1) Regional trade agreements (RTAs) like the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) have increased foreign direct investment (FDI) flows between member countries due to trade facilitation and preferential market access provisions. 2) Intra-RCEP investment accounts for about 30% of FDI flows to RCEP countries and has strengthened economic connectivity within the region through production networks and supply chains. 3) However, Bangladesh has declined offers to join RCEP due to concerns from bureaucrats that it requires commitments beyond trade in goods and services, despite analysts arguing this will leave Bangladesh without access to major trade and investment groups.

1. Dhaka, Mon, 21 August 2017
http://www.thefinancialexpress-bd.com/2017/08/20/80262/RTAs----the-route-to-increased-FDI-for-
Bangladesh
RTAs -- the route to increased FDI for Bangladesh
M S Siddiqui
Foreign direct investment (FDI) is considered as one of the major sources of employment
generation, technology transfer, managerial capacity building and improving market
efficiency in any country. Bangladesh invested huge amount of money for "Road shows" of
investment through "foreign tour" to tell overseas investors that the labour in Bangladesh is
the cheapest and GDP growth is around 7.0 per cent. But the desired FDI is not yet visible.
Global statistics revealed that FDI is flowing from members of some trade groups to another
members or intra-groups. The reasons of this exchange of investment are due to free trade
agreements and other facilities extended to member countries. Their intra-group
investment is significant, with some 30 per cent to 63 per cent of these inflows originating
from within the group. There is significant cross-membership among these existing and
prospective major groups.
The Group-20 (F-20), Transatlantic Trade and Investment Partnership (TPIP), Asia-Pacific
Economic Cooperation (APEC), Trans-Pacific Partnership (TPP), Regional Comprehensive
Economic Partnership (RCEP), and the Brazil, Russia, India, China and South Africa (BRICS)
account for a significant share of global FDI. Most of these groups' objectives include
fostering more investment-friendly environment to further encourage FDI flows into and
within the group. The actual impact of these partnerships on FDI, however, is likely to vary,
depending on a number of factors, including specific provisions of the agreements among
members, transaction costs, the scale and distribution of existing operations within a group,
and corporate strategy.
FDI flow among members of the mega-groupings in 2015 was trillions of dollars that
included countries from regions such as: in Africa-- South Africa; in Latin America--
Argentina, Brazil, Chile, Mexico, Peru; in developed economies -Australia, Canada, France,
Germany, Italy, Japan, New Zealand, United Kingdom, United States; and in Asia-- Brunei
Darussalam, Cambodia, China, Hong Kong (China), India, Indonesia, Lao People's
Democratic Republic, Malaysia, Myanmar, Philippines, Taiwan, Thailand, Viet Nam, Republic
of Korea, Singapore.
The G20 member economies are home to more than 95 per cent of the Fortune Global 500
companies. Intra-G20 investment is a significant source of FDI within the group accounting
for an annual average of 42 per cent of inflows in 2010?2014. Intra-G20 investment in 2015
rose by 187 per cent, from $92 billion in 2014 to $265 billion, and are contributing to
stronger intra-group investment and corporate connectivity.
Intra-group investment is significant in APEC, accounting for 47 per cent of the total in
2010?2014 and reflecting increasingly connected economies. Multinational Enterprises
(MNEs) headquartered in APEC member economies have been actively investing within the

2. group. MNEs from Japan, the Republic of Korea, ASEAN member economies, China, Hong
Kong (China) and Taiwan have a significant presence in other Asian APEC members, while
United States and Canadian MNEs are heavily investing in the NAFTA sub-region of Canada,
Maxico and USA. Taken together, these MNEs are contributing to a wide production network
and to inter and intra-regional value chains across the Pacific.
The TPP receives a significant share of global FDI inflows (34 per cent), largely in line with
its weight in world GDP. In 2015, FDI in the partnership rose by 68 per cent to $593 billion,
reflecting a significant rebound of investment to the United States from an a typical low
point of $107 billion in 2014 to $380 billion in 2015. Within the group, NAFTA, which
accounted for 75 per cent of the TPP's GDP in 2015, remains the largest recipient sub-
group, attracting about 80 per cent of FDI flows to the TPP.
The partnership's FDI in Stock Exchange in 2015 was $9 trillion, about the size of the
economies of Australia, Belgium, Canada, France, Germany and Sweden combined. Intra-
TPP investment accounted for an average 36 per cent of total inflows to the group between
2010 and 2014 (figure I.10). Unlike in other major groups, however, intra-TPP cross-border
sales in 2015 increased by 7 per cent to $113 billion. TPP partner countries acquired 46 per
cent more assets in the United States than in 2014. FDI into and within TPP continues to be
highly concentrated, with the United States and Singapore both the main recipients and
sources.
The exit of USA from TPP has created a new scenario. If the TPP agreement could get
implemented, some MNE production networks could be reconfigured and consolidated, as
parts and components become easier and cheaper to source through intra-firm
arrangements.
The five BRICS countries are home to 41 per cent of the world population and account for
23 per cent of world GDP but received 15 per cent of global FDI flows in 2015. They held
$2.4 trillion FDI stock in 2015 - 9 per cent of the world total. FDI in BRICS is highly
concentrated, with China alone receiving more than 50 per cent of the group's total FDI
inflows in 2015.
This reflects the minimal intra-BRICS corporate connectivity. Yet BRICS countries are a
growing source of investment in other developing economies, contributing to strengthening
South-South cooperation. A significant percentage of outward FDI from BRICS countries is
in neighbouring economies.
Regional Comprehensive Economic Partnership (RCEP) is a mega RTA among 10-member
alliance of Association of Southeast Asian Nations (ASEAN) and there are six partners in free
trade agreements (FTAs). The RCEP members have a total population of over three billion.
Their combined share in global trade is around 29 per cent and combined size of the
economy is around $22 trillion. Together, the RCEP countries generated about 31 per cent
of world GDP in 2015 but accounted for a much lower 19 per cent share of global FDI
inflows. FDI in the RCEP partners is dominated by ASEAN countries and China - the two
largest recipients in the developing world - which together held 70 per cent of the group's
FDI stock in 2015. Intra-RCEP investment accounts for about 30 per cent of FDI flows to the
prospective group and is expected to remain a major source of FDI. Intra-RCEP M&As have
been significant - at $18 billion in 2015, representing 43 per cent of total RCEP cross-border
M&A sales. The strong level of intra-RCEP M&As is also contributing to a greater
interconnection of corporate activities in the proposed partnership. Bangladesh has been
offered to join the FTA but the authorities particularly the bureaucrats in different ministries
are not willing to let Bangladesh join any trade agreement.

3. The prospective RCEP member countries are increasingly interconnected through trade,
investment and regional production networks: many Japanese, Korean, ASEAN and Chinese
MNEs, for instance, have already established a strong presence in other RCEP partner
countries. These connections could become stronger when a negotiated RCEP agreement is
signed and implemented. The rise in intra-ASEAN investment and regional value chains is
further strengthening the connectivity of firms and countries within this subgroup.
Will Bangladesh for FDI only on the basis of low- cost labour? The FDI will not come only on
invitation but on the basis of mutual benefits and facilitation of business.
Bangladesh declined to join this RTA on the pretext that "it is a big RTA which goes beyond
trade in goods and services and we are not going to do so now or in near future," as told by
top bureaucrats to the Financial Express (FE). Observers do not consider this a wise decision
as Bangladesh will be left alone as there is hardly any prospect to join existing FTA groups
or any probable FTA group in future.
The writer is a Legal Economist . shah@banglachemical.com