Dhaka (The Daily Star/ANN) - An economic slowdown in Europe may affect Bangladesh as it is highly dependent on exports to the Eurozone, said World Trade Organisation (WTO) Director General Pascal Lamy yesterday.
"Macroeconomic development is not looking very good, especially for countries like Bangladesh, whose two-thirds of exports are to Europe. For the moment, the European economy has a major problem - it will grow very slowly in the year to come," he said.
The caution from Lamy, who was on a two day-visit to Bangladesh, came at a gathering of businessmen, economists and trade analysts at Sonargaon Hotel in Dhaka.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) organised the discussion on recent developments in the global economy and the role of WTO.
Finance Minister AMA Muhith and Commerce Minister GM Quader also spoke at the programme chaired by FBCCI President AK Azad.
The WTO chief said expansion of world trade depends on four major factors - growth of the developed economies, availability of trade finance, countries' openness to a trade regime and changes in technology, such as internet.
Lamy said Europe now fights low growth.
"The question is whether this growth in Europe will last for the next five years or 10 years," he said, adding that Europeans are trying to find the right mix in fiscal adjustments to address debt and stimulate growth.
Lamy feared that the volume of world trade this year would be below the level in 2011 because of sluggish growth of the world economy.
He cautioned that the availability of trade finance might be low, especially for poor countries and small businesses catering to the low-end of the market.
He said the high-end market and markets of big countries may not face difficulties in getting finance for trade as they have big banks with enough liquidity.
"The problem lies on the low end of the market. Small banks, small business, poor countries will obviously face problems - both in availability and pricing of trade finance," he said.
With the clothing industry being the life line for Bangladesh, the least developed country (LDC) exports a bulk of its products - garments - to Europe and the US and caters to the low-priced segment of the global clothing market.
Lamy advised LDCs to unite and place their own agendas at the WTO.
"That sort of consensus allows LDCs to move forward in their own agenda at the WTO," said Lamy.
Despite short-term problems, Bangladesh has the potential to develop fast in region, he said. He suggested Bangladesh integrate its economy into the global value chain, and become a trade and transportation hub in South Asia, like Singapore.
Others include going for deeper regional economic integration, building capacity on non-tariff barriers.
"Bangladesh is at a low level of trade and economic integration," he said.
He said Bangladesh and other countries such as India, Nepal, Bhutan, Pakistan and Sri Lanka lag in regional trade for a number of reasons.
Lamy said Bangladesh has a huge potential in developing faster because of its geographical location in South Asia.
"In many ways, there lies an important asset for Bangladesh. I believe that Bangladesh has the potential to become Singapore in South Asia. Singapore represents a new world of trade you will be living in a few decades from now," said Lamy.
The president of FBCCI also expressed concerns over an economic slowdown in the Eurozone, Bangladesh's major market.
"We are passing through difficult times," he said. "Our exports are decreasing. Inflow of FDI and foreign finance are also insignificant."
"We are deeply concerned over fallout in the European sovereign debt crisis. And the adversity of the financial crisis has also engulfed developing and high-income countries and, more so, the least developed countries like us," Azad said.
He also expressed concern over protectionism in the current difficult economic environment.
Finance Minister AMA Muhith said long and medium term plans are needed to address the issues raised by Lamy.
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