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Trade in Services Series

By Ananya Raihan and Mabroor MahmoodCentre for Policy Dialogue

Issue Paper No. 3

ICTSD Programme on Trade and Services and Sustainable DevelopmentMarch 2007

Opportunities and Risks of Liberalising Trade in Services

Country Study on Bangladesh

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March 2007 l ICTSD Programme on Trade in Services and Sustainable Development

Opportunities and Risks of Liberalising Trade in Services

Country Study on Bangladesh

Prepared for ICTSD by

Ananya Raihan and Mabroor Mahmood Centre for Policy Dialogue

Issue Paper No.3

Bangladesh.indb 1 8/3/07 22:11:16

iiOpportunities and Risks of Liberalising Trade in Services — Bangladesh

Published by

International Centre for Trade and Sustainable Development (ICTSD)International Environment House 27 chemin de Balexert, 1219 Geneva, SwitzerlandTel: +41 22 917 8492 Fax: +41 22 917 8093E-mail: [email protected] Internet: www.ictsd.org

Ricardo Meléndez-Ortiz

Programme Coordinator: Johannes Bernabe

Programme Officer: Heidi Ullrich

For more information about ICTSD’s programme on services, visit our web site: www.ictsd.org/issarea/services

ICTSD welcomes feedback and comments on this document. These can be forwarded to Heidi Ullrich at [email protected]

Citation: ICTSD (2007) Opportunities and Risks of Liberalising Trade in Services, ICTSD Trade in Services and Sustainable Development Series. International Centre for Trade and Sustainable Development, Geneva, Switzerland.

Copyright © ICTSD, 2007. Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged.

The views expressed in this publication are those of the authors and do not necessarily reflect the views of ICTSD or the funding institutions.

ISSN 1992-4348

AcknowledgementsThe authors gratefully acknowledge the contribution of CPD colleagues. Dr. Debapriya Bhattacharya and Professor Mustafizur Rahman provided valuable guidance and support and created an environment where the authors could concentrate solely on the analysis of their findings. The authors would like to acknowledge the selfless contributions of the following colleagues at both the Research Division and Dialogue Division: Kazi Mahmudur Rahman, Research Associate, Wasel Bin Shadat, Research Associate, Syed Saifuddin Hossain, Research Associate, Asif Anwar, Programme Associate, Farhana Rahman Shima, Programme Associate, Simeen Shakiba, Programme Associate, Damien Brosnan, Visiting Youth Ambassador, Australia and A.H.M. Ashrafuzzaman. The authors would like to mention specially the contribution of Kazi Mahmudur Rahman, who spent almost three months collecting data on the category-based exports of service providers. Without his persistence this study could not have been completed in its present form.

ICTSD is grateful for the support of the project by the Deutsche Gesellschaft für Technische Zusammenar-beit (GTZ), the Swedish Ministry of Foreign Affairs and the Swiss State Secretariat for Economic Affairs. The authors are also grateful to Mr. Alex Werth and Mr. David Vivas of ICTSD, Geneva for their valuable sug-gestions in preparing this paper.


Chief Executive:

iiiTrade in Services and Sustainable Development

CONTENTS

ACRONYMS v

FOREWORD vii

EXECUTIVE SUMMARY ix

1 INTRODUCTION 11.1 The GATS and Developing Countries 11.2 Relevance of the GATS to Bangladesh 21.3 Organisation of the Study 3

2 OVERVIEW OF THE SERVICES SECTORS IN BANGLADESH 42.1 Services in GDP 42.2 Employment 42.3 Trade in Services 5

3 STATE OF SELECTED SERVICE SECTORS IN BANGLADESH 63.1 Telecommunications 63.2 The Education Sector 93.3 Temporary Movement of Natural Persons 123.4 Summary of the Three Sectors 14

4 GOVERNANCE OF SERVICE SECTORS IN BANGLADESH 154.1 Telecommunications 154.2 The Education System 184.3 Temporary Movement of Natural Persons 19

5 THE ROLE OF IFIs IN SERVICES SECTORS IN BANGLADESH 225.1 Private Sector Development and the Role of IFIs 225.2 PRGF, PRSP and Sector Development 225.3 Direct Support to the Private Sector 245.4 The Lessons from the Roles of IFIs 24

6 BANGLADESH’S GENERAL AND SPECIFIC INTERESTS 256.1 Sectors of Export Interest 256.2 Sectors of Import Interest 266.3 Sectors Requiring Protection 266.4 Telecommunications 266.5 Movement of Natural Persons 28

7 STATUS OF THE SERVICES NEGOTIATIONS 327.1 The Doha Mandate and Developments in the Negotiations 327.2 The LDC Modalities 327.3 Temporary Movement of Natural Persons 347.4 Unfinished Business and Sequence of Negotiations 347.5 The Cancun Ministerial Conference and the Latest Developments 34

8 BANGLADESH IN THE SERVICES NEGOTIATIONS 358.1 Involvement in the Negotiating Process 358.2 Consultations with Domestic Stakeholders 358.3 Bangladesh’s Constraints in GATS Negotiations 358.4 General Analysis of the Request-Offer Process 368.5 Analysis of the Request-Offer Process for Bangladesh 36

9 NEGOTIATING STRATEGIES FOR BANGLADESH 389.1 Development Objectives 399.2 Strategy for TMNP 39


ivOpportunities and Risks of Liberalising Trade in Services — Bangladesh

9.3 Negotiating Points 409.4 Programme Minimum 41

10 IMPLICATIONS OF THE SERVICES NEGOTIATIONS FOR BANGLADESH 42

10.1 General Implications 4210.2 TMNP Liberalisation: Potential Gains for Bangladesh under the Optimistic

Scenario 43

11 THE SERVICES NEGOTIATIONS AND DEVELOPMENT CO-OPERATION 46

11.1 General 4611.2 Sector-specific Development Co-operation 47

ENDNOTES 48

REFERENCES 71

TABLESTable 2.1: Employed persons 15 years and over by broad economic sector and sex, 2000 4

Table 3.1: Mobile telecom operators, services and subscription size 8

Table 3.2: Role of remittances from TMNP in balance of payments stabilisation 13

(million USD) 13

Table 4.1: The BTTB’S ISD call rate 18

Table 5.1: Sector objectives and action plan 23

Table 6.1: Distribution of service providers through TMNP according to ISCO-88, 2003 29

Table 6.2: Projected decline of working age population (15-65 years) 30

Table 6.3: Ageing scenario in Europe 31

Table 7.1: Achievements of LDC modalities 33

Table 8.1: Identification of Sector Offer 37

Table 9.1: Development-related aspects of the services negotiations 38

Table 9.2: Top ten exporters and importers of Mode 4 services 40

Table 10.1: Simulation of benefits from increased exports of service providers through TMNP 44

ANNEXESANNEX 1: ADDITIONAL TABLES & FIGURES FOR CHAPTER 2 49

ANNEX 2: ADDITIONAL FIGURES FOR CHAPTER 3 52

ANNEX 3: ADDITIONAL TABLES & FIGURES FOR CHAPTER 4 58



FIGURESFigure 2.1: Foreign Direct Investment in the Services Sector and Its Share 5

Figure 3.1: Comparison of connection charges in Bangladesh, India and South Asia 8

Figure 3.2: Exports and Imports of Telecommunication Services in Bangladesh 8

Figure 3.3: Education GDP and its Growth 9

Figure 3.4: Trade in education services 10

Figure 3.5: Skill composition of Bangladeshi workers 13

Figure 4.1: Revenue income of the BTTB and the share of its absorption by the government 17


vTrade in Services and Sustainable Development

ACRONYMS

ABT Agreement on Basic TelecommunicationADB Asian Development BankAMPS Analogue Telephone SystemBANBEIS Bangladesh Bureau of Educational Information and Statistics BES Bangladesh Economic SurveyBMET Bureau of Manpower Employment and TrainingBOI Board of InvestmentBoP Balance of PaymentBOU Bangladesh Open UniversityBPM5 Balance of Payment ManualBRTA Bangladesh Rural Telecom AuthorityBTRC Bangladesh Telecommunication Regulatory CommissionBTTB Bangladesh Telegraph and Telecommunication Board CBIT Council for Bangladesh Institute for TechnologyCDMA Code Division Multiple Access CMTS Cellular Mobile Telephone ServiceCPD Centre for Policy Dialogue CTS Council for Trade in ServicesDDCSP Dynamic Distributed Constraint Satisfaction ProblemDFID Department for International DevelopmentECAs Export Credit Agencies ECNEC Executive Committee of the National Economic CouncilEDI Electronic Data InterchangeEPZ Economic Processing ZonesEU European UnionFDI Foreign Domestic Investment FY Financial Year GATS General Agreements on Trade and ServicesGDP Gross Domestic ProductGMAT Graduate Management Admission TestGP Grameen PhoneGRE Graduate Record ExaminationsGSM Group of Special MobileGSP Government Security ProgramGTZ Deutsche Gesellschaft für Technische ZusammenarbeitHDI Human Development IndexHSC Higher School CertificateHSTTIs High Secondary Teachers Training InstitutesICT Information and Communication TechnologyIDB Islamic Development BankIER Institute of Education and ResearchIFC International FinanceIFIs International Financial InstitutionsIMF International Monetary Fund IMO International Maritime OrganizationIOM International Organization for MigrationISCO International Standard Classification of Occupations ISPs Internet Service ProvidersIT Information TechnologyITC International Trade Centre ITU International Telecommunication Union


viOpportunities and Risks of Liberalising Trade in Services — Bangladesh

ITX International Trunk ExchangeJBIC Japan Bank for International Cooperation LDC Least Developed CountryMCP Microsoft Certified ProfessionalMCSE Microsoft Certified Systems EngineerMFN Most Favored Nation MOE Ministry of EducationMoPT Ministry of Post and Telecommunications MSICT Ministry of Science and Information and Communication Technology NAEM National Academy of Educational Management NAMA Non-Agricultural Market AccessNAPE National Academy for Primary EducationNCSTD National Council for Skill Development and TrainingNCTB National Curriculum and Textbook Board NGOs Non-Governmental OrganisationsOECD Organization for Economic Co-operation and DevelopmentPBTL Pacific Bangladesh Telecom LimitedPCG Partial Credit Guarantee PMED Primary and Mass Education DivisionPOB Power Development Board PRG Partial Risk GuaranteePRGF Poverty Reduction and Growth FacilityPRSP Poverty Reduction Strategy Paper PSTN Public Switched Telecommunications NetworkPTIs Primary Training Institutes SDT Special and Differential TreatmentSMEs Small and Medium Size EnterprisesSSC Secondary School CertificateTMIB TM International BangladeshTMNP Temporary Movement of Natural PersonsTRC Telecommunications Regulatory Agency TRIPS Trade-Related Aspects of Intellectual Property Rights TTCs Teachers Training CollegesUGC University Grant CommissionUNCTAD United Nations Conference on Trade and DevelopmentUNICEF United Nations for Children’s FundUSAID United States Agency for International DevelopmentVOIP Voice Over Internet ProtocolVSAT Very Small Aperture Terminal Satellite EquipmentVTIs Vocational Training Institutes VTTIs Vocational Teachers Training Institutes WTO World Trade Organisation


viiTrade in Services and Sustainable Development

FOREWORDEleven years after trade in services was included in the multilateral trading system, the WTO’s General Agreement on Trade in Services (GATS) remains an unfinished project. It continues to stir up frustration among its original proponents — given the arguably low level of liberalisation attained so far — as well as deep concern among others with regard to the policy orientation of its provisions. In the context of international negotiations, the GATS was the result of a complex process of political quid pro quos that catapulted services into a major component of the Uruguay Round negotiations. By and large, major services providers in the US and Europe acted as demandeurs for a services framework for liberalisation that would lead to global trade expansion in the sector. Their counterparts in developing countries were left uncertain as to how their development concerns would be resolved by the vagueness of the GATS. The absence of concrete data, private sector insecurity and a crippling perception of an unfavourably tilted playing field prevailed in development circles throughout the negotiations. Broad public policy issues remained off the negotiating table. Difficult tensions — arising, for instance, from the fundamentally different approaches of diverse public law traditions to the role of the State in the provision of certain services — permeated the discussions. Notwithstanding, the eight years of discussions leading to the design of the GATS represented a breakthrough in international trade treaty-making as trade in what was hitherto referred to as ‘invisible’ products was successfully integrated into the multilateral system of trade rules.

The implementation of the Agreement has to a large extent been characterised by the same dynamics which pervaded the Uruguay Round talks. As the GATS moved into its liberalisation phase in the past few years as mandated under its built-in agenda, policymakers in developing countries, academics, trade analysts and observers from advocacy groups and civil society have expressed increasingly serious reservations about the implications of requiring developing countries to make greater market access concessions. This concern is aggravated by the GATS’ lack of appropriate safety nets to guard against untoward negative consequences of binding liberalisation, as well as its absence of adequate rules to ensure that the conditions of competition for supplying services are not distorted by subsidies and other similar support mechanisms. Moreover, many if not most developing countries have not undertaken an assessment of the impact of liberalisation in services trade, and more fundamentally, are still evolving the regulatory frameworks and institutions to govern the services sectors in their domestic territories. The unresolved discussions on the foregoing issues have hampered further advancement of negotiations and have been significant factors in the widely-shared perception that the GATS negotiations under the current Doha Round leave much room for improvement in terms of liberalisation commitments. More importantly, practically all parties underline the point that a comprehensive policy analysis of the implications of trade in services for sustainable development, and of the policy spaces available for implementing public policies, is still missing.

To address this concern, ICTSD has commissioned a series of studies on the opportunities and risks of liberalising services trade in selected developing countries, including Bangladesh, Mozambique, Nicaragua, Pakistan, South Africa, Egypt, Guatemala, and Tanzania.

In Bangladesh, the services sector is increasingly important for economic development given that services make up 57.5 percent of its GDP and generates over 25 percent of employment. In sharp contrast, trade in (commercial) services represents the equivalent of only 5-7 percent of total trade in goods. Given the significant contribution of the services sector to its GDP and the relatively limited trade in services, it appears that there is substantial, untapped potential which may accrue from optimising Bangladesh’s trade in services through well-managed, progressive liberalisation and a more predictable competitive environment. At the same time, the nature of its services trade


viiiOpportunities and Risks of Liberalising Trade in Services — Bangladesh

makes it vulnerable to external shocks, and may prompt advocacy of protectionist policies within certain domestic service industries, including in particular audio-visual, financial, and rail transport services.

The study finds that Bangladesh is confronted with a particularly delicate task in developing a WTO negotiating strategy. Although Bangladesh is allowed as an LDC to demur from undertaking liberalisation commitments under the Doha Round of negotiations, it is pursuing a strategy of ‘critical engagement’ in the GATS negotiations. This recognizes that services liberalisation and regulatory reform can play a positive role by improving the competitiveness of the goods sector and other services, as well as increasing export opportunities and the efficiency of domestic services sectors.

Specifically, telecommunications and education were sectors where a positive spillover can be generated with further liberalisation. Additionally, Mode 4 (i.e., the Temporary Movement of Natural Persons) is identified as the mode of supply that offers Bangladesh the greatest export interest, including a wide-range of employment categories ranging from professionals to skilled, semi-skilled, and less-skilled services providers.

This case study is one of a series of Issue Papers on topics relevant to the current GATS negotiations produced under ICTSD's programme on Trade in Services and Sustainable Development. This programme aims to empower developing country policy-makers and other stakeholders at bilateral regional and international levels through information, dialogue, capacity-building and research targeted at influencing the international service trading system to advance the goal of sustainable development.

We hope you will find this pleasant and informative reading and an effective contribution to the debate.

Ricardo Meléndez-Ortiz Chief Executive, ICTSD


ixTrade in Services and Sustainable Development

EXECUTIVE SUMMARYAs a least-developed country, where services play a major role in the domestic economy but generate only a fraction of export earnings, Bangladesh faces a delicate task in developing a WTO negotiating strategy that furthers its national development interests.

After two decades of robust growth, the services sector now accounts for almost 60 percent of the Bangladesh’s GDP and generates more than a quarter of its total employment. In 2003, the GDP-employment ratio for services was four times higher than that for agriculture. This growth was primarily driven by domestic investment, which stood at US$756.64 million in 2003, while the contribution of foreign direct investment (FDI) was only US$162.9 million.

In contrast to the services sector’s dominance in the domestic economy, trade in commercial services represents only 5.44 percent of the value of merchandise trade. For the last couple of years, the trade deficit in services has ranged between 20 and 40 percent. In 2003, Bangladesh imported more than double the value of services it exported (US$324.94 million).

The high contribution of the services sector to Bangladesh’s GDP and its low share in cross-border trade point both to the economy’s vulnerability to external shocks, which calls for protection of the domestic service industry, and to growth potential through an open market regime. In order to retain and deepen competitiveness in goods exports, realise opportunities through increased tradeability of services, and to improve the delivery of quality services to the domestic market, liberalisation is necessary, but so is keeping the mechanism of protection in place.

Priority Sectors for Bangladesh

In order to identify priority sectors with regard to export and import interests, as well as sectors that need protection, we analysed the share of individual sub-sectors in GDP and employment, their balance of payments situation, as well as their strengths and weaknesses from the national sustainable development perspective. We also looked at the requests made to Bangladesh by WTO Members and the provisions for special treatment for least-developed countries (LDCs) in the services negotiations. In general, sub-sectors that show secular positive signs in the balance of payments are predominantly of export interest; negative signs will imply sectors predominantly of import interest, and sub-sectors showing mixed signs are those that need comparatively higher protection.

Export Interests

Bangladesh has an export interest in four services sub-sectors, which generally enjoy a positive balance of payments: computer and related services; telecommunication services; life insurance; and maritime transport services.

In some cases, despite a positive balance of payments, liberalisation of a sub-sector will be necessary to attract further foreign investment and improve universal access to a particular service. Telecommunications, with huge growth potential but a very weak infrastructure, provide a good example. Poor telecommunications hinder the development of other sectors of the economy and reduce the competitiveness of exports. To speed reform, it will be necessary to open the market to foreign firms in a carefully planned manner.

Temporary Movement of Natural Persons (TMNP) is the mode of supply that offers the greatest export interest to Bangladesh, which already exports service providers to many countries under bilateral arrangements. If countries can identify specific categories of service providers in which


xOpportunities and Risks of Liberalising Trade in Services — Bangladesh

they have export interests, then negotiations can take place on a practical ground rather than in rhetorical terms. We have identified specific categories of service providers in which Bangladesh has considerable strength, covering the entire range of employment from agricultural workers to highly skilled scientists and corporate managers.

Any liberalisation measure taken by a country is based on economic benefit to the country itself. The liberalisation of TMNP is no exception. Several studies show that demographic momentum in OECD countries and countries like Bangladesh creates a perfect demand-supply equilibrium at the aggregate level in the medium to long term. EU member states would need an additional 46 mil-lion labour migrants up to 2050 to keep the workforce constant. Until 2025, countries in Central and Eastern Europe will require a net inflow of 8 million people to stabilise their working age population.

Import Interests

Based on balance of payment analysis, sectors of pre-dominantly import interest are: rental/leasing services without operators, construction and related engineering services, education services, health and social services, tourism and travel-related services, news agency services, research and development services, and air transport services. While these sectors have been identified at the aggregate level, many of their sub-sectors might need protection from the view point of national sustainable development and the principle of universal access to basic services.

Sectors Needing Protection

Among sectors needing protection are audio-visual services, financial services (non-life, reinsurance and banking), personal, cultural and recreational services, and rail transport services. However, protection does not mean that these sectors should operate in complete autarky.

Bangladesh and the WTO Negotiations

A number of countries – including Singapore, the EU, Japan, Norway and the US – have requested Bangladesh to open some services sectors in the Doha Round market access negotiations. More than one country requested access to maritime transport, financial services, construction and related engineering services, telecommunications and environmental services. A single country asked for computer and related services, distribution and other business services and services auxiliary to all modes of transport.

Bangladesh has not yet submitted any requests or made offers to Member countries. However, after the adoption of the special LDC modalities in September 2003, Bangladesh is in a good position to develop comprehensive requests and proposals for making liberalisation happen in TMNP and other sectors

Developing a Negotiating Strategy

Special and differential treatment for less-developed WTO Members – supported by the global campaign of poverty alleviation through the Millennium Development Goals – has created room for LDCs to bargain in the negotiation process. The scope for using this latitude largely depends on the identification of country positions on each issue and the creation of issue-based coalitions. The Cancun Ministerial showed that through informed positions and ‘critical engagement’ LDCs can influence the multilateral trading system.

Specifically, Bangladesh should base its negotiating strategy on the following elements:

• the provisions of the special modalities for LDCs;


xiTrade in Services and Sustainable Development

• the sectors identified for export interests, import interests and protection;

• the development objectives of individual sectors;

• the experience of current liberalisation in individual sectors; and

• building partnerships with country groups.

Given the policy objectives of increasing access to basic services, improvement of infrastructure and diversification of exports, liberalisation in Bangladesh is largely taking place independently of the WTO. The multi-lateral negotiations should strike a balance between autonomous liberalisation and locking in those measures under the WTO.

The negotiating strategy for TMNP should include, inter alia, a different approach to developed and developing countries; the use of additional commitments for the inclusion of selected categories of service providers; addressing horizontal commitments and limitations; and highlighting the poverty alleviation implications of TMNP.

The negotiating strategy should also identify domestic policies to facilitate human development and mitigate the costs of temporary movement of service suppliers, as well as address ‘brain drain’ and ‘brain circulation’ through incentives, improved domestic conditions and recovery of lost investment. As opportunities through market opening will only be meaningful if there are enough quality service providers, investment in training and education is a must.

Mutual recognition agreements with key markets, as well as bilateral co-operation on visa and recruitment policies with host countries, should be actively pursued.

Implications of the Services Negotiations for Sustainable Development

As an LDC, Bangladesh is allowed to offer less than national treatment and not to take on additional commitments. It thus has the possibility to protect domestic services sectors where necessary and to limit offers in those sectors where the impact of liberalisation is not clear. Bangladesh may also be able to seek credit for autonomous liberalisation on a non-reciprocal basis under the LDC modalities. However, the sectors where Bangladesh may seek credit – financial and energy services, among many others – are being further liberalised under the aegis of the World Bank and the IMF, which is against the principle of coherence between international financial institutions and WTO negotiations.

Although liberalising health and education services is generally more complicated than other sectors, Bangladesh has opened these markets to a certain degree during the past decade. The question is whether such liberalisation generates further disparity in a highly polarised society and thus creates a potential danger of destabilisation.

The commitment to provide market access under Mode 4 (i.e. TMNP) in ‘all categories’ of natural persons identified by LDCs is extremely important for Bangladesh, since market access in Mode 4 has a strong development and poverty alleviation dimension. Regression analysis of the total remittance of a number of Bangladeshi service providers under Mode 4 shows that Bangladesh would gain substantially through increased export of service providers through TMNP. The additional income from exporting skilled service providers has been estimated at US$381 million; less skilled categories could bring another US$3.5 billion. Earnings from professionals in foreign countries could reach US$11.57 billion.

It should also be noted that policy reform and budgetary increases for particular services sectors are distinct from the WTO negotiating process. For example, a simple budget increase may be


xiiOpportunities and Risks of Liberalising Trade in Services — Bangladesh

enough to ensure rural people better access to education or health care; however, without a level playing field in the telecommunication sector, Bangladesh will not be able to attract more foreign investment to ensure universal access to basic and value-added telecommunications services.

The WTO negotiations will also have important repercussions on the environment and environmental services, but more specific analysis is needed to comment on the implications of liberalising environmental services.

Dealing with Capacity Challenges

One fundamental structural problem adversely affecting Bangladesh’s trade negotiations is that the Ministry of Commerce deals with trade matters in Dhaka while negotiations at the WTO are co-ordinated by the Ministry of Foreign Affairs. The negotiating mechanism lacks in-house legal expertise, as well as research and analytical capacity that could provide timely support to the negotiating team. Despite recent efforts to remedy the situation, it is becoming increasingly difficult to handle bilateral, plurilateral and multilateral negotiations simultaneously on a wide range of issues. Due to the capacity problem the entire WTO negotiations have become increasingly challenging for policy-makers and negotiators from Bangladesh and other LDCs.

