The window of opportunity opened up through the ongoing initiatives must now be seized through win-win follow-up initiatives.
This article is part of the series — India–Bangladesh Relations @50: Commemorating Bilateral Ties.
The fluctuating fortunes of the Bangladesh–India relationship have witnessed a remarkable shift towards a closer partnership and a deeper cooperation in recent times, particularly over the last decade. The changing landscape of bilateral ties is informed by significant developments on a number of fronts which includes the economy, political economy, as well as the domain of critical geostrategy. The idea is to build on the foundations of historical ties and take the relationship to a newer level of partnership and cooperation by identifying mutually rewarding win-win outcomes.
On its part, Bangladesh strongly feels that by leveraging closer ties with India — a rising powerhouse and driving force of the 21st century that is being touted as the “Asian century” — it will be able to ensure strengthened regional and global integration of her economy. This consideration has an added urgency also because of the journey of dual graduation that Bangladesh has embarked upon: Transition from low-income to lower-middle-income country status, with a consequent rise in the cost of aid money and stringent aid conditionalities; and the upcoming Least Developed Country graduation, which is to take place in 2026, with anticipated loss of preferential market access and many of the other international support measures which have contributed greatly to Bangladesh’s socio-economic development. There is a need for a strategic rethinking; and deepening of ties with India is perceived to be a critically important cornerstone of this strategy.
As of now, benefits of trade and economic cooperation remain far below their potential. Trade between the two countries, a major part of which takes place through land ports, face formidable challenges. Cost of trading remains very high, mostly associated with lack of appropriate trade facilitation as well as logistical difficulties and the consequent high lead time that discourages traders. Indeed, some studies show that for some products, trade costs for Bangladesh are higher than those associated with trading with Europe and North America. In spite of the fact that India imports about US$ 450.0 billion worth of products annually from the global market, Bangladesh’s exports to India have tended to hover around only US$ 1.0 billion. Production networks and value chains remain mostly absent.
It is against this backdrop that the ongoing efforts and policy shifts are important from the perspective of triggering substantive changes in going forward. The recent efforts to deepen bilateral cooperation have been underpinned by initiatives in many areas including promoting trade in goods, services and energy; establishing multi-modal connectivity; infrastructure building; initiatives to stimulate cross-border investment; and cooperation in areas of technology and capacity-building in various sectors. A large number of projects are being implemented in Bangladesh at present, with many being financed by the three lines of credit (LOC) offered by India worth US$ 8 billion. Energy import from India; India’s involvement in building Bangladesh’s nuclear power plant; the grant provided for the Padma bridge; building special economic zones for Indian investors in Bangladesh; the signing of the coastal shipping agreement; allowing transit facilities to Nepal and Bhutan through India to use Bangladesh’s Mongla, Chattogram, and Payra ports; the signing of the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicle Agreement and other initiatives could usher in a sea of change in the way that trade, business, and other areas of connectivity operate at the moment. Bangladesh perceives these to be opportunities that could be leveraged to transform its comparative advantages to competitive advantages, enabling it to address the challenges of development and the dual graduation.
However, physical connectivity will need to be translated into business ventures and development tools. Modalities of public-private partnerships and cross-country joint private sector initiatives will need to be identified and realised on the ground to reap the potential benefits originating from the various ongoing initiatives. For Bangladesh, a key challenge is to be able to make greater use of the Indian offer of duty-free market access, which has allowed Bangladesh to cross the one-billion-dollar export mark, but whose potential continues to remain largely under-utilised. One strategy in view of this is to be able to attract Indian investments that take advantage of the preferential market access offered to Bangladesh by India. Taking the discourse beyond bilateral trade deficit to areas of trade creation will be important, with concrete initiatives to realise the potential opportunities. Transforming the transport corridors into economic corridors will be key here. From this vantage point, concrete actions will need to be identified towards triangulation of trade, transport, and investment connectivity to develop the production networks and establish the backward and forward value chains that serve the interests of trade, business and commerce, bilateral and even beyond that. Bangladesh has recently expressed its interest to join the India-Myanmar-Thailand trilateral highway project. India has also invited Bangladesh to join the BRICS Bank. These opportunities need to be explored further.
The window of opportunity opened up through the ongoing initiatives must now be seized through win-win follow-up initiatives. One hopes that the upcoming visit of Indian Prime Minister Narendra Modi to Bangladesh and his talks with the Bangladesh Prime Minister will be an important step in this direction. One also hopes that deeper ties with India will contribute to Bangladesh realising its aspiration to make the transition to an economically developed, socially inclusive, and environmentally sustainable country in light of its Vision 2041 of the Bangladesh government which has set out the target of transforming Bangladesh into a developed country by 2041.
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Dr Mustafizur Rahman is currently a Distinguished Fellow at the Centre for Policy Dialogue (CPD) a leading think tank in Bangladesh. Previously he had taught ...
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