Bangladesh and India are set to sign an agreement this week which would allow the latter to use Chattogram and Mongla ports for freight transportation to its land-locked north-eastern region. This will obviously enhance sub-regional connectivity.
Under the proposed deal, as revealed in the press, Bangladeshi vehicles will tranship goods from these two ports to border points of India's north-eastern states and also the other way round. The transhipment will be guided by the rules of the World Trade Organisation (WTO), and customs regulations and duties on the products will be applicable as similar to those in Bangladesh. These provisions will help increase the acceptability of the agreement as an equitable one.
On the face of it, the proposed agreement will primarily serve India's interest by reducing the cost of its domestic trade in its north-eastern region. For Bangladesh, local transport traders are likely to get an opportunity to grab a greater share of business as like bilateral inland-water transit agreement. Bangladeshi water vessels are now carrying around 95 per cent of the Indian transit cargoes through Bangladesh's rivers. The port authorities in Bangladesh may also be able to earn some additional revenues when Indian goods will be transhipped through these ports.
So far, so good. But the question is: have the authorities have kept in view the downsides of the initiative?
The capacities of both the Chattogram and Mongla ports in handling goods efficiently are limited. Chattogram port is struggling to meet the growing demands from local exporters and importers. The port handled over 2.8 million 20-foot equivalent units (TEUs) of containers in the past fiscal year, 12.19 per cent up over that of the previous year. Despite addition of some facilities recently, congestion is a regular affair here and the port still suffers due to lack of adequate advanced equipment and ancillary apparatus. Again, Mongla remains hamstrung by inadequate investment and endemic mismanagement.
Likewise, roads and highways connecting the two ports to the Indian border points will also face additional traffic. Dhaka-Chattogram highway is yet capable of ensuring smooth traffic for the country's domestic and export-oriented vehicles. Tailback is a regular affair here causing cost escalation of business. Besides, the existing railway facilities are too inadequate to handle the handle the pressure of carrying domestic import and export transportation.
It is obvious that if the proposed agreement with India comes into force without building adequate capacities of the seaports, roads and railway, domestic economy will suffer. There is another issue. At the moment Bangladesh trade with India's Seven Sister states is increasing, and this may be adversely affected with the proposed agreement facilitating mainland India's trade with its landlocked region.
The authorities should keep all such worrying factors into consideration so that the proposed agreement does not go wrong for Bangladesh.
The proposed agreement with India for the use of Chattogram and Mongla ports as well as transhipment of Indian cargoes to the Seven Sister states may be a step forward towards making Bangladesh seaports sub-regional hubs. The process will be completed when similar agreements will be signed with Nepal and Bhutan.
Nepal and Bhutan have long been urging Bangladesh to allow them to use these ports to reduce their costly dependence on Indian ports. Bangladesh has already allowed both the land-locked countries to use these seaports. As Nepal and Bhutan have to use Indian territory to take the advantage, a formal deal in this respect involving all the four countries is essential. According to a recent news report, India has agreed to prioritise movement of goods to, and from, Nepal and Bhutan using its land. But, a legally-binding mechanism is crucial to make the thing effective, instead of any 'best endeavour' approach.
The Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicle Agreement (MVA) already provides a framework in this regard. Under the agreement, there are separate protocols for passenger vehicles and cargo vehicles. But it is a flawed deal as it ignores the business-to-business transaction. Under the MVA, vehicles are allowed to cross territories of each other through dedicated routes. Moreover, it is reciprocal in nature. Thus cargo vehicles protocol under BBIN MVA needs to be extended widely so that Nepal and Bhutan get the Indian transit facility smoothly. Again, Bhutan is yet to ratify the MVA. Without ratifying the deal, it is not possible for the country to use the transit facility. To overcome all these troubles, a separate transit-transhipment deal should be expedited.
Above everything else, opening of the window of opportunity of making Bangladesh seaports sub-regional hubs depends on capacity building of Chattogram and Mongla ports, and development of the road, railway and river transport networks.
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