On the other hand, Bangladesh has been able to partially overcome its limitations of in-house capacity through its tradition of extensive consultations aimed at developing consensus in key negotiating areas. An advisory committee, as well as sectoral expert groups comprising wider stakeholders, are the main channels for this interaction.

Development co-operation can play a significant role in building negotiating capacity and increasing the participation of Bangladesh and other LDCs in the services trade, as required by Article IV of the GATS.

Conclusion

Bangladesh should continue to pursue a strategy of ‘critical engagement’ in the GATS negotiations as services liberalisation can play a positive role through improving the competitiveness of the goods sector, as well as increasing export opportunities and the efficiency of domestic services sectors. More generally, LDC negotiators should recognise that many sectors would benefit from an open policy regime and a predictable competitive environment. However, proper sectoral studies are a pre-requisite for opening more sectors.


�Trade in Services and Sustainable Development

1.1 The GATS and Developing Countries

1 INTRODUCTION

The General Agreement on Trade in Services (GATS) regime is particularly important to least-developed countries (LDCs), which suffer from severe constraints to economic development due to poor infrastructure and a lack of institutional and human capacities to cope with the challenges arising out of the liberalisation of trade in services. The fact that services trade has become a significant component in individual economies means that without the necessary precautions and adequate readiness, LDCs will be lucrative targets for strong market players, which might jeopardise the growth potential of their domestic services markets. However, incremental liberalisation measures in the services trade might also open windows of opportunity.

From the viewpoint of developing countries, the importance of trade in services has increased for three fundamental reasons:

• Retaining and furthering competitiveness in goods exports: while overall economic growth and development of many developing and least-developed countries largely depend on the export of goods, retaining competitiveness in goods exports significantly depends on how service providers facilitate this process through continuous support in such areas as banking and insurance, port facilities, transport, logistics, consulting, telecommunications, etc.

• Opportunities through increased tradability of services: with the advent of information and communication technology (ICT) many professional services can now be supplied without crossing borders through global communication networks, which simultaneously address many structural issues, such as competition in the labour market from foreign service suppliers, social and cultural problems arising from the presence of these suppliers and issues relating to cost reduction in manufacturing and services industries,

etc. In addition to the supply of services through communication networks, market opening has also broadened avenues for tradability of services due to increased opportunities to deliver consumer services through commercial presence abroad.

• Improvement in the quality of services in domestic markets: trade in services also increases the scope for improving the quality of domestic services through technology transfer and increased competition.

According to World Bank estimates, services liberalisation in developing countries could provide as much as US$6 trillion in additional income in the developing world by 2015.1 This amounts to four times what could be achieved from trade in goods.

The share of services in the GDP and total trade of LDCs and other developing countries is quite significant and they enjoy a comparative advantage in the areas of manpower exports due to their large pool of skilled, semi-skilled and unskilled human resources. GATS Article IV stipulates that developed Members should facilitate increased participation of developing countries in world trade by negotiating specific commitments relating to: (a) strengthening their domestic service capacity, efficiency and competitiveness; (b) improving access for developing country service suppliers to distribution channels and information networks; and (c) liberalising market access in sectors of export interest to developing countries.

Recent estimates, based on limited empirical information, suggest that Mode 3 (commercial presence) accounts for more than half of world services trade. Mode 1 (cross-border trade) accounts for about a 25 percent, while Mode 2 (consumption abroad) contributes about 15 percent. Mode 4 (presence of natural persons) was found to be nearly insignificant, accounting for just over one percent of world services


�Opportunities and Risks of Liberalising Trade in Services — Bangladesh

trade (see box above for a detailed description of the four modes). Hence, a comprehensive framework based on Mode 4 may increase the

share of developing countries and LDCs in the global services trade through the increased movement of natural persons globally.

The Modes of Services Delivery under the GATS

Mode 1: Cross-border supply covers services flows from the territory of one Member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail).

Mode 2: Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into another Member's territory to obtain a service.

Mode 3: Commercial presence implies that a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member's territory to provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains).

Mode 4: Presence of natural persons consists of persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of Natural Persons specifies, however, that Members remain free to operate measures regarding citizenship, residence or access to the employment market on a permanent basis.

Source: WTO website

1.2 Relevance of the GATS to Bangladesh

Temporary movement of natural persons (TMNP) is especially important for Bangladesh since remittance inflows from its citizens working abroad have contributed significantly to the stability of the country’s balance of payments in recent years. In fiscal year 2003, total remittance earnings amounted to 46.76 percent of total export earnings; this volume was equivalent to 5.9 percent of GDP. The skills breakdown for natural persons working abroad shows that five percent of workers were professionals, forty-five percent were skilled, twelve percent were semi-skilled and the remaining 38 percent were un-skilled. Moreover, Bangladesh, being one of the countries recognised by the International Maritime Organisation (IMO), currently earns about US$50 million in foreign exchange from 5,000 seamen.2

It should be noted that while opportunities for growth through trade liberalisation are often theoretical and potential in nature, the danger

of jeopardising a domestic economy through unplanned liberalisation is real. The GATS comprises 11 broad service categories, covering 160 sub-sectors. The negotiations on rules and market access under the GATS cover key areas of interest, both for developed and developing countries, including Bangladesh. To understand the nitty-gritty of liberalising services requires critical analysis for each individual sector, which in turn is important when undertaking market opening commitments and requesting other countries to open markets in sectors of export interest. Participation in negotiations without the proper homework may be catastrophic for less-developed countries.

The stakes in GATS negotiations are high for all WTO Members. As Bangladesh wants to accrue maximum benefits from the negotiations, this study attempts to identify the opportunities and risks facing the country in the liberalisation of trade in services.



Chapter 2 highlights the importance of the services sector in the Bangladeshi economy from three broad viewpoints, i.e. competitiveness in goods exports, tradability of services and opportunities for services exports. Following a short review of Bangladesh’s services sectors, the section describes the external interface (export and/or import) and the economic contribution of key services sectors, namely telecommunications, financial services, land transport, education, health and temporary movement of natural persons.

Chapter 3 elaborates on the economic contribution of these services. Development objectives are set for each sector, followed by an analysis of the current state of that development, which will help understand the gap to be addressed through policy interventions.

Chapter 4 deals with the constraints to service sector growth as a whole and on sub-sectors where applicable. It examines the main features of the policy regime and regulations for the production and distribution of services, and provides an analysis for a few important sub-sectors. It also draws attention to the environmental aspects of services delivery.

Since international financial institutions (IFIs) play a significant role in shaping the policies of various service sectors, particularly telecommunications and financial services, and since their policies are closely related to the rules governing negotiations under the GATS, Chapter 5 deals with the merits and demerits of intervention by IFIs in policy formulation. It describes the coverage of the services sector in the Poverty Reduction Strategic Paper (PRSP), which has replaced the national five-year planning exercises.

Chapter 6 bridges the negotiating strategy of the country with the expectations from negotiations. It identifies interests in terms of export opportunities and import interests that could facilitate efficiency gains in the

goods sector, while enhancing the efficiency of the domestic services sector facing increased competition (import substitution).

Chapter 7 deals with the overall status latest developments of the services negotiations from a developing country perspective.

Chapter 8 sets out Bangladesh’s participation in the negotiating process. Its first part analyses both Bangladesh’s requests to other countries and the requests Bangladesh has received from other WTO Members. In the second part, the offers and requests are matched against Bangladesh’s specific trade interests. This matching exercise goes some way to designing a strategy for Bangladesh in the Doha Round services negotiations.

Chapter 9 describes the sectoral interests of Bangladesh, its development objectives for the services sector, the negotiating framework post-Cancun, the country’s limitations in terms of negotiating capacity, the need for reform in the domestic services sector and the technical assistance needed to enhance competitiveness.

Chapter 10 highlights the implications of services negotiation outcomes for three scenarios; (a) an optimistic scenario, where it is assumed that the GATS will impact positively on the development of LDCs; (b) a pessimistic scenario, where it is assumed that an unfavourable outcome of negotiations will put LDCs at a disadvantage in terms of decisions regarding the protection of domestic service providers through, inter alia, subsidies and safeguard measures, and (c) a status quo scenario, which assumes that the negotiations will not succeed in reconciling the extreme positions of countries in certain areas.

Chapter 11 discusses the development objectives of the services sector in Bangladesh and the implications of negotiations for development co-operation.

1.3 Organisation of the Study


4Opportunities and Risks of Liberalising Trade in Services — Bangladesh

Between 1994 and 2003, service sector growth in Bangladesh exceeded GDP growth overall, with the exceptions of fiscal years 1996 and 1997 (the major services sectors, their share in GDP and growth rates are presented in Tables 1 and 2 in Annex 1). Growth statistics for individual categories show the major sub-sectors to be telecommunications (18.19 percent); electricity, gas and water supply (8.86 percent); construction and related engineering services (8.29 percent); education services (7.87 percent); transport services (7.33 percent); tourism and travel-related services (7.0 percent); financial services (6.96 percent); distribution services (6.6 percent); health-related and social services (5.82 percent); and real estate and other rental services (3.5 percent).

According to their share in GDP, the major services sectors are: wholesale and retail trade (13.91 percent); transport, storage and communication services (9.78 percent); construction and related engineering services (8.63 percent); real estate and other rental services (8.46 percent); community, social and personal services (7.71 percent); education services (2.36 percent); health-related and social services (2.21 percent); financial services (1.63 percent); electricity, gas and water supply services (1.55 percent); communication services (1.3 percent); and tourism and travel-related services (0.67 percent). Together, these sectors account for 58.21 percent of Bangladesh’s GDP.

Table 2.1: Employed persons 15 years and over by broad economic sector and sex, 2000

Broad Economic Sector

Both Sexes Male FemaleNumber (Million) % Number

(Million) % Number (Million) %

Total 51.8 100 32.4 100 19.4 100

Agriculture 32.6 62.9 17.4 53.7 15.2 78.4

Non-Agriculture 19.2 37.1 15 46.3 4.2 21.6

Industry 5.3 10.3 3.6 11.1 1.7 8.8

Services 13.9 26.8 11.4 35.2 2.5 12.8

Source: LFS, 2002

2.2 Employment

Currently, a quarter of the Bangladeshi domestic labour force is employed in service sectors.3

(see Table 2.1 below)

The GDP-employment ratio for service sectors was US$1,312.09 per employee per annum. The corresponding ratios for industry and agriculture were US$1,944.70 and US$383.81 (see Table 3 in Annex 1).

InvestmentLike many other South Asian countries, Bangladesh has not attracted significant inflows of foreign direct investment (FDI). Against a global per capita average FDI inflow of about US$135 during 1997-2000, per capita FDI to Asia was only US$37. In South Asia, the amount equalled to a meagre US$3 during the same

period. In 2001, the region’s FDI stood at US$4.2 billion (35 percent higher than in the previous year). However, US$3.3 billion of this total went to India alone (WIR, 2003).

Determination of actual FDI in Bangladesh’s services sector is quite difficult due to the fact that there is a wide discrepancy between the Figures reported by the Bangladesh Bank and the Board of Investment (BOI). The Bangladesh Bank reports the FDI inflows through its of balance-of-payments (BoP) statement, which includes inflows and outflows of funds through banking channels, while the BOI reports data on the basis of registered investments. The unavailability of data on FDI inflows at a disaggregated sub-sector level also makes it difficult to gauge the level of actual FDI in Bangladesh’s services sectors.

2 OVERVIEW OF THE SERVICES SECTORS IN BANGLADESH

2.1 Services in GDP


5Trade in Services and Sustainable Development

The Board of Investment recently conducted an FDI census to gather comprehensive primary data on actual investment based on projects registered with the BOI and economic processing zones (EPZ). According to the survey, FDI fl ows in FY 2003 amounted to US$368 million. Half of the investment was fi nanced by equity, of which 31 percent was reinvested earnings and the remaining 19 percent was through intra-company loans. In FY 2002, FDI shifted towards the manufacturing sector (44 percent) from the traditionally targeted the energy sector (WIR, 2003). The most important sources of FDI in 2003 were Japan, the UK, the Netherlands, Korea, and Taiwan (see Table 4 in Annex 1).

The highest foreign investment in the services sector was in 1997-98, and the sector’s highest share of total registered FDI was in 1998-99 (see Figure 2.1 below). FDI gradually declined over the years and in FY 2003 the total registered investment in the service sector was only US$162.9 million.

Domestic investment in services decreased in FY 2003 compared to FY 2002, with textiles receiving the highest investment over the last two years, followed by agro-based industries, food and allied industries, printing, chemicals, glass and ceramics.

Figure 2.1: Foreign Direct Investment in the Services Sector and Its Share

Source: Bangladesh Board of Investment

2.3 Trade in Services

Although services account for 57.5 percent of Bangladesh’s GDP, trade in commercial services only amounts to 5-7 percent of the country’s total trade in goods. The trade defi cit for commercial services is between 20-40 percent (see Figure 1 in Annex 1).

According to Bank of Bangladesh data, growth rates for trade in services fl uctuated between 2000 and 2003. In FY 2001, growth was negative, which may be largely attributed to the global recession and the post-9/11 syndrome. While FY 2003 saw a recovery, overall growth of trade in commercial services during the period FY 2000 —FY 2003 was -8.21 percent.

Analysing the sectors by GATS classifi cation, computer and related services, telecommunications, distribution services, life insurance and maritime transport services generally enjoy a positive balance of trade. Conversely, the following sub-sectors have shown a negative trade balance since FY 1999: rental and leasing services without operators; construction and related engineering services; education

services; health-related and social services; tourism and travel-related services; news agency services; research and development services; and air transport services. The highest defi cit is in air transport services (US$219.75 million). Bangladesh’s import of tourism and travel-related services surpassed exports by US$32.33 million. At US$25.83 million, the defi cit in the education sector is also comparatively high.

The fi nancial sector is the most important of the services sectors experiencing fl uctuating balances. Fluctuating balances have also been observed for audiovisual services, rail transport services and other business services.

Overall, the level of trade in commercial services in Bangladesh remains low. There is a huge potential for growth provided that positive policy reforms take place to facilitate development. The identifi cation of sub-sectors with positive, negative and fl uctuating balances (receipts over payments) is useful in identifying which sectors are of interest in the Doha Round services negotiations (see Table 5 in Annex 1).



In order to select sectors for detailed analysis, we initially identified 12 broad GATS service categories and then ranked them in descending order using three major economic indicators, i.e. the category’s share in GDP, export volume and import volume (see Table 1 in Annex 2). The analysis was conducted according to the following the methodology:

• The sum of the rankings for the three indicators was put in ascending order, i.e., the lowest total is number one.

• For categories that obtained the same score, the one with a lower ranking in share of GDP was placed first. The rationale behind this was that domestic interest in those categories was higher while their priority for offer-request negotiations was low.

• The categories for which the calculation of share of GDP was not possible were excluded from the analysis, despite their importance in the services negotiations.

From the scoring it is clear that the transportation sector comprises five major sub-sectors: air transport, rail transport, marine transport, inland water transport and road transport. The

ranking of this sector with regard to exports, imports and share of GDP is also high. Thus the sector deserves a separate comprehensive analysis. As regards the tourism sector, it ranks low in GDP share. Furthermore, Bangladesh had initial commitments in this sector during the conclusion of the Uruguay Round negotiations. It is quite obvious from such commitments that the government of Bangladesh developed some understanding of the opportunities and risks involved in this sector, even in this initial period of negotiations. Therefore, transportation and tourism have been excluded from the analysis below.

Although a classification problem prevented the inclusion temporary movement of natural persons (TMNP) in the ranking exercise, it has been included in the study due to the fact that visible progress has been made in this area through the adoption of the Modalities for the Special Treatment for Least-developed Country Members in the Negotiations on Trade in Services (TN/S/13) on 3 September 2003 (hereinafter ‘LDC Modalities’). Thus, telecommunications, education and TMNP were selected for the detailed analysis below.

3.1 Telecommunications

Access

The telecommunications infrastructure in Bangladesh is the weakest in South Asia. The country’s teledensity is difficult to estimate due to connection problems between fixed-line and mobile telecommunications networks. In FY 2003, the teledensity of the fixed-line telephone network was 0.67 percent, but considering both fixed and mobile telecommunication networks with 100 percent interconnection between them, teledensity rises to an estimated 1.87 percent. This progress reflects the exponential growth of the mobile telecom market in Bangladesh since the second half of the 1990s.

Competition

The Bangladesh Rural Telecom Authority (BRTA)

and Sheba Telecom were the first private sector operators in fixed-line telecommunications. In 2000, the government awarded a contract to WorldTel Limited of the United Kingdom to establish a telephone system in Dhaka with 300,000 digital lines on a build-own-operate basis. The system was expected to be operational in 2003. For unknown reasons, however, the installation stalled. This sent an incorrect signal of a lack of a predictable and reliable business environment to foreign investors.

Cellular mobile telephone services were first introduced in Bangladesh in 1989 by Pacific Bangladesh Telecom Limited (PBTL), a joint-venture owned by the local Pacific Group conglomerate. They started with an analogue mobile phone system (AMPS), but lately

3 STATE OF SELECTED SERVICE SECTORS IN BANGLADESH



switched to code division multiple access (CDMA) technology. Mobile telephone services remained a private sector monopoly until 1996. Recently, VSAT and Internet services have been opened up to private sector participation.

Fixed-line Telecommunications

The fixed-line telecom market is dominated by the state-run Bangladesh Telegraph and Telecommunication Board (BTTB). Between 1992 and 2003, Bangladesh experienced massive growth in the areas of total fixed telephones, and the number of NWD circuits and international circuits. Despite this, teledensity still remains less than one percent, which is the lowest in South Asia and the second lowest in the world. In rural areas, the Bangladesh Rural Telecom Authority (BRTA) and Sheba Telecom have a total of 25,000 subscribers with capacity for 76,000 lines. To improve public access to telephony, a card phone system was introduced in 1992, leading to an increase of card phones from 153 in 1992 to 1,497 in 2003 (MOF, 2003).

Access to telephony (as opposed to teledensity) is not measured in Bangladesh. The majority of the population does not have easy access to affordable and reliable telephony services, and telephone facilities include only simple voice services (see Table 2 in Annex 2).

The BTTB has established small digital exchanges in 92 sub-districts (upazila) to improve telephony access. Furthermore, 105 digital exchanges were established at sub-district level. BTTB, the state run operator for fixed-line telephony, has introduced package switching exchanges in several regions for data exchange.4 Networking has been established for data communication on domestic and international routes.

The Mobile Network

There are currently seven private sector operators licensed to provide basic telecom and value-added services including paging and cellular services. Most of them are joint ventures with foreign investment coming from Norway, Italy, the US and Malaysia. Since 1996, mobile telecommunications have expanded exponentially and in FY 2003 the total number

of mobile subscribers reached approximately 1.67 million (Mahmud, 2004). The breakdown of subscribers and service types is presented in Table 3.1. Tax revenues collected from all the mobile operators are now almost equivalent to BTTB’s net surplus of Tk 3.9 billion over the period 2001-2002 (ADB, 2003).

The mobile operators include one AMPS-based company providing cellular mobile services for Dhaka and Chittagong city dwellers, and another providing CDMA services to subscribers in the same cities. In addition, three GSM cellular companies that operate in the Dhaka, Chittagong and Khulna regions, while paging and radio trunking telephone services are provided by a single operator in the same regions.

Affordability

Telephone connection costs are very high in Bangladesh compared to other countries in the world (see Figure 3.1).

Revenue and Quality of Services

From the perspective of revenue generation, the Bangladeshi government considers it important to exercise control over the country’s telecom market. While the BTTB’s share in total government revenue was around five percent in 2003, in 1999 it had reached more than eight percent. However, the reliability of the BTTB’s transmission infrastructure is very low with an annual reported main line fault rate of 600 faults per 100 main lines. There are also problems involving bad connections, with many connections being made with incorrect numbers. With a call completion rate reported to be about 40 percent, there is considerable customer dissatisfaction. The poor service quality can be gauged from the complaint rate, which averages 50 complaints per 100 lines per year.

Trade in Telecommunication Services

Trade in telecommunication services is largely dependent on basic telecommunication services, primarily domestic voice telephony. The volume of international incoming traffic is more than five times higher than that of outgoing international calls.



Table 3.1: Mobile telecom operators, services and subscription size

Name of the Operator Start of Service Type of Service Total subscribers

Pacific Bangladesh Telecom Ltd. (PBTL) 1989

CDMA+AMPS800 MHz

Mobile + Fixed Cellular225,000

Grameen Phone (GP) 1997 GSM900 MHz 1,100,000

TM International Bangladesh (TMIB) 1997 GSM

900 MHz 290,000

Sheba Telecom 1997 GSM900 MHz 50,000

Grand Total 1,665,000Source: Mahmud S.M., 2004.

Figure 3.1: Comparison of connection charges in Bangladesh, India and South Asia

Source: ITC Database

As Figure 3.2 shows, imports of telecommu-nication services between 1999 and 2003 were stable but exports were volatile. There is con-cern that illegal use of the Voice Over Internet Protocol (VOIP) has cut the BTTB’s revenue with the majority of international calls taking place outside its network.

The US is the major destination for telecommu-nication service exports; however, these exports fell to US$4.09 million in FY 2003 from a high of US$32.51 million in FY 1999. Interestingly, telecommunication service exports increased to the EU, rising from US$0.48 million to US$2.53 million in FY 2003.

Figure 3.2: Exports and Imports of Telecommunication Services in Bangladesh



Figure 3.3: International Incoming and Outgoing Calls (minutes)

3.2 The Education Sector

Education is one of the basic services where market failure is common and the role of government is essential to ensure education for all. This particular service sector has always been a target for increased investment, both from the public and private sectors, due to the growing demand for education and education-related services.

During the last few decades, Bangladesh has progressed remarkably in terms of human development, which is clearly evident from Bangladesh’s recent improvement in position in the Human Development Index (HDI). Bangladesh’s overall grade rose from 0.318 in 1975 to 0.502 in 2001.5 Since development in the education sector constitutes a signifi cant part of the index, it may be assumed that Bangladesh improved her position based on achievements in the areas of adult literacy rate, primary enrolment rate, secondary enrolment rate, etc.

The education sector in Bangladesh has made remarkable progress compared to many other LDCs and developing countries during the last decade, thanks to the combined efforts of the government, the private sector, NGOs and donor agencies. The share of education in the total GDP, and its growth rate showed an almost fl at trend over the period FY 1998 — FY 2003. (See Figure 3.3)

In 1970, the adult literacy rate was 24 percent, which signifi cantly improved to 64 percent by 2000; during the corresponding periods, the (gross)

primary education enrolment rate increased from 54 percent to 96 percent, while the secondary education enrolment rate increased from 18 percent in 1980 to 25 percent in 1999.

Such an impressive improvement was largely driven by the government’s increased attention to establishing new schools, colleges and universities, teacher training facilities, and keeping the education sector updated in line with changing global and domestic demands. During the past few decades, substantial amounts have been spent on various educational levels in order to improve infrastructure, the overall quality of education, governance mechanisms and the participation of the private sector. The impact of these initiatives can be seen from the growth patterns in the numbers of educational institutes over time (See Table 3 in Annex 2). Data shows that between 1980 and 2001, the growth scenarios of the number of institutions, as well as other important variables — such as the number of teachers and students — was quite impressive. One should, however, exercise caution with such growth fi gures since the few expected years of schooling, limited participation in science and technology education, high dropout rates, etc. still represent areas requiring signifi cant improvement.

Government Expenditure on Education

In FY 2001, the government allocated Tk 196,330 million (18.23 percent of the total allocation

Figure 3.3: Education GDP and its Growth


�0Opportunities and Risks of Liberalising Trade in Services — Bangladesh

for all sectors) to education. The corresponding figures for the development budget during the same period were Tk 175,000 million and 12.87 percent (see Table 4 Annex 2).

