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Bangladesh and India Must Remain Focused on Regional Connectivity

  • Dr. Atiur Rahman
  • 16th July, 2022 04:11:02 PM
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The opening of the Padma Bridge has created a new ecology of regional cooperation providing seamless opportunity for connectivity between Bangladesh and the adjoining countries, particularly India. Three more bridges will also be opened very shortly in Bangladesh to bolster connectivity within Bangladesh to create forward and backward linkages for more efficient use of transport related game-changing infrastructures. Not only road development, but efforts are also being made by both India and Bangladesh to improve the ecology of multi-modal connectivity through which the complementarities of railways and waterways will synergize the desired development of transportation infrastructures to expand intra-regional trade which has become critical in the new context of global economic crisis precipitated by the aftereffects of the pandemic and the fallouts of Ukraine-Russia war. Both crises have been disrupting the already vulnerable supply chains with unprecedented implications for the lives and livelihoods of the marginalized people of almost all countries including those in South Asia. The inflation is wrecking the livelihoods of most people in the region in the wake of mounting trade deficit leading to huge volatility of the exchange rates and erosion of foreign exchange reserve. The uncertainties and instabilities are indeed unbelievable throughout the world.

It is in this context we hope to highlight the potential for regional cooperation focusing particularly on Bangladesh and India along with the imperative of transport connectivity which has significant implications for employment, women empowerment, and energy cooperation among others. It must, however, be flagged at the very beginning that despite enormous potential, South Asia remains one of the least economically integrated regions in the world. Of the region’s total trade, intra-regional trade accounts for only 5%. The ratios for East Asia and Sub-Saharan Africa, on the contrary, stand at 50% and 22% respectively. Although the BIMSTEC region houses 20% of the global population, the intra-regional trade here constituted only 3.7% in 2016. The figure didn’t change much since then. It has been found by most experts that high cost of connectivity is the most important factor working behind this low level of regional integration. Besides political constraints, the tariff and non-tariff barriers and as well as poor quality of infrastructure have made the cost of connectivity astronomically high. The only way forward is development of supportive infrastructure projects with forward and backward linkages in place to enhance the desired seamless connectivity. Fortunately, there has been an unprecedented level of political will between India and most of its bordering countries, in particular Bangladesh, to overcome these barriers.

A well-established transport network is key to connectivity. It can promote regional cooperation and integration through enhancement of trade and investment. Besides, well-placed transport connectivity can also have positive impact on social and cultural development by promoting people to people cooperation through tourism and cultural exchanges. Despite huge potential, bilateral trade between India and Bangladesh, though growing, was only 11 billion USD in the fiscal year 2021-22 (Bangladesh exported 1.27 billion USD). It may also be noted here that less than one percent of Indian investment abroad goes to South Asian countries. Yet, given appropriate support Bangladesh’s export to India can grow by 300 percent if it can just fetch only one percent of total Indian import. We can certainly learn from ASEAN model of cooperation. This regional association not only reduced drastically the intra-regional tariffs but also developed adequate connectivity like ASEAN highway network and ASEAN open skies. It has also focused on business incubation and telecommunications network. The ASEAN power grid with six cross-border connections is yet another replicable example of regional economic cooperation.

Thanks to an unprecedented level of willingness to cooperate between the two governments the cooperation in trade and investment between India and Bangladesh, has been, however, growing steadily. The Joint statement between the two governments after the visit of Bangladesh Premier to India in 2019 amply demonstrates that there is a strong political will for cooperation. The statement made commitment to trade facilitation by agreeing to joint survey for economic partnership, MoU between standards authorities of both countries, reduction of tariff barriers, cooperation in RMG and jute sectors. The support measures that were emphasized in the statement included enhanced road, air, and waterways connectivity, enhanced development assistance (loans, partnership), energy cooperation, education and youth development. The statement could correctly anticipate the huge investment opportunities that lie ahead. None can deny that India is a growing investor in Bangladesh as indicated by several investment proposals registered with Bangladesh Investment Development Authority (BIDA) in three Special Economic Zones at Mongla, Bheramara, and Mirsarai. Similarly, Bangladesh companies could become key investors in Northeastern states of India. Deepening value chains could benefit both Bangladesh and Northeastern India. In fact, corporates like PRAN RFL and ACI have made substantial business inroads in this region. Importance of energy cooperation between the countries of this sub-region has become can hardly be overemphasized in the context of current global economic crisis. Bangladesh is already benefiting from import of 1160 MW of electricity from India. Indeed, Bangladesh can be the ‘power corridor’ to link the state of Arunachal with the rest of India. Also, energy trade enhancements may result in creation of a BBIN power market in future.

