International Trade & Finance

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A Report on
Economic integration in the perspective of
Bangladesh
Tazrina Farah
Assistant Professor
Department of Finance
University of Dhaka
GROUP # 06
Section: A
Batch: 19th
Department of Finance
University of Dhaka
Date of Submission: 28th
May, 2015
PREPARED FOR
PREPARED BY

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Group
Profile
Serial Name ID
1 Maruf Hossain 19-013
2 Md. Niaz Mahmud Khan 19-067
3 Manjurul Ahsan 19-099
4 Md. Abdul Quyum 19-121
5 Md. Ripon Molla 19-123
6 Md. Woasiul Hamim 19-139
7 Raqib Hossain 19-157
8 Md. Ariful Hasan 19-175
9 Shibpada Barmon 19-193
10 Md. Moshiur Rahman 19-269

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LETTER OF TRANSMITTAL
May28, 2015
Tazrina Farah
Lecturer
Department of Finance
University of Dhaka
Subject: A report on “Economic Integration in the perspective of Bangladesh “
Honorable Madam,
This is a great pleasure for us to submit the report on “Economic Integration in the perspective
of Bangladesh” as a partial requirement of the BBA program in University of Dhaka.
Preparation of this report has been a great pleasure & an interesting experience. It enabled us
to know about various economic knowledge more broadly than before and also their economic
condition.
This report helped us tremendously to understand and to know the various term of economic
integration and the condition of trade in various region.
We have undertaken our sincere effort for successful completion of the BBA program. If we
have any unintentional errors and omissions that may have entered into this report will be
considered with sympathy.
Therefore, we beg your kind consideration in this regard, we will be very grateful if you accept
our report and oblige there by.
Sincerely,
On the behalf of members of group 06

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Acknowledgement
We would like to pay our gratitude to all of the related books, articles, journals, authors and
related Web Sites that helped us a lot for the completion of this report before, during, and after
the working period. At first we would like to acknowledge the Almighty, who helped us every time
and was with us and gave us moral support and strength every moment.
We are especially grateful to our honorable course instructor Tazrina Farah for giving us valuable
suggestions and support to prepare this report. Without her advice and support, it would not be
possible for us to prepare this report.

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Executive summary
International trade and finance is the most important tropic in the recent business world. Basically
the world is now fully control and monitor through the terms and condition of trade. Our assigned
topic is about economic integration in perspective of Bangladesh. We have tried to show our best
competence in our report. From the perspective of Bangladesh economic integration we find after
1971 Bangladesh join some economic organization. In line with others, Bangladesh believes that
economic integration in South Asia can be further enhanced through the adoption of various trade
liberalizing initiatives. Bangladesh along with the seven other nations are all original members and
no plans for expansions have been made. The Developing 8 is an economic development alliance
consisting of Muslim majority states which focuses in multiple areas which are rural development,
science and technology, banking, agriculture, humanitarian development, energy, environment,
health and finance. On May 14, 2006 in Bali, Indonesia, Bangladesh was the only nation not to sign
a preferential trade agreement. Bangladesh is currently chairman of the Developing 8 Countries.
The government has participated in numerous international conferences, especially those dealing
with population, food, development, and women's issues. In 1982-83, Bangladesh played a
constructive role as chairman of the "Group of 77", an informal association encompassing most of
the world's developing nations. It has taken a leading role in the "Group of 48" developing
Countries. For make this report we have collected information from different web sites and also
taking help to our senior and text book. We have tried our best to provide every possible
information and try to make information easy to understand.

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Table of contents
SL. Title Page no.
1.1 Introduction 5
2.1 Discussion of economic Integration 7
2.2 Stages of Economic integration 8
2.3 Discriminatory Policies Against non-members 10
3.1 Levels of economic integration 11
3.2 Types of economic integration 11
3.3 Economic effects of economic integration 12
4.1 Bangladesh perspective 14
5.1 Conclusion 17

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Chapter: 1
Introduction

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1.1 Introduction
Economic integration is the unification of economic policies between different states through the
partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior
to their integration. This is meant in turn to lead to lower prices for distributors and consumers
with the goal of increasing the combined economic productivity of the states. The removal
of barriers to trade that prevent or hinder the flow of goods and services into or out of a nation
or society. Economic integration usually implies repealing tariffs, embargos, or other
punitive customs practices, and may also include extending favorable taxation rates or regulatory
treatment to encourage cross-border investments.
1.2 Objective of the study
The main objectives of this report are:
 To gather knowledge broadly about economic integration.
 To gather knowledge about different policies related with it.
 Involvement of Bangladesh in different policies.
1.3 Scope of the report
The report has been prepared by collecting information from study materials and internet. The
sources were relevant to the main problem of the report. Much data and sources made the report
simple. The scopes of the report have very good influence to make it the perfect one.
1.4 Methodology of the report
 We took help from the study material to understand the conceptual matters.
 We also followed guidance of our course teacher.
 We also make analysis with the help of internet browsing.
 Though the analysis in Microsoft word and Microsoft Excel we have tried to draw some
valid conclusions and findings.
1.5 Limitation of the study
 Time limitation.
 Lack of information.
 Lack of previous experience on study on an insurance company.