The Structure of the Education System

The education system in Bangladesh is divided into primary, secondary and tertiary education. Primary and secondary education comprise primary schools, high schools and intermediate colleges, while the tertiary education segment involves degree colleges, universities and other higher level institutions that offer specialised and professional programmes. Besides the secular stream, the system also includes Madrasahs, which deal with Islamic education. There is also a separate stream called technical and professional education, which allows students to enter into specialised training in particular disciplines after the completion of a specified period of schooling. Moreover, the education system also includes infrastructure for teacher training facilities to develop human resources as skilled teachers. Along with the formal educational institutes, there are non-formal education centres, particularly targeted towards the poor population aged between 11 and 45, in order to improve adult literacy rates. The entire education system and a brief description of each of the components are presented in Table 5 in Annex 2.

Trade in Education Services

Trade in education services takes place only in the tertiary sector, except for an education programme in Afghanistan run by Bangladesh Rural Advance Commission. The trade takes place in all Modes. In Mode 1, Bangladeshi students participate in various certificate exams, like TOEFL, GMAT, GRE etc. to qualify for pursuing higher studies abroad, particularly in the US, Canada and the UK. Students of computer science and ICT courses also participate in various professional examinations, like MCSE and MCP. Although participation in such examinations can be termed as the import of educational services, it is not possible to measure the volume of imports in the education sector through Mode 1.

Import and export of educational services take place essentially through Mode 2. According to balance-of payment (BoP) data provided by the Bangladesh Bank, the country is a net importer of education services under Mode 2 (See Figure 3.4).

Major destinations for tertiary education abroad are: the US, the UK, Canada, Australia, Japan, India and Singapore. Generally, students going abroad for higher studies stay there under permanent immigration schemes. Gathering information on the number of students who go abroad for higher education and training is difficult. Major sources of such information would be the Ministry of Education, the Immigration Control Points at airports and seaports and those

Figure 3.4: Trade in education services


��Trade in Services and Sustainable Development

foreign embassies in Bangladesh who provide visas for educational purposes. According to information provided by a few embassies in Dhaka and discussions with some officials, the total number of students to major destinations was 25,000, of which 40 percent go to India, and more than 2,000 to Australia.

In terms of exports through Mode 2, Bangladesh attracts students from Nepal, Bhutan, India and some African countries. The total number of students is unknown. Most foreign students come to Bangladesh to study medicine, languages or science disciplines.

Bangladesh started to import education services through Mode 3 after the government allowed the establishment of private universities and off-shore campuses for foreign private universities. In 2003, the total number of private universities and off-shore campuses of many foreign universities was 52. In most cases, private universities substituted for the import of educational services.

While half of the private universities do not have campuses of their own, all have credit transfer facilities with universities abroad. More than half have foreign affiliation status. The countries with which the universities have affiliations, or exchange, joint and off-shore programmes, are Australia, the US, the UK, Malaysia, Japan, New Zealand, Canada and Singapore.

Although there are serious concerns regarding the quality of most private universities, the boom in these establishments is proof that there is a demand for adult education services to complement the education available at public universities.

As a whole, private universities are under-funded or the total layout of investment has not been made available. Since 1992 the total investment in private universities was US$34.45 million. Twenty-nine foreign teachers visited Bangladesh to provide education services through private universities.

One positive impact of these establishments is that many holders of foreign PhDs have returned to Bangladesh to teach. In 2003, the

total number of teachers with a PhD degree was 362, and 284 students transferred their study credits to foreign universities.

In terms of export, many Bangladeshi teachers also provide education services at foreign universities on either short- or long-term basis, although precise data on the numbers is not available. As a whole, the tertiary education sector is very vibrant and there is potential for further growth in the areas of adult education and training services through all Modes.

Supply Capacity

Analysis of output statistics shows that every year almost 45,000 students graduate from various technical colleges and institutes, and the number of students graduating from professional institutes is around 82,000. Each year, almost 277,000 students pass the Secondary School Certificate Examination, while some 150,000 students pass the Higher Secondary Certificate Examination.

Areas for Foreign Investment

Although the education sector in Bangladesh has experienced progressive development over the last few decades, it is clear that this particular service sector looks forward to further investment in order to fill the increased demand for quality education. The government’s future vision and current education policy also support the view that any kind of investment geared towards developing the education sector would be well appreciated. Therefore, private entrepreneurs, particularly foreign service providers, should take note of the underlying opportunities in this particular service industry. The following is a brief description of the areas where foreign service providers can look for investment opportunities:

Tertiary Level Education: This particular level has experienced massive growth in recent years in terms of the establishment of new private universities, the opening of campuses for foreign universities and institutes, and the transfer of students and foreign teaching professionals. The increased demand for tertiary level education, coupled with growing competition in public universities, has opened a window


��Opportunities and Risks of Liberalising Trade in Services — Bangladesh

of opportunity for foreign service providers to invest in this area.

Training of Professionals: Since the movement of natural persons has emerged as one of the most lucrative export sectors in recent years, there is an increased demand for skills training to enable workers to access more value-adding professions. However, the lack of experts and training centres have emerged as constraints in this regard. Foreign service providers, therefore, have opportunities to seize opportunities in this area.

Technical Education: Bangladesh has responded to the global growth of information technology. The government has already formulated an ICT policy, which addresses the need for increased private participation to drive growth in this sector. People have become more informed about the potential in this sector and therefore the increased demand for IT-related skills training has attracted foreign investment in this

area. So far, a good number of foreign training centres have opened branches in various cities; some of them initiated jointly with Bangladeshi entrepreneurs. However, the wide gap between the supply and demand for services, as well as the limited number of quality training centres, reflect the breadth of opportunity for development in this area.

Besides computer-related skills training, there is also increased demand for training in graphic design, interior decoration, machine operation, packaging development and global trade issues.

Primary and Secondary Education: Although the establishment of foreign schools has not yet been experienced in Bangladesh, there are still opportunities for foreign service providers in this particular segment through publication of textbooks, teacher training skills, consulting on the modernisation of teaching methods or efficient management of schools and colleges.

3.3 Temporary Movement of Natural Persons

The supply of workers and professionals of various skill levels is one of Bangladesh’s major areas of export interest. From 1976 to 2003, more than 3.5 million Bangladeshis went aboard with temporary work permits to provide services in the Middle East, Asia, Africa and Europe (see Table 6 in Annex 2). From 1976 to 1993, the number of workers going abroad increased steadily, however, this trend has been volatile since 1994. Since the Middle East is a major destination for Bangladeshi service providers, the fall in manpower exports between 1994 and 2001 can be explained by the Gulf War and the US invasion of Iraq.

It is important to note that Bangladesh exports professionals and skilled workers, as well as low-skilled labour (see Figure 3.5). The composition of manpower exports shows that Bangladesh’s scope for attaining benefits from the current classification under the GATS in terms of exporting services through TMNP remains high. The trend in exporting services through TMNP proves the fact that if there had been no interruption in exports of manpower, such as war, the export of services through

TMNP would have achieved further growth (see Figure 1 in Annex 2). This trend applies to all skill categories except semi-skilled workers.

The Role of TMNP in Bangladesh’s Economy

Temporary movement of natural persons plays a very important role in terms of maintaining macroeconomic stability, reducing the pressure on national unemployment, poverty alleviation, investment in infrastructure, etc. In FY 2003, remittance earnings were equivalent to 6.1 percent of GDP. This ratio has had a secular increasing trend over the years. The ratio of remittances to export earnings is also increasing steadily and in FY 2003 it was 48.5 percent. Remittance earnings play an important role in the stability of foreign exchange reserves and the Figure for these earnings was 1.29 times higher than foreign exchange reserves for FY 2003.

Without remittance earnings, the BoP deficit would have reached US$2,734 million in FY 2003. Remittance earnings of US$3,062



million (FY 2003) produced a surplus of US$328 million in the current account balance. This BoP surplus was achieved as the trade deficit widened, from US$1,768 million to US$2,207 million (see Table 3.2).

TMNP has a direct impact on poverty alleviation. A study (ILO, 2003) shows that the higher the skill and education level of overseas workers and employees, the lower their ties with the home country and the incidence of sending remittances back home. About 94 percent of Bangladeshi overseas workers do not fall under professional categories and thus they have strong ties with home and tend to send a significant portion of their pay back home. The breakdown of workers’ spending patterns shows that expatriate workers spend

29.8 percent of their income on personal consumption abroad, send 44.9 percent of their income back home and save 22.8 percent (IOM, 2002). The remittances sent by these overseas workers are used for various productive, investment and consumption purposes. A major share of remittances (36 percent) is used to meet recurrent consumption, which includes education, health care, and food (see Table 7 Annex 2). Around 14 percent of remittances are spent on better housing arrangements (IOM, 2002).

Major destinations for Bangladeshi workers are the Middle East, followed by other countries in Asia, Africa, Europe and the rest of the world. TMNP to Europe started in 1995 with 329 people to Spain. Recently, Ireland, Italy

Figure 3.5: Skill composition of Bangladeshi workers

Table 3.2: Role of remittances from TMNP in balance of payments stabilisation (million USD)

Items FY 2002 FY 2003

Current Account Balance without Remittances

-2,261 -2,734

Remittances 2,501 3,062

Current Account Balance with Remittances

240 328

Trade Balance -1,768 -2,207

Source: Bangladesh Bank



3.4 Summary of the Three Sectors

and the UK started to hire ICT professionals, the total number of which was 397 in 2003. In Asia, Singapore, Korea and Malaysia were the major destinations for Bangladeshi workers (see Annex 2).

The raw data on TMNP has been mapped across to ISCO-88 occupation categories. This mapping is important to identify those categories of service providers that are important for Bangladesh in the Doha Round negotiations on Mode 4.

Telecommunications

• Fixed-line telephone networks could not be expanded substantially due to the lack of (i) BTTB’s control over revenue, and (ii) a proper competitive environment.

• Competition in the mobile telecom sector produced positive results in terms of improving access to basic telecommunication services.

• Deregulation of VSAT facilitated the growth of Internet services.

• Low FDI hinders this sector’s growth.

• Telecommunications remain dependent on basic telecom services with little focus on value-added services.

Education

• Bangladesh has made notable progress in providing access to basic education, thanks to the combined efforts of the government, the private sector, NGOS and donor agencies.

• The public-private partnership principle performs well in terms of spreading the education network across the country for primary, secondary and tertiary sectors.

• While quantity is being achieved, quality and access are still suffering due to insufficient investment.

• Bangladesh is a net importer of adult education services and will continue to be in the near future.

• The growth in private universities has substituted for the import of education services through Mode 2. On the other hand, the quality and infrastructure of these universities are still matters for concern.

• The role of the government is important in the education sector.

Temporary Movement of Natural Persons

• Bangladesh is a major exporter of services through TMNP.

• Remittance earnings play a positive role in consolidating the balance of payments through foreign exchange reserves.

• Bangladesh sends workers of all skill categories abroad. The current structure of the GATS classification may create benefits for Bangladesh, but only to a limited extent.

• Remittance earnings have a positive impact on reducing the pressure on unemployment, as well as poverty alleviation through the improvement of the livelihoods of relatives of overseas workers.

• Although the destinations for exporting manpower are largely concentrated in Middle Eastern countries, there is potential to increase such exports to developed countries as well.

• The adoption of the ISCO-88 categories may improve the export of services through TMNP.


�5Trade in Services and Sustainable Development


4 GOVERNANCE OF SERVICE SECTORS IN BANGLADESH

The connectivity requirements for the telecom-munications sector in Bangladesh are fairly ba-sic. The public switched telecommunications network (PSTN), the backbone of any informa-tion infrastructure, is still restricted to parts of Dhaka and other major cities, whereas village dwellers’ access to telecommunication services remains sporadic and limited even though sig-nificant infrastructure development and huge in-vestment have taken place in this area over the last few decades. Penetration of PCs, Internet connections and corporate organisations with a connected ICT infrastructure is so low that reli-able sources of data are not yet available. Legis-lation enabling financial institutions to offer net-working and ICT-based customer services (such as banks) is lacking, and public awareness of the benefits from tapping into such services is in some cases limited. The mobile sector is devel-oping rapidly, primarily because it has emerged as an affordable alternative for people who pre-fer not to wait a long time for a fixed-line from the BTTB. But the services provided by the mo-bile operators are restricted to voice communi-cation and, to a limited extent, some peripheral data services. Moreover, the lack of connectivity between mobile operators and the fixed BTTB lines is causing dissatisfaction amongst subscrib-ers.

Overall, infrastructure development in Bangladesh is not only sporadic and limited to the people who have the ability to pay (e.g. urban and mobile users); it is also unsupported by a policy or regulatory framework that would guide the country towards building a connected infrastructure. The virtual absence of any sort of sophisticated or high-capacity information infrastructure creates an opportunity, as well as challenge for policy-makers to make informed choices between available options.

Bangladesh needs to develop a modern telecommunications network for three fundamental reasons:

• Bangladeshi enterprises cannot take

advantage of the emerging ‘new economy’ ushered in by the global ICT revolution until the connectivity crisis is solved.

• The digital divide between urban and rural populations will eventually pose severe constraints to the social development of the latter, and the situation will deteriorate further as they have less access to basic needs, such as education and social and health services.

• Foreign buyers who are unable to contact local entrepreneurs might eventually lose interest in conducting business with Bangladesh.

Major Constraints to Growth

The constraints identified after active consultations with various stakeholders (CPD, 2001) in the telecommunications industry are: (a) an absence of (or poor) physical infrastructure; (b) lack of capital, which prevents adequate coverage of geographic areas or populations; (c) an inappropriate competition policy; (d) the Telecommunications Regulatory Agency’s (TRC) lack of independence; (e) the inadequate role of the state telecommunications operator; (f) people’s inability to afford telecommunication services; (g) poor quality of services; (h) lack of technology, knowledge and know-how, and (i) poor quality of existing human resources.

Policy Objectives for the Telecommunication Sector

The Ministry of Post and Telecommunications (MoPT) of Bangladesh has set the following goals to be achieved by June 2005:

• to make telephones affordable and easily available to the population. The International Telecommunication Union (ITU) has urged governments to recognise basic telephone facilities as a 'human right';

• to bring all districts, upazillas (sub-



districts) and remote areas of the country into a telecom network; and

• to use the telecom infrastructure as the main vehicle of development and expand the country’s ICT base.

Domestic Regulation in the Telecommunications Sector

Bangladesh is the only South Asian country to have lacked a telecom regulator until 8 July 2001, when the TRC was established. The TRC is the central element of a reform programme aimed at ensuring a level playing field for all telecom operators. The Commission’s principal tasks are to issue licenses to operators, allocate inter-connection frequencies and fix tariffs for the various telecom services. But, to date, the overlapping regulatory and operational roles of the Bangladesh Telegraph and Telecommunication Board (BTTB) have severely hampered progress. After enactment of the TRC Act, the MoPT signed an operating agreement with WorldTel despite the fact that under the Act only the TRC had the authority to make such a deal. The TRC in its current form will not be able to maintain its independence. The new government should amend the TRC to ensure its independence and transparency.

The agreement on basic telecommunications negotiated under the WTO in February 1997,6 annexed a reference paper forming a part of the commitments of most of the original signatories to the Agreement on Basic Telecommunications (ABT). Bangladesh committed to liberalising basic telecommunications under the ABT.7 According to the agreement, the regulatory body should be separate from and not accountable to any supplier of basic telecommunications services. Furthermore, the decisions of, and the procedures used by, regulators were to be impartial in respect of all market participants whether public or private service providers.

Bangladesh is possibly one of the pioneers in South Asia in opening up telecommunication services to the private sector. As far back as 1989, the public switch telephone network (PSTN)8 in the semi-urban and rural areas, the country-wide cellular mobile telephone service

(CMTS)9 and paging10, radio trunking and riverine radio communications were opened up for private participation. Most private operators were given a five-year tax holiday in those areas for which licences had been issued in order to allow them to become self-reliant.

De-monopolisation

Although the MoPT was the formal regulator of the BTTB, it apparently did not have any authority to regulate BTTB tariffs, which were supposed to be approved by the Ministry of Finance. Moreover, major investment and spending decisions by the BTTB, such as investment for the expansion of, or costs to be incurred for, the maintenance of the network, had to be approved by the Planning Commission and ECNEC, which are under the jurisdiction of the Prime Minister’s Office. This situation did not change even after the emergence of the TRC. The BTTB’s revenue income together with the share absorbed by the Ministry of Finance is presented in Figure 4.1. This mechanism seriously hinders resource allocation for the growth of the telecommunications sector in Bangladesh.

The government has recently allowed the BTTB to launch its own GSM mobile service. This operation is exempted from any license fees including spectrum charges. Interconnection with PSTN is guaranteed as it is owned by the BTTB itself. Guaranteed access to such costly infrastructure support has already raised concern among existing private mobile operators.

Interconnection

Interconnection is one of the major issues casting a negative influence over the expected expansion and smooth operation of services provided by the private sector. The chronic inability and possibly unwillingness of the BTTB to provide interconnections of sufficient capacity to the private operators is already a matter of concern. The present bilateral agreements reflect a sort of one-sided arrangement imposed upon the private operators largely in favour of BTTB.



Affordability

The Telecom Act explicitly stipulates the principles for the determination of tariffs and the procedure for their approval by the Commission. The provisions of the law also prohibit any discrimination or unreasonable preferences. The Commission has been provided with the absolute authority to approve or reject any tariff proposal from any operator. The Commission undertook a programme to formulate regulations detailing the considerations to be made in developing the tariff structure. The principles of cost-based pricing or price-cap tariffs have now begun to exist in practice. For major destinations, tariff rates have already been reduced sharply (see Table 4.1). Nevertheless, the connection fees and the per-minute charge rates of the state-owned BTTB still remain very high compared to other countries in Asia.

Due to inadequate investments in capacity, the BTTB is unable to keep up with the growing demand, resulting in potential customers having to wait several years for an installation. Similarly, due to a lack of sufficient investment, the BTTB has not been able to provide adequate interconnection facilities to mobile operators even at BTTB’s own highly preferential pricing. This has led to a situation where only about a tenth of mobile subscribers can talk to BTTB fixed-line subscribers. As a result, mobile operators are offering mobile-to-mobile-only

services to a majority of their customers and are constrained in expanding their services to meet the growth in demand.

The Internet

The Internet in Bangladesh has grown rapidly in the last few years. The total bandwidth capacity in July 2000 was estimated between 100 to 150 mbps, much below the desired level for an efficient transmission network (TechBangla, 2001). Internet connection speeds vary between 64 kbps and 2 mbps gateway access.

Internet access is very limited for several systemic reasons, such as poor teledensity, poor electricity supplies, unaffordable computers and the lack of proper knowledge about the Internet itself. Public Internet access is available to a limited degree in private telephone centres and cyber cafes. Divisional headquarters and some district towns have access to the Internet.

There is increased competition among Internet service providers (ISPs). The rapid growth of Internet services has been declining after the BTTB’s deregulation of VSAT. Since VSAT deregulation, prices have come down almost 140 percent on average and are still declining. The average rate now is Tk 0.45 per minute, and several ISPs are offering flat-rate services. Despite the rapid fall in Internet service prices, they are still considered high for the general public and students (CPD, 2001).

Figure 4.1: Revenue income of the BTTB and the share of its absorption by the government



Governance of the Education System

Primary and secondary education in Bangladesh is managed and administered by two governing bodies, i.e. the Ministry of Education (MOE) and the Primary and Mass Education Division (PMED), which receive regular support from other bodies in order to implement their decisions and supporting programmes. Although the MOE is the highest body for the formulation and implementation of education policy, the existence of other regulatory bodies has made the governance mechanism more decentralised. The Primary and Mass Education Division is responsible for the determination and implementation of programmes for the development of primary and general adult education. In addition to these two bodies, directorates at various educational levels administer personnel, formulate policies, and improve the status of both the formal and non-formal education sectors.

At the tertiary level, the University Grants Commission (UGC) is responsible for regulating private and public universities, and thus serves as the intermediary between the government and autonomous educational institutes. The names of the regulatory bodies, their scope of operations and their respective responsibilities is attached (see Table 1 in Annex 3).

Development Policy Objectives

Bangladesh’s constitution stipulates a more equitable and socially-oriented education system, accessible to all irrespective of race, social class or religion. Article 17 of the Constitution clearly states that:

The State shall adopt effective measures for the purpose of establishing a uniform, mass-oriented and universal system of education and extending free and compulsory education to all children to such stage as may be determined by law; relating education to the needs of

4.2 The Education System

Table 4.1: The BTTB’S ISD call rate

Name of the country/ destination

Country / Destination

Code

Collection Rate per minute

Normal Rate (USD) Reduced Rate (USD)

Asian Country 0.47 0.35

North America 0.57 0.43

South America 0.69 0.52

EU 0.40 0.30

Africa 0.52 0.38

Other European Country 0.51 0.37

Australia and Oceania 0.51 0.38

Inmarsat Atlantic Ocean (East) 871 8.64 8.64

Inmarsat Atlantic Ocean (West) 874 8.64 8.64

Inmarsat Indian Ocean 873 8.64 8.64

Inmarsat Pacific Ocean 872 8.64 8.64

N.B.

1) For International Direct Dialling, the charge is for every 30 seconds.

2) For International Booking (Trunk) calls, the charge is for the first 3 minutes and then for every 30 seconds.

3) For a Particular Person (PP) call, 2 minutes charge is added to the trunk call charge.



Governance

The activities related to movement of natural persons are regulated by the Ministry of Labour and Employment. Traditionally, the ministry’s main responsibility was to manage labour issues in Bangladesh, but with the increasing demand for Bangladeshi workers abroad, issues related to training were brought under its auspices. The increasing demand for labourers in the Middle East starting in 1976 led to the creation of the Bureau of Manpower, Employment and Training (BMET) as a distinct executive institution of the government, now the largest division under the Ministry of Labour and Employment.

The primary objectives of the BMET are to:

• provide skill development training to meet the growing demands in industrial production, infrastructure development and other technical professions inside and outside the country;

• implement internship and in-plant training programmes designed to enhance workers’ skill levels;

• identify the exact demand for manpower abroad and initiate training programmes accordingly;

• complete registration and introduction of job seekers, both inside and outside the country;

• collect labour market related information, undertake research work, develop job guidelines and perform institutional surveys;

• monitor and control the activities of recruiting agencies and develop rules and regulations for overseas employment, and

• implement self-employment and poverty-alleviation programmes.

These objectives are not sufficient to meet current needs in terms of exploiting the opportunities created under the GATS. As the


society and producing properly trained and motivated citizens to serve those needs, and removing illiteracy within such time as may be determined by law.

The recently prepared Poverty Reduction Strategy Paper (PRSP) recognises the fact that education development is one of the avenues for future growth. The approach of ‘all routes matter’ in the PRSP takes into consideration the importance of education, along with other routes, i.e. health, nutrition, employment-oriented skill training, the closing of gender gaps, etc. By recognising education as one of the driving sectors, the government is therefore expected to take initiatives in order to raise the quality of primary education, increase the enrolment at secondary level and expand and improve the standard of technical and vocational training.

To achieve the Millennium Development Goals set by the United Nations, the government has fixed the following specific educational targets by 2015:

• attain universal primary education for all girls and boys of primary school age;

• eliminate gender disparity in primary and secondary education;

• raise the adult literacy rate to 88 percent; and

• ensure 100 percent primary and secondary enrolment ratio.

Constraints to Growth in the Education Sector

The constraints facing the education system in Bangladesh can be categorised under three broad headings, i.e. (1) access and equity; (2) quality of education, and (3) governance and management of education. Similar to other South Asian and least-developed nations, the growth potential in the education sector in Bangladesh is severely hampered by institutional, regulatory and social constraints, such as centralised governance, inadequate resources, corruption, mismanagement, etc. A partial list of such constraints at various educational levels is annexed (see Table 2 in Annex 3).



BMET was established to meet the demand for workers in the Middle East, the organisation did not change its vision to take advantage of the emerging opportunities from globalisation. Just providing workers with technical and vocational training is not adequate to meet the growing overseas demand for skilled and professional human resources.

