Regional links to open new doors for economy

Allowing transit through each other's territories, Bangladesh and India yesterday renewed the bilateral trade agreement which is believed to usher in a new era of regional trade.

Under the deal, Bangladeshi vehicles will carry goods to Bhutan and Nepal through Indian territories. And India will transport cargo through Bangladesh, particularly from the mainland to its northeastern states. 

The tenure of the agreement has been extended from three years to five years, having the option of auto renewal. The first India-Bangladesh trade deal was signed in 1972.

“Today, we have unveiled some of the pathways to this future,” Indian Prime Minister Narendra Modi said after the deal renewal in Dhaka.

“Connectivity is the catalyst for deeper engagement. Bangladesh's decision to allow transit of power equipment and food grains to the [Indian] northeastern states echoes the strength of your human values and our shared economic opportunities,” he said.

 “It will also open new economic doors for India's northeast. And, it will enable our two countries to integrate South Asia and connect it with the dynamic East.”

“As I have said before,” Modi told the press, “we will deepen regional connectivity and cooperation between Bangladesh, Bhutan, India and Nepal. There is a natural logic to this arrangement.”

He added, “Connectivity by road, rail, rivers, sea, transmission lines, petroleum pipelines and digital links will increase.”

According to Commerce Minister Tofail Ahmed, this is a great achievement for Bangladesh. “We will be able to save both money and time,” the minister told The Daily Star by phone.

In recent years, trade between Bangladesh and India has been increasing at a faster rate though the trade balance is heavily tilted towards India. One of the major reasons for the trade imbalance is higher import of basic commodities by Bangladesh from its larger neighbour.

India is a major source of Bangladesh's import of rice, onion, garlic, spices, lentils, cotton, industrial raw materials, fabrics and machinery.

Addressing journalists after the deal renewal at the Prime Minister's Office, Modi said, “I am conscious of the huge trade imbalance, despite Bangladesh's duty-free and quota free access to India for all but 25 items.

“Yet, I have assured the prime minister that we will do everything we can to bridge the deficit.”

He added, “Indian investments in Bangladesh will help. I will also try to make trade smoother and easier, including at the border. The agreement on standards and testing is a step in that direction.”

Sumit Mazumder, president of the Confederation of Indian Industry (CII), termed Modi's visit a huge boost for India-Bangladesh commercial ties.

Bilateral trade could touch $10 billion by 2018, and Modi's visit to Bangladesh is bound to result in big gains for both countries, Mazumder said in a statement on Friday.

In order to reach the $10 billion target, the two countries should aim at opening new land customs stations, harmonisation and recognition of standards, pruning of negative lists, and banking and finance cooperation, he added.

“Bangladesh aims to become a middle-income country by 2021 and India should emerge as a strong partner in realising this goal,” he said. 

Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said, “Renewal of trade agreement will definitely benefit both of us. We can export goods to India, Nepal and Bhutan easily at cheaper costs.

“The deal has allowed free movement of goods and people in the region.”

“But our exports to India will have to increase,” added Matlub, who has been doing business with India for decades.

Cumulative Indian investments in Bangladesh stood at $2.5 billion in 2012-13.

In FY2013-14, Bangladesh's imports from India were worth $6.03 billion, and $4.78 billion the previous fiscal year, according to the commerce ministry.

On the other hand, Bangladesh exported goods worth $456.63 million in FY2013-14 and $563.97m in 2012-13.

It is believed that goods worth $6 billion come to Bangladesh through informal channels through the 4,096km porous border.

“Economic areas such as trans-border trade, infrastructure bottlenecks, and non-tariff issues need to be addressed to achieve full potential of bilateral trade between the two countries,” said Chandrajit Banerjee, director general of CII, India's apex trade body.

“Indian industry can explore investment opportunities in Bangladesh across sectors such as energy, garment, and skill development, among others” he said in the CII statement.