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Chapter: 2
Chapter: 2

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2.1: Discussion of economic Integration
Economic integration describes a process whereby countries coordinate and link their economic
policies.
As the degree of economic integration increases, the trade barriers between countries decrease
and their fiscal and monetary policies are more closely harmonized.
2. 2: Stages of Economic integration:
Six Stages of Economic Integration:
Complete
Economic

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Preferential Trading Areas (PTA)
A PTA is a trading bloc that gives preferential access to certain products from certain countries.
This is usually achieved by reducing, but not eliminating tariffs. An example of a PTA is one
between the EU and the ACP (Africa, The Caribbean & the Pacific) countries. This is an
agreement between the EU and 71 countries in the ACP. Many of these countries were former
colonies of EU members.
It enables the EU to guarantee regular supply of raw materials and the ACP countries gain tariff
preferences and access to special funds that are used to achieve price stability in agricultural
and mining markets.
Free Trade Areas
A free trade area is an agreement made between countries, where the countries agree to trade
freely between them, but are able to trade with countries outside of the FTA in whatever way
they wish.
• An example of an FTA would be the North American Free Trade Agreement, which
comprises the US, Canada and Mexico.
• NAFTA was formally established in January 1994.
However, it was not until January 2003, that a final tariff reduction between Canada and
Mexico, achieved the ultimate goal of tariff free trade in the region (99%)
Free Trade Areas Other examples of FTAsEconomic & Monetary Union
1. European Free Trade Association
• Iceland, Norway, Switzerland and Liechtenstein)
2. South Asia Free Trade Agreement
• India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.
Custom Union
A Customs Union is an agreement made between countries, where the countries agree to trade
freely among themselves, and also they agree to adopt common external barriers against any
country attempting to import into the customs union.
• All common markets and economic and monetary unions are also customs unions.
• Therefore the EU has a customs union.
Other examples:
The Switzerland-Liechtenstein Customs Union.

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East Africa Community, comprising Kenya, Uganda, & Tanzania.
Mercosur, comprising Brazil, Argentina, Uruguay and Paraguay.
Common Markets
Examples of common markets are:
• The Carioca a single market and economy (CMSE)
• Current members are Barbados, Belize, Guyana, Jamaica, Suriname, Trinidad& Tobago,
Antigua & Barbuda, Dominica, Grenada, St Kitts & Nevis, St Lucia & St Vincent and the
Grenadines.
Montserrat is also expected to join.
Economic & Monetary Union
Economic & monetary union is a common market with a common currency.
The best example of economic and monetary union is the Euro zone, which includes the
member countries of the EU that have adopted the EU as their currency.
Note: Some countries in the EU have not adopted the Euro (Eg: Britain) and therefore are not
part of Euro zone statistics.
Complete Economic Integration
This would be the final stage of economic integration at which point the individual countries
involved would have no control of economic policy.
There would be full monetary union and complete harmonization of fiscal policy.
• The advantages and disadvantages of trading blocs clearly depend to a large extent on
the degree of integration
Common
Markets
.
In purely economic terms, the benefits of being a member of a trading bloc are similar
to those of free trade.
• These include greater market size with the potential for a larger export market,
increased competition leading to greater efficiency, more choice and lower prices for
consumers.
The consequences may not be even, as some domestic producers are likely to gain from the
larger market while others may find themselves unable to compete.

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•There may be further stimulus for investment due to the larger market size, and foreign
investment might be attracted from the outside the bloc as a way of getting a foot in the
door of a larger market.
• There is also an argument that along with the economic gains, a trading bloc will foster
greater political stability and cooperation.
It is also possible that trade negotiations may be easier in world made up of a number of
large trading blocs, rather than among sovereign states.
2.3 Discriminatory Policies Against non-members
By their very nature, trading blocs favor increased trade among members, but enact
discriminatory policies against non-members. This can be damaging to the achievements of the
multilateral trading negotiations of the WTO.
Loss of Political Sovereignty
If integration reaches the stages of customs unions, then political decisions start to be
made by a central body and this reduces the power of the domestic government of the
country.
This may not be popular with domestic politicians and also with those members of the
population who are especially patriotic.
An example is the European Parliament making decisions for EU countries.
Loss of Economic Sovereignty
Again if integration reaches the stages of a customs union, then economic decisions also
start to be made by a central body.
Governments and citizens in any given country may be reluctant to give up rights to
make decisions about economic matters.
An example of this would be the European Central Bank, making decisions relating
tinterest rates. Loss of Economic Sovereignty

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Integration into a common market may `force` a country to change its economic
policies.
If there are greater tax benefits in one country and factors of production are free to
move from one to another, then the government in the country with higher taxes may
have to lower them in order to discourage such movement.
The greater the level of economic integration the move member countries will lose control
over political and economic affairs.

