SANEI: Completed Studies: Abstract

Bangladesh-India Bilateral Trade: An Investigation into Trade in Services

Studies dealing with Bangladesh-India bilateral trade relations have generally tended to focus only on t?Srade in goods carried out through formal, and in recent times, informal channels. Issues related to bilateral trade in services (more particularly, trade in health and education services) between the two countries have continued to remain outside the ambit of serious research in spite of an increasing evidence which bear out that in recent years a growing number of Bangladeshi nationals are seeking education and health services from various educational and health establishments in India. As a result, no official estimate exists as to the number of students and patients who visit India every year in order to seek such services. Neither is there any reliable estimate on the cost of imports of such services and its implication for bilateral trade balance. Absence of these estimates has undermined the GOB's policies in the areas of health and education services and has also seriously constrained research on related issues. One of the reasons for the absence of reliable data is the formidable difficulty in accessing and generating reliable information on trade in services.

The objective of the present study is to generate data and information on such important variables as (i)number of Bangladeshi service importers, (ii)socio-economic background of service seekers, (iii)causes of imports of services from India, (iv)financial implications of importing the services, (v) mode of transfer of money and (vi)policy initiatives required for strengthening import substitution activities in Bangladesh.

The study was conducted on the basis of extensive field level research, both in India and Bangladesh, which covered a large number of (i)service seekers and (ii)service providers. A large number of other key informants including government officials was also debriefed for the purpose of the study.

The analysis on import of health services by Bangladeshi patients from Indian health establishments throws important insights into such variables as socio-economic background of the service seeking patients, types of diseases treated in India, perception of patients on the quality of medical services in India, spatial distribution of treatment in India, duration of treatment, expenditures for procurement of medical services and mode of transfer of the resources from Bangladesh for treatment in India. Similarly, the analysis on imports of education services by Bangladeshis provides information on some of the key issues including socio-economic background of the students, structure of the expenditure pattern, spatial distribution of the students in India, number of students currently studying in India, an estimate of the financial outflows involved and channels of transfer of money.

GOB estimates show that the amount of foreign currency endorsed for import of education and medical services was about US$ 1.37 million and US$ 0.17 million respectively in the FY1999. Government estimates also indicate the number of Bangladeshi students studying in India to be approximately in the range of 10 thousand only. The research undertaken for this study, however, shows that at present there are approximately 53 thousand students studying in various educational institutions across India. The study also found that on average about 50 thousand Bangladeshi patients visit various treatment facilities and medical establishments across India. The study indicates that Bangladeshi service seekers on average pay about US$ 102 million on account of import of health and education services from India (US$ 30 million and US$ 74 respectively). This contrasts strikingly with the official endorsement in Bangladesh of only US$ 1.54 million for import of these two services that was mentioned above. It was also found that, though a large part of the actual service payments is transferred through formal channels and gets reflected as transfers on account of tourism, a significant part is indeed transferred through various informal channels (mainly hundi). It was found that an amount of US$ 42 million (i.e. 41% of total outflow) was transferred to India from Bangladesh through official channels and about US$ 57 million (i.e. 56% of the total) was transferred through the informal channel. The rest (4% of the total costs of the imported service) was borne by Indians relatives of the Bangladeshi service seekers.

The study presents a detailed analysis of the key variables related to the imports of the two services from India. The study also puts forward some suggestions to address some of the attendant issues and identifies a number of potential policy initiatives in order to encourage and stimulate import-substitution activities in Bangladesh.

Download in pdf format