First News
Volume:7, Number:42
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Business & Finance 1
THIS WEEK

Consolidation or Consolation?

| Asjadul Kibria |

Prime minister Sheikh Hasina’s visit to India this month has a significant impact on the future path of Bangladesh, considering geopolitical tension in the region

Prime minister Sheikh Hasina’s visit to India on April 7-10 this year has drawn huge attention in both India and Bangladesh. By signing around three dozen, 35 to be specific, instruments in the form of agreements, memorandum of understanding (MoU), and bilateral documents, Dhaka and New Delhi have consolidated their existing bilateral relationships.In fact, the visit has a significant impact on the future path of Bangladesh, considering the geopolitical tension in the region. There is much confusion and apprehension about the short-term and long-term impact of the MoUs and agreements.

Trade-transitconnectivity

As Bangladesh has already done enough regarding bilateral economic relations, trade and economic issues got less attention this time. Since 2009, both the countries have taken a series of initiatives to enhance bilateral trade and establish greater connectivity. As transit was a longstanding demand from India, the government of Bangladesh has actively moved to provide the facility. As a result, transshipment of goods to the northeastern states of India through the Ashuganj river port of Bangladesh and further movement through Akhaura- Agartala by road, has commenced in June 2016. Before that, several transhipment consignments ran through the route. To facilitate the construction of a power plant in Paltana of Tripura, Bangladesh even built a temporary road over the Titas river in 2010 to move heavy vehicles to Tripura.

Again in 2015, a memorandum of understanding on the use of Chittagong and Mongla ports for the movement of goods to and from India was signed. The required deal will be finalized soon. Or, take the example of the Coastal Shipping Agreement that was signed during the Bangladesh prime minister’s India visit in 2015. It has also been operationalized since February 2016 when the first container services between Kolkata and Pangaon (around 20 kilometers from Dhaka) took place under the agreement. India allowed tariff-free market access to all but 25 Bangladeshi products in 2010. Immediately after that, export to India jumped by around Consolidation or Consolation? Prime minister Sheikh Hasina’s visit to India this month has a significant impact on the future path of Bangladesh, considering geopolitical tension in the region 69 percent and reached USD512 million in FY11 from USD305 million in FY16. But in the later years, export to India fluctuated mildly and averaged annually around USD550 million. Moreover, export to India is facing a series of Non-Tariff Measures (NTMs), many of which converted to Non- Tariff Barriers (NTBs).

The trade gap is not necessarily a matter of serious concern as a large part of imports are raw materials and intermediary goods for exportoriented products. Moreover, the trade gap also reduced to USD4.76 billion in FY16 from USD5.30 billion in FY15. The latest addition to bilateral trade dynamics is the imposition of anti-dumping duties on Bangladeshi jute goods and hydrogen peroxide. Prime minister Sheikh Hasina, however, raised the issue of anti-dumping duties at the bilateral meeting with her Indian counterpart, Narendra Modi. Extending the current level of bilateral economic cooperation goes beyond regular merchandise trade. Energy, transport, and infrastructure became three critical areas where bilateral engagement was prominent. In January 2016, the Adani Group and Reliance ADAG announced their intent to invest around USD11 billion in power, LNG, and the port sectors in Bangladesh. The revival of old rail links and transit-transport related infrastructure have priority under the two lines of credit provided by the Indian government in two phases, worth USD3 billion in total.

During the latest visit, the two countries signed an MoU for extending a third line of credit. The amount is USD4.5 billion and the funds will be used in port construction, railways, roads, airports, power and energy, telecommunications, and shipping. It is, however, not clear why Bangladesh needs Indian credit, which is mostly a suppliers’ credit in nature, when soft loans from multilateral bodies are available. One primary reason, however, may be the particular pattern of connectivity which has huge political and economic implications. There is criticism that India is obtaining a corridor facility in the name of connectivity, while ‘caging’ Bangladesh by fencing the whole border.

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