This momentum of economic cooperation can be further deepened if the countries continue to focus on transport connectivity. Fortunately, initiatives are already in motion (e.g., BBIN, MVA, PIWITT). If appropriate transit facilities are in place, both time and carrying cost may be reduced by half or less than that. Multi-modal connectivity, of course, enhances reliance and sustainability of trade transactions. As we have seen, amid the pandemic-induced lockdowns Indo- Bangladesh trade continued through railways and waterways when the road transportation was totally stopped.

Already, both the countries are eagerly waiting to reap the benefits of multimodal connectivity. For example, operationalizing of BBIN-MVA will be pivotal to enhancing connectivity. The ‘Maitree Setu’ will connect Tripura with Chattogram port, which is only 75 km from Agartala. Bangladesh has also received USD 510 million loan from India for three railway projects, even though the pace of implementation of the same has been very slow. Bangladesh is, in fact, planning to revitalize all the pre-1965 rail connections with India to benefit from the complementarities of the infrastructures which was abruptly cut-off following the Indo-Pakistan war. The inland waterway connectivity initiatives are also in motion. Already, Indian cargo ship arrived at Narayanganj in 2019 for the first time.          If adequately facilitated, waterway connectivity can reduce travel cost by at least 30%. Enhanced waterway connectivity can also bolster micro, small and medium enterprises, many of them to be led by women entrepreneurs.

Given the potential for huge entrepreneurial development and consequent employment opportunities, it is time to prepare for increased trade related activities in both countries. Digitization of the custom process is a must to embrace ‘paperless trade’ which is in the offing. The port activities are still heavily dependent on human labor. Policymakers and other stakeholders ought to work for efficient and humane automation of all port activities. Fortunately, international development agencies are coming forward to support digitization of the port activities for reducing trade and transport cost. Recently, the World Bank has initiated ‘Accelerating Transport and Trade Connectivity in Eastern South Asia’(ACCESS) program to support digital systems, infrastructure and streamlining of land ports at Benepole, Bhomra and Burimari in addition to upgradation of 43 Km two-lane Sylhet-Charkai-Sheola road to four lanes. The project will also support the modernization of Chattogram customs house. There is another component of project for Nepal for similar upgradation of road and highways.

Bangladesh’s growth potential indeed mimics the growth path of Southeast Asian peers and reach USD 4000 per capita income by 2026. Bangladesh growth originates mostly from consumption (73%) which is likely to grow nominally more than 12 percent by 2026. About one-third of the population will belong to the middle-income group by 2026, about 11% graduating from lower income group. By this time around 36% of the population will have tertiary education with higher level of disposable income. Bangladesh with such a rising middle and advance consumer groups can be an ideal destination of Indian investment. For that matter, Bangladesh has already made strategic moves to overhaul transformational infrastructures, mostly related to multi-modal transportation like Padma and other bridges, Metrorail, Karnaphuli tunnel and four to six lanes highways. The special economic zones across the country will be additional advantage to attract investors, both foreign and local. In fact, the Padma Bridge with both rail and road facilities has created the potential to revive the old rail link between Sealdah and Khulna and further extend to the bridge. This connectivity could reduce the cost of trade exchange by more than 75%. It will also reduce the congestion at Petrapole-Benapole with huge implication for trade facilitation.

Indeed, the opportunities for trade expansion are huge if both countries can remain focused on multi-modal connectivity. Additional benefits will also be flowing in as both Nepal and Bhutan are also expected to join the fray. As already noted, both India and Bangladesh have burgeoning consumer bases and collaboration between them will certainly enhance competitiveness. India’s vibrant IT sector, healthcare, education sector can utilize the tech-savvy youthful human resources that are abundant with tertiary education. Agricultural value chain development can also be further developed. In fact, the PRAN group from Bangladesh has already set its feet strongly in most states of India.

The potential for cooperation for faster and sustainable economic growth in Indo-Bangladesh sub-region is indeed unlimited. Both countries are now politically poised to develop the infrastructures for the desired level of cooperation. Together the two countries can certainly move ahead with caution and humility. The upcoming visit of Bangladesh Premier will hopefully usher a new era of understanding and mutual confidence to reap the benefits of multi-modal connectivity which is already in place to expand the regional trade. To realize this potential, both countries must accelerate implementation of the projects that are already in motion including the railway projects under Indian line of credit defying all the bureaucratic hurdles. The initiatives to enhance ‘people to people’ cooperation, for example through upgradation of the ‘border hats’, should be at the heart of the concept of connectivity for not only trade expansion but also for fostering peace and mutual appreciation of the ‘people first’ strategy. In the process, the entire border area will at some point in time transform itself into a ‘special-economic zone’ where trade will take place seamlessly. Given the global economic and geopolitical challenges India and Bangladesh must reprioritize their connectivity strategy not only for desired trade expansion but also for inclusive sustainable development for their citizens.

The author is a noted economist, chair of Unnayan Shamannay and former Governor Bangladesh Bank.

Email: [email protected]

Source: Sun Editorial