Bangladesh and Malaysia have commenced the first round of negotiations for a free trade agreement (FTA) in Dhaka, marking a strategic effort by Bangladesh to secure preferential market access ahead of its upcoming graduation from the least developed country (LDC) status. The talks began on October 27 at the Hotel Pan Pacific Sonargaon, with the goal of finalizing an agreement by next year, according to a Bangladesh commerce ministry official who requested anonymity.
Leading the Bangladesh delegation is Additional Commerce Secretary Khadiza Nazneen, while a 30-member Malaysian team is participating in the discussions. The proposed FTA forms a key part of Bangladesh’s broader strategy to expand its network of trade agreements as it prepares to face the erosion of current trade benefits tied to its LDC classification.
Earlier this year, Bangladesh signed an economic partnership agreement (EPA) with Japan and a comprehensive economic partnership agreement (CEPA) with South Korea. However, both treaties remain pending parliamentary ratification in the respective countries and have yet to take effect. Bangladesh also operates a preferential trade agreement (PTA) with Bhutan, established in December 2020, which covers selected products from both nations.
Md Anwar Shahid, president of the Bangladesh Malaysia Chamber of Commerce and Industry (BMCCI), welcomed the negotiations, emphasizing the need for Bangladesh to secure FTAs with emerging partners to mitigate the impact of lost preferential access. While acknowledging that an FTA could reduce tariff revenues for the National Board of Revenue, Shahid highlighted that the potential long-term benefits to the country’s trade and economic development should not be overlooked. He further urged that manpower export opportunities be incorporated into the talks, noting that Bangladesh’s economic relationship with Malaysia remains narrowly focused and largely reliant on garment exports.
Current trade flows between the two countries show Bangladesh exporting textiles, garments, leather goods, jute products, fish, seafood, and pharmaceuticals to Malaysia. Imports from Malaysia primarily include electrical and electronic equipment, palm oil, machinery, rubber goods, and chemicals. Data from the Export Promotion Bureau and Bangladesh Bank indicate that in the fiscal year 2024-25, Bangladesh exported $282 million worth of goods to Malaysia while importing $2.29 billion, reflecting a substantial trade imbalance largely driven by palm oil imports.
M Masrur Reaz, chairman and CEO of the Policy Exchange of Bangladesh, also stressed the urgency of diversifying export destinations and securing broader market access in the lead-up to the country’s LDC graduation. He noted that approximately 84 percent of Bangladesh’s exports are concentrated in the garment sector, with a similar proportion destined for just three markets: the United Kingdom, the United States, and the European Union. Much of this concentration has been sustained by duty-free access contingent on LDC status.
Reaz suggested that expanding trade ties with Asian partners, including Malaysia, Japan, and South Korea, will be critical, as these countries could facilitate Bangladesh’s integration into wider regional markets such as the Association of Southeast Asian Nations (ASEAN). Despite ASEAN’s significant growth potential, Bangladesh’s exports to the region remain modest.
Both Shahid and Reaz underscored the importance of including labor mobility provisions in the FTA negotiations to broaden the scope of bilateral cooperation and capitalize on the existing flow of manpower between the two countries. They also pointed to the increasing global shift toward regional trade frameworks amid geopolitical uncertainties as a driver for strengthening economic ties within Asia.