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Chapter: 3

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3.1: Levels of economic integration
There are three level of economic integration. The economic integration has been a
predominant feature of the contemporary global economy. The econ integration brings
together countries based on collaboration, flexibility, risk and cost, shared interest and
objectives. The econ integration has led to a relocation of resources across sectors and space.
Global: trade liberalization by GATT or WTO
The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. This
agreement was designed to provide an international forum that encouraged free trade
between member states by regulating and reducing tariffs on traded goods and by
providing a common mechanism for resolving trade disputes.
The World Trade Organization (WTO) came into being in 1995. It is the successor to the
GATT. Now it is the only global international organization dealing with the rules of trade
between nations. At its heart are the WTO agreements, negotiated and signed by the
bulk of the world’s trading nations and ratified in their parliaments. The goal is to help
producers of goods and services, exporters, and importers conduct their business.
– Location-Geneva, Switzerland
– Members—153 countries
Regional: preferential treatment of member countries in the group
– NAFTA
Bilateral: preferential treatment between two countries
3.2: Types of economic integration
Groups or countries are coming together all over the world with the idea of defending
themselves economically against the incursions of other blocks in the area.
1. FTA (free trade area)—free and open trade among members No internal tariffs
among members, but each country imposes its own external tariffs to the third country.
– NAFTA (North America Free Trade Agreement)
• 1994; free trade area among the US, Canada and Mexico.
– AFTA (ASEAN Free Trade Area)
• Signed in 1992 Singapore; originally 6 countries

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– EFTA (European Free Trade Area)
• 1960, Austria, Denmark, Norway, Sweden, Portugal, Switzerland and UK
2. Customs Union
No internal tariffs and common external tariffs
– Mercosur (Southern Common Market)
• Formed in 1991 by Brazil, Argentina, Paraguay and Uruguay
– CACM (Central American Common Market)
• 1960, Guatemala, El Salvador, Honduras, Nicaragua
– CARICOM (Caribbean Community and Common Market)
3. Common Market:
• free movement of products and factors (resources), which is customs
union plus factor mobility
• EU (European Union – previously Euro Econ Community)
4. Economic union
• common market plus common currency
• coordination of fiscal and monetary policy
Economic integration brings significant benefits, more efficient allocation of resources
Static effects: Short-term effects
– Better use of existing resources
– Trade creation: production shifts to more efficient member countries from
inefficient domestic or outside countries.
– Specialization, comparative advantage
Dynamic effects: Long-term effects
– Cost reduction due to economies of scale
– Cost reduction due to increased competition.

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Both producers and consumers benefit from more efficient allocation of resources as a result of
integration.

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Chapter: 4

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Bangladesh perspective
In line with others, Bangladesh believes that economic integration in South Asia can be further
enhanced through the adoption of various trade liberalizing initiatives. Bangladesh as part of
economic integration joined Commonwealth, United Nations, on-Aligned Movement, OIC,
SAARC, BIMSTEC and WTO. Also Bangladesh played a vital role as chairman of the "Group of
77", an informal association encompassing most of the world's developing nations. It has
taken a leading role in the "Group of 48" developing countries.
Common wealth of Nations
Bangladesh, which was part of British India until 1947, joined the Common wealth of Nations
in 1972 after its establishment as an independent nation in 1971.[1] It has actively
participated in the Heads of Government conferences that take place bi-annually.
United Nations
Bangladesh was admitted to the United Nations in 1974[2] and was elected to a Security
Council term in 1978-1980[3] and again for a 2000-2002 term. Foreign Minister Choudhury
served as president of the 41st UN General Assembly in 1986.
In recent years, Bangladesh has played a significant role in international peace keeping
activities. Nearly 10,000 Bangladeshi military personnel are deployed overseas on peacekeeping
operations, making it a large contributor to the UN peacekeeping forces. Under UN auspices,
Bangladeshi troops have served or are serving in Somalia, Rwanda, Mozambique, Kuwait,
Bosnia and Herzegovina, and Haiti, and units are currently serving in Kuwait and East Timor.
Bangladesh responded quickly to U.S. President Bill Clinton's 1994 request for troops and police
for the multinational force for Haiti and provided the largest non-U.S. contingent. As of
December 2012, Bangladesh is the largest provider of UN peacekeepers.
Non-Aligned Movement
Bangladesh was selected to provide the next chairman of NAM at the summit scheduled for
Dhaka 2001; however it was later decided to host the summit at an alternative venue. As a
member of the Non-aligned Movement Bangladesh never took any position in line with bi

