Businesses build hopes on India’s ‘free transit’ offer
India has been providing free transit to Bangladesh for exporting its products to Nepal and Bhutan, according to the joint statement released on Wednesday, a day after official talks between Prime Minister Sheikh Hasina and her Indian counterpart Narendra Modi in New Delhi. It says India has offered Bangladesh free transit via its territory for exporting products to third countries through specified land customs stations, airports and seaports.
Here are the views of economists and trade leaders on how these developments, in particular "free transit" through Indian territory, is going to impact Bangladesh's exports to two South Asian nations – Nepal and Bhutan.
BBIN agreement to be activated first
Prof Mustafizur Rahman, Distinguished Fellow, Centre for Policy Dialogue
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Although India has already provided transit facilities to Bangladesh for bilateral trades with Nepal and Bhutan, initiatives to implement the Bangladesh, Bhutan, India and Nepal (BBIN) Motor Vehicles Agreement have to be taken to utilise it.
In the latest, India has offered Bangladesh free transit facilities for exports to third countries using its territory and land, sea and airports. This means India will not impose any fee if Bangladesh exports goods to a third country using Indian ports. It is certainly positive news for us.
It means India will not charge any transit fee if any Bangladeshi product heads for a third country after reaching Mumbai by road or sea. It will be good for our exports and ease of doing business outlook.
But a multimodal connectivity will be required to utilise the facility. An integrated customs system and immigration need to be developed first.
We have to be prepared, develop necessary infrastructures and put the inter-operable systems in place to take the advantage.
Bangladeshi trucks are still not able to go to Nepal and Bhutan through India under the transit facility given to Bangladesh for exports to the countries. The BBIN agreement must be activated to get this benefit.
The agreement was signed in 2015, and the standard operating procedures were prepared even during the pandemic. But it has not been implemented yet. Necessary infrastructure should be developed for this first. Developing and implementing a quality border system will yield good results.
Will roll out a win-win situation
Jashim Uddin, President, Federation of Bangladesh Chambers of Commerce & Industries
Along with increasing bilateral connectivity with India, Bangladesh has taken various initiatives to increase regional connectivity. As part of this, the country constructed the Padma Bridge, and is increasing the capacity of Mongla port and developing 100 special economic zones across the country.
Indian businessmen are also showing interest in investing in the commercial areas.
In addition to sea routes, Bangladesh and India are connected by roads and rails. India seeks regular transshipment facilities through Chattogram and Mongla ports, as four scheduled trial runs have already been completed successfully. This means, India will take the transshipment facilities by using our sea and land ports.
India has offered similar facilities to Bangladesh during the prime minister's visit. The country said Bangladeshi exporters can export to third countries using India's designated land ports, airports and seaports.
This proposal by India will roll out a win-win situation for both countries. If Bangladeshi exporters find that shipment cost to a third country using Indian ports is reasonable, they will take the advantage.
At present, trucks from Nepal and Bhutan are doing imports and exports with Bangladesh using the Indian territory. But Bangladeshi trucks cannot go to Nepal and Bhutan via India. I believe that Bangladesh will also get the benefit from India in the coming days.
During the prime minister's visit, there were also talks with Indian businessmen about our investment climate. Hopefully we will get a huge amount of Indian investment in the future, from which both the countries will be benefited.
Although the joint statement did not announce the withdrawal of India's anti-dumping duty on jute products, we expect India to withdraw it very soon. The FBCCI has discussed the matter with the top business organisations of India.
Not likely to gain hugely
Rizwan Rahman, President, Dhaka Chamber of Commerce & Industry
The free transit facility offered by India is a good opportunity for us as it can help improve our trade growth to India and other countries.
It may ease up Bangladesh's entry into Nepal and Bhutan, but the huge trade gap of Bangladesh with India cannot be reduced instantly with the facility.
Bangladesh usually takes fewer Indian routes for trade with third countries. So, we are not likely to gain from Indian free transit immensely.
Rather, India will be more benefited from Bangladesh transit with higher trade share and able to get easy access to north eastern Indian states.
For us, it is more important to finalise the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (BBIN-MVA), which is more inclusive for the countries of this region.
However, to reap the benefits of the Indian transit facility, our land ports, roads and other infrastructures need to be improved. For that, India may offer financial assistance.
We believe our existing non-tariff barriers to trade in rules of origin, technical barriers to trade and South Asian Free Trade Area (Safta) protocol need to be relaxed for significant benefit in our trade growth in India, which is hovering around $2 billion.
Thus, this new transit offer can help us to some extent in the future.
Need a guaranteed continuation of policy
MA Razzaque, Research Director, Policy Research Institute
The free transit offer by India is undoubtedly positive, but its utilisation by the Bangladesh business community will depend on the details.
Particularly, traders need effective implementation of the proposed facility. Uncertainty in the policy environment is often a feature of India's policies towards its neighbours and this is an area where credibility will have to be established first.
With regards to Bangladesh's exports to Bhutan and Nepal, the current trade volumes are low, but there are massive prospects for growth as these economies are growing pretty fast. It is the policy uncertainty that makes traders and investors less interested in using land ports or transit facilities.
Unless India guarantees the policy continuation of free transit, businessmen will not be able to finalise their investments.
Besides, India's non-tariff barriers to trade are high. According to the World Bank report, India is too protectionist in terms of trade with neighbouring countries.
Non-tariff barriers push up businessmen's costs. There is no scope for Bangladesh to gain from Indian transit in the short term, but the country can make some testing ground.
For instance, Pran exports products to India. The company could send some products to Nepal and Bhutan by using Indian ports to see if it is profitable and sustainable.
Since India is now the fifth largest economy in the world and the size of the country's economy will be even bigger in the future, Bangladesh should maintain close ties with the neighbouring country.
India's offer may not be of much use now, but it could turn out to be profitable to Bangladesh at some point of the future.
