Originally Published 2019-10-30 10:56:10 Published on Oct 30, 2019
Sheikh Hasina has guided her country’s policy wisely and adroitly, making Bangladesh the best performing economy in Asia.
Bangladesh, India ties: A new neighbourhood model

Prime Minister Sheikh Hasina’s India visit, during the first week of this month, reinforced bilateral ties to an extent that the Official Joint Statement described it as “a bond transcending strategic relationship”. This was her first visit to India during her third consecutive term in office as PM, after her electoral success in December last year. Undeniably, the transformation in bilateral ties has been impressive, thanks to the visionary leadership of Sheikh Hasina who stormed back to power in 2008, riding on a huge electoral wave that gave her party, the Awami League (AL), three-fourths majority in the Jatiyo Sangsad (Parliament).

Both during the UPA-2 government and PM Modi’s first tenure, mutual trust and confidence was reciprocated fully by India’s leadership, resulting in strengthening and expanding bilateral ties substantially. The key to this was PM Hasina’s firm action in uprooting Indian insurgent groups and stern steps against jihadi extremists. It would not be an exaggeration to call bilateral ties a model for South Asia or any other region. She has guided her country’s policy wisely and adroitly, making Bangladesh the best performing economy in Asia.

Speaking at the India Economic Forum meeting in Delhi, PM Hasina highlighted the economic boom, with GDP growth of over 8% per annum, fuelled by, what is arguably a liberal investment regime, with attractive fiscal incentives. Like India and several other countries with youth bulges in their demographic profiles, Bangladesh, too, has built an aspirational middle-class of around 30 million. There is rapid urbanisation and the manufacturing base is diversifying. Over 100 Special Economic Zones (SEZs) are being built to attract manufacturing companies from home and abroad, with 2 SEZs specially earmarked for India. PM Hasina is aiming high. She wants Bangladesh to be a developed nation by 2041.

Predictable and less dependent on subsistence agriculture, production has added to food security, an important concern for Bangladesh. PM Hasina, underscored this aspect of food security by pointedly bringing up the issue of India’s export ban on onions. She quipped that she had instructed her cook not to use onions. In a price sensitive market, where onions are an essential ingredient of daily meals in South Asia, the ban has led to skyrocketing of prices creating a wave of popular disgruntlement. India has reacted by making a special provision of export of onions to Bangladesh which depends on meeting 30% of its onion consumption on Indian supplies.

By 2021, Bangladesh will graduate to a developing country, from her less developed country status, with per capita GDP touching USD 2000. Bangladesh is also moving up the value chain of manufacturing in certain areas, like ship building, white goods and IT services, though apparel exports still amount to over 70% of exports. Bangladesh’s exports to India have crossed USD 1 billion, a record 52% growth over last year. Though total bilateral merchandise trade is just over USD 10 billion, Bangladesh faces an adverse balance of trade.

While this was an irritant in the bilateral trade agenda earlier, the growth of exports owes much to the duty-free entry provided by India to Bangladeshi exports. India, too, struggles with a huge adverse trade balance viz-a-viz China, owing to China’s restrictive trade practices. There is scope for reducing non-tariff and para-tariff barriers to ease the flow of goods across the border. Bangladesh has concerns on anti-dumping provisions on export of certain products like jute.

Impediments to movement of transit goods through Bangladesh remain and need to be removed, particularly movement of Indian goods via Mongla and Chittagong ports. Infrastructural bottlenecks on the border are being tackled via building of Integrated Check Posts. India’s Lines of Credit (LOC) and grants of over USD 8 billion, offsets the adverse balance of trade to some extent. Cumulative Indian FDI in Bangladesh is a bit over USD 3 billion.

This is likely to grow once the SEZs are fully operational. There are infrastructure deficits, bureaucratic red tape and corruption which continue to impede FDI. Bangladesh’s growing economic success is laying the foundation of future prosperity that is likely to propel the country to surpass India’s GDP per capita by 2030 and make it the 26th largest economy in the world.

While economic linkages have emerged as an important pivot of this relationship, multi-dimensional connectivity, energy cooperation, security, defence, human resource development and people-to-people ties are growing in tandem. Modernisation of Bangladesh Railways, better road, rail and air links are being implemented. An agreement to import bulk LPG from Bangladesh has also been inked as well as one on the second electricity grid connectivity.

Border management agreements will facilitate completion of the border fencing and visa liberalisation will ease travel across borders, while tackling crimes like smuggling of fake Indian currency, banned goods narcotic drugs, infiltration of radical extremists, terrorists and trans-border criminal activity. The new maritime surveillance agreement will enable Bangladesh to deploy shore-based radars provided by India to monitor the Bay of Bengal, in pursuit of a more secure and integrated region.

The politically sensitive issue of sharing of river waters will be taken up by the Joint Rivers Commission, for six trans-boundary rivers and Bangladesh has agreed to allow India to draw more water from the Feni river, to supply the needs of Sabroom town in Tripura. India has to do more to deliver on the pending agreement on the Teesta river that remains embroiled in Centre-State politics.

There are challenges in bilateral ties over issues like location of power plants, the NRC and Rohingyas. There are sections in Bangladesh who are unhappy with closer bilateral ties between the two countries. Advocate Sultana Kamal, a well known activist for human rights and a civil society leader, has expressed the view that India is giving favours to manipulate Bangladesh for its selfish interests and has turned the country into a “business district”.

Civil society and NGOs in Bangladesh have been agitating against the building of power plants near the Sunderbans, a heritage UNESCO-recognised site and home to the world’s largest Mangrove forest. These lobbies are also against the use of coal for power generation, given the effects of greenhouse gases on Climate Change. It is perhaps, time for the two governments, to start a joint effort urgently to protect and preserve the shared Sunderbans region, in a public-private partnership mode.

While there is no political challenge to PM Hasina, there has been domestic carping against agreements that the two countries have signed during the recent visit, particularly on giving water from the Feni river, supply of LPG, supply of Hilsa fish and the coastal surveillance radar system. A student in BUET, Bangladesh’s equivalent of an India’s IIT, was allegedly beaten to death by members of the Chattra League, the youth wing of the AL, for Facebook posts critical of these agreements.

While PM Hasina has promised strict action against those who killed the student, there is a growing feeling that she is giving away too much to India. This is nothing new, since such charges have been made before by anti-Indian political parties in Bangladesh. PM Hasina has weathered such criticism before and knows how to deal with it. Both countries have invested heavily in bilateral ties and the momentum generated is unlikely to dissipate.

This commentary originally appeared in The Indian Express.

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Pinak Ranjan Chakravarty

Pinak Ranjan Chakravarty

Pinak Chakravarty was a Visiting Fellow with ORF's Regional Studies Initiative where he oversees the West Asia Initiative Bangladesh and selected ASEAN-related issues. He joined ...

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