Thursday, September 16

How economic integration could help India and Bangladesh fulfil the expectations of their people

India-Bangladesh connectivity agreements mean it’s now more feasible for ready-made manufacturers in Bangladesh to increase imports from its second largest source of cotton – India

Bangladesh’s economic growth means that New Delhi needs a new approach.

Media narratives that describe foreign power and influence over Dhaka gaslight Bangladeshis. Those narratives don’t speak to their experience.

Meanwhile, stakeholders’ efforts to securitize economic relations only alienate friends in Dhaka. The government there is already criticized for pandering to New Delhi.

The failure of these ideas, however, has created room for more constructive discourse.

Researchers, analysts, and bureaucrats have taken inspiration from historic trade flows – rather than merely dwelling on them – to advocate regional connectivity and trade. Their work has paved the way for market opportunities that are becoming more tangible.

The Bangladesh, Bhutan, India, Nepal Motor Vehicles Agreement is the most concrete example. The agreement will ease personal, passenger, and cargo vehicle travel across the four countries once fully implemented. It has attracted broad support since the four members signed the agreement in 2015.

Indians and Bangladeshis have the most to gain.

The agreement will increase economic activity substantially. This will raise real income levels in India between 1.4% and 5.6%, and income in Bangladesh between 3.4% and 11.3%, according to the World Bank’s Connecting to Thrive: Challenges and Opportunities of Transport Integration in Eastern South Asia.

Income levels could rise by as much as 15% in West Bengal, 28% in Chittagong, and 40% in Dhaka.

Reduced transport and trade costs for traders will lead to consumer savings. This will be most pronounced in Indian states that border Bangladesh – particularly in West Bengal, where the price of goods could decrease by more than 4.5% – as well as every district in Bangladesh.

No similar study assesses the impact of enhanced maritime connectivity specifically. But there is reason to be similarly optimistic about these long-neglected routes.

India and Bangladesh have worked out several maritime agreements. Coastal trade agreements for shipping across the Bay of Bengal. Inland transit and trade agreements for river trade. Transhipment facilities connecting India to its northeast through Bangladesh’s ports and rivers.

Improved maritime connectivity should have a Motor Vehicles Agreement-like chain effect. More trade and transit inspire new economic activity that raises income and lowers costs for businesses and consumers.

Rail connectivity may prove more difficult.

India primarily uses broad gauge, while Bangladesh has a mix of broad and meter gauge railways. Four of the eight border stations connecting the countries aren’t operational. The countries are, however, committed to restoring links severed decades ago.

Taken together, it shows something many choose to ignore: the will to integrate South Asia.

Pushing forward

The Motor Vehicles Agreement serves as a case in point. After Pakistan stymied India’s Motor Vehicles Agreement proposal at a South Asian Association for Regional Cooperation summit in 2014, the Bangladesh, Bhutan, India, Nepal Initiative took up the proposal.

Bhutan hasn’t ratified the agreement. But it didn’t stop India, Bangladesh, and Nepal from pushing the initiative forward. Bhutan, meanwhile, is seeking to create domestic political support.

There is also the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. It includes Thailand, Myanmar, Bangladesh, Bhutan, Nepal, India, and Sri Lanka.

The two-decade old grouping has been reinvigorated in recent years.

A Bimstec Conclave of Ports agreement now links Thailand’s Ranong Port with ports in Chennai, Vishakhapatnam, and Kolkata. They are also studying two more ambitious deals. A Bimstec Coastal Shipping Agreement and a Bimstec Free Trade Agreement.

A Bimstec Free Trade Agreement would bring 1.67 billion people – 22% of world’s population – together into an economic region with a combined $3.71 trillion GDP – roughly equal to Germany’s GDP.

It is all administered from Bimstec’s secretariat in Dhaka.

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