Quality of Skill and Certification Procedures

Currently, student admission, curriculum design, conducting and evaluating final exams, certifications etc. are administered by the Bangladesh Technical Education Board. The National Council for Skill Development and Training (NCSDT), on the other hand, is responsible for conducting, co-ordinating and controlling the quality of all vocational training programmes run by various government and quasi-government institutions, as well as those run by NGOs and the private sector. The NCSDT comprises the Minister for Labour and Manpower as its Chair along with two members of parliament and representatives from various ministries, NGOs and a number of related organisations. The certifications equal 12 years of schooling.

Internship Training Courses are being conducted in line with the Internship Ordinance (1962) and the Internship Act (1967), which are antiquated and lack foresight.

In-plant/on-the-job training programmes are conducted by the Bureau of Manpower, Employment and Training, and are aimed at improving the skill level of factory workers. The in-plant training programme was initiated under the IDA Vocational Training Programme/Project of 1979. Between 1981 and 1987 a total of 2,097 individuals were trained to meet the demand of various public industry units, such as the Steel and Engineering Corporation, Sugar and Food Industries, Chemical Industries, Textile and Jute Industries. But since many state-owned enterprises have already been shut down or are in the process of closure, new business models for in-plant training are required where public-private partnership would be the key success factor.

BMET provides information support to individual service providers and guidance on skill development training. There is a growing need for market information, particularly information related to job requirements in emerging overseas markets. BMET is trying to grow to become an information focal point in Bangladesh for all relevant stakeholders.

Governance of Inbound Professionals and Workers

Recruiting foreign professionals in Bangladesh’s business enterprises is subject to Board of Investment (BOI) approval. Before joining, the foreign candidate must fill in an application and the recruiting organisation must show that there is a valid ground for recruiting a foreign national instead of an equivalent national.

The following issues can be observed in such application requirements:

• A business enterprise cannot recruit a foreign national without a valid reason. It must prove that an equivalent candidate could not be found in the local job market.

• Foreign professional(s) can be recruited only if the business enterprise has a comprehensive training plan under which the foreign candidate(s) will train local employees and transfer professional knowledge and expertise.

• The regulatory authority has the scope to judge (by comparing the number of existing local and foreign employees and their respective salary structures) whether it is necessary to recruit foreign professionals. The government will not allow recruitment of any new foreign professional if the existing number of such employees constitutes more than five percent of the total workforce, including top management.

• The information to be supplied about the annual production performance of the business enterprise enables the regulatory authority to determine whether past recruiting foreign professionals had a significant impact on production



performance. The application might be denied if there was no significant improvement had taken place.

Besides the rigorous application process, the candidate must also adhere to government guidelines on obtaining a work permit, which include obtaining security clearance from the Ministry of Home Affairs, being a citizen of a country which Bangladesh recognises, etc.

Policy Objectives of TMNP

In order to ensure substantial gains from manpower export in future, strategies should include measures such as investigating overseas demand for workers and opening new markets for manpower exports through active negotiations, developing human resources accordingly, and taking advantage of the opportunities arising out of the demographic changes in Europe as well as other developed countries through a strong institutional support structure. Implementing such a strategy would require developing the institutional capacity to provide support to the domestic workforce through disseminating information and other relevant services, strong marketing efforts and improving the quality of human resources according to overseas demand. In short, it is essential to have strong co-operation among the ministries of commerce, foreign affairs, expatriate welfare and overseas employment, education and labour.

The government of Bangladesh recognises manpower export as an effective instrument for employment generation, which impacts directly on poverty reduction. In its Poverty Reduction Strategy Paper the government explicitly states that “special efforts will be given to avail the opportunities of exporting skilled manpower to meet the demands in developed

(e.g. OECD) countries over the medium term through adequate training and skill developing measures for the youth”. However, the paper does not adequately address how these ‘special efforts’ will be made or how overseas demands will be met through ‘adequate training and skill development measures’. Describing the medium-term policy measures, the government highlights “enhancing unrestricted inflows of remittances” as the primary goal for reducing balance-of-payment imbalances, and outlines the actions to be taken to achieve this goal. The government seems to think that simply ensuring the unrestricted flow of remittances would suffice; there is no need for any other complementary measures to develop the areas of manpower export further. Moreover, the mid-term agenda, as well as the actions taken regarding the issues of remittance earnings, only relate to the enactment of the Money Laundering Prevention Act 2000 and other related measures to ensure the channelling of funds through the official system. It is quite evident that the measures already taken, and those in the pipeline under the medium-term framework, are not forward-looking, but rather ex-post.

Neither does the government appear to have any medium-term strategy for addressing the bottlenecks in its institutional capacities to ensure better services for the prospective outgoing workforce. While it outlined measures for upgrading education standards at all levels, as well as developing skilled human resources through training in vocational and technical institutes, it did not describe how these measures would relate to the overseas demand for manpower export. It can therefore be concluded that the policy measures aimed at ensuring maximum gains in this area are still inadequate.



International financial institutions (IFIs) play an important role in Bangladesh’s service sector development. In the health and education sectors their contribution (like that of bilateral development agencies) is of a relatively uncontroversial nature. In the financial sector, however, reform measures are directly related to the country’s macroeconomic stability, and the role of IFIs regularly draws severe criticism from various quarters on the grounds that such initiatives are subject to strict conditionalities. On the other hand, the government welcomes

any kind of IFI participation in the development of the telecommunications sector because it acutely needs the injection of funds, either in the form of foreign direct investment or support from multilateral donor agencies. It should also be noted that the emphasis of IFIs in the economic development of developing countries has already shifted from a sectoral approach to an overall policy approach, which in Bangladesh has supported the preparation of the Poverty Reduction Strategy Paper (PRSP) and the Poverty Reduction and Growth Facility (PRGF).

5 THE ROLE OF IFIs IN SERVICES SECTORS IN BANGLADESH

5.1 Private Sector Development and the Role of IFIs

Recently, both IFIs and bilateral donor agencies have sought to integrate private sector efforts in promoting development in individual business sectors into the government’s direct support policy. Aid programmes seek to promote the development of the private sector indirectly through providing credit to the government in support of various reform programmes and directly by providing equity and/or loans to private sector projects. Indirect support to the private sector includes the support of reform programmes designed to create an enabling environment through the provision of technical assistance. Technical assistance for the telecommunications sector, particularly for strengthening both the policy co-ordination role of the Ministry of Posts and Telecommunications (MoPT) and the regulatory role of the Bangladesh Telecom Regulatory Commission, serve to illustrate this. Multilateral agencies such as the World Bank’s International Finance Corporation (IFC), the Asian Development Bank’s Private Sector Group and the Islamic Development Bank

(IDB) have a separate private sector window. Three types of instruments are generally used by multilateral agencies: (i) equity, which may include preferred stock, convertible loans and other forms of mezzanine financing, (ii) loans, including direct loans and commercial co-financing, and (iii) two types of guarantees for private sector projects: (a) partial credit guarantees (PCG), and (b) partial risk guarantee (PRG) (Khan F.K., 2004).

In addition to the private sector windows of multilateral agencies, export credit agencies (ECAs) provided supplier credits to the private sector. Export credit is usually provided by means of (i) commercial bank loans that are insured or guaranteed by ECAs or (ii) direct loans from ECAs. In addition to the World Bank, the Asian Development Bank and the ECAs, other bilateral donors such as the Netherlands, USAID, DFID, GTZ, JBIC (financing physical infrastructure) etc. have supported private sector development in Bangladesh.

5.2 PRGF, PRSP and Sector Development

The government of Bangladesh and the International Monetary Fund (IMF) have reached an agreement on the Poverty Reduction and Growth Facility (PRGF), a three-year US$490 million balance-of-payment support programme for fiscal years 2003-2005. The priorities of the facility include ensuring a stable macroeconomic

environment and judicious management of public resources, to be achieved through tax reforms, the strengthening of the public expenditure structure, the liberalisation of exchange and trade regimes, the reform of the nationalised commercial banks and state-owned enterprises, and by addressing economic governance issues.



Telecommunications

The policy objective for the telecommunications sector is to widen the telecommunications network at a low cost. The government considers the establishment and functioning of the TRC as an important step towards that policy objective. The action agenda is quite straightforward, and includes separation of the policy-making process from regulatory and operational functions of the government through a more focused MoPT, strengthening the TRC, and structural reform of the BTTB so that it provides quality services on competitive terms and becomes just another operator without any influence in regulatory issues. The PRSP does not mention any specific targets for growth of the telecommunications sector. A recent World Bank supported project is more comprehensive in terms of bringing an appropriate competitive environment to the sector and also improving the sector’s regulatory and technical management (World Bank, 2003).

The World Bank, after prolonged discussion with the government, agreed in principle to accept the sector’s development policy agenda, which is more comprehensive than the PRSP coverage (see Table 5.1 below).

The IFIs have tried to support the government in making the telecommunication sector a vibrant one by providing crucial support to the private sector through cost effective technology development. The World Bank in particular has been providing support to the government since the early 1990s in this regard. In 2003, it initiated the most recent Telecommunications Technical Assistance Project, which is expected to be completed by 2007 with a total funding outlay of US$9.12 million. It has two components, which will be implemented simultaneously:

• The MoPT Component− restructuring of the BTTB;− strengthening MoPT's policy functions;

and− strengthening project management

capacity.

• The BTRC Component− Spectrum management and monitoring

system.

Implementation of the project is expected to bring a much-awaited level playing field in all three sub-sectors of the telecommunications industry, i.e. fixed and mobile network, as well as value-added services.

Table 5.1: Sector objectives and action plan

Time frame Short-term Medium-term Long-term

Policy Objectives

1. To support independence between policy, regulatory, and operational functions

2. To create a level playing field for telecom operators

1. To refine business environment for telecom operators

2. To attract new investment to sector

3. To increase rural access to ICT services

1. To continue to attract sufficient investment to serve the needs of the nation

2. To promote innovation and investment

Priority Issues

1. Separation of policy-making and operational roles for the government

2. Sector liberalisation

1. Further restructuring of the BTTB’s successor company

1. Greater private sector opportunities

2. Convergence

Priority Action Items

1. BTTB restructuring and MoPT strengthening

2. Revise Bangladesh’s WTO commitments on telecommunications

3. BTRC strengthening4. Award new licenses5. Establish and

implement a fair interconnection regime

1. Develop options for private participation in the BTTB

2. Legislative change to protect the BTRC’s independence

3. Adopt and implement a universal access strategy

1. To be determined

Source: World Bank 2003.



Education

The PRSP contains four specific policy objectives for the education sector:• improving the quality of education;• promoting female education; • promoting vocational training and skills;

and • improving science and technical education.

Although these objectives cover important areas of concern, two important issues are not adequately addressed in the strategy paper. One is the harmonisation between various types of education systems, including the general Bangla medium system, the Islamic madrasah system and the English medium system. The other concerns the improvement of the teaching quality by attracting capable and qualified people to the teaching profession through redesigning the compensation structure. Failure to address this fundamental point would eventually lead to further division between the rich and poor in terms of access to quality education.

Given the low revenue/GDP ratio, the government is largely dependent on external sources for financing its development budget. External aid finances more than 50 percent of government development expenditure on education (CPD, 2003). Donor agencies have supported the development of the education sector, particularly through programmes that encourage female students to attend school. Multilateral donor agencies such as the ADB, the World Bank and UNICEF have long supported multiple programmes that promote access to primary education. Besides collective efforts, individual countries such as Japan, have also supported multiple education-related programmes. IFI support is playing a crucial role in eradicating illiteracy from the country along with the active role of NGOs and the government. The development of the education sector in Bangladesh has become another success story for the country after the micro-credit revolution of the early 1980s.

5.3 Direct Support to the Private Sector

The concept of public-private partnership and private sector development has become popular in Bangladesh and has achieved considerable success in recent years. The energy sector, telecommunications and the financial sector have all received direct support from the Asian Development Bank with a total volume of around US$140 million (Khan F.K, 2004). Up until 2002, the International Finance Corporation (IFC) provided US$44.7 million in loans and equity to various institutions in the financial, telecom and energy sectors.

Export Credit Agency Financing

In addition to the support received from mul-tilateral donor agencies, Bangladesh’s private sector also receives support from export credit agencies (ECAs). Export credit is usually provided either through ECA- guaranteed or insured com-mercial bank loans, or through direct loans from ECAs. Export credit is often part of a put together by a trade or project finance unit of a commercial bank. Total support to the telecommunications sector was US$35 million for the period 1997-2001 (see Table 1 in Annex 4). In addition to the mul-tilateral agencies and ECAs, bilateral donors are also involved in private sector development.

5.4 The Lessons from the Roles of IFIs

The important lessons to be drawn from the role of IFIS are:

• Obtaining support from foreign donor agencies in ensuring basic services is contributing significantly to the poverty

alleviation efforts of the country, as well as to overall economic development.

• Specific support towards the overall development of the business environment and private sector should be targeted at creating a competitive environment.



As seen in Chapter 1, the GATS negotiations are strategically important for LDCs, including Bangladesh, for the following three fundamental reasons:

• retaining and deepening competitiveness in goods exports;

• opportunities through increased tradability of services; and

• improvement of quality of services in domestic markets.

After active consultations with various stakeholders including exporters and importers of goods and services, domestic service providers and domestic consumers of services, we classified various service categories under the three broad headings above (see Table 1 in Annex 5).

Chapter 2 discussed the identification of sectors of export, import and mixed interest according to balance-of-payment (BoP) Figures:

• If a sub-sector has a secular positive BoP trend, it is of export interest.

• A sector with a secular negative BoP trend is of import interests.

• Sectors with mixed BoP trends have both export and import interests.

These principles can be applied in general. However, the identification exercise should be supplemented with an investigation of the strengths and weaknesses of individual sub-sectors. The following factors should be considered:

• strength of the selected sector or sub-sector in terms of available training facilities, capacity-building, technology acquisition, etc;

• provision and improvement of infrastructure;

• investment and attracting FDI;• definition of legitimate regulatory

objectives and mechanisms; • identification of appropriate measures

for the development of the sector or sub-sector;

• improvement in the efficiency and competitiveness of the service sector;

• adoption of pro-competitive policies;• identification of target sectors for foreign

services suppliers, and• identification of policies and regulations

for an opening of trade in services.

Finally, the analysis exercise for sector strengths and weaknesses to finalise the list shows that:

• Bangladesh has export interests and will request Member states to open those sectors under market access negotiations;

• Bangladesh has import interests in order to retain and improve competitiveness of its goods exports, as well as to improve the quality of services for domestic markets. It should thus offer to liberalise certain sectors the request of other Member countries, and

• Bangladesh should exercise protection to promote domestic service providers.

The share of particular sub-sectors in GDP is also a factor in defining whether Bangladesh should exercise protectionism. The exercise carried out in Chapter 3 for the selection of sub-sectors for detailed analysis is pertinent here.

To prioritise liberalisation efforts, further exercises should be performed concentrating on the requests made to Bangladesh by Member countries and the provisions for LDCs given under the LDC Modalities in Services Negotiations.

6.1 Sectors of Export Interest

According to BoP criteria, the following sub-sectors have been identified for export interest in (for details, see Table 2 in Annex 5):

• computer and related services; • telecommunication services;

• distribution services; and• life insurance and maritime transport.

Among these sub-sectors, distribution services have the highest share of GDP (13.91 percent in FY 2003). There are hardly any foreign

6 BANGLADESH’S GENERAL AND SPECIFIC INTERESTS



service providers in this sector of the domestic market. Distribution services are provided by a large number of small- and medium-size enterprises (SMEs), which will need protection to maintain their present contribution to GDP. The transportation sector’s share in GDP is also

high (9.78 percent), while maritime transport stands at more than 50 percent. However, the maritime sector is classified separately under the GATS. Therefore, the identification of export-import interests for this sector requires further analysis.

6.2 Sectors of Import Interest

The sub-sectors with a negative balance-of-payments include: rental/leasing services without operators, construction and related engineering services, education services, health and social services, tourism and travel-related services, news agency services, research and development services and air transport services.

The construction and related services sector accounts for 8.63 percent of GDP. Technology transfer plays a significant role in the development of this sector. As the sector has high stakes for domestic service providers, as well as substantial imports, liberalisation of this sector should be balanced. The GDP shares

for education services (2.36 percent), health-related and social services (2.21 percent), tourism and travel-related services (0.67 percent) are comparatively low. Liberalisation of these sectors will attract foreign investment which will facilitate their further growth and will play an import substitution role in the long run, particularly in the health and education sectors. Analysis of the education sector in Chapter 3 shows that the opening of off-shore campuses of foreign universities and the growth of private universities with foreign affiliation creates some sort of import substitution effect. The same is true for the health sector. However, stakeholders in this sector have strong reservations about opening up Mode 4.

6.3 Sectors Requiring Protection

The sub-sectors with mixed signs in balance of payments are: audio-visual services, financial services (non-life, reinsurance and banking), personal, cultural and recreational services, and rail transport services (see Table 3 in Annex 5). It should be mentioned that the financial sector in Bangladesh has already been opened up under the aegis of the World Bank and the IMF since the 1990s. Although the GDP share of this sector is not very high (1.63 percent), the sector has an important role to play in macro-economic stability. The increased frequency of financial crises worldwide hints at the need for a cautious approach in further liberalisation

financial services. Although rail transportation has a long tradition in Bangladesh, lack of investment and the protectionist attitude of neighbouring India has prevented the sector from flourishing despite its huge potential. Bangladesh has both import and export interests in this sector with the balance tending more towards protectionism, however. Thus the policy-makers should follow a cautious approach in liberalising rail transportation.

The following section examines the two of the specific interest sectors of this study more in detail.


Primary analysis of this sector indicates that Bangladesh has export interests here. The analysis of the basic features of the sector in Chapter 3 showed that it could not grow rapidly due to the absence of appropriate domestic policies and improper regulation despite a huge potential for domestic expansion of networks

and the export opportunities for other value-added services. Moreover, the poor development of this sector hinders growth for real sectors of the economy and reduces the competitiveness of other export sectors. Therefore, this sector needs planned liberalisation.



Sector Strengths and Weaknesses

Inadequate human capacity, high licensing fees, cumbersome procedures and non-transparent regulatory processes made it difficult for the telecommunication sector to acquire state-of-the-art technology both in the areas of fixed-line and wireless telephony. In fact, there is little opportunity for higher studies in telecommunications engineering in the country. As a result, the process of human capacity-building is also very slow. Sector liberalisation with local equity participation could improve technology transfer to this sector.

Provision and Improvement of Infrastructure

Coverage: There is wide scope for development here. The recent growth in mobile telecommunications shows that effective demand for such services is very high. The country-wide high-speed data connection network is still virtually non-existent, except for a limited facility provided by Bangladesh Railway and Power Development Board. Coverage shortfall thus creates growth opportunities for Bangladeshi telecommunication industries.

Attracting FDI: Telecommunications is one the service sectors that could have attracted substantial amounts of foreign direct and domestic investment over the last decade (see analysis in Chapter 3). To achieve the target of tele-density specified in the fifth five-year plan, Bangladesh needed US$7 billion (PWC, 2000). Attracting FDI in this sector through further liberalisation under Mode 3 is essential.

Liberalising the telecommunications sector created considerable interest from overseas service providers who would like to operate both fixed-line and mobile cellular networks, rural telephone exchanges, and provide paging and trunking facilities, Internet and other value-added services.

Regulatory Objectives and Mechanisms: After a period of stagnation and indecision, regulatory objectives and mechanisms are now in place. The government has separated the functions of

policy-formulation, regulation and operation. Bangladesh has received support from the World Bank to further strengthen the regulatory and policy regimes in the telecommunications industry, which should instill confidence among potential investors.

Identification of Appropriate Measures: The policy objectives and action plans prioritised by the government for speedy implementation are clearly stated in the government’s policy documents (see Chapter 5).

Adoption of Pro-competitive Policies: The corner stones of a predictable business environment were laid through the enactment of the National Telecom Policy in 1998 and the Bangladesh Telecom Act 2001. The formation of BTRC in 2001 and separation of regulatory activities away from the state-run operator BTTB were also positive steps. Currently, issues regarding the privatisation of the BTTB are being discussed with heightened interest. Despite fragmented policy implementation, the budding competitive environment did facilitate rapid growth in the mobile telecommunications sector over the past decade.

Trade Policy and Regulation: At the conclusion of the Uruguay Round, telecommunications was one of the two sub-sectors where Bangladesh made commitments under the GATS.

Since there is still a large unmet demand for telephone lines, this sector has a very large potential for expansion and is expected to attract substantial investment from both large and small investors. The consistent policy environment and removal of procedural bottlenecks can improve the investment environment in this sector. GATS negotiations on transparency and Bangladesh’s commitments in this regard may improve foreign investor confidence.

Derivatives of Development: The ICT sector in Bangladesh is relatively small compared to other South Asian and South East Asian countries, such as India, Pakistan, the Philippines and Sri Lanka. The export of computer and related services was only US$1.14 million in FY 2003. However, this sector could have considerable growth potential,



if it were to receive better support from the government. Consequently, it may offer increased opportunities to small- and medium-sized investors from Europe. To date, IT investment in Bangladesh has mostly been confined to information processing by Bangladeshi firms with business alliances with international firms, mostly from America, for data entry, medical forms processing, etc. However, growth has proven very slow due to the country’s poor IT infrastructure, including poor connectivity, the high cost of data transmission, poor productivity, the lack of trained programmers and managers, and poor market promotion by Bangladeshi firms.

The government declared ICT as a ‘thrust sector’ in 1996. As a result, import tariffs on both computers, computer accessories, and components have been eliminated, which has already led to reductions in retail prices of up to 40 percent on assembled computers. The Ministry of Science and Technology was renamed as Ministry of Science and Information and Communication Technology (MSICT) to provide better support to the ICT industry. The liberalisation of telecommunications and computer services under the GATS is, therefore, expected to create a more conducive environment for foreign participation through Mode 3.

6.5 Movement of Natural Persons

LDC Modalities and Mode 4

The adoption of Modalities for the Special Treatment for Least-developed Country Members in the Negotiations on the Trade in Services (TN/S/13, see Chapter 7 for details) brought a significant development in the area of service classification. The current classification structure is limited certain skill categories, but since LDCs enjoy a degree of competitive advantage in the area of manpower exports, they demand inclusion of all skill categories in the GATS classification. However, it is important to identify categories of service providers that have the potential to export to recipient developed and developing countries. The following exercise was undertaken to identify the categories where Bangladesh has short-term, mid-term and long-term export interests.

There is an ongoing discussion on how all categories of service providers can be included in GATS classifications. The International Standard Classification of Occupation 1988 could provide a good basis for such an exercise. Bangladesh’s exports of service providers through TMNP are performed through its own classification system. To identify the categories of professions in which Bangladesh has specific export interests, its national categories have been matched with the ISCO-88 classifications (see Table 4 in Annex 5).

It is important to note that Bangladesh exports service providers through TMNP in all skill Categories according to the ISCO-88 classification and also to all continents (see Table 6.1 and Table 5 in Annex 5).

To identify priority categories, all ISCO-88 categories were divided into three groups. Short-term priority Group 1 includes the ISCO-88 categories for which the number of service providers exported is more than 1,000. It includes 23 categories at 3-digit level and all 1-digit level categories except category 1 (see Table 6 in Annex 5). The major categories in Group 1 are: nursing and midwifery professionals, secretaries, personal service workers, guards, sales persons, farmers, miners, building finishers, painters, machinery mechanics and fitters, metal workers, handicraft workers, printers, food processing workers, machine operators, domestic helpers, cleaners and launderers, drivers, caretakers, agricultural labourers, and construction workers.

The group for mid-term priorities (Group 2) consists of 19 3-digit level categories. The number of services providers exported under this group is less than 1,000 (see Table 7 in Annex 5). Major Group 2 categories include: managers, physicists, chemists and related professionals, architects, engineers and related professionals, life science professionals, health professionals (except nursing), college, university and higher



education teaching professionals, computer associate professionals, optical and electronic equipment operators, finance and sales associate professionals, protective services workers, fashion and other models, shop sales persons and demonstrators, livestock workers, metal moulders, welders, sheet-metalworkers, structural-metal preparers and related trades workers, machine operators, textile, fur and leather products machine operators, messengers, porters, doorkeepers and related workers.

