EXPORT POTENTIAL OF BANGLADESH IN BIMSTEC FREE TRADE AREA: EVIDENCE FROM GRAVITY MODEL

This article investigates Bangladesh’s export potential inside the BIMSTEC Free Trade Area by applying a standard augmented gravity model to bilateral trade flows. It discusses how market size, distance, relative factor endowments, and trade costs shape realized exports, and how policy variables—tariff preferences, rules of origin, and logistics quality—mediate the results. The study situates the analysis in the context of Bangladesh’s changing export basket beyond ready-made garments, highlighting emerging niches in pharmaceuticals, leather goods, frozen foods, and light engineering. Using benchmark partners in South and Southeast Asia, it identifies persistent “trade gaps” where predicted exports exceed actual flows, implying untapped opportunities. The abstract summarizes the empirical approach, core coefficients, and policy levers with the greatest marginal impact, noting that improved connectivity, streamlined customs, and deeper mutual recognition mechanisms could unlock substantial welfare gains while diversifying markets away from traditional destinations.

The body details the model specification, data sources, and estimation strategy, including fixed effects to control for multilateral resistance. After outlining descriptive statistics for intra-BIMSTEC trade, the paper reports baseline results showing GDP and common border dummies as positive and significant, while distance, logistics frictions, and behind-the-border barriers remain binding constraints. Robustness checks incorporate alternative distance measures, exchange-rate volatility, and infrastructure proxies. Country-pair residuals reveal underperformance with Sri Lanka, Thailand, and Myanmar in product lines such as knitwear accessories, jute composites, light engineering items, and select agro-processed foods. The discussion then turns to policy: adopting comprehensive trade facilitation (digital customs, AEO schemes), harmonizing standards and testing through MRAs, rationalizing sensitive lists, and catalyzing corridor investments that connect manufacturing clusters to regional ports. Case vignettes illustrate how cold-chain upgrades and SPS alignment could immediately expand frozen-food exports. The conclusion emphasizes a sequenced agenda—facilitation first, tariff deepening next, and investment in multimodal logistics—to narrow the trade gap and enhance resilience.