Originally Published 2020-08-13 10:05:18 Published on Aug 13, 2020
Bhutan: The significance of opening of new trade routes

The Covid-19 pandemic has redefined the way the world thinks about connectivity. With international trade taking a severe beating at the hands of the virus, policy discourses on improving connectivity and boosting trade have taken a backseat. Given the situation, the pandemic may probably  stay for a while, but causing the continued suspension of connectivity and trade for long would be untenable.

Even in these unusual times, Bhutan and India opened a new trade route on 15 July. The new trade route passes through the Indian town of Jaigaon in West Bengal and leads to Alhay near Pasakha in Bhutan. It is a temporary measure, announced by India at the behest of Bhutan. It is in recognition of the special ties that the two countries maintain, and India’s effort to support Bhutan in this tough time.

Sustenance of trade

Following the spread of the pandemic, Bhutan had sealed its borders on 23 March. Bhutan had stocked fuel and essential food items for at least 12 days as a contingency. As a precautionary measure, a high alert was sounded on the Jaigaon-Pheuntsholing trade route, which accounts for 90 percent of the bilateral trade. The Pasakha industrial estate, a major hub of Bhutan’s industrial activities, was, however, allowed to remain open with some riders by the Bhutanese government.

Despite the pandemic, India provided full support to Bhutan, facilitating supply of both essential items and other goods, including industrial raw materials. India also facilitated movement of people who wanted to return to Bhutan. Bhutan too continued engaging in trade and business with people in border towns, especially Jaigaon.

Interestingly, in the period between March and July, Bhutan’s imports of essential items increased from Nu. 2.19 billion last year to Nu.3.31 billion during the same period this year, according to Kuensel reported trade figures. However, imports of industrial raw materials and petroleum products from India witnessed a drop -- to Nu. 7.35 billion and Nu. 1.82 billion respectively. Also, unlike during the pre-Covid days, now it is mostly Indian vehicles that are transporting the goods between Jaigaon and Phuentsholing.

The new route, under the Jaigaon Land Customs Station (LCS) at Alhay, would expedite the movement of trucks carrying industrial raw materials from India to Bhutan and boost trade and commerce between the two countries, say diplomats. This route provides an alternative to the Jaigaon-Phuentsholing route, thus decongesting the traffic. The route will immensely help Bhutan’s import of raw materials for the Pasakha Industrial Estate.

Resuming boulder exports

Bhutan is keen on resuming boulder trade with India and Bangladesh. Reportedly, Thimphu is set to resume boulder exports from Samste district that shares borders with the Indian States of Sikkim and West Bengal. Resumption of trade in boulders is crucial for Bhutan as it is the second highest export commodity in terms of value.

Bhutan’s boulder business has increased exponentially in the last two years, doubling from Nu. 2.1 billion in 2018 to 4.9 billion in 2019. Earlier, Bhutan had requested India to allow exports of boulders across the Jitti-Nagrakata LCS.

The trade activities and announcement of new routes is an indication of the strong inclination of both India and Bhutan to support each other in times of an emergency. It also is a signal of New Delhi’s resolve to sustain and expand connectivity in the sub-region.

Sub-regional connectivity

The trial run in July of a container ship from Kolkata to Agartala via Chittagong Port of Bangladesh boosts prospects for sub-regional connectivity. This operation of multimodal transhipment holds great potential not just for India’s connectivity in the north-eastern region but also for Bhutan.

Already, Bhutan is awaiting approvals for third country exports from Bangladesh for Mongla and Chittagong ports. In a separate development, India and Bangladesh added new ports of call that included Jogighopa in Assam that allows connectivity to Meghalaya and Bhutan as well. Bhutan is keen on operationalisation of the Jogighopa port for aiding the flourishing boulder business.

Bhutan is also in talks with Bangladesh for adding a few additional ports between Chilmari and Narayanganj in Bangladesh. Such connectivity between the three countries that have already initiated new routes and modes of connectivity present prospects for connectivity in the sub-region.

The starting of new trade routes through land and water modes gives fresh impetus for Bhutan to reconsider joining the BBIN initiative and strengthen sub-regional connectivity.

This commentary originally appeared in South Asia Weekly.

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Mihir Bhonsale

Mihir Bhonsale

Mihir Bhonsale was a Junior Fellow in the Strategic Studies Programme and Indian Neighbourhood Initiative of ORF.

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