India- Bangladesh: How the Recent Economic and Strategic Initiatives will strengthen the relations between the two countries
- In Military & Strategic Affairs
- 04:44 AM, Nov 17, 2019
- Mukul Asher,Shilpi Chhabra
The Context
During a visit of the prime Minister of Bangladesh to India during October 3-6, 2019, several key economic and strategic initiatives were taken which would strengthen already robust cooperation between the two countries.
India and Bangladesh have almost 4100 km long international border; and share 54 rivers. India and Bangladesh signed land boundary agreement in 2018.
It is however only in recent years that potential for maritime and other cooperation for expanding their economic and strategic has received focused attention. The current leadership in both countries has played an important role in reducing the trust deficit, and thereby in addressing one of the constraints in deeper and sustainable bilateral cooperation.
The Dhaka Dialogue, hosted jointly by the Bangladesh Institute of International and Strategic Studies and the Observer Research Foundation, was organized from November 11 to 13, 2019. Delegates and speakers from over 45 countries attended. This represents an important contribution of the two think- tanks to further advance the cooperation agenda, and help generate new ideas from the region. https://www.orfonline.org/expert-speak/welcome-address-by-samir-saran-president-orf-at-the-dhaka-global-dialogue-57696/
It has been estimated that in 2018-19, the bilateral merchandise trade was about three-fifths of the potential trade of USD 16.4 Billion. (Kathuria,2018). The above figures do not capture the unrecorded bilateral trade through their common land borders.
In addition, trade in service transactions, not included in the above figures, is also substantial, but is not officially published. Thus, India Tourism Statistics 2018 reports that in 2017, India received 10 million foreign tourists, with visitors from Bangladesh accounting for 2.2 million or 21 percent of the total. It is reported that the Indian High Commission in Bangladesh issues more than one million visas annually, amongst the highest numbers issued by Indian missions globally. (Dhaka Tribune, 14 July 2018). Most of these are tourist visas, and the majority of these visitors enter India through the land borders. The tourists flow from India to Bangladesh is also significant. Land borders play a significant role in bilateral tourist flows.
In 2017, India’s receipts from international tourism in 2017 were USD 27.9 Billion, while of Bangladesh were 0.34 Billion (https://data.worldbank.org/indicator/ST.INT.RCPT.CD)
Tourism is only one component of service transactions. The others are transport, including ports and inland transport, and business and financial services. If these were also included, the bilateral trade relations will be significantly higher.
The study by Kathuria cited above, suggests that to help realize the trade potential, the following areas need greater focus. These are addressing border tax distortions; lowering non-tariff barriers, improving connectivity, and reducing trust deficit.
Mustafizur Rahman of Centre for Policy Dialogue has argued that a lack of adequate trade facilitation is the most important NTB (Non-tariff Barrier) for operators on both sides. https://www.eastasiaforum.org/2019/09/17/making-the-most-of-bangladesh-india-trade/)
He reports that India’s EXIM Bank has provided three lines of credit totaling USD 8 Billion to Bangladesh, which should be used more effectively for further improving connectivity between the two countries, and within Bangladesh.
Rankings in Global Indexes
India’s rank in Ease of Doing Business published annually by the World Bank improved from 134 the in 2014 to 63rd in 2019 (out of 190 countries). https://timesofindia.indiatimes.com/articleshow/71731668.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst. India however needs to take substantive initiatives to improve in several sub-components of the index, including in ease of paying taxes, and in areas involving the judiciary. such as enforcing contracts, in registering property, and in starting a business.
/economictimes.indiatimes.com/articleshow/71747571.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Bangladesh, ranked 168 in 2019, also has a substantial scope to improve in various sub-components which make up the Index.
It is encouraging to note that Bangladesh is participating in the 39th India International Trade Fair to be held in New Delhi from November 14 to 27, 2019. Its theme is improving e ease of doing business.
It may also be relevant to state rankings in the LPI (Logistics Performance Index). The aggregate LPI ranking, combining 2012, 2014, 2016, and 2018 rankings, was 42nd for India (out of 167 countries) and 100 for Bangladesh. (https://lpi.worldbank.org/international/aggregated-ranking).
India needs to substantially improve its ranking in customs, infrastructure, and logistics competence sub-components of the LPI to move up in the rankings.
