Why connectivity will determine Bangladesh’s economic future

Bangladesh is developing fast and in five years will become a middle-income country with hopefully better infrastructure and better regional connectivity. As Bangladesh's economy grows, there is more opportunity for the country to use its geographical location to its advantage. 

It is pertinent therefore to figure out how we can utilise this advantage to strengthen our position as a key economic player in the region in the near future. 

As Mercy Tembong, World Bank Country Director for Bangladesh and Bhutan says "Geographically, Bangladesh's location makes it a strategic gateway to India, Nepal, Bhutan, and other East Asia countries. Bangladesh can also become an economic powerhouse by improving regional trade, transit, and logistics networks." 

At present there are various restrictions to Bangladesh' mobility both because of the political fractures that are developing in South Asia and also because of Covid-19. However, as we move into the future, we must place importance on how connectivity will shape the economy. 

The addition of the Maitri Setu (friendship bride), in that regard, is an act of solidarity between India and Bangladesh, which also has long term economic implications. The 1.9 km long bridge connects Ramgarh, Tripura with Bangladesh's Sabroom.

 If the infrastructure in both parts becomes ready to use, both parties will be in a position to start trade faster. With Chittagong port being 80km away from Sabroom, Tripura then becomes a gate into Northeast India.

In a World Bank report, it was suggested that increasing connectivity will increase the size of the economies by 17% in Bangladesh and 8% in India. 

Trade restrictions which include high tariffs and other measures (para-tariffs and non-tariff), however, act as major obstacles to trade growth. In India and Bangladesh, simple tariffs are over two times the world average. As trade grows between the countries, there is still room for improvement. The report estimates that bilateral trade is $10 billion below current potential. 

As Bangladesh and India open up their doors to connectivity and ease of travel, trade and ties, there is much for Bangladesh to connect with other countries in Southeast Asia as well. 

Bangladesh would like to open a new chapter in trans-border corridors with India and Myanmar in the Indo-Pacific zone by joining the India-Myanmar-Thailand (IMT) trilateral highway. Trade and commerce are encouraged by the IMT's primary emphasis on infrastructure.

There have been two initiatives undertaken by India under the 1,360 km long IMT (Indo-Myanmar-Thai Crossroads) starting from Moreh in India, through Myanmar to Mae Sot in Thailand: Bangladesh if it is a part of the scheme can be the gateway to India to build the road into Myanmar. The project is also in talks with Vietnam, Laos, and even Cambodia. Bangladesh is searching for greater trade than joint energy trade with its neighbours.

Bangladesh and India have worked to boost transport and trade and connectivity. They have made more improvements in rail, ports, and coastal waterways connectivity recently.

We also must note that Bangladesh is part of the Belt and Road Initiative (BRI). Bangladesh has always had good relationships with its neighbours, and we cannot miss the strategic location of Bangladesh for both India and China. There is great potential in Bangladesh's roads, riverways and ports if they are used efficiently. 

For a long time, we have seen Bangladesh as a strategic location in the subcontinent. The mountainous countries of Nepal, Bhutan, and the landlocked country of India have plans for the years ahead. On December 10th, 2020, the engineers installed the 41st span on the Padma Bridge. The growth of Bangladesh and southern China could be mutually beneficial to each other. 

The Greater Hong Kong Bay city, on the southern coast of China, has been one of the key catalysts for the mainland's urbanisation. Supply chains have extended and opened up many new opportunities for the region, and because of this, opportunities have increased for Bangladesh, which is near China.

Small businesses in China and Bangladesh have additional opportunities as well. The phrase "Belt and Road" has particular significance for those who consider the initiative too broad. We see that today, Hong Kong has turned into a major financial centre. 

The goal of the greater bay area is to create a city that can challenge San Francisco on the international scene. Having Bangladesh so close to China also helps, but is not enough. New infrastructure projects can benefit by providing fair competition in transportation and access. The country will need to diversify into the technology sector and begin establishing relations with Shenzhen to help itself expand.

Bangladesh's geographical location and its resources can be of utmost importance for the next few years as the country takes the new status as a middle-income country. Bangladesh has to export its services to the world and diversity from its RMG sector. Better connectivity to India and China is one of the many tools to achieve this feat. 

Safen Roy is a contributor to The Business Standard.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.