Group 3 includes categories that Bangladesh does not currently export, but which have future export potential because of (a) the existence of educated unemployed, and (b) current protection regimes in importing countries. These categories are important for Bangladesh in the long run (see Table 8 in Annex 5). Under these categories, there are 39 3-digit level categories.

Demand for TMNP

Several studies (Winters et. al, 2003; IOM, 2003) show that demographic trends in OECD countries and countries like Bangladesh create a perfect demand-supply balance in the medium- to long-term.

Over the next 50 years, the OECD will experience a sharp rise in the share of elderly persons in the total population. By 2050, the average share of individuals aged 65 and over in the total population will reach an average of 30 percent or more in such countries as Korea, Japan, Italy, Sweden, Australia, the Czech Republic, New Zealand, Poland and Spain. If individuals between 55 to 64 years old are included, this share would rise to nearly 40 percent of the total population by the end of the projection period. For most countries, this increase is concentrated in the period from around 2020 to 2040. At the same time the working age

Table 6.1: Distribution of service providers through TMNP according to ISCO-88, 2003

Code Major Group 2-digit categories

3-digit categories

Number of service providers

Share (%)

1 Legislators, senior officials and managers 1 1 203 0.1

2 Professionals 3 6 1,564 0.7

3 Technicians and associate professionals 2 3 655 0.3

4 Clerks 1 1 1,834 0.8

5 Service workers and shop and market sales workers 2 5 3,812 1.7

6 Skilled agricultural and fishery workers 1 2 1,828 0.8

7 Craft and related trades workers 4 10 92,435 41.0

8 Plant and machine operators and assemblers 3 6 30,004 13.3

9 Elementary occupations 3 6 92,878 41.2

Total 71.43 21.28 225,213 100.0

Source: CPD Analysis from BMET Data.



population will decline in almost all countries, although to different degrees (see Table 6.2).

EU member states would need an additional 46 million labour migrants by 2050 to keep the workforce constant.11 By 2025, countries in Central and Eastern Europe will require a net inflow of eight million people to stabilise their working population. At present, these figures would appear to underestimate the size of the necessary inflow as many studies predict that some three to five million citizens from Central and Eastern Europe may move to Western Europe for economic reasons during the first 15 years following EU enlargement (see Table 6.3, Fassman and Munz, 2002).

The modest growth in total population will lead to small but widespread declines in the total labour force, by —0.1 percentage point per year averaged over the next five decades and across countries. Where participation rates of women are low now, labour force growth will be more rapid than in countries where women’s participation rates are already at a high level. Employment growth will also decline, although by slightly less than for the workforce, reflecting assumed falls in the unemployment rates. Sharper falls in unemployment rates explain the somewhat faster average growth in employment in several countries (Austria, France, Italy, Poland and Spain).

Age imbalances between the oldest and the younger parts of the population, as measured by the old-age dependency ration will rise

sharply, although wide variation is expected across countries. While current ratios lie in the range of 20-30 percent, they will represent between 38 and 67 percent by mid-century. For most countries, the old-age dependency ratio is projected to increase until about 2035/45 and then stabilise or decline marginally. Nonetheless, the dependency ratio will continue to rise in some countries even at the end of the period.

Employment growth is projected to be positive in the early part of the period in most countries. However, by mid-century, growth rates are expected to be near zero or below for most countries. Thus, the key changes in the labour market will occur in the first 25 years. The analysis of the age structure of the future workforce shows that the share of older workers will rise from 10 percent in 2000 to around 17 percent in 2050. By the end of the period, about one worker out of four will be over 55 years old in Japan, Korea and Poland. In addition, reforms seeking to lengthen working life (particularly for the 55 to 64 group) could lead to a further rise in the share of workers in this age group (but, of course, this would contribute to an increase in the total number of workers at the same time). Most of this increase will occur in the first two decades, after which these workers will begin to retire.

Net inflows into the labour market are expected in the period 2000-2010, followed by outflows in France and Italy. Net inflows are

Table 6.2: Projected decline of working age population (15-65 years)

CountriesProjected Decline by 2025 Projected Decline by 2050

Million % Million %

the UK -0.2 -0.6 -4.8 -12.3

France -0.2 -0.5 -4.3 -8.4

Germany -6 -10.7 -15.7 -28.2

Poland -2.3 -8.6 -7.7 -29.1

Italy -5.7 -14.8 -16.3 -41.9

Spain -3.9 -14.8 -11.4 -41.5

Source: World Migration Report 2003.



likely to decline over most of the period for the Netherlands, where the increase is projected to slow and then begin to fall in the period 2020-2030. The number of workers continues to rise in the first two to three decades while the number of younger workers increases by less or declines.

The greater outflow of older higher skilled workers may also lead to a small productivity shock as they are only partly replaced by a smaller number of less experienced younger workers (who are likely to be less productive). This may put downward pressure on labour productivity and create more labour-intensive growth.

In the longer term (up to 2050), without mass immigration, nearly all European countries will experience a decline of between 10 and 50 percent in their active populations aged 15 to 65. This will almost inevitably lead to the systematic recruitment of both skilled and semi-

skilled or unqualified foreign labour on a larger scale than at present. In order to stabilise the size of the working population in the 15 older EU countries, an some 550,000 foreign workers and professionals would be necessary up to 2010 and a further 1.6 million per year between 2010 and 2050, giving a net inflow of 68 million people between 2003 and 2050.12

A review of current European initiatives to attract more foreign workers suggests that the emphasis is very much on recruiting limited numbers of skilled workers on a temporary or permanent basis.

The analysis of the export of service providers from Bangladesh to the whole world and the future demand for labour in OECD countries dictate the initiation of pragmatic policy decisions by developed countries and the resolution of the issues surrounding temporary movement of natural persons under the current negotiations.

Table 6.3: Ageing scenario in Europe

RegionPopulation (65+); in million

2002 2025 Growth Rate (%) 2050

Western Europe 63.4 92 37.2 84.3

Central and Eastern Europe 16.6 23.6 41 29.2

Source: World Migration Report 2003.



7 STATUS OF THE SERVICES NEGOTIATIONS

7.1 The Doha Mandate and Developments in the Negotiations

The negotiations on the built-in-agenda in services were launched in 2000, and the Council Trade in Services established negotiating guidelines and procedures (S/L/93) in March 2001. The main method of negotiation was decided to be the request-offer approach.

The Doha Ministerial Meeting endorsed the work already done under the built-in agenda. Paragraph 15 of the Doha Declaration established that the current national schedules should be the starting point of the process, without prejudice to the content of requests. It also confirmed that the services negotiations were part of the single undertaking. Market access negotiations started in early 2003. According to the schedule, countries were to make requests for liberalisation by 30 June 2002. Initial market access offers were to be tabled by 31 March 2003. The deadline for concluding the negotiations was fixed at 31 December 2004. Before that, a stock-taking of developments in the negotiations was to take place at the fifth Ministerial Conference in Cancun, Mexico, 2003.

In the third stage of negotiations, countries raised questions regarding the benefits of liberalisation and its speed and extent. Many countries emphasised the need for an assessment of services liberalisation. However, problems in the classification of services and the lack of statistics limited progress in this regard.

A draft of modalities for the treatment of autonomous liberalisation was adopted in this stage. This issue was of special interest to developing countries, and in particular for Bangladesh, which liberalised its services trade autonomously during the 1980s and 1990s, often at the behest of the IMF and the World Bank and with devastating consequences. However, the move from a plurilateral exercise to bilateral negotiations severely undermined the expectations of the LDCs, which often lack negotiating strength. The Chair of the Council for Trade in Services (CTS) recognised in a statement that the modalities did not create any legal obligations nor did they establish any automatic right to credit or recognition.

At its 4 July 2003 negotiating session, the CTS considered new informal documents on modalities for the special treatment of least-developed countries in the services negotiations. Following a proposal made in May by Zambia, the WTO Secretariat and the US proposed alternative language on LDC modalities to move the issue forward before the Cancun Ministerial Conference. The LDC group prepared an elaboration on the modalities, which was supported by many developing countries. Finally, on 3 September 2003 the Modalities for the Special Treatment for Least-developed Country Members in the Negotiations on the Trade in Services” (TN/S/13) were adopted.

7.2 The LDC Modalities

The revised submission from LDCs suggested that they should not be obliged to offer national treatment to foreign service providers or to make 'additional commitments' (GATS Article XVIII) on regulatory issues — e.g. qualifications, standards and licensing requirements. The revised draft proposed that a ‘preferential market access mechanism’ should be created for achieving effective market access for LDCs to developed country markets. The LDC group strengthened their demands on movement of natural persons (Mode 4), suggesting that Members should open

their markets to "all categories of natural persons from LDCs, particularly unskilled and semi-skilled persons" without applying the so-called economic needs test. The LDC group argued that a Mode 4 approach for unskilled and semi-skilled persons was the most significant means for least-developed countries to market their services globally, as well as to reduce poverty.

The adoption of the LDC Modalities was a success of persistence. The text of the Modalities uses the word ‘shall’, which should ensure the



Table 7.1: Achievements of LDC modalities

Paragraph Text Assessment

4 Members […] shall exercise restraint in seeking commitments from LDCs due to achieving the objectives of Art. IV. Unconditional

5 Flexibility to LDCs for opening few sectors, liberalising fewer types of transactions. Unconditional

5

LDCs shall not be expected to offer full national treatment, nor are they expected to undertake additional commitments under Article XVIII of the GATS on regulatory issues which may go beyond their institutional, regulatory, and administrative capacities.

Conditional Alternative text: Members shall not demand full NT and additional commitments from LDCs.

5

In response to requests, LDCs may make commitments compatible with their development, trade and financial needs and which are limited in terms of sectors, Modes of supply and scope.

Conditional Alternative text: LDCs shall have flexibility to make…

6

Members shall (Articles IV and XIX) give special priority to providing effective market access in sectors and Modes of supply of export interest to LDCs, through negotiated specific commitments pursuant to Parts III and IV of the GATS.

ConditionalProposal: Omit blue lined text (should be provided multilaterally)

8Members shall take measures, in accordance with their individual capacities, aimed at increasing the participation of LDCs in trade in services.

Conditional

10 LDCs shall be granted appropriate credit for their autonomous trade liberalisation. Conditional

10 In addition, Members shall refrain from requesting credits from LDCs. Unconditional

9

It is recognised that the temporary movement of natural persons supplying services (Mode 4) provides potential benefits to the sending and recipient Members. LDCs have indicated that this is one of the most important means of supplying services internationally. Members shall to the extent possible, and consistently with Article XIX of the GATS, consider undertaking commitments to provide access in Mode 4, taking into account all categories of natural persons identified by LDCs in their requests.

Conditional Omit bold-italic text. Adopt ISCO-88 Classification of Occupation as the basis of inclusion

12 Targeted and coordinated technical assistance and capacity building programmes shall continue.

Unconditional, but in practice the extent of coverage is very poor.

12Technical assistance shall also be provided to LDCs to carry out national assessments of trade in services in overall terms and on a sector basis .

Unconditional

binding nature of obligations. The text also recognises the ‘serious difficulties’ LDCs face in undertaking special commitments. For the first time, the text recognises that trade in services is important for addressing poverty, upgrading welfare, improving the universal availability of, and access to, basic services. The Modalities also recognise the serious difficulty in addressing a number of complex issues simultaneously, and

LDCs’ lack of institutional and human capacities to analyse and respond to offers and requests.

The LDC Modalities significantly reduce the negotiating burden of LDCs, which are now expected to be able to focus on just a few sectors of export and import interests. The underlying factor for this success is the pro-active role taken by LDCs. Bangladesh should play a leading role in the upcoming negotiations.




The issues surrounding TMNP were prioritised in the LDC Modalities, which recognise that the temporary movement of natural persons supplying services (Mode 4) provides potential benefits to both the sending and recipient Members. The modalities stipulate that Members shall to the extent possible, and consistently with Article XIX of the GATS, consider undertaking commitments to provide access in Mode 4, taking into account all categories of natural persons identified in LDCs requests. This paragraph could provide the groundwork for developing practical mechanisms to start negotiations on the issue (developing countries and LDCs are in fact advancing the idea of agreeing to a model

schedule that would facilitate bringing uniformity and predictability to Mode 4 commitments).

Negotiations to date have not offered any significant market openings in Mode 4. Discussions are on-going among like-minded groups on how best to push the issue forward. UNCTAD has developed a Draft Model Schedule Covering the Temporary Entry of Natural Persons under the GATS, as well as organised an expert meeting on the issue. This model schedule is now proposed for use by individual developing countries when formulating requests, but — despite providing some clarifications on issues of concern to developing countries — it still does not reflect many concerns of the LDCs.

7.4 Unfinished Business and Sequence of Negotiations

The Working Party on GATS Rules has been dealing with the unfinished business of the Uruguay Round, including safeguards (Article X); subsidies (Article XV); qualifications, technical standards and licensing (Article VI); and government procurement (Article XIII).

The Guidelines and Procedures for the negotiations established that the rule-making negotiations should be completed prior to the conclusion of the negotiations on specific commitments.

Rule-making negotiations and negotiations on specific commitments are integral parts of a single whole, and the commercial value and sensitivity of different commitments could vary under different multilateral rules and disciplines governing safeguards, subsidies and government procurement. For example, there is significant empirical evidence that energy services and environmental services are highly subsidised. At the same time, many countries are seeking deep liberalisation commitments in these sectors.

7.5 The Cancun Ministerial Conference and the Latest Developments

Although GATS-related issues were of high interest to developing countries and LDCs, they did not get adequate attention in Cancun. In particular, the LDC Modalities were not properly reflected in the Cancun Draft Text (Revision 2). In fact, except some improvements relating to Mode 4, there was no difference between the Doha Ministerial Declaration and the (unadopted) Cancun Ministerial Text. The Doha Declaration recognised “the work already undertaken in the negotiations […] on a wide range of sectors and several horizontal issues, as well as on movement of natural persons”. The Cancun text improved this somewhat by “noting the interest of developing countries, as well as other Members, in Mode 4”. Article 26 of the Cancun Draft Declaration mentioned “priority to the sectors and Modes of supply of export interest to LDCs,

particularly in regard to movement of service providers under Mode 4”. The text related to services liberalisation in the LDC paragraph was relatively strong, stating “we shall give special priority to the sectors and Modes of supply of export interest to LDCs, particularly in regard to movement of service suppliers under Mode 4”.

However, none of this would have mattered much in terms of actual benefits unless the services classification included the category of skilled service providers. Consideration of the ISCO-88 list for inclusion into the GATS agreement was important in this context since without transparency in the economic needs tests and equivalence for degrees and qualification requirements, market access for service providers would hardly mean anything.



8 BANGLADESH IN THE SERVICES NEGOTIATIONS

8.1 Involvement in the Negotiating Process

Bangladesh has been the spokesman for LDCs in WTO negotiations twice since the completion of the Uruguay Round, and acted in that capacity during the Cancun Ministerial Conference. In the run-up to the WTO Ministerial, Bangladesh hosted the second LDC Ministerial Meeting in Dhaka from 31 May to 2 June, 2003. The Ministerial Declaration adopted at the meeting contains concrete proposals on temporary movement of natural persons13, one of the major points discussed during the meeting.

The Dhaka Ministerial Meeting also achieved consensus on other issues of importance to LDCs, such as the inclusion of some African countries’ concerns regarding cotton in the Ministerial Declaration. Bangladesh’s success in the negotiation process was also reflected in the fact that LDC Modalities adopted just before the Cancun Ministerial Conference covered 14 out of 20 points raised in the Dhaka Declaration.

Bangladesh’s participation in the Cancun Ministerial Conference reflected incremental progress made in terms of domestic capacity-building. The Bangladeshi Mission in Geneva played a proactive role in the various negotiating committees that discussed areas of interest to the country, identifying and prioritising issues in light of the Dhaka

Declaration of LDC Ministers. The participation of Bangladeshi press at Cancun also increased the visibility of Bangladesh’s efforts during the WTO Ministerial Conference.

As one of the three Vice Chairs at that meeting, Bangladesh had three roles to play: a global role as a Vice Chair, a partisan role as an LDC leader, and her own national role. Bangladesh tried to uphold the two agreed major national priorities — market access for industrial products and temporary movement of service providers.

As Vice Chair Bangladesh had the added responsibility of trying to steer the negotiations to a consensus-based conclusion. Although Bangladesh tried to pursue a negotiating stance in line with the Dhaka Declaration, faced with the realities of Cancun, it was ready to show more flexibility than the G-20 or the group of African LDCs on a number of key issues.

Bangladesh chaired three of the nine Plenary Sessions. As a Vice Chair, it also had access to ‘green room’ consultations, although it should be pointed out that unlike earlier Ministerial Conferences there was a visible effort to make the Cancun process inclusive (Bhattacharya D. et al., 2004a).

8.2 Consultations with Domestic Stakeholders

Bangladesh has a good tradition in holding wide stakeholder consultations on important issues under the Doha Round. The Ministry of Commerce has formed a WTO advisory body to consult with business groups, civil society, academics, related ministries and government agencies. The advisory body and its five working

groups on thematic issues (i.e. agriculture, NAMA, services, TRIPS and S&D) have held several consultations and the thematic task forces have prepared a number of background papers. Civil society organisations such as the CPD were involved in both aspects of the consultative process.

8.3 Bangladesh’s Constraints in GATS Negotiations

Like other LDCs, Bangladesh lacks capacity to deal with negotiations in the WTO. The country signed the WTO agreement in 1994 without much consultation with stakeholders and with

little understanding about the implications of the agreement. Gradually, the government started to mobilise professionals to deal with the negotiations. A WTO cell has been formed



with a Director General as its chief. The Ministry is taking steps to stop the transfer of people with certain skills and expertise on WTO issues. Recently, a Bangladesh Foreign Trade Institute has been established with public-private partnership to provide research support and training to government officials and negotiators on WTO issues.

Despite these efforts, the capacity to manage the whole negotiation machinery is still very low. The total number of people dealing the negotiations in Bangladesh and in Geneva is still less than ten. It is impossible to deal with the whole negotiation process with such limited capacity. The negotiating body is missing economists and lawyers who are essential for the preparation of successful negotiations.

The co-ordination between Geneva and Dhaka is essential to maximise the output of these limited resources, and there is a need for better co-ordination on identifying issues for negotiation and preparing arguments to pursue the negotiating positions based on adequate analysis of alternative scenarios.

Bangladesh developed its negotiating capacity substantially between the Doha and Cancun Ministerial Meetings. However, negotiations on a number of complex issues lie ahead, which will call for further strengthening of negotiating capacity. Bangladesh needs to develop a comprehensive capacity-building plan with support provided by IFIs and other bilateral and multilateral programmes.

8.4 General Analysis of the Request-Offer Process

The negotiations on the built-in agenda started in 2000 as scheduled in the GATS. The Doha Round was launched in November 2001. By 30 June 2002 — the deadline for submitting services market opening requests to individual WTO Members — more than 160 proposals had been tabled, almost half by developing countries, in some cases jointly with developed countries. The major proposal areas are domestic regulation, transparency and predictability, small- and medium-enterprises, classification issues and assessment of trade in services. Financial services, telecommunications, energy services, environmental services, maritime transport services, construction and related engineering services, and some professional services dominated the initial request list.

At the aggregate level, the interests of countries in opening sectors are shown in the following descending order: tourism, financial services, business services, communications, transport, construction, recreation, environment,

distribution, health and education. There is a correlation between the level of economic development of the countries and the number of commitments made by them in services trade: the higher the level of economic development, the larger the number of commitments made. The less developed countries are generally more conservative about making commitments.

The negotiating interests of developed and developing countries are also different: the latter are more interested in negotiations on tourism, communications, distribution, construction, computer and related services, while developed countries tend to target business services, transport, financial services, energy services, environmental services and education services. While both groups have shown equal interest in Mode 4, developing countries are more interested in the structural issues of the GATS and have shown greater interest in horizontal issues.

8.5 Analysis of the Request-Offer Process for Bangladesh

Requests to Bangladesh

Singapore, the EU, Japan, Norway and the US have requested Bangladesh to open some services sectors. While the contents of the US requests has not been disclosed, the other requests

were limited to professional and business services, audiovisual services, construction and related engineering services, entertainment services, transport services (including maritime transport), financial services, legal and



Table 8.1: Identification of Sector Offer

Sector Major Interest of Bangladesh

Maritime transport Export but more research needed

Environmental services Unknown

Financial services (insurance and banking and other insurance) Protection with limited liberalisation

Telecommunication services Export

Construction and related engineering services Cautious import

Computer and related services Export

Other business services Unknown

Distribution services Export with more protection

Services auxiliary to all modes of transport Unknown

accounting services, software and information services, environmental services, energy services, e-commerce, telecommunications, computer and related services, infrastructure services, and distribution services. There was also a request to remove most-favoured-nation (MFN) exemptions on the application of different tariff rates in the telecommunications sector.14

The EU’s requests were the broadest and included the opening of computer and related services, construction and related engineering services, environmental services, financial services, transport services and other business services. Japan’s requests were limited to infrastructure services, such as telecommunications, construction and related engineering services, distribution services, financial services and transport services. Norway requested the opening of environmental services and telecommunications.

Some specific requests were made for market access in the maritime transport sector, particularly with regard to equipment and international cargo. Singapore, whose only request concerned maritime transport, requested Bangladesh to make an ‘unbound’ commitment “except as indicated in the horizontal section”.

Requests for ‘horizontal commitments’ were common for Mode 4. Under national treatment,

Norway requested the removal of limitations and restrictions and the making of full commitments in all sub-sectors.

Linking the export and import interests of Bangladesh with the requests received, Table 8.1 contains a primary list of sectors to be emphasised in the negotiations.

Bangladesh’s Requests

At the conclusion of the Uruguay Round, Bangladesh committed to liberalising basic telecommunications and the tourism sector. Bangladesh also prepared a request to Members for special commitments in Mode 4, but this was not submitted due to lack of preparedness for bilateral negotiations. The un-submitted paper requested trading partners to:

• soften immigration policy, qualifications and licensing requirements;

• ensure wage parity;

• exempt workers and professionals from paying social security taxes if corresponding benefits are not extended;

• remove quantitative restrictions on visas for professionals;

• remove entry barriers in the form of economic needs tests;

• provide mutual recognition of certificates and degrees; and

• remove additional licensing requirements.



9 NEGOTIATING STRATEGIES FOR BANGLADESH

The strategy for negotiations should include the following elements:

• use of the provisions under the LDC Modalities;

• use of this study to identify sectors of export interests, import interests and sectors in need of protection;

• development objectives for individual sectors;

• use of the experience gained from current liberalisation in individual sectors; and

• build partnerships with country groups.

The LDC Modalities provide the scope for framing the following negotiation outlines (see Table 9.1).

Table 9.1: Development-related aspects of the services negotiations

Text Strategy for negotiations

Members [..] shall exercise restraint in seeking commitments from LDCs due to achieving the objectives of Art. IV.

Limit the number of sectors for liberalisation offers.

Flexibility for LDCs to open fewer sectors and liberalise fewer types of transactions.

Limit the types of transactions in the sectors offered

LDCs shall not be expected to offer full national treatment, nor are they expected to undertake additional commitments under Article XVIII of the GATS on regulatory issues that may go beyond their institutional, regulatory, and administrative capacities

Offer preferential treatment to domestic service providers in sectors where liberalisation commitments are made.

Members shall (Articles IV and XIX) give special priority to providing effective market access in sectors and Modes of supply of export interest to LDCs, through negotiated specific commitments pursuant to Parts III and IV of the GATS.

Develop model schedules for sectors of export interests and request selected countries to liberalise those sectors.

LDCs shall be granted appropriate credit for their autonomous trade liberalisation.

Seek deeper concessions in major sectors of export or development interest against autonomous liberalisation

In addition, Members shall refrain from requesting credits from LDCs.

Use, if needed, this provision for rejecting demand for credit by other Members.

