Report

T RADE IN SERVICES AND SOUTH ASIA: AN OVERVIEW 99
20–40% (Raihan and Mahmood 2004:6). Growth rates
for trade in services fluctuated between 2000 and 2003.
Between 1994 and 2003, services sector growth in
Bangladesh exceeded overall GDP growth (Ibid: 5).
Nevertheless, Bangladesh maintains one of the most
liberal FDI regimes in South Asia, with no limits on
foreign equity participation (Bangladesh’s TPR 2006).
Possibly due to ‘a better enabling investment environment’
and reduction of investment expenditure (cost),
annual FDI inflows into Bangladesh grew almost ninefold
during 2002–04, increasing from $52 million to
$460 million and outflows were $3 million and $4
million.
Since the beginning of the 1990s, Bangladesh has
adopted a number of policies to facilitate the expansion
of the private sector and increase the inflow of foreign
investment (UNCTAD-ICC 2000). The private sector
is recognised as the engine of growth. Foreign companies
are welcome. As already noted, the country offers
perhaps the most liberal FDI regime in South Asia, with
no prior approval requirements or limits on equity
participation or restrictions on the repatriation of
profits and income.
UNCTAD-ICC also suggest that while discussing
the investment climate in Bangladesh one of the weaknesses
of the Bangladeshi economy is that it has low
levels of skills and training in the workplace implying
that foreign investors have an opportunity to invest in
education and training (UNCTAD-ICC 2000). Similarly,
it has been suggested that inadequate infrastructure
provides immense investment particularly in the
construction industry. This indicates that Bangladesh
has strong import interest in both education and
construction services and liberal commitments in these
services would help the country meet the requirements
of the economy.
In Bangladesh, computer and related services,
telecommunications, distribution services, life insurance
and maritime transport services generally enjoy a
positive balance of trade. Conversely, the following subsectors
have shown a negative trade balance since 1999:
rental and leasing services without operators;
construction and related engineering services; education
services; health-related and social services; tourism and
travel-related services; news agency services; research
and development services; and air transport services.
Bangladesh’s import of tourism and travel-related
services surpassed exports by $32.33 million. At $25.83
million, the deficit in the education sector is also
comparatively high. Overall, the level of trade in
commercial services in Bangladesh remains low.
In the context of the ongoing services negotiations
at the WTO, Bangladesh has not yet submitted its initial
offer and the Uruguay Round commitments it has
undertaken are limited to tourism. In fact, during the
Uruguay Round, Bangladesh had undertaken commitments
in just one sub-sector covering five star hotels
and lodging services under tourism sector. Later in
1998, it also undertook commitment in telecommunications.
However, as the paper argues, Bangladesh
has strong import and to some extent exports interest
in construction and education services and accordingly,
it ought to undertake commitments in these services.
Alongside, it needs to make wider and deeper commitments
in tourism services as well.
Nepal
Nepal acceded to the WTO in 2004. As a result of the
accession negotiations it has undertaken relatively
liberal commitments in a number of service sectors.
From GATS point of view, Nepal offers perhaps the
most liberal services regime in South Asia. This assumes
greater significance considering the fact that Nepal is
an LDC. Nepal has undertaken commitments in all the
services sectors being discussed here. Nepal however
suffers from a variety of problems that commonly beset
poor countries at an early stage of industrialisation
(UNCTAD-ICC 2003). Skills and productivity in the
workforce are at a low level. Infrastructure is insufficient
and poorly maintained. There are also policy areas
that need attention. One example is the labour law,
which is widely seen in the business community as
excessively restrictive.
Services account for barely 39% of Nepal’s GDP
which is only slightly higher than that of Bhutan’s GDP.
The tourism and travel related service sector appears
to be the area of its strength in services as the country
has spectacular natural and cultural assets. Thus, while
in tourism Nepal has strong export interest, in
construction and education services it has import
interests. Being a landlocked poor country any attempt
to upgrade the state of its infrastructure will have
economy-wide positive implications. Hence, attracting
investment in the construction sector will be highly
beneficial. Similarly, as the paper argues, in view of
low skill level of the labour force, Nepal has to invest
huge sums of capital to revamp its education commensurate
to the requirements of its economy.
In recent years Nepal has been moving towards
creating a more hospitable environment for foreign
investors (WIR 2004). In 1992, the government
introduced a new policy on FDI and instituted a ‘one-