Delayed transit

Following the joint communiqué and agreements between India and Bangladesh in January this year, the Bangladesh government has welcomed negotiations on transit facilities with Nepal.

The transit agreement had been signed between the two countries in 1976, but had been pending for three decades and could not be implemented due to a number of reasons. Modalities for implementing the long-standing agreement were finally agreed upon on 14 July in a commerce secretary-level meeting in Dhaka. This meeting, which is supposed to be held annually and hosted alternately by Kathmandu and Dhaka, has been very irregular until now, further delaying the implementation of the agreement – the last meeting (before the one in July) was held in 2007.

According to the agreement, landlocked Nepal will be able to use the Mongla seaport in Khulna district (via Banglabandh, Panchagarh, Thakurgaon, Syedpur, Rangpur, Bogra, Natore, Dhashuria, Pakshi, Kushtia, Jhenidah and Jessore) to ship goods to Western and European markets. Participants of the commerce secretary-level meeting which ended on July 15 have also agreed to work on road and rail links between Nepal and Bangladesh, as well as follow up on potential bilateral trade and investment.

The transit agreement now requires approval from the two governments, which Bangladesh Commerce Secretary Ghulam Hussain believes can be obtained by February 2011 because approval from the cabinet and parliament 'should not take more than six to seven months'.

While the agreement deals, for the most part, with transit between the two countries, there are also trade potentials that should be explored for the greater interest of the two countries, Hussain believes. Moreover, according to Professor Imtiaz Ahmed of the University of Dhaka's department of international relations, although trade between Bangladesh and Nepal has been low until now, there is immense potential for Nepal to diversify. A transit agreement between Nepal and Bangladesh, however, is not effective until there is a formal agreement between Bangladesh and India as well as India and Nepal for transit to take place.

During a visit to Bangladesh on 7 August to sign a one-billion dollar loan agreement, India's Finance Minsiter Pranab Mukherjee told the media that India has also agreed to allow Nepal use Bangladesh transit. 'We will soon have arrangements in place to allow trucks from Nepal to enter the Bangladesh side of the land customs station at Banglabandha,' he said.

Professor Mahbub Ullah of the University of Dhaka's department of development studies, however, remains sceptical. Attempts were made during the last regime of the Awami League government to use the currently agreed upon route for transit, and while transit between Nepal and Bangladesh was then opened from Banglabandh, it had to be shut down within 15 minutes. 'India considers its Banglabandha port or the Siliguri corridor as a sensitive zone. India is a security state, and for it, all other factors for come second to security,' says Prof Mahbub.

From diplomacy to trade
While Nepal was the seventh country to recognise Bangladesh and the two countries established diplomatic relations in 1972, limitations such as geographical location did not allow the translation of diplomatic goodwill to economic relations, which have been limited, both in terms of export and import, according to Towfiqul Islam Khan, a senior research associate with the Centre for Policy Dialogue.

Security concerns, such as smuggling of goods and the movement of separatist groups and terrorists inside the country, have also played a part in limiting transit and transshipment, but this needs to change and policymakers in Bangladesh need to be mindful of economic gains as well. 'It is not just about bilateral trade. Nepal is also looking forward to exporting goods via the Mongla port, so it is a kind of service export that we are about to offer,' Khan says.

Hussain maintains, however, that the benefits or losses of this transit trade have not been quantified with any formal studies. 'Despite its infrastructural development, Mongla is a grossly underutilised port,' he believes.

Before counting their eggs, though, the two countries also need to be mindful of the need to modernise customs services. The new transit trade route passes through two customs points – between Nepal and India, and between India and Bangladesh. The speed of delivery from both checkpoints will be a matter of concern because Southasia is notorious for botched customs handling. In order to minimise these hassles, Nepal and Bangladesh should have joint industrial and manufacturing units – such as the ones Nepal has with India – in Bangladesh. With ensured shipping arrangements, this will also reduce operation costs for Nepal.

During the July meeting, meanwhile, the Nepal delegation headed by Purushottam Ojha also raised concerns about the lack of cold-storage facilities for perishable goods in Bangladesh. The Bangladesh government has promised to look into the feasibility for providing this option, and officials have suggested, in the short run, the use of refrigerated trucks which are used to transport perishable goods. By December 2010, Hussain says, the working committee headed by the joint secretaries of both countries will finalise the list of goods for tariff concession and work out the terms of trade.

Under the circumstances, however, the transit trade agreement is beneficial for both countries. The agreement suggests that Nepal be exempted from transit fees and also be given a 50-percent concession on storage, warehousing and landing charges. 'While the distance between Nepal and the Kolkata Port is almost the same as that from the Mongla Port, considering the rush at the Kolkata Port, Mongla should definitely be an attractive option for Nepal,' Hussain says. Prof Ahmed concurs. 'In a capitalist sense, more than one port gives Nepal the option to bargain and also allows the landlocked country to evade monopolistic exploitation,' he says.

He cautions, however, that while Nepal would want to overcome its dependency on a single port for the shipment of goods, 'this interest must not be taken for granted' and the benefits for Bangladesh, such as infrastructural development, better medical facilities and high-class restaurants, must also be kept in mind.

With New Delhi having displayed its readiness in granting transit between Bhutan, Nepal and Bangladesh via India, the materialisation of these agreements is now a matter of time. The transit deal, it must be remembered, is still in its infancy without the resolution of security and trade issues.

– Saad Hammadi is a senior staff writer with the New Age in Dhaka.