How the agreement with South Korea be leveraged for economic transformation

Bangladesh and South Korea signed a Comprehensive Economic Partnership Agreement (SEPA) on 4 August 2026. This agreement was finalised after nearly a year of five rounds of formal discussions and several meetings.

This timing is particularly significant for Bangladesh because, in November 2026, the country is scheduled to graduate from the list of Least Developed Countries (LDC). Consequently, the nature of Bangladesh's trade relationships will change in the upcoming days.

So far, as an LDC, Bangladesh has received duty-free or preferential access to the markets of developed and some developing countries unilaterally. After LDC graduation, some of these benefits will no longer be available as before. Therefore, Bangladesh must now secure new market advantages through bilateral and regional agreements.

From this perspective, CEPA with South Korea is not just a trade agreement; it could be an essential part of Bangladesh's trade, investment, and economic strategy post-LDC graduation. However, it is important to remember that signing an agreement does not automatically translate into economic benefits. The success of this agreement will ultimately depend on how well-prepared Bangladesh is and how effectively it can leverage the opportunities presented by this agreement.

• South Korea's CEPA is not just a trade agreement; it could be a vital part of Bangladesh's trade, investment, and economic strategy after LDC graduation.

• In many advanced service sectors, Korean companies have much higher technological expertise and international experience than Bangladesh. Therefore, both countries will benefit from the opening of the market.

• Imports from Korea to Bangladesh may increase due to CEPA, raising concerns of an existing trade deficit with Korea potentially worsening.

Modern CEPA is not merely an agreement to reduce product tariffs or provide duty-free benefits. The Bangladesh-South Korea CEPA includes issues such as trade in goods and services, investment, rules of origin, customs procedures, sanitary and phytosanitary measures, trade technical barriers, digital trade, intellectual property, and economic cooperation.

Therefore, limiting this agreement to the question of 'how many goods can be exported duty-free to South Korea' would overlook its vast potential. Instead, it should be seen whether this agreement enables Bangladesh to increase and diversify exports, attract technology-based Korean investment, integrate Bangladeshi companies into Korea's supply chain, and enhance the productivity and technological capability of the country's industries.

The practical benefits Bangladesh will derive from CEPA depend significantly on the rules of origin. Many of Bangladesh's export industries, including ready-made garments, rely on imported raw materials and intermediate goods. Therefore, even if South Korea offers duty-free benefits, if the rules of origin are complex, many Bangladeshi exporters may not be able to utilise those benefits fully.

The key point is that the success of the CEPA cannot be assessed simply by looking at the percentage or number of products receiving tariff preferences. We need to see how many exporters are actually using these benefits and how much they are exporting under them. This will be an important measure of how effectively the market access benefits are being utilised in practice.

Government and business organisations have responsibilities in this regard. They must provide clear information and assistance to exporters on rules of origin, customs processes, product standards, and other technical requirements in Korea. This assistance is especially crucial for small and medium-sized exporters. Large companies can understand these rules with their own personnel and experts, but small companies do not always have that capability.

Another promising area for Bangladesh is service and digital trade. New opportunities may arise for Bangladesh in South Korea's information technology, IT-enabled services, professional services, and other knowledge-based sectors. However, even here, simply opening the market will not increase exports.

Bangladesh must first understand which service sectors in Korea have realistic opportunities for it. The Bangladeshi institutions and professionals entering this market need to know what qualifications, licences, or other rules must be fulfilled.

It should also be noted that Korean firms' technological expertise and international experience in many advanced service sectors are much greater than Bangladesh's. Thus, the opening of the market will benefit both countries. Bangladeshi companies will need to improve their technology, efficiency, and service quality to stay competitive.

In the long run, Bangladesh's most significant benefit from CEPA will likely be in investment and technology rather than tariff advantages. South Korea has played an important role in the industrialisation history of Bangladesh. In the late 1970s, through collaboration between Korea's Daewoo and Bangladesh's Desh Garments, production, management, and marketing knowledge was brought to Bangladesh.

