. The recent visit by a 35-member delegation of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) to Bangladesh, culminating in the signing of a Memorandum of Understanding (MoU) for a Joint Business Council, is a clear indicator of the renewed commitment to fostering bilateral trade relations. The Trade Development Authority of Pakistan (TDAP) is also gearing up for a trade delegation visit to Bangladesh in April, signalling a proactive approach to exploring export possibilities for Pakistani products. This momentum is further bolstered by the resumption of direct passenger and cargo flights between the two countries, and the historic direct sailing of a cargo ship from Pakistan to Bangladesh in November 2024.
The current state of bilateral trade, hovering around $700 million annually, is a fraction of its true potential. The trade imbalance, with Pakistan’s exports to Bangladesh significantly outpacing imports, highlights the need for a more balanced and diversified trade relationship. The projected trade volume of $3 billion within the next three years is ambitious but achievable, provided both countries address key barriers to trade, including tariffs and non-tariff barriers. The establishment of a Free Trade Agreement (FTA) or a Preferential Trade Agreement (PTA) could be a game-changer, opening up new trade areas and facilitating smoother trade flows.
Bangladesh’s growing economy presents a substantial opportunity for Pakistan to expand its trade share. The country’s total global exports amounted to over $50 billion in 2024, with imports standing at $70 billion. This economic landscape offers a fertile ground for Pakistani exports of machinery and equipment for various industries, including sugar, cement, and chemical plants. The demand for light engineering goods such as tractors, agricultural implements, and mining equipment further underscores the potential for Pakistani industries to supply these products. Historically, Pakistan has supplied railway coaches and equipment to Bangladesh, and there is a clear opportunity to revive and expand such cooperation.
The sugar industry in Bangladesh, a critical sector for employment and agricultural support, is ripe for Pakistani investment. With Bangladesh planning large-scale investments and modernization of its sugar sector, Pakistan’s expertise in sugar mill installation and operation could be a significant asset. The projected market size of $2.29 billion by 2030 offers a lucrative opportunity for Pakistani exports of both machinery and raw and refined sugar.
Similarly, the construction industry in Bangladesh, driven by urbanization and industrialization, presents a promising sector for Pakistani engagement. The cement industry, expected to grow at an annual rate of approximately nine per cent, will require large quantities of cement, building materials, and construction machinery. Pakistan’s previous experience in supplying machinery and equipment to Bangladesh’s cement industry positions it well to establish joint ventures and modernize the sector.
The resumption of the Pakistan-Bangladesh Joint Economic Commission (JEC) at the government level is crucial for revitalizing trade and industrial cooperation. This, combined with the optimization of existing regional trade agreements such as the Agreement on South Asian Free Trade Area (SAFTA) and the Developing-8 Countries for Economic Cooperation (D-8), could maximize economic, industrial, and trade opportunities. By implementing these measures, Pakistan and Bangladesh can pave the way for a mutually beneficial partnership that fosters economic growth and regional stability. The potential for joint ventures in IT, cement, pharmaceuticals, and the chemical industries further underscores the need for strategic engagement and proactive measures to realize the full potential of bilateral trade.