It is recognised that the temporary movement of natural persons supplying services (Mode 4) provides potential benefits to the sending and recipient Members. LDCs have indicated that this is one of the most important means of supplying services internationally. Members shall to the extent possible, and consistently with Article XIX of the GATS, consider undertaking commitments to provide access in Mode 4, taking into account all categories of natural persons identified by LDCs in their requests.

Propose specific categories of interest not necessarily under the current provisions (short-term intra-company visits, visit for fulfilling contractual obligations on behalf of a company and short-term visits of individual service providers on their own behalf).

Targeted and co-ordinated technical assistance and capacity-building programmes shall continue.

Identify specific technical assistance needs and claim them.

Technical assistance shall also be provided to LDCs to carry out national assessments of trade in services in overall terms and on a sector basis.

Seek technical assistance for overall assessment and assessment of selected sectors.

Among the sectors for which Bangladesh received requests, the following sectors have been identified for both offers and requests:

• financial services (non-life, reinsurance, banking);

• telecommunication services;• computer and related services; and • education services.

Health and related services, tourism and travel-related services were also selected for offers because Bangladesh has import interests in these sectors through Mode 3.

The major area for requests is temporary movement of natural persons.



9.1 Development Objectives

Policy objectives for the telecommunications and education sectors have been discussed above. They include increased access to telecommunication facilities across the country and the provisions of universal education to all citizens at least up to secondary level. On the other hand, for the tertiary sector, the objective is to create an environment of import substitution and to enhance the quality of education.

The experience of liberalisation in the telecommunications sector has been positive in Bangladesh. However, the experience of liberalisation in the tertiary education sector has been mixed. Thus the negotiation strategy for telecommunications may be more open than that for the education sector.

9.2 Strategy for TMNP

“Natural persons” may include all categories of professionals - with low to high skills. Considering the broader coverage for professionals, a three-pronged strategy has been proposed for negotiations on the Temporary Movement of Natural Persons (TMNP):

• obtain improved market access commitments in Mode 4 from selected countries of interest and for selected sectors;

• improve structure and scope of horizontal commitments in Mode 4; and

• address horizontal limitations and broaden relevant GATS provisions.

Selected Countries and Sectors

Europe, Asia, Africa and the Middle East are the main export destinations of Bangladeshi service providers through TMNP. One specific feature of Bangladesh’s TMNP exports is that the developing countries are more open to receiving temporary service providers than developed countries. Thus Bangladesh’s negotiating strategy should evaluate developing countries and developed counties separately.

Analysis in Chapter 6 has shown that OECD countries will face huge shortages in their labour force over the next fifty years. As a result, the OECD countries should be the major group of countries to whom Bangladesh should make specific requests.

Horizontal Commitments in Mode 4

Horizontal commitments in Mode 4 are limited to a few sectors. The negotiating strategy

should include a proposal to include new sectors and skill categories under ‘additional commitments’. The list of important categories of service providers presented in Annex 5 should be included in additional commitments under horizontal commitments.

The negotiation strategy should also enlarge the scope and coverage of service providers, including independent professionals and contractual service providers. It is very important to delink commercial presence from Mode 4. It is also important to supplement sector commitments, not substitute for them.

Horizontal Limitations

Bangladesh should propose to develop multilateral guidelines on the use of economic needs tests to reduce their discriminatory applicationn. The unnecessary confusion around temporary and permanent movement should be removed through the introduction of a GATS visa. The indiscriminate practice of charging social security taxes for temporary workers should be stopped and the negotiation strategy should clarify the obvious difference between temporary and permanent workers.

Sectoral Commitments

The flexibility of the GATS should be interpreted rightly in that it allows flexibility to modulate commitments in four ways: by sector, category, skill-level and period of stay. This explanation would resolve problems in the definition of a temporary stay.



Table 9.2: Top ten exporters and importers of Mode 4 services

(BOP compensation of employees, 1999)

Top exporters Compensation, million USD Top importers Compensation, million USD

1. France 8,904 1. United States 7,589

2. Philippines 6,794 2. Switzerland 5,389

3. Belgium-Lux. 3,892 3. Germany 4,673

4. Germany 3,749 4. Belgium-Lux. 2,794

5. United States 2,208 5. Israel 2,407

6. Italy 1,581 6. Italy 1,927

7. United Kingdom 1,551 7. United Kingdom 1,228

8. Thailand 1,460 8. France 1,093

9. Switzerland 1,058 9. Netherlands 969

10. Austria 1,019 10. Denmark 694

Source: WTO, 2003.

Highlight Poverty Alleviation Implications of TMNP

The analysis in Chapter 3 showed the poverty alleviation implications of TMNP. These issues should be highlighted in all requests with country-specific facts and figures and linked with Millennium Development Goals. It is important to highlight that temporary migration facilitates the alleviation of underemployment and unemployment. TMNP also helps ensure

higher wages for workers who stay at home through increased bargaining power.

Violation of MFN?

A legitimate argument for liberalisation of TMNP is that Mode 4 trade is limited only to the OECD countries with a few exceptions. Table 9.2 shows that, with the exception of Thailand and the Philippines, the top ten importers and exporters of Mode 4 services are OECD countries.

9.3 Negotiating Points

• There should be a reference to Article 3 of the Annex on Movement of Natural Persons Supplying Services under the Agreement, which specifies that “Members may negotiate specific commitments applying to the movement of all categories of natural persons supplying services under the agreement”. The text in the LDC Modalities reinforces the text of the Annex.

• As ISCO-88 can be the basis of development of a multilaterally accepted classification of service providers, Bangladesh should pursue the following points:

• As a primary alternative the ISCO-88 can be accepted in its current form.

• The secondary alternative could be for WTO Members to work towards the modification of the ISCO-88 to accommodate country-specific classifications and their harmonisation.

• The adoption of a multilaterally-accepted classification of service providers is necessary to comply with the stipulations of Article 3 of the Annex on Mode 4, which recognises all categories of service providers.

• The adoption of the classification of service providers is also necessary for implementation of Paragraph 9 of the LDC Modalities.

• Bangladesh should highlight the poverty



alleviation linkage of TMNP and relate it to Paragraph 2 of LDC Modalities: “The importance of trade in services for LDCs goes beyond pure economic significance due to the major role services play for achieving social and development objectives and as a means of addressing poverty, upgrading welfare, improving universal availability and access to basic services, and in ensuring sustainable development, including its social dimension”. This linkage could serve as leverage in the upcoming negotiations.

• The benefit from the framework of LDC Modalities largely depends on how effectively Bangladesh plays a proactive role in the negotiations ahead. Two specific actions could be pursued in the short term:

− preparing requests to be submitted to a number of countries on Mode 4 based on ISCO-88 categories; and

− preparing a proposal to adopt a classification of service providers, which would remove the distortion between the current coverage under the GATS and Article 3 of the Annex on Mode 4 and Paragraph 9 of the LDC Modalities.

• While Bangladesh and other LDCs will identify their categories of interests, it is important that there is a demand for those categories in the importing countries. Bangladesh should propose that the WTO and UNCTAD undertake a study on mapping country-specific employment against a multilaterally-accepted classification of service providers for the OECD and other countries.

9.4 Programme Minimum

Developed countries provide preferential treatment to LDCs through various initiatives, including, inter alia, GSP schemes, the EU’s Everything But Arms initiative, the Cotonou Agreement, the US African Growth and Opportunity Act and the Caribbean Basin Initiative. Recent offers of preferential treatment by Canada, Australia and New Zealand have enhanced LDCs’ scope for retaining market share in global trade.

There is work in progress at the WTO for awarding preferential treatment to the LDCs multilaterally. Developed countries could be requested to provide similar preferential market access to LDCs for TMNP bilaterally until a multi-lateral framework is agreed upon. On the basis of a needs assessment in individual countries of the OECD, a quota system could be introduced for TMNP from LDCs.



10 IMPLICATIONS OF THE SERVICES NEGOTIATIONS FOR BANGLADESH

10.1 General ImplicationsThe outcome of the services negotiations is expected to have significant impact on the development of the services sector in terms of ensuring sustainable development.

Three scenarios have been assumed for analysis of the general implications of outcomes to the service sector negotiations:

• The Optimistic Scenario assumes that:

− GATS Article IV will be meaningfully implemented from the perspective of the developing countries;

− the LDC Modalities will effectively enable LDCs to protect sensitive domestic sectors and get access to developed country market in sectors of prime interest;

− the negotiations sequence will be streamlined by the completion of negotiations on the built-in-agenda, particularly with regard to rule-making.

• Pessimistic Scenario: this scenario assumes that the jeopardy in the negotiations sequence will not be aligned, which will put the LDCs in a disadvantageous situation in terms of decisions regarding the protection of domestic service providers through, inter alia, subsidies and safeguard measures. Under this scenario, it is assumed that Bangladesh will fail to negotiate access to the developed markets, and will be forced to undertake substantial commitments at horizontal as well as sector levels.

• Status Quo Scenario: This scenario assumes that the negotiations will not succeed in reconciling the extreme positions of the countries in certain areas and no significant changes are expected in the services trading regime.

Implications under the Optimistic Scenario

Under this scenario Bangladesh is expected to achieve to following outcome:

• only a few sectors will be offered for liberalisation;

• liberalisation in general will bring efficiency to the domestic service suppliers and efficiency in the real economy;

• liberalisation measures will create a predictable environment for investment, both domestic and foreign, thus attracting the investment needed for improving access to services, affordability, quality of services, employment generation etc.

• liberalisation measures will create new opportunities for exporting services and change the balance of trade in services in favour of the country; and

• Bangladesh will increase its services exports while dependence on the export of goods will be reduced and sustained economic growth will be ensured.

The sectors identified for offer are: financial services, telecommunication services, health and related services, tourism and travel services and education services. The study did not cover the strategy for negotiations on the financial, health and tourism sectors. A moderate opening of the Bangladeshi financial sector has already brought a positive outcome in terms of technology transfer and improved efficiency in the sector. Offers are expected to be below the current state of liberalisation (Raihan, 2004).

The liberalisation of the health sector with limited opening under Mode 4 will bring positive results in reducing the deficit in trade in health services, improving the quality of health services and enhancing technology transfer. The opening of the tourism sector will increase the volume of domestic tourism, as well as the level of investment. Currently, Bangladesh is a net importer of tourism services through Mode 2 despite having enormous resources for the development of its tourism sector.

In the telecommunications sector, Bangladesh expects to make both offers and requests. Through opening the domestic telecommunications sector Bangladesh



is expected to bring the required foreign investment for improving tele-access, improving affordability through price competition, facilitating the growth of ICT sectors, reducing the cost of business to the real economy and improving the competitiveness of its export sectors.

Liberalisation of the tertiary education sector will have an import substitution effect. As with health and related services, Bangladesh is a net importer of education services. Despite problems with private sector tertiary education, liberalisation could meet domestic demand for foreign-affiliated tertiary education. It is important that liberalisation in education enhances the ‘brain circulation effect’ through attracting teachers of Bangladeshi origin with PhD degrees. As a result of liberalisation 362 PhD holders have already returned to Bangladesh to teach.

In other sectors Bangladesh will be able to undertake gradual reforms with a view to opening these sectors in the medium- to long-term.

Implications under the Pessimistic Scenario

Under the pessimistic scenario, Bangladesh will have to open all those sectors for which Members have made requests, including distribution and transport services, construction and related engineering services, environmental services and other business services. Opening these sectors will have serious implications for domestic service providers. The contribution of these sectors taken together is 42.1 percent of GDP.

As most of the service providers are SMEs, there is a danger that they will be forced to close. The employment implications of opening these sectors are huge. The opening of these sectors would jeopardise macroeconomic stability.

Three Members requested Bangladesh to liberalise its environmental services sector. Liberalisation of environmental services is a controversial issue. It is related to the negotiations on rule-making, particularly the rules on subsidies and government procurement. In all developing countries, the environmental services are highly subsidised and governments try to keep the subsidies for social reasons. Liberalisation under the pessimistic scenario will hinder access to environmental services by the poor section of the population and will have severe health and social consequences.

Implications of Status Quo

Under the status quo scenario Bangladesh will be unable to gain access to those markets of WTO Members where it has export interests. Thus the development of its objectives regarding TMNP and poverty alleviation in particular would not be achieved.

If service negotiations fail to achieve the objectives set out in the agreement, Bangladesh will not be a loser in the short term. However, the objective of making services work for the poor will be jeopardized.

Bangladesh will have to seriously continue its reform measures to bring about discipline in its domestic service sectors.

10.2 TMNP Liberalisation: Potential Gains for Bangladesh under the Optimistic Scenario

Regression analysis of the total remittance of service providers through TMNP against the number of professionals, skilled, semi-skilled and un-skilled workers shows that Bangladesh would gain substantially through increased export of service providers through TMNP.

Increase in export of skilled workers: The potential benefit from an increase in the number

of skilled service providers is the lowest, which may be explained by the low ratio of skilled workers in the total composition of migrant workers. An increase of 200,000 skilled workers would bring US$381 million.

Increase in export of un-skilled workers: The potential benefit from exporting unskilled workers is more than that of exporting skilled



Table 10.1: Simulation of benefits from increased exports of service providers through TMNP15

Number of Skilled Worker

Potential Benefit (Million USD)

Skilled Unskilled Professionals All categories1,000 2 18 58 56

2,000 4 35 116 112

3,000 6 53 174 168

4,000 8 71 231 225

5,000 10 89 289 281

10,000 19 177 579 561

20,000 38 354 1,157 1,123

30,000 57 532 1,736 1,684

40,000 76 709 2,314 2,246

50,000 95 886 2,893 2,807

100,000 191 1,772 5,785 5,615

200,000 381 3,544 11,570 11,230

workers. An increase in the number of unskilled workers by 200,000 would bring an additional US$3.5 billion.

Increase in export of professionals: The benefit from the export of professionals by an increased number of professionals going abroad is even higher. The potential benefit from exporting 200,000 professionals would be US$11.57 billion. A detailed analysis of the regression exercise is presented in Table 10.1.

Domestic Policy Issues

LDCs should stop insisting that they do not need to open any sectors. Many sectors would benefit through an open policy regime and a predictable competitive environment. Proper sectoral studies are a pre-requisite for opening more sectors.

Opportunities through market opening would only be meaningful where the supply of service providers is of an adequate quality. Investment in training and education (fiscal resource issues) is a must for ensuring improved quality, standards, and competitiveness of service providers. Establishment of independent regulatory bodies and monitoring mechanisms to ensure standards is another way to create level playing fields. The strategy should include plans for active negotiations for mutual recognition agreements with key markets. Short-term

bilateral agreements with selected countries and institutions would be useful to understand the difficulties and streamline solutions. These efforts would help to bring transparency in mutual recognition.

Bangladesh lacks a policy to regulate skilled labour outflow. The current structure is solely dedicated to deal with low-skilled service providers. Regulations for inward migration are concentrated only on the manufacturing sector. These issues also need proper attention in order to create a vibrant service sector in the country.

The policy of exporting service providers through TMNP requires plans to attract returnees, an essential element of which is to help them to be effectively absorbed into the domestic labour market. Promotion of investment schemes for the Bangladeshi diaspora is also useful for attracting returnees.

The negotiation strategy should also address the issues of ‘brain drain’ and ‘brain circulation’ through incentives, improved domestic conditions and the recovery of lost investment.

Finally it is essential to develop bilateral co-operation on visa and recruitment policies with host countries to regulate flows:

• To strengthen the arguments for opening



up developed country markets for TMNP, the government should identify the current capacity for manpower supply in each identified category of TMNP.

• Bangladesh should develop a comprehensive plan with different timescales for promoting the export of service providers through TMNP.

• Analysis shows that unskilled workers and professionals send more remittances than the other two groups. The current focus of manpower export is mainly on low-skilled people. This focus should be broadened and the export of professional service providers should be included in the plan.

• Active market research is essential to enhance the benefits from TMNP. Bangladesh missions should identify niche

opportunities in the recipient countries.

• Identification of markets and negotiations for market access should be linked with skill development plans. Otherwise, opportunities will remain unrealised.

• Data from the BMET on the export of service providers is the major source, but not the only one. Although the remittance data show earnings from the US and the UK, the head-count data does not show the number of people who went to those countries. It is important to identify all channels of temporary migration and compile reliable migration data. This is essential for the design of any medium- to long-term strategic manpower export plans.



11 THE SERVICES NEGOTIATIONS AND DEVELOPMENT CO-OPERATION

Chapter 5 discussed the development policy objectives and roles of IFIs, as well as plurilateral and bilateral development co-operation. As a whole, the experience of development co-operation is mixed and varies from sector to sector.

The concept of special and differential treatment and technical co-operation for developing countries and LDCs has been incorporated into WTO agreements to bridge the gap in the capacity of developing countries and LDCs to negotiate liberalisation, as well as to prepare their domestic sectors to absorb the shock of liberalisation.

However, the WTO’s scope for capacity-building is limited since it is not a funding agency. On the other hand, IFIs have been reluctant to provide support for domestic capacity-building as their policies are driven

by other macroeconomic and development objectives. There is a serious need for coherence between the policies of the IFIs and other donor agencies to make LDCs comfortable with undertaking liberalisation commitments. While some progress has been observed in this regard, this section highlights some specific proposals related to the needs for development co-operation.

There are two components of development co-operation related to service negotiations:

• support directly related to the negotiating process, which is necessary for informed participation; and

• support related to domestic reform and development, both of which are essential for undertaking liberalisation commitments.

11.1 General

• Assessment of the liberalisation of trade in services is essential to furthering negotiations in the WTO. Although it was initially the WTO’s responsibility to undertake such an assessment for each country and sector, the task has gradually shifted to individual countries. Bangladesh needs support from development partners to investigate the opportunities and risks of liberalising individual sub-sectors. Based on the analysis in this paper, the specific sub-sectors, which need support for assessment are:

− Professional services− Business services− Construction and related engineering

services− Transport services− Financial services− Legal and accounting services− Software and information services− Environmental services

− Energy services− Telecommunication services− Distribution services− E-commerce services

• There are serious difficulties in extracting data on the production, export and import of services. The Manual for Statistics of International Trade in Services is a valuable contribution in streamlining service data. However, Bangladesh still maintains data according to the IMF’s BPM5. Support is required for:

− proper mapping of services data according to the GATS classification;

− proper mapping of services production, investment, employment data according to some internationally comparable format.

• Public access to information networks related to services trade is a GATS requirement (Article III and Article IV: b).



Development co-operation is essential for Bangladesh to develop such capacity, which will in turn enable Bangladeshi services traders to access information of other Members and provide information to them.

• Technical assistance to the Bureau of Manpower Export and Training (BMET) is paying dividends through providing up-to-date data on the export of manpower

from Bangladesh. Such support is needed for the important service sectors identified above.

• The Ministry of Commerce recently formed a WTO ‘cell’ to deal with the WTO negotiations. Support to the cell is essential for building capacity to deal with the services negotiations. Specifically, support could take the form of providing experts for research on services trade.

11.2 Sector-specific Development Co-operation

• Although TMNP plays an important role in the national economy, there is no comprehensive plan with long-term targets. The PRSP is also missing this component. Development co-operation could facilitate the design of a comprehensive TMNP plan, which should include the following components:

− Capacity-building of skill-development institutions related to the export of service providers through TMNP.

− Without a comprehensive mapping exercise of the current and future demand for labour in the categories of interests to Bangladesh, importing countries will not be in a position to make meaningful market opening offers. As the countries of interest to LDCs cannot be expected to start immediately identifying categories, UNCTAD and the WTO could carry out research in this regard. Bangladesh should propose that they undertake a study mapping country-specific employment opportunities for a multilaterally-accepted classification of service providers in the OECD and other countries.

− The private tertiary sector needs investment support to improve the quality of tertiary education, particularly in ICT education and training, which has direct linkage with the TMNP objective.

• One of the policy objectives of the telecom sector is to increase access to telecommunication facilities across the country. Private sector development partners should continue their support for more investment in the fixed-line and mobile telecom sectors.

• The development policy objectives for the education sector are to provide universal education to all citizens at least up to secondary level. With the generous support of its development partners Bangladesh has achieved significant progress in terms of quantity. Support is now needed in particular for improving quality.

• By recognising education as one of the ‘thrust’ sectors in the PRSP, the government must take the initiative to improve the standard of technical and vocational education.



ENDNOTES

1 WTO 2003: Progress Report on the WTO Services Negotiations (2002)

2 Economic Survey, 2003, Economic Trend, Bangladesh Bank, October, 2003, BMET, EPB.

3 Source: World Bank estimates.

4 Dhaka, Chittagong, Khulna, Barisal, Sylhet, Rajshahi, Bogra and Mymensingh.

5 Bangladesh ranked 139th amongst 175 countries in 2001. In 2000, Bangladesh held the 145th position. Amongst the South Asian economies, Bangladesh ranked fifth, leaving behind Pakistan and Nepal. The HDI ranking is measured on the basis of achievements made in the areas of life expectancy, educational attainment and adjusted real income.

6 This came into effect on 1st January 1998.

7 The commitments of Bangladesh regarding basic telecommunications are discussed in Chapter 8.

8 Bangladesh Rural Telecom Authority and Sheba Telecom Limited

9 Bangladesh Telecom Limited (subsequently owned by Pacific Bangladesh Telecom Limited)

10 Bangladesh Telecom Limited

11 As many of them would be followed by dependent family members, the probable size of total immigration would be higher.

12 In the light of current reluctance in Europe to accept the permanent inflow of high numbers of foreigners, one can question whether these perspectives are realistic.

13 Free access to developed country markets for temporary movement of natural persons, particularly unskilled and semi-skilled service providers, under Mode 4 by inter alia recognising professional qualifications, simplifying visa procedures and without asking for Economic Needs Test.