This experience later played a crucial role in the development of Bangladesh's ready-made garment industry. It is now necessary to take this experience to more advanced and technology-dependent industries.

Efforts could be made to attract Korean investment in sectors such as electronics, engineering, automotive components, renewable energy equipment, medical equipment, advanced textiles, and the digital industry.

However, the focus should not only be on increasing the amount of foreign investment. It is necessary to attract investment that will bring new technology, create a skilled workforce, and establish connections with local Bangladeshi companies. Business relationships between Korean investors and Bangladesh's small and medium enterprises must be developed, technical training provided, cooperation between universities and industry, and opportunities for joint research increased.

The crucial question is not "how much investment came', but rather how much new knowledge, technology, and production capacity this investment created in Bangladesh's economy.

Imports from Korea to Bangladesh may increase due to CEPA, raising concerns of an existing trade deficit with Korea potentially worsening. However, it would not be correct to conclude that the agreement is detrimental to Bangladesh just because the trade deficit widens.

If lower tariffs allow advanced machinery, raw materials for industries, intermediate goods, and technology to come from Korea, and if these enhance the productivity and competitiveness of Bangladesh's industries, then such imports could be positive for the economy. Therefore, it is important to look beyond just the volume of imports and assess whether these imports are boosting the country's production capacity.

However, there will be cause for concern if CEPA results in increased imports of primarily finished consumer goods without a corresponding rise in exports from Bangladesh or Korean investment. Therefore, the government should not focus solely on the bilateral trade deficit. It is essential to regularly monitor exports, import types, investments, employment, the impact on domestic industries, and customs revenue.

The major challenge now for Bangladesh is moving from signing the agreement to effectively implementing it. Through the Foreign Trade Agreement Wing of the Ministry of Commerce, Bangladesh's capacity for trade negotiation and bargaining has improved compared to before.

However, implementing modern trade agreements is a more complex task.
Bangladesh has already signed an economic partnership agreement with Japan, CEPA with South Korea, and is initiating economic agreements with other countries, including Singapore and the UAE. Therefore, developing sustainable expertise on international trade, trade law, services, investment, customs, product standards, rules of origin, and digital trade is vital.

There must be effective coordination between the Ministry of Commerce, National Board of Revenue, Bangladesh Bank, Bangladesh Investment Development Authority, regulatory bodies, and other related institutions. Although responsibility is distributed across various institutions, if there is no coordination, many opportunities under the agreement will remain unrealised.

An effective monitoring system is needed to regularly review CEPA's implementation progress. Key indicators that could be looked at include how much Bangladesh's exports to South Korea are increasing, whether new products are being exported, whether exporters can practically use tariff benefits, whether service exports are increasing, which sectors Korean investment is coming into, whether technology is being transferred, and whether Bangladesh's SMEs are integrating into Korea's supply chain.

Sector-specific strategies for the Korean market are also needed for Bangladesh. Merely obtaining market privileges is not enough. Bangladeshi businesses must understand the Korean market, meet the necessary standards, and network with business organisations there. Similarly, to attract Korean investment, instead of general promotion, Bangladesh's industrialization goals should focus on specific sectors and specific companies.

Therefore, five years later, the success of the Bangladesh-South Korea CEPA should not be judged only by how many products received tariff benefits. Instead, the key is to assess whether Bangladesh's exports have increased and diversified, whether service exports have risen, whether Korean investment has come into advanced industries, and whether new technology and skills have developed among Bangladeshi companies and workers.

CEPA presents a significant opportunity for Bangladesh, but the benefits of this opportunity will not come automatically. Bangladesh must now transform market advantages into exports, investments into technology and skills, and economic partnerships into production capacity. If this can be achieved, CEPA with South Korea could become a key foundation for Bangladesh's economic transformation post-LDC graduation.

*Dr. Fahmida Khatun is an economist and distinguished fellow at CPD.
*The views expressed here are the author's own.

#This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam