The Financial Express

Economic cooperation with India: Removing the irritants

| Updated: October 24, 2017 01:19:33

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Economic cooperation with India: Removing the irritants

Over the last eight years, bilateral relation between Bangladesh and India has advanced significantly thanks to the political willingness of both countries. Bangladesh, certainly, has moved faster to accommodate a wide range of Indian interests and concerns -- from transit to terrorism. Indian has also started to reciprocate, though at a slower pace.
In fact, economic relations between the two countries have apparently entered a higher stage of cooperation.  Despite the improvement, a long road lies ahead to make the ongoing level of cooperation practically sustainable.  From trade to investment to connectivity, many things are still not settled, and are not believed to be heading in the right direction.  
NTMS & DISPUTES: Bilateral trade is growing, but not steadily. It has doubled from $3.2 billion in FY09 to $6.20 billion in FY16. Bangladesh's exports to India also doubled in last six years after India allowed duty-free access to all but 25 tariff lines in November, 2011. It was done by reducing the 'sensitive list' of products under the South Asian Free Trade Area (SAFTA) agreement. But, Bangladesh's export to India averaged annually at around US$550 million over the last six years meaning that exports leaped for the time being and then remained stagnant.
Export to India is facing a series of Non-Tariff Measures (NTMs). However, Bangladeshi exporters have now become more conscious regarding product standards. Regional trade bodies and research organisations are working actively to create awareness on NTMs. Both exporters and importers are now much more aware on the issue and understand the fact that all NTMs are not necessarily barriers to trade (NTBs).
As NTMs are a set of rules and regulations or legitimate policy instruments and are sometimes applied to protect public health and environment of a country, it is critical to develop capacity to deal with these rules and regulations. But wrong and distorted application of NTMs turn them into Non-Tariff Barriers (NTBs). The common NTBs for Bangladeshi products are discriminatory attitude of some Indian customs officials at different border points, misinterpretation of existing rules, delay in processing export-import documents and complexity in standard testing of products.  
On the other hand, Bangladesh's import from India averaged at $5.23 billion while import from India actually declined in last three years. As a result, trade deficit with India also reduced to $4.76 billion in FY16 from $5.57 billion in FY14 and $5.30 billion in FY15.
Meanwhile, a new trade dispute is arising between the two countries. Early this year, India has imposed anti-dumping duties on Bangladeshi jute goods along with the Nepali ones. Duty in the range of $8.0 to $350 a tonne will be in force for five years and payable in rupees. India has also initiated the process to impose anti-dumping duty on hydrogen per-oxide imported from Bangladesh.
INVESTMENT QUESTION: Foreign Direct Investment (FDI) from India to Bangladesh is gradually increasing and crossed $100 million in 2015. This is around 5.0 per cent of the country's total FDI received annually. Though a number of investment deals were signed two years back during Indian Prime Minister Norendra Modi's visit to Dhaka, little progress has been made so far.
Besides, the deals on investment and trade in energy have come under question as regards viability and costing. For example, the proposed Indo-Bangla joint venture of 1,320 megawatt coal-fired power plant at Rampal in southern Bangladesh has already fuelled massive protests in the country. Many find it damaging for the eco-system of the Sundarbans, one of the largest mangrove forests in the world and a UNESCO world heritage site. The project has also been critically reviewed in India and two Indian legal experts argue that if environment protection regulation is introduced in future, a state-investor dispute may arise. Bangladesh, being the party of state side, may face difficulty in such dispute. Bangladesh government is, however, firm to go ahead with the project.   
To attract Indian investment, Bangladesh has offered two sites for setting up exclusive economic zones for Indian companies. Bangladesh Economic Zone Authority (BEZA) has proposed to develop the zones by taking Indian loans. Indian response is not yet known.   
CONNECTIVITY: The most visible progress during the last eight years since 2009 is in the area of connectivity - bilateral, sub-regional and regional. Bangladesh has already allowed India multi-modal transit to carry goods from one to another part of its territories using waterways, roads and railways of Bangladesh at very low charges. Per tonne transit fee is Tk 192 only (around US$2.5).
Official trans-shipment of goods to North-Eastern States of India through Ashuganj river port of Bangladesh and further movement through Akhaura-Agartala road has started from June 2016. Since then, only five consignments of goods were transhipped through the route. It means traffic in transit-transhipment is still low. It is also not clear why Indian traders are not taking the advantage. Nevertheless, finalisation of agreements allowing India access to Chittagong and Mongla sea ports is under process.     
Meanwhile, under the coastal shipping agreement, the first container services between Kolkata and Pangaon port took place last year. Besides, under the BBIN (Bangladesh-Bhutan-India-Nepal) Motor Vehicle Agreement (MVA) two trial runs have already taken place between the two countries. Indian $3-billion credit line to Bangladesh is mostly linked with developing connectivity-related infrastructures. Reconnecting the old rail links are getting priorities.
BORDER ISSUE: While effort on connectivity is advancing fast, India's simultaneous move to fully fence the border appears like 'caging Bangladesh with corridor.' India may have its security concern over terrorist infiltration through the border but killing of Bangladeshis by the Border Security Force (BSF) of India continues unabated.  
The whole gamut of Indo-Bangladesh bilateral relations will possibly be reviewed during Prime Minister Sheikh Hasian's upcoming visit to New Delhi. One wonders what would transpire in the summit meeting as regards the pending issues, including Teesta waters dispute and border killings.
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