14 The MFN exemptions expired automatically at the end of 2004.

15 Statistical analysis related to Table 10.1: Multiple R 0.93 Independent variables Coefficients t-test

R Square 0.86 Professionals 0.057852 2.61

Adjusted R Square 0.80 Skilled 0.001905 0.39

Standard Error 312.29 Semiskilled -0.02133 -3.18

Observations 27 Unskilled 0.01772 5.30



ANNEX 1: ADDITIONAL TABLES & FIGURES FOR CHAPTER 2

Table 1: GROWTH RATE OF MAJOR SERVICES SECTORS AND THEIR SHARE IN BANGLADESH’S GDP*

Sectoral Growth Rate (%)

Sector FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 (P)

Agriculture, Forestry and fisheries 0.8 -0.3 3.1 6.0 3.2 4.7 7.4 3.1 0.0 3.3

Minerals and Mining 5.1 3.3 14.5 3.6 5.7 1.3 9.5 9.7 4.5 6.3

Manufacturing 8.1 10.5 6.4 5.0 8.5 3.2 4.8 6.7 5.5 6.6

Service 4.9 5.5 4.4 4.9 5.4 5.7 5.9 6.0 5.9 6.2

Import Duty 1.3 13.3 8.4 9.6 2.6 2.0 1.3 1.9 5.8 -1.2

Overall GDP 4.1 4.9 4.6 5.4 5.2 4.9 5.9 5.3 4.4 5.3

GDP at Constant price (in Billion $); Base: FY96

35.64 37.10 38.93 40.73 42.92 45.16 47.36 50.18 52.82 55.16 58.09

* FY 1993-FY 2003; constant prices

Table 2: SECTORAL SHARE (%) IN GDP OF BANGLADESH

FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02

FY03

(P)Agriculture, Forestry and fisheries 27.2 26.3 25.0 24.6 24.8 24.3 24.3 24.6 24.1 23.1 22.6

Minerals and Mining 0.9 0.9 0.9 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Manufacturing 13.3 13.8 14.6 14.8 14.8 15.2 15.0 14.8 15.0 15.2 15.4

Service 54.9 55.3 55.6 55.5 55.3 55.4 55.8 55.8 56.2 57.0 57.5

Import Duty 3.7 3.6 3.9 4.0 4.2 4.1 4.0 3.8 3.7 3.7 3.5

GDP at Constant price 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

* FY 1996, constant prices

Table 3: EMPLOYMENT BY SECTORS, THEIR RESPECTIVE SHARE IN TOTAL EMPLOYMENT AND GDP/EMPLOYMENT RATIO

Employ-ment, Million

Share

GDP/ Employ-

ment Ratio

1996 2000 1996 2000 1996 2000

Industry including mining 3.56 4.08 10.23 7.88 1810.21 1944.70

Industry excluding mining 3.54 3.78 10.18 7.30 1703.98 1967.16

Services 13.96 15.51 40.14 29.97 1162.32 1312.09

Agriculture 16.99 32.17 48.84 62.15 590.71 383.81



Table 4: COUNTRY-WIDE DISTRIBUTION OF FDI REGISTERED WITH BOI

Country FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 Share in 2002-03

Japan 12.42 58.56 68.32 24.46 0.94 0.82 106.00 28.77%UK 73.39 32.12 827.15 15.96 28.08 3.88 88.40 23.99%Netherlands -- 2.63 -- 3.04 4.82 27.21 42.64 11.57%South Korea 84.75 89.78 14.10 5.14 43.19 24.61 27.28 7.40%Taiwan -- -- -- -- -- -- 23.49 6.38%Australia -- -- -- -- -- -- 17.41 4.73%Singapore 132.15 33.06 273.14 20.39 86.11 2.28 16.05 4.36%USA 8.17 1378.54 382.01 1178.35 308.99 2.51 13.00 3.53%UAE -- -- -- -- -- -- 7.24 1.97%Malaysia 43.67 288.02 16.36 6.13 11.39 1.19 5.70 1.55%India 48.83 5.48 154.87 7.60 31.62 15.32 5.11 1.39%Hong Kong 484.92 156.54 13.18 35.48 1.17 59.75 4.78 1.30%China 9.97 25.38 18.33 10.29 27.23 9.49 2.86 0.78%Finland -- -- -- -- -- -- 1.81 0.49%Thailand -- -- -- -- -- -- 1.55 0.42%Germany 12.63 23.59 57.74 1.93 115.54 1.79 1.07 0.29%Norway -- -- -- -- 518.16 -- 1.02 0.28%Others 142.60 1346.35 100.34 811.11 94.64 52.74 3.00 0.82%Total 1053.50 3440.05 1925.54 2119.88 1271.88 301.52 268.42 100.00%

Source: Board of Investment

Figure 1: TRADE IN SERVICES AND BASIC FEATURES


5�Trade in Services and Sustainable Development

Table 5: THE BALANCE OF TRADE OF VARIOUS SERVICE SECTORS

WTO Classification of Service Sectors and Bangladesh's service trade

FY 1999 FY 2000 FY 2001 FY 2002 Jul 2002 - Jun 2003

Sub-Sectors, CodeRe

ceip

ts

Paym

ents

Rece

ipts

Paym

ent

Rece

ipts

Paym

ens

Rece

ipts

Paym

ents

Rece

ipts

Paym

ents

Business Services

Computer & Related Services 909.36 521.79 2799.80 347.23 2213.19 336.53 2792.93 300.33 4199.14 164.23

Rental/Leasing Ser-vices without Ope-rators

95.24 2294.76 0.00 3328.88 17.68 5331.60 0.00 1409.56 0.00 1179.27

Communication ServicesTelecommunication Services 33746.15 10703.85 41531.60 7071.16 13791.01 7572.63 22870.85 4835.87 9237.18 7083.09

Audiovisual Services 249.81 0.00 8.11 0.00 4.50 0.00 416.00 478.04 3629.60 156.74

Construction and Related Engineering Services 200.37 8935.00 132.12 219.26 0.00 0.00 252.93 6649.97 2362.04 8485.60

Distribution (merchanting and other services) 2668.35 295.80 14842.62 3541.78 5910.38 2729.95 5091.21 3934.81 3740.85 2520.57

Education Services 2663.92 20234.10 2508.88 25355.18 3114.33 29031.56 2582.15 29009.40 3010.74 28840.02

Financial ServicesAll insurance and insur-ance-related services 2231.61 4361.19 3415.86 4448.90 2171.55 3901.69 3072.91 8143.50 3383.58 6450.55

Life, accident and health insurance ser-vices

335.41 198.25 614.69 153.71 665.92 150.41 764.11 139.40 750.19 142.63

Non-life insurance services 1094.80 4149.71 2660.35 4294.43 1162.68 2883.25 2141.13 3290.35 2041.78 8.13

Reinsurance and retro-cession 801.39 13.23 140.83 0.76 342.96 868.03 167.66 4713.74 591.61 6299.79

Banking service 16271.91 18573.41 15797.48 29056.95 9074.65 18977.22 9859.59 12794.78 18790.95 9081.12

Health Related and Social Services 0.00 759.47 0.00 835.64 0.00 698.35 0.00 452.34 0.00 523.04

Tourism & Travel-Related Services 46656.64 120684.71 48828.66 269293.76 45780.78 236030.10 51174.16 58126.17 52386.37 84717.20

Recreational, Cultural and Sporting Services (other than audiovisual services)

149.67 0.00 312.22 0.00 516.94 11.27 62.35 55.62 35.72 205.84

News agency services 74.89 934.29 132.92 1116.16 200.07 909.08 77.59 684.28 115.49 603.61

Research and Development Services 51.25 6864.00 74.68 3599.30 22.68 5957.80 97.51 3686.94 252.90 3150.05

Transportation 95330.05 202405.89 105734.92 214667.30 84957.51 251763.79 84136.48 225403.22 97665.96 276694.92

Maritime Transport Services 78375.57 20256.12 80618.03 21747.92 65198.28 23454.15 68842.03 23272.56 67569.33 26851.38

Air Transport Services 15881.73 182127.32 25107.65 192919.38 19439.33 228309.64 15294.45 202130.66 30096.63 249843.54

Rail Transport Services 1072.74 22.45 9.24 0.00 319.90 0.00 0.00 0.00 0.00 0.00

Business Services other than Computer and Rental and Other business Ser-vices1

44372.99 45375.55 60230.09 48828.40 93764.86 103961.60 97129.10 57718.67 126129.34 78696.36

245672.20 442943.80 296349.97 611709.90 261540.14 667213.16 279615.76 413683.49 324939.86 508552.21

Exchange rate 48.06 48.06 50.31 50.31 53.96 53.96 57.43 57.43 57.9 57.9

1 Professional services (Legal Services, Accounting, Auditing & Book-keeping Services, Taxation Services, Architectural Services, Engineering Services, Integrated Engineering Services, Urban Planning & Landscape Architectural Services, Medical & Dental services, Veterinary services, Services provided by midwives, nurses, physiotherapists & paramedical personnel), R & D (R&D services on natural sciences, R&D services on social sciences and humanities, Interdisciplinary R&D services), Others( Advertising services, Market research and public opinion polling services , Management consulting service, Services incidental to agriculture, hunting and forestry, Services incidental to mining.


5�Opportunities and Risks of Liberalising Trade in Services — Bangladesh

ANNEX 2: ADDITIONAL FIGURES FOR CHAPTER 3

Table 1: RANKING OF GATS SERVICE CATEGORIES FOR DETAILED ANALYSIS

Sub-Sectors Share in GDP Export Import Score Rank

Business Services n/a 5 12 excludedCommunication Services 6 4 6 16 3Construction and Related Engineering Services 2 9 5 16 5

Distribution Services (merchanting and other trade services)

1 6 9 16 6

Educational Services 4 8 4 16 4Financial Services 7 7 7 21 7Health-related and Social Services 5 12 10 27 8

Tourism & Travel-related Services 8 3 2 13 2

Recreational, Cultural and Sporting Services (other than audiovisual services)

n/a 11 11 excluded

Research & Development Services n/a 10 8 excluded

Transportation 3 2 1 6 1Other Business Services n/a 1 3 excluded



Table 2: STATUS OF TELECOMMUNICATION IN BANGLADESH, 2003

Number of Telephones - Extremely low levels of access to a telephone;- Badly structured and poorly managed BTTB, the government-owned telephone company;- Existing telecom policies are adequate, but no action towards implementation;- Tariff reform took place for major destinations, but the connection charge still remains high. - Recent opening up of VSAT service to the private sector;- Tremendous shortage of BTTB network capacity, limited interconnection to new cellular subscribers and other users of value added services;- Buoyant growth of the cellular industry;- A very high scarcity premium for new fixed telephone connections;- Voice Over Internet Protocol (VOIP) recently declared legal, but not implemented yet;- Restricted data communication through mobile network;- A burgeoning domestic IT industry suffering from lack of connectivity and telecom service;- BTTB’s services sector is in a poor state- An undersea cable project is said to be in the works, to become operational in June 2005;- Urgent need of thousands of public telephones- More than 200,000 ISP subscribers, thanks largely to opening up of VSAT services, but now ISPs cannot market their services aggressively due to the lack of the additional lines they need.

BTTB 920,993

Private Operators 1,665,000

Teledensity (including mobiles) 1.87%

Registered Pending Demand 192,100

International Voice Circuit 2,107

International Trunk Exchanges (ITX) 3

Total International Circuits 3,700

National Wide Dialling Circuits 33,781

VSAT Hub 4

VSAT Users 67

VSTA Providers 27

Zonal Internet Service Providers 140

Nationwide ISPs 14

DDCSP 20

Policy -maker Ministry of Post and Telecommunications (MOPT)

RegulatoryAgency Bangladesh Telecommunications Regulatory Commission (BTRC)

ServiceProvider

Basic Fixed ServicesLocal (limited competition)

Domestic Long Distance (monopoly)International Long Distance (monopoly)

Cellular ServicesCompetition

Value AddedServices

Competition

Public Sector Private Sector Private Sector

Private SectorInternet ServiceProviders (ISPs),VSAT serviceproviders and other

CompanyBangladeshTelegraph andTelephone Board(BTTB)

Company Company

Bangladesh RuralTelecom Authority Grameen Phone

(BTRA)City Cell

Data as of endSeptember 2002AK Tel

Sheba TelecomSheba Telecom

Source: Mahmud (2004), EC (2001), WB (2003).



Table 3: STATUS OF BANGLADESH'S EDUCATIONAL INSTITUTIONS

Particulars 2001 1980 Growth Rate (%) (1980 as the base)

Primary Education Number of Schools 78126 43936 77.82 Number of Teachers 320694 174161 84.14 Number of Students 17659220 8419313 109.75Secondary Education Number of Schools 16166 8485 90.52 Number of Teachers 183277 88351 107.44 Number of Students 7887010 2405057 227.93College Education Number of Colleges 2511 599 319.20 Number of Teachers 64720 10908 493.33 Number of Students 1534833 333580 360.11Madrasah Education Number of Madrasahs 7651 2684 185.06 Number of Teachers 109993 28499 285.95 Number of Students 3299107 380013 768.16University Education Number of Universities 39 6 550.00 Number of Teachers 6537 2386 173.97 Number of Students 116079 36530 217.76Technical & Vocational Education Number of Institutes 1416 109 1199.08 Number of Teachers 7568 1703 344.39 Number of Students 132381 22156 497.50Professional Education Number of Institutes 191 106 80.19 Number of Teachers 3760 1387 171.09 Number of Students 62341 32889 89.55Teachers' Training Institutions Number of Institutes 129 63 104.76 Number of Teachers 2311 544 324.82 Number of Students 25633 8640 196.68

Source: BANBEIS

Table 4: GOVERNMENT EXPENDITURE IN EDUCATION SECTOR [MILLION USD]

Year Revenue Budget Development Budget Revenue and Development Budget

All

Sect

or

Educ

atio

n

% o

f al

l se

ctor

All

Sect

or

Educ

atio

n

% o

f al

l se

ctor

All

Sect

or

Educ

atio

n

% o

f al

l se

ctor

1990-91 RB 2049 331 16.17 1716 88 5.1 3764 419 11.131991-92 RB 2071 362 17.49 1874 138 7.37 3945 500 12.681992-93 RB 2174 428 19.68 2075 152 7.30 4249 579 13.631993-94 RB 2288 451 19.73 2400 239 9.95 4688 690 14.721994-95 RB 2562 499 19.49 2774 378 13.62 5336 877 16.441995-96 RB 2893 527 18.21 2558 336 13.13 5451 863 15.821996-97 RB 2936 538 18.21 2740 363 13.26 5676 901 15.871997-98 RB 3190 593 18.59 264 326 12.16 5873 919 15.651998-99 RB 3488 618 17.70 2913 364 12.51 6401 982 15.331999-2000 RB 3666 647 17.76 3280 394 12.01 6946 1041 14.992000-2001 RB 3638 667 18.23 3243 417 12.87 6882 1081 15.70

Source: Ministry of Education, GoB



Table 5: THE EDUCATION SYSTEM IN BANGLADESH

Education Level Components

Primary Education (Grades I – V)

Secondary Education (Grades VI – XII)

Tertiary Education

The duration of this level is 5 years and it is targeted for the children of the age-group of 6-10 years.The duration of this level is 7 years; It has the following sub-levels:Junior Secondary Education (VI – VIII)Duration: 3 years; Target Group: Children of the age-group of 11-13 years.Secondary Education (IX – X)Duration: 2 years; target Group: Boys and girls of the age-group of 14-15 years. At the end of this level, students must appear at the Public Examination and the successful candidates are offered a Secondary School Certificate (S.S.C).Higher Secondary Education (XI – XII)Duration: 2 years; Target Group: Boys and girls of the age-group of 16-17 years. At the end of this level, students must appear at the Public Examination and the successful candidates are offered the Higher Secondary Certificate (H.S.C).At this level, students might opt for a two-year pass course, upon completion of which thry are awarded a Bachelor (Pass) certificate. They might also enter into a three-year Honours programme leading to a Bachelor (Honours) degree. After completion of the bachelor degree, students can enter into Masters programmes. For the students with a Bachelor (Pass) degree, the the Masters programme takes is two years. For Honours degree holders, the duration of the Masters program is one year. Some of the public and most of the private universities, however, have a four-year Honours programme. Programmes at this level are generally being offered at various degree colleges, public and private universities.

Madrasah Education

Parallel to the main stream of formal education, there exists 5 stages of Madrasah education system, which offers Islamic Education. It consists of 5-year Ebtedayee, 5-year Dakhil, 2-year Alim, 2-year Fazil and 2-year Kamil courses. The Madrasahs are required to adopt national curricula as a condition of government recognition and support. Students are required to appear at the Public Examinations after completing courses of each level, except Ebtedayee.

Technical/Professional Education

There are separate streams, which exist for vocational, technical and professional education like Engineering, Medical, Agriculture, etc. After completing the Junior Secondary level (Grade-8), students enter into Vocational Training Institutes for 2-year SSC (Vocational) courses and after having SSC (Vocational)/SSC (Science), they enter into Vocational Training Institutes (VTIs), Polytechnic Institutes for 2-year HSC (Vocational)/3-year Diploma-in-Engineering courses. After passing HSC (Science), students enter into 4-year B.Sc. Engineering/5-year MBBS (Medical)/4-year B.Sc. (Agriculture) course offered by different Colleges and Universities.

Teachers’ Education

There are several institutes and courses for the teachers of different educational levels. These are: Primary Training Institutes (PTIs), which offer 1-year Certificate-in-Education course for the teachers of primary level. Teachers Training Colleges (TTCs) offer 1-year Bachelor of Education (B.Ed) course for the teachers of secondary level. Bangladesh Open university (BOU) also offers B.Ed course through distance education mode. The Institute of Education and Research (IER) of Dhaka University also offers 1-year Diploma-in-Education and 1-year M.Ed. course. In addition, TTCs also offer M.Ed. course. Higher Secondary Teachers Training Institutes (HSTTIs) conduct in-service training for the college teachers. Vocational Teachers Training Institutes (VTTIs) offer 1-year course for the teachers of VTIs and Technical Teachers Training Colleges conduct training course for the teachers of Polytechnic Institutes.

Source: Ministry of Education.



Table 6: TEMPORARY SERVICE PROVIDERS GOING ABROAD AND REMITTANCE EARNINGS OF BANGLADESH

Year Professional Worker

Skilled Worker

semi-skilled Worker

un-skilled Worker Total

Remittance (Million

US$)

1976 568 1775 543 3201 6087 23.71

1977 1766 6447 490 7022 15725 82.79

1978 3455 8190 1050 10114 22809 106.90

1979 3494 7005 1685 12311 24495 172.06

1980 1983 12209 2343 13538 30073 301.33

1981 3892 22432 2449 27014 55787 304.88

1982 3898 20611 3272 34981 62762 490.77

1983 1822 18939 5098 33361 59220 627.51

1984 2642 17183 5484 31405 56714 500.00

1985 2568 28225 7823 39078 77694 500.00

1986 2210 26294 9265 30889 68658 576.20

1987 2223 23839 9619 38336 74017 747.60

1988 2670 25286 10809 29356 68121 763.90

1989 5325 38820 17659 39920 101724 757.84

1990 6004 35613 20792 41405 103814 781.54

1991 9024 46887 32605 58615 147131 769.30

1992 11375 50689 30977 95083 188124 901.97

1993 11112 71662 66168 95566 244508 1009.09

1994 8390 61040 46519 70377 186326 1153.54

1995 6352 59907 32055 89229 187543 1201.52

1996 3188 64301 34689 109536 211714 1355.34

1997 3797 65211 43558 118511 231077 1525.03

1998 9574 74718 51590 131785 267667 1599.24

1999 8045 98449 44947 116741 268182 1806.63

2000 10669 99606 26461 85950 222686 1954.95

2001 5940 42742 30702 109581 188965 2,071.03

2002 14450 56265 36025 118516 225256 2,847.79

2003 15862 74530 29236 134562 254190 3,177.63



Figure 1: TEMPORARY WORKERS/PROFESSIONALS GOING ABROAD FROM BANGLADESH

Table 7: ANNUAL EXPENDITURE OF THE OVERSEAS WORKERS’ HOUSEHOLDS

ItemExpenditure (USD) Change Distribution

Before After Before After

Food 558.6 627.3 12.3 58.71 54.23

Footwear/Apparel 59.1 75.4 27.6 6.21 6.52

House Maintenance 11.6 12.1 4.5 1.22 1.05

Education 67.2 101.9 51.6 7.06 8.81

Medical Expenses 23.3 48.5 108.2 2.45 4.2

Social Expenses 36.4 50.8 39.7 3.82 4.39

Electricity 26.5 29.1 9.8 2.78 2.51

Water, Gas, Fuel 39.3 49.4 25.7 4.13 4.27

Transport 24.2 30.9 27.7 2.54 2.67

Occupation related 87.3 103.6 18.7 9.17 8.96

Cosmetics 16.4 24.0 46.9 1.72 2.08

Others 1.8 3.8 111.0 0.19 0.33

Total 951.5 1156.8 21.6 100 100.02

Source: BMET




Table 1: GOVERNANCE OF THE BANGLADESH’S EDUCATION SYSTEM

Name of the Body

Areas of Operations Responsibilities

Apex Bodies

Ministry of Education

Junior Secondary/Secondary Level

· Administration, planning, and management of all educational levels except primary and adult education level· Formulation of the national education policy· Recruitment, selection, promotion, transfer, and management of teachers of state run high schools and colleges· Training of teachers, etc.

Primary and Mass Education Division

Primary and General Adult Education Level

· Determination of policies and proper implementation of line programs of the primary and general adult education level (known as mass education or non-formal education)

Directorates of Education

All Educational Levels

· Administration and management of Bangladesh’s Education System. It performs its responsibilities through the following directorates:

Directorate of Primary Education· Management of the entire education system excluding the universities.

Directorate of Secondary and Higher Secondary Education· Implementation of government policies and development programmes in secondary education level· Enforcement of academic standards of secondary and higher education· Recruitment of the teachers and non-teaching employees, although the decision-making lies with the MOE.

Directorate of Non-formal Education· Address the needs of the illiterate population outside the formal system, and run literacy programs and campaigns being implemented by the government and non-government institutions.

Directorate of Technical Education· Planning, development, coordination and supervision of technical and vocational education under the Ministry of Education

University Grants Commission (UGC)

University Education

· Formulate and implement policies for the development of tertiary level education· Serve as the intermediary between the government and the universities and protect the latter from direct government control

Staff Organizations

The National Curriculum and Textbook Board (NCTB)

Primary and Secondary Education Level

· Develop curricula and publish textbooks for primary and secondary schools

Boars of Intermediate and Secondary Education

Secondary and Higher Secondary Level

· Accreditation of non-government secondary education institutions· Administration of the SSC and HSC examinations

Madrasah Education Board

Madrasah Level · Conducting public examinations from Dakhil to Kamil levels, and recognising new madrasahs.

The National Academy for Primary Education (NAPE)

Primary Education

· Training of Primary Training Institute (PTI) Instructors, officials of different levels and conducting PTI examinations and related research activities.



Name of the Body

Areas of Operations Responsibilities

The National Academy of Educational Management (NAEM)

·Training of educational administrators and managers

Bangladesh Bureau of Educational Information and Statistics (BANBEIS)

All Educational Levels

· Collection, compilation, and dissemination of educational information and statistics at various levels· Selection, processing, and computerization of data necessary for awarding government subvention to all private education institutions

National University

Higher Level Colleges and Universities

Controlling affiliated colleges offering courses in Degree Pass, Honours and Masters for conducting Bachelor Degree and Masters examinations

Technical Education Board

Technical Education Level

· Conducting certificate and diploma examinations in technical education· Recognising new private sector technical institutes

Council for Bangladesh Institute of Technology (CBIT)

Technical Institutes

Regulate four Bangladesh Institutes of Technology (BITs) in the country and conduct examinations

Table 2: CONSTRAINTS OF THE EDUCATION SECTOR IN BANGLADESH

Issues Access and Equity

Pre School Education

· No existing policy or program for intellectual development of young children· The private institutions, mostly English medium schools, are affordable only by richer sections of the society· Access to preschool classes is determined by parent’s interest and willingness to pay for this service· No available training facilities for the teachers

Primary Education

· There is a 30 percent spread between net and gross enrolment rate. · Low completion rate and attendance rates· Educational provisions for children with disability are very limited, both in the public and the private sector

Non-formal Education

· The reported achievements are suspicious because there is no comprehensive assessment· Since most of the clienteles are women, cultural barriers pose a problem for ensuring equality

Secondary Education

· Too low graduation rate amongst 11-15 year group· Low gross enrolment ratio (under 20%) at the higher secondary level· Rate of drop out is high· High cost for education

Vocational and Technical

Education

· Very limited opportunities for organized vocational and technical skill development against the population demand· The intake capacity in the public and private sector institutions is only 80,000· The quality standard of the private institutions is unmeasurable because there is no system for accreditation or registration

Tertiary Education

· Intake capacity is low in good institutions, therefore, the competition for accessing this level is very high· The quality of education at the degree colleges is very low· Female participation is low compared to male· The programs offered in private universities can be accessible by the richer sections of the society




Table 1: CREDIT INFLOW TO THE PRIVATE TELECOM SECTOR*

Name Of The Firm FY97 FY98 FY99 FY00 FY01 Rate Of Interest

Down Payment

Repay-ment

Period

Broadway Enterprises Ltd. 0.08 0.05 0.50 1.00 10 20.0% 1.5 years

New Reliance Ltd. 0.52 0.30 0.00 7.5 0.0% 0.75 years

luki Bangladesh Ltd. 1.24 5.36 4.48 4.24 5.50 8.5 0.0% 0.5 years

Pacific Associates Ltd. 0.34 0.19 1.87 0.77 0.00 8.38 0.57 years

NitoiJalalabad 5.00 0 0.5 years

Interlink 0.10 6 1 years

Access Telecom 0.24 Libor+4 1.5 years

T. M. International (BD) Ltd. 0.85 1.00 Libor+3.5 5.5 years

Arcadia Intl. Medical City 29.40 6.36 10 years

Grameen Telecom 10.60 5.036 7 years

Grameen Shakti 0.10 2 10 years

Bangladesh Rural Telecom Authority 23.00 0.25 10.00 4.00 10.00 Libor+4 3.25 years

GMG Airline Ltd. 0.71 10.00 25.00 8 10.25% 15 years

TOTAL 29.58 7.42 27.85 46.21 41.60

*In million US$

Source: Information obtained from Bangladesh Bank, Board of Investment and survey of selected firm.




Table 1: THE CLASSIFICATION OF SERVICES SECTORS

a. Retaining and deepening com-petitiveness in goods export

b. Opportunities through in-creased tradability of services

c. Improvement of Quality of Ser-vices in Domestic Market

Software implementation services BUSINESS SERVICESResearch and development ser-vices Engineering services Professional services

R & D services on natural sciences Architectural services Legal servicesR & D services on social sciences and humanities Medical and dental services Taxation services

Interdisciplinary R & D services Veterinary services Accounting, auditing and bookkee-ping services

Advertising servicesServices provided by midwives, nurses, physiotherapists and para-medical personnel

Medical and dental services

Market research and public opinion polling services Computer and related services Integrated engineering services

Management consulting service Software implementation services Urban planning and landscape architectural services

Services related to management consulting Data processing services Consultancy services related to the

installation of computer hardwareTechnical testing and analysis ser-vices Database services Research and development ser-

vicesServices incidental to energy dis-tribution

Rental/leasing services without operators Real estate services

Related scientific and technical consulting services

Market research and public opinion polling services

Rental/leasing services without operators

Maintenance and repair of equip-ment (not including maritime ves-sels, 633+ aircraft or other trans-port equipment)

Services incidental to agriculture, hunting and forestry Management consulting service

Convention services Services incidental to fishing Services related to management consulting

Telecommunication services Services incidental to mining Services incidental to energy dis-tribution

Electronic data interchange (EDI) Services incidental to manufactur-ing Investigation and security

On-line information and/or data processing (including transaction processing)

Placement and supply services of personnel

Maintenance and repair of equip-ment (not including maritime ves-sels, 633+ aircraft or other trans-port equipment)

Adult education Building-cleaning services Postal servicesNon-life insurance services Photographic services Telecommunication servicesReinsurance and retrocession Packaging services Electronic data interchange (EDI)Banking and other financial servi-ces (excluding insurance) Printing, publishing Code and protocol conversion

All payment and money transmis-sion services Courier services Audiovisual services

Guarantees and commitments Telecommunication services General construction work for buildings

Trading for own account or for ac-count of customers, whether on an exchange, in an over-the-counter market or otherwise, the follow-ing:

On-line information and database retrieval

General construction work for civil engineering

Foreign exchangeEnhanced/value-added facsimile services including store and for-ward, store and retrieve

Installation and assembly work



Derivative products including, but not limited to, futures and options

On-line information and/or data processing (including transaction processing)

Adult education

exchange rate and interest rate instruments, including products such as swaps, forward rate agree-ments, etc.

Audiovisual services Refuse disposal services

Hotels and restaurants (including catering)

Building completion and finishing work Sanitation and similar services

Maritime transport services DISTRIBUTION SERVICESServices auxiliary to insurance (including broking and agency ser-vices)

Internal waterways transport Adult education Hospital servicesAir transport services Other education services Other human health services

Rail transport services FINANCIAL SERVICES Hotels and restaurants (including catering)

Road transport services Banking and other financial ser-vices (excluding insurance)

Travel agencies and tour opera-tors services

Services auxiliary to all modes of transport

Participation in issues of all kinds of securities, including underwrit-ing and placement as agent (whether publicly or privately) and provision of service related to such issues

RECREATIONAL, CULTURAL AND SPORTING SERVICES(other than audiovisual services)

Advisory and other auxiliary finan-cial services on all the activities listed in Article 1B of MTN.TNC/W/50, including credit reference and analysis, investment and port-folio research and advice, advice on acquisitions and on corporate restructuring and strategy

Entertainment services (including theatre, live bands and circus services)

Provision and transfer of financial information, and financial data processing and related software by providers of other financial ser-vices

News agency services

Hospital services Internal waterways transportOther human health services Air transport servicesSocial services Road transport servicesHotels and restaurants (including catering)

Other transport services

Travel agencies and tour opera-tors servicesTourist guides servicesEntertainment services (includ-ing theatre, live bands and circus services)Maritime transport servicesAir transport servicesRail transport servicesRoad transport servicesPipeline transport

The (*) indicates that the service specified is a component of a more aggregated CPC item specified else where in this classification list.

The (**) indicates that the service specified constitutes only a part of the total range of activities covered by the CPC concordance (e.g. voice mail is only a component of CPC item 7523).



Table 2: SECTORS OF EXPORT INTEREST: PRIMARY SELECTION

Sub-SectorsComputer & Related Services

Telecommuni-cation

Services

Distribution Services

Life, accident and health insurance Services

Maritime Transport Services

FY 1999

Receipts 0.91 33.75 2.67 0.34 78.38Payments 0.52 10.70 0.30 0.20 20.26Balance 0.39 23.04 2.37 0.14 58.12

FY 2000


FY 2001


FY 2002


FY 2003


Table 3: SERVICES SUB-SECTORS WITH MIXED BALANCE OF TRADE REQUIRING PROTECTION

Sub-Sectors

FY1999 FY2000 FY 2001 FY 2002 FY 2003

Rece

ipts

Paym

ents

Bala

nce

Rece

ipts

Paym

ents

Bala

nce

Rece

ipts

Paym

ents

Bala

nce

Rece

ipts

Paym

ents

Bala

nce

Rece

ipts

Paym

ents

Bala

nce

Audiovisual Services

0.25 0.00 0.25 0.01 0.00 0.01 0.00 0.00 0.00 0.42 0.48 -0.06 3.63 0.16 3.47

Financial Services

18.50 22.93 -4.43 19.21 33.51 -14.29 11.25 22.88 -11.63 12.93 20.94 -8.01 22.17 15.53 6.64

Non-life insurance services

1.09 4.15 -3.05 2.66 4.29 -1.63 1.16 2.88 -1.72 2.14 3.29 -1.15 2.04 0.08 1.96

Reinsurance and retrocession

0.80 0.01 0.79 0.14 0.00 0.14 0.34 0.87 -0.53 0.17 4.71 -4.55 0.59 6.30 -5.71

Banking and other insurance service

16.27 18.57 -2.30 15.80 29.06 -13.26 9.07 18.98 -9.90 9.86 12.79 -2.94 18.79 9.08 9.71

Personal, Cultural and recreational

0.15 0.00 0.15 0.31 0.00 0.31 0.52 0.01 0.51 0.06 0.06 0.01 0.04 0.21 -0.17

Rail Transport Services

1.07 0.02 1.05 0.01 0.00 0.01 0.32 0.00 0.32 0.00 0.00 0.00 0.00 0.00 0.00

Other Business Services

44.37 45.38 -1.00 60.23 48.83 11.40 93.76 103.96 -10.20 97.13 57.72 39.41 126.13 78.70 47.43

Source: Bangladesh Bank



Table 4: MAPPING OF ISCO-88 CODES OF OCCUPATION AND BANGLADESH NATIONAL OCCUPATION CATEGORIES

ISCO-88 Categories Bangladesh National Categories

Cod

e

Major Group2-

digi

t C

ode

Sub-Major Group

3-di

git

Cod

e

Minor Group BD

Cod

e

Occupation

1 Legislators, senior officials and managers

12 Corporate Managers

122 Production and operations department managers

122 Production Manager

2 Professionals 21 Physical, mathematical and engineering science professionals

211 Physicists, chemists and related professionals

211 Chemist

214 Architects, engineers and related professionals

214

22 Life science and health professionals

221 Life science professionals 221 222 Health professionals (except

nursing) 222 Doctor

223 Nursing and midwifery professionals

223 Nurse

23 Teaching professionals

231 College, university and higher education teaching professionals

231 Teacher

3 Technicians and Associate Professionals

31 Physical Engineering Science Associate Professionals

312 Computer associate professionals

312 Computer Engineer, Network Engineer

313 Optical and electronic equipment operators

313 Telecom Tech

34 Other associate professionals

341 Finance and sales associate professionals

341 Accountant

4 Clerks 41 Office Clerks 411 Secretaries and keyboard-operating clerks

411 Computer Operator

5 Service workers and shop and market sales workers

51 Personal and Protective Services Workers

514 Other personal service workers 514 Barber, Decoration Labour, Iron Man, Laundry Man

516 Protective services workers 516 Guard52 Models,

salespersons and demonstrators

521 Fashion and other models 521 Designer522 Shop salespersons and

demonstrators 522 Grocer

523 Stall and market salespersons 523 Sales Man6 Skilled

Agricultural and fishery workers

61 Market-oriented skilled agricultural and fishery workers

612 Market-oriented animal producers and related workers

612 Shepherd

613 Market-oriented crop and animal producers

613 Farmer



ISCO-88 Categories Bangladesh National Categories

Cod

e

Major Group

2-di

git

Cod

e

Sub-Major Group

3-di

git

Cod

e

Minor Group BD

Cod

e

Occupation

7 Craft and related trades workers

71 Extraction and building trade workers

711 Miners, shot-firers, stonecutters and carvers

711 Mason

713 Building finishers and related trades workers

713 Plumber, Plasterer, Tiles Fixer

714 Painters, building structure cleaners and related trade workers

714 Painter

72 Metal, machinery and related trades workers

721 Metal moulders, welders, sheet-metalworkers, structural-metal preparers and related trades workers

721 Denter, welder

723 Machinery mechanics and fitters

723 Auto Mechanic, Pipe Filter, Steel Fixer

724 Electrical and electronic equipment mechanics and fitters

724 A/C Mechanic, Electrician

73 Precision, handicraft, printing and related trades workers

731 Precision workers in metal and related materials

731 Worker (Ind)

733 Handicraft workers in wood, textile, leather and related materials

733 Tailor (Garments), Garment Worker, Leather Tech, Tailor

734 Printing and related trades workers

74 Other craft and related trades workers

741 Food processing and related trades workers

741 Bread Maker, Cook, Butcher, Juice Maker, Pastry Maker

742 Wood treaters, cabinet-makers and related trades workers

742 Carpenter, Door Fixer, Wood worker

8 Plant and Machine operators and assemblers

81 Stationary Plant and related workers

812 Metal-processing plant operators

812 Lath Machine Operator

82 Machine operators and assemblers

821 Metal and mineral products machine operators

821 Machine Operator (Ind)

823 Rubber and plastic products machine operators

823 Plastic Operator

826 Textile, fur and leather products machine operators

826 Sewer, Car Sit Maker

829 Other machine operators and assemblers

829 Patrol Station Operator, X-Ray Technician

83 Drivers and mobile plant operators

832 Motor vehicle drivers 832 Driver

9 Elementary Occupations

91 Sales and services elementary occupations

913 Domestic and related helpers, cleaners and launderers

913 Cleaner, House Maid

914 Building caretakers, window and related cleaners

914 Labour, Room Keeper

915 Messengers, porters, doorkeepers and related workers

915 General Worker

92 Agricultural, fishery and related labourers


921 Bee Collector

931 Mining and construction workers

931 Road Binder

## Other 934 Other 934 Paltry Man



Table 5: THE DISTRIBUTION OF TMNP BY ISCO-88 CATEGORIES AND DESTINATIONSIn

tern

atio

nal

Stan

dard

Cl

assi

fica

tion

of

O

ccup

atio

nsEurope Middle-

east Asia Africa Others Total

Code Major Group 0 0 0 0

1 Legislators, senior officials and managers

0 193 10 0 203Total 203

2 Professionals 0 213 0 0 0 2130 124 0 0 0 1240 56 18 0 740 11 0 0 110 1057 0 55 11120 30 0 0 30

Total 1564

3 Technicians and Associate Professionals

0 486 0 0 1 4870 37 22 0 590 109 0 0 0 109

Total 655

4 Clerks 0 1776 52 5 1833Total 1833

5 Service workers and shop and market sales workers

0 1421 3 21 0 14450 856 3 0 8590 178 1 0 1790 53 4 0 571 1214 8 9 40 1272

Total 3812

6 Skilled Agricultural and fishery workers

0 9 0 0 90 1743 52 24 1819

Total 1828

7 Craft and related trades workers

0 1172 0 0 11720 3819 181 16 3 40190 2178 922 76 1 31772 395 34 0 4310 1394 87 27 2 15100 2343 37 0 1 23814 65063 2575 554 282 684782 6628 290 157 123 72000 0 0 0

10 1489 24 4 17 15441 2297 115 110 0 2523

Total 92435

8 Plant and Machine operators and assemblers

0 87 0 0 870 2060 229 0 22890 136 1 0 0 1371 136 135 0 89 3610 238 0 0 2380 26867 23 2 26892

Total 30004


3 31949 963 412 4 333304 47936 1337 163 1 494410 125 2 0 1270 6506 5 0 65110 2232 1 0 22330 1230 6 0 1236

Total 92878 28 215846 7140 1635 564 225213

Note: The Figures are for 11 months of 2003



Table 6: IMPORTANT CATEGORIES IN THE SHORT RUN

Code Major Group Code Sub-Major Group Code Minor Group2 Professionals 223 Nursing and midwifery professionals 4 Clerks 41 Office Clerks 411 Secretaries and keyboard-operating clerks 5

Service workers and shop and market sales workers

51

Personal and Protective Services Workers

514 Other personal service workers

516 Protective services workers

52 Models, Salespersons and Demonstrators

523 Stall and market salespersons

6 Skilled Agricultural and fishery workers

61 Market-oriented Skilled Agricultural and Fishery Workers

613 Market-oriented crop and animal producers

7

Craft and related trades workers

71

Extraction and building trade workers

711 Miners, shot-firers, stonecutters and carvers

713 Building finishers and related trades workers

714 Painters, building structure cleaners and related trade workers

72 Metal, machinery and related Trade Workers

723 Machinery mechanics and fitters 724 Electrical and electronic equipment

mechanics and fitters 73

Precision, handicraft, printing and related trades workers

731 Precision workers in metal and related materials

733 Handicraft workers in wood, textile, leather and related materials

734 Printing and related trades workers 74

Other craft and related trades workers

741 Food processing and related trades workers

742 Wood treaters, cabinet-makers and related trades workers

8

Plant and Machine operators and assemblers

82 Machine operators and assemblers

821 Metal and mineral products machine operators

83 Drivers and mobile plant operators

832 Motor vehicle drivers


91

Sales and services elementary occupations

913 Domestic and related helpers, cleaners and launderers

914 Building caretakers, window and related cleaners



93 Labourers in mining, construction, manufacturing and

931 Mining and construction workers

## Other 934 Other



Table 7: IMPORTANT CATEGORIES IN THE MID TERM

Code Sub-Major Group Code Minor Group

12 Corporate Managers 122 Production and operations department managers

21 Physical, mathematical and engineering science professionals

211 Physicists, chemists and related professionals

214 Architects, engineers and related professionals

22 Life science and health professionals

221 Life science professionals

222 Health professionals (except nursing)

23 Teaching professionals 231 College, university and higher education teaching professionals

31 Physical Engineering Science Associate Professionals

312 Computer associate professionals

313 Optical and electronic equipment operators

34 Other associate professionals

341 Finance and sales associate professionals

516 Protective services workers

52 Models, salespersons and demonstrators

521 Fashion and other models

522 Shop salespersons and demonstrators

61 Market-oriented skilled agricultural and fishery workers

612 Market-oriented animal producers and related workers

72 Metal, machinery and related trades workers

721 Metal moulders, welders, sheet-metalworkers, structural-metal preparers and related trades workers

81 Stationary Plant and related workers

812 Metal-processing plant operators

823 Rubber and plastic products machine operators

826 Textile, fur and leather products machine operators

829 Other machine operators and assemblers

9 915 Messengers, porters, doorkeepers and related workers



Table 8: IMPORTANT CATEGORIES IN THE LONG RUN

Code Major Group Code Sub-Major Group Code Minor Group1 Legislators,

senior officials

ana managers

11 Legislators and

senior officials

112 Senior government officials113 Traditional chiefs and heads of villages114 Senior officials of special interest organizations

12 Corporate managers 121 Directors and chief executives123 Other departmental managers

13 General managers 131 General managers 2 212 Mathematicians, statisticians and related

professionals 213 Computing professionals

232 Secondary education teaching professionals 233 Primary and pre-primary education teaching

professionals 234 Special education teaching professionals 235 Other teaching professionals

24 Other professionals 241 Business professionals 242 Legal professionals 243 Archivists, librarians and related information

professionals 244 Social sciences and related professionals 245 Writers and creative or performing artists 246 Religious professionals

3 Technicians

and associate

professionals

31 Physical and

engineering

science associate

professionals

311 Physical and engineering science technicians 314 Ship and aircraft controllers and technicians 315 Safety and quality inspectors

32 Life science and

health associate

professionals

321 Life science technicians and related associate

professionals 322 Modern health associate professionals (except

nursing)323 Nursing and midwifery associate professionals 324 Traditional medicine practitioners and faith-

healers 33 Teaching associate

professionals

331 Primary education teaching associate

professionals 332 Pre-primary education teaching associate

professionals 333 Special education teaching associate

professionals 334 Other teaching associate professionals

342 Business services agents and trade brokers 343 Administrative associate professionals 344 Customs, tax and related government

associate professionals 345 Police inspectors and detectives 346 Social work associate professionals 347 Artistic, entertainment and sports associate

professionals 348 Religious associate professionals



Code Major Group Code Sub-Major Group Code Minor Group 4 412 Numerical clerks

413 Material-recording and transport clerks 414 Library, mail and related clerks 419 Other office clerks

42 Customer service

clerks

421 Cashiers, tellers and related clerks 422 Client information clerks

5 Service

workers and

shop and

market sales

workers

51 Personal and

protective services

workers

511 Travel attendants and related workers 512 Housekeeping and restaurant services workers 513 Personal care and related workers 515 Astrologers, fortune-tellers and related

workers

6 Skilled

agricultural

and fishery

workers

61 Market-oriented

skilled agricultural

and fishery workers

611 Market gardeners and crop growers 614 Forestry and related workers 615 Fishery workers, hunters and trappers

62 Subsistence

agricultural and

fishery workers

621 Subsistence agricultural and fishery workers

712 Building frame and related trades workers 732 Potters, glass-makers and related trades

workers 743 Textile, garment and related trades workers

744 Felt, leather and shoemaking trades workers 8 Plant and

machine

operators and

assemblers

81 Stationary plant and

related operators

811 Mining and mineral-processing plant operators 813 Glass, ceramics and related plant operators 814 Wood processing and papermaking plant

operators 815 Chemical processing plant operators 816 Power production and related plant operators 817 Automated assembly-line and industrial robot

operators 822 Chemical products machine operators

824 Wood products machine operators 825 Printing, binding and paper products machine

operators 827 Food and related products machine operators 828 Assemblers

83 Drivers and mobile

plant operators

831 Locomotive engine-drivers and related workers 833 Agricultural and other mobile plant operators 834 Ships' deck crews and related workers

9 Elementary

occupations

91 Sales and services

elementary

occupations

911 Street vendors and related workers 912 Shoe cleaning and other street services'

elementary occupations 916 Garbage collectors and related labourers

932 Manufacturing labourers 933 Transport labourers and freight handlers



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Chadha, Rajesh. (2000). GATS and Developing Countries: A Case Study of India. World Bank..

Chadha, Rajesh. (2002). Competitiveness of Service Sectors In South Asia: Role And Implications of GATS. National Council of Applied Economic Research. New Delhi, India.

Chen, Zhiqi and Lawrence Schembri. Measuring the Barriers to Trade in Services: Literature and Methodologies. Department of Foreign Affairs and International Trade. Ottawa, Canada.

Collantes Verona A. (2003). Movement of Natural Persons (Mode 4): Importing Country Members’ Commitments, Paper presented at Regional Consultation on Movement of Natural Persons and Human Development, UNCTAD. New Dehli, India.

CPD, (2003). Developing A Policy Agenda for Bangladesh. Civil Society’s Task Force Reports 2001, CPD-UPL, 2003.

European Commission, (2001). Your Investment Kit: Guidebook for European Investors to Bangladesh sector Profiles, European Commission Asia Investment facilities.

Farooq F. Q. M. (2003). Telecommunication Policy & Regulatory affairs in Bangladesh, paper presented at 3rd Asia-Pacific forum on telecommunication policy & regulation, Chiang Rai, Thailand, 10 - 12 July 2003, Bangladesh Telecommunication Regulatory Commission.

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SELECTED ICTSD ISSUE PAPERS

International Trade in Agriculture and Sustainable DevelopmentSpecial Products and the Special Safeguard Mechanism: Strategic Options for Developing Countries. Issue Paper No. 6 by ICTSD, 2005.

Lessons from the Experience with Special Products and Safeguard Mechanisms in Bilateral Trade Agreements. Issue Paper No. 5 by Dr. Carlos Pomareda, forthcoming

Methodology for the Identification of Special Products (SP) and Products for Eligibility Under Special Safeguard Mechanism (SSM) by Developing Countries. Issue Paper No. 4 by Luisa Bernal, 2005.

Special Products: Options for Negotiating Modalities. Issue Paper No. 3 by Anwarul Hoda, 2005.

Tariff Reduction, Special Products and Special Safeguards: An Analysis of the Agricultural Tariff Structures of G-33 Countries. Issue Paper No. 2 by Mario Jales, 2005.

The New SSM: A Price Floor Mechanism for Developing Countries. Issue Paper No. 1 by Alberto Valdés and William Foster, 2005.

Trade and EnvironmentAn Overview of Key Markets, Tariffs and Non-tariff Measures on Asian Exports of Environmental Goods. Issue Paper No.4 By Rokiah Alavi, 2007.

Trade in Environmental Services: Assessing the Implications for Developing Countries in the GATS. Issue Paper No. 3 by Colin Kirkpatrick, 2006.

Options for Liberalising Trade in Environmental Goods in the Doha Round. Issue Paper No. 2 by Robert Howse and Petrus von Bork, 2006.

Defining Environmental Goods and Services: A Case Study of Mexico. Issue Paper No. 1 by Enrique Lendo, October 2005.

Intellectual Property Rights and Sustainable DevelopmentNew Trends in Technology Transfer: Implications for National and International Policy. Issue Paper No. 18 by John H Barton, 2007.

Exceptions to Patent Rights in Developing Countries. Issue paper No. 17 by Christopher Garrison, 2006.

Protecting Traditional Knowledge: Pathways to the Future. Issue paper No. 16 by Graham Dutfield, 2006.

The International Copyright System: Limitations, Exceptions and Public Interest Considerations for Developing Countries. Issue Paper No. 15 by Ruth L. Okediji, 2006.

Intellectual Property and Economic Development: What Technical Assistance to Redress the Balance in Favour of Developing Nations? Issue Paper No. 14 by Michel Kosteki, 2006.

Utility Models and Innovation in Developing Countries. Issue Paper No.13 by Uma Suthersanen, 2006.

Intellectual Property Provisions of Bilateral and Regional Trade Agreements in Light of US Federal Law. Issue Paper No.12 by Frederick M. Abbott, 2006. Technical Assistance for the Formulation and Implementation of Intellectual Property Policy in Developing Countries and Transition Economies. Issue Paper No.11 by Tom Pengelly, 2005.

Fisheries, International Trade and Sustainable DevelopmentFisheries, International Trade and Sustainable Development: Policy Discussion Paper, by ICTSD, 2006

Aquaculture: Issues and Opportunities for Sustainable Production and Trade. Issue Paper No. 5 by Frank Asche and Fahmida Khatun, 2006.

Market Access and Trade Liberalisation in Fisheries. Issue Paper No. 4 by Mahfuz Ahmed, 2006.

Trade and Marketplace Measures to Promote Sustainable Fishing Practices. Issue Paper No. 3 by Cathy Roheim and Jon G. Sutinen, 2006.

Fisheries Access Agreements: Trade and Development Issues. Issue Paper No. 2 by Stephen Mbithi Mwikya, 2006.

Trade and Sustainable Energy Linking Trade, Climate and Sustainable Energy. Selected Issue Briefs, 2006.

These and other ICTSD resources are available at www.ictsd.org/pubs/series.htm.

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