The rankings in global indexes should be viewed only as one of the inputs in formulating policies and specific initiatives for broad-based improvement in governance and organizational capabilities. This is particularly the case for countries with physically large and varied geography and population, as is the case for India and Bangladesh. Improvements must percolate down to local levels to have the desired impact. The importance of what is not measured, such as focus on outcome orientation, and improving societal norms, also should not be underestimated.
Improving Connectivity as a Priority
The above discussion strongly suggests that the priority in bilateral relations is to improve connectivity between the two nations through land, water, and air. The connectivity requires investment in physical infrastructure, but that alone is insufficient to sustainably reduce logistics costs, and encourage new growth nodes.
There also needs to be unification and standardization in the logistics sector in each country. Thus, within each country logistics permits required by different government organizations at all levels of government need to be unified and standardized. Use of post code, city code and goods code should be such that digital economy transactions are facilitated. Both countries are planning to accelerate digital economy transactions in both private and public sectors.
Rehman states that “…about 50 per cent of the bilateral trade between Bangladesh and India takes place through land ports. The border points are not crossing points — they are control and checkpoints. Goods need to be unloaded and reloaded in ‘no man’s land’ leading to delays and cost-escalation. In the absence of mutual recognition agreements, goods wait for several days until inspection results come from laboratory facilities in distant testing centers.”
The need to reduce these costs has been recognized by both countries. India has taken the initiative to establish Integrated Check-Posts (ICPs) with its neighbors. As of 2019, 20 checkpoints have been identified for development as ICPs, of which half are on the India–Bangladesh border (Bhattacharjee, 2019). These are designed to facilitate cross-border trade, and movement of goods and people.
Bhattacharjee (2019) has suggested the following measures to help improve India’s ICPs with Bangladesh.
- Increasing the use of technology for scanning and monitoring purposes, especially the installation of cargo scanners to prevent pilferage.
- Improving support infrastructure to ensure optimal use of technology, e.g. enhancing digital connectivity and better budget allocation for the maintenance of technological tools.
- Early issuance of smart cards for the drivers who provide their services in the ICPs.
- Streamlining immigration by developing a centralised database. Further, immigration across ICPs should be brought under the aegis of a single agency.
- Furthering cooperation between state governments to improve infrastructure such as roads and land acquisition. Institutionalising dialogue between state authorities and the union government will help to better address the concerns of the states and find ways to increase cooperation. Moreover, since the ICPs involve multiple agencies, a framework must be established to formalise the interaction amongst such agencies. This will ensure the smooth functioning of ICPs.
Recording of greater proportion of bilateral trade through the appropriate initiatives would help increase revenue for both countries; provide better data for policy measures; and reduce hassle costs, thus improving logistics efficiency.
Recent Bilateral Initiatives
Recent select bilateral initiatives which will significantly enhance density of economic and strategic relations between the two countries may be summarized as follows. Specifically, these initiatives are expected to spur growth in India’s North East Region and in Bangladesh, and greatly enhance road, waterways, and rail connectivity.
- The Blue Economy Initiatives - The term Blue Economy refers to utilization of a country’s coast-line, inland waterways, and sea connectivity globally for more sustainable and broad-based economic development. Both countries are committed to better utilizing this avenue.
India and Bangladesh signed coastal shipping agreement in June 2015. Since then, the two countries have concluded an agreement for Standard Operating Procedures for the use of Chattogram and Mongla ports for movement of goods to and from India.
Bangladesh has offered two Special economic Zones (SEZs) for investment by private Indian companies in Bheramara, Kushtia and the coastal Mongla belt in Bagerhat. https://www.eastasiaforum.org/2019/09/17/making-the-most-of-bangladesh-india-trade/). These could further strengthen coastal maritime cooperation between the two countries.
Examples of specific activities under such initiatives are:
- A consignment involving two barges of fly ash bound for Guwahati’s Pandu port on the Brahmaputra in Assam sailed from Kahalgaon on the Ganga river in Bihar, a distance of 2085 kilo meters, in late August 2018. This journey also involves using Indo-Bangladesh protocol. This is the first time that the NTPC (National Thermal Power Corporation) is moving its products on the waterways to Assam.
Fly ash is in huge demand as raw material in cement and brick industry and is also used for the purpose of land filling. More such journeys are planned, benefitting particularly the north East region of the country.