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However it parted with its principle by voting at the United Nations against North
Korea, under pressure from Japan, in December
2008.
OIC
In 1974, then Prime minister Bangabandhu Sheikh Mujibur Rahman, lead a Bangladeshi
delegation team consisting Kamal Hossain, Enayet Karim, Ataur Rahman Khan, Taher Uddin
Thakur, Tofail Ahmed and Shah Azizur Rahman under him,[4] to the international meeting
of the Organization of the Islamic Conference (OIC, now the Organization of Islamic
Cooperation) held in Lahore. Following this participation Bangladesh was admitted as a
member of OIC. In
1977, President Ziaur Rahman amended the Constitution of Bangladesh, including a
clause
stating that " the state shall endeavor to consolidate, preserve and strengthen
fraternal relations among Muslim countries based on Islamic solidarity ".[5] Since then, an
explicit goal of Bangladeshi foreign policy has been to seek close relations with other Islamic
states. In 1980, President Ziaur Rahman was included in a 3 member "Al-Quds" summit
committee to attend the summit at Morocco.[6] In 1983, Bangladesh hosted in capital Dacca
the foreign ministers meeting of the OIC. At the OIC headquarters at Jeddah, Bangladesh is
represented in the capacity of one of the Director Generals.
South Asian Association for Regional Cooperation
The government also pursued the expansion of cooperation among the nations of South
Asia, bringing the process—an initiative of former President Ziaur Rahman—through its
earliest, most tentative stages to the formal inauguration of the South Asian Association for
Regional Cooperation (SAARC) at a summit gathering of South Asian leaders in Dhaka in
December 1985. Bangladesh has served in the chairmanship of SAARC and has participated in
a wide range of ongoing SAARC regional activities.
Centre on Integrated Rural Development for Asia and the Pacific
An intergovernmental and autonomous organization, the organization consists of fifteen
members:- Afghanistan, Bangladesh, Fiji, India, Iran, Indonesia, Laos, Myanmar,
Malaysia, Nepal, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam. The area of
cooperation is primarily focused on agriculture, regional relations and the development of
the region.

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Bay of Bengal Initiative for MultiSectoral Technical and
Economic Cooperation
An international organization which includes South Asian and Southeast Asian
nations. The member nations of this group are: Bangladesh, India, Myanmar, Sri
Lanka, Thailand, Bhutan and Nepal. The organization focuses on regional economy,
regional development and trade
Developing 8 Countries
Bangladesh along with the seven other nations is all original members and no plans for
expansions have been made. The Developing 8 is an economic development alliance
consisting of Muslim majority states which focuses in multiple areas which are rural
development, science and technology, banking, agriculture, humanitarian development,
energy, environment, health and finance. On May 14, 2006 in Bali, Indonesia, Bangladesh
was the only nation not to sign a preferential trade agreement.
Asia Pacific Trade Agreement
In 2005, Bangladesh signed the APTA agreement which would enable it to reduce trade gaps
between itself and other nations such as China, South Korea and its neighbour India. Another
aspect of the agreement is to be given duty-free access to its products.
World Trade Organization
Bangladesh is an active member of the World Trade Organization (WTO). Bangladesh has a
permanent mission in Geneva to look after matters relating to multi-lateral trading
system under the WTO regime since mid-1990s.
World Customer Organization
Bangladesh is an active member of the World Customs Organization (WCO). Bangladesh has a
permanent representative to WCO which has its headquarters in Brussels.
Others
Bangladesh is currently chairman of the Developing 8 Countries. The government has
participated in numerous international conferences, especially those dealing with population,
food, development, and women's issues. In 1982-83, Bangladesh played a constructive role as
chairman of the "Group of 77", an informal association encompassing most of the world's
developing nations. It has taken a leading role in the "Group of 48" developing countries.
Bangladesh also participates in these international organizations: ARF, AsDB, BIMSTEC, CP,
FAO, IAEA, IBRD, ICAO, ICC, ICCt (signatory), ICRM, IDA, IDB, IFAD, IFC, IFRCS, IHO, ILO, IMF,.

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Conclusion:
Economic integration is the unification of economic policies between different states
through the partial or full abolition of tariff and non-tariff restrictions on trade taking place
among them prior to their integration. There are varying levels of economic integration,
including
preferential trade agreements (PTA), free trade areas (FTA), customs unions, common
markets
and economic and monetary unions. The more integrated the economies become, the
fewer trade barriers exist and the more economic and political coordination there is
between the member countries.