- Trucks from Chennai Port to Mongla port in Bangladesh were transported in October 2017. This route of 1500 KM has saved 15-20 days of travel time as compared with current road route while saving on fuel.
- In November 2019, a ship carrying 53 containers left Haldia Port in West Bengal State for Guwahati in Assam State, a journey covering 1489 Kilometers passing through Bangladesh waters. https://timesofindia.indiatimes.com/business/india-business/1st-containerised-cargo-on-haldia-guwahati-route-flagged-off/articleshow/71913510.cms.
- India has been given rights to draw waters from the Feni River by Bangladesh. This would help provide drinking water to the state of Tripura.
- It is to be hoped that long pending agreement on Teesta River water sharing between the two countries will be concluded in not too distant future. Teesta river originates in Sikkim and flows through West Bengal to merge with the Brahmaputra in Assam and With Jamuna in Bangladesh. India has argued for 55 percent of the water supply during the December to March period, while Bangladesh has argued for 50 percent of the supply.
- India has agreed to build Coastal Surveillance System (CSS) system in Bangladesh. This will increase maritime domain of Bangladesh and help secure shared coastline. The Memorandum of Understanding between the countries is reported to be in final stages as of October 2019. Bangladesh currently has no such system. https://www.benarnews.org/english/news/bengali/bangladesh-india-10072019184507.html
Energy Security initiatives:
Bilateral mutually beneficial measures in this area are being taken.
Examples Include:
i Bangladesh has agreed to export imported and processed LPG to India, improving India’s energy security, while diversifying economic activities in Bangladesh. https://tbsnews.net/bangladesh/bangladesh-not-giving-away-gas-india-momen?browserpush=true
ii Reliance Power of India and JERA of Japan have agreed to jointly invest US$3 billion to set up a 3000 MW power plant and a floating liquefied natural gas import terminal in Bangladesh. https://www.newindianexpress.com/business/2019/sep/04/reliance-power-jera-to-set-up-750-mw-plant-in-bangladesh-2028478.html
III Electricity exports from India are expected to meet around a quarter of total needs of Bangladesh. https://www.thehindubusinessline.com/economy/policy/power-exports-from-india-to-meet-25-of-bangladesh-demand/article9916980.ece
iv Both countries have agreed to develop a 765kV Double Circuit cross-border electricity interconnection between Katihar (India), Parbotipur (Bangladesh) and Bornagar (India).
- Other Connectivity Initiatives
Bangladesh, Bhutan, India and Nepal Motor Vehicle Agreement (BBIN-MVA) signed in 2015 is progressing well in facilitating cargo-carrying vehicles to move across borders, resulting in a significant reduction in transport and logistics costs. https://www.outlookindia.com/newsscroll/bbin-motor-vehicles-agreement-will-boost-regions-economy/1612467.
Bangladesh has also allowed India to move goods between its western and north-eastern states through Bangladeshi territory.
The construction of two railway projects - Kulaura-Shahbazpur Section Rehabilitation of Bangladesh Railway and Akhaura-Agartala Dual-Gauge Rail Connectivity (Bangladesh part) was initiated in September 2018. These form part of Trans Asian Railway Network, and are expected to help reduce transport costs, and open up India’s Northeast region. https://www.joc.com/rail-intermodal/new-projects-promise-faster-cheaper-india-bangladesh-rail_20180911.html
Concluding Remarks
India and Bangladesh have laid solid foundations for helping to expand economic and strategic space of each country. Their initiatives are helping in creating India’s North east Region as an important new growth-node, while diversifying the economy of Bangladesh.
Domestic reforms in each country should be designed for broad-based high growth; and to improve ranking is Cost of Doing Business and in Logistics Performance Index (LPI).
Stakeholders on both sides must continue efforts to reduce the trust deficit between the two countries. Cultivating greater confidence towards their future, and more outcome-oriented attitude would also be essential to realize the potential of bilateral cooperation initiatives.
REFERENCES
Bhattacharjee, Joyeeta. 2019. “Integrated Check-Posts on the India-Bangladesh Border: A Field Survey and Brief Analysis”, ORF Special Report No. 96, Observer Research Foundation.
“Kathuria, Sanjay (Editor). 2018. A Glass Half Full: The Promise of Regional Trade in South Asia. South Asia Development Forum; Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/30246
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