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The commerce minister of Bangladesh Tipu Munshi, who is visiting India from 21 to 24 December for talks, is aiming at pushing forward trade ties between Bangladesh and India. The main focus of the visit is the negotiation on the Comprehensive Economic Partnership Agreement (CEPA).
Though a Joint Feasibility Study was finalised by the both country, the negotiations remained to be done. The next steps to take forward negotiations on the agreement are expected to figure in his meeting with his Indian counterpart Piyush Goyal on 22 and 23 December.
There are manifold mutual and reciprocal investment opportunities for both India and Bangladesh. Along with the investment opportunities, both parties must talk about the trade facilitation measures, connectivity issues, deadlock of land ports, and infrastructural development. If these things are not taken seriously, this economic partnership agreement won't bring any fruitful results.
Investment opportunities
India can invest in the area of food, pharmaceuticals, leather and leather products, textile and apparel sector, agro-based Industries and farm machinery plants, automobiles, light engineering and electronics, ceramics, ICT sector, banking and financial services, telecommunications, and mega construction project. Bangladesh is establishing three large Special Economic Zones for Indian entrepreneurs.In these special regions, Indian investors will be able to set up factories to cater to the supply chain needs of Bangladesh and the North-Eastern states of India and to export to other parts of the world. On the contrary, Bangladesh can invest in India in the field of food and beverages, agro-processing, pharmaceuticals, plastics and rubber products, leather and leather products, textile and apparel, jute and jute products, cement, spinning mills, electronics and batteries, travel and tourism and ICT sectors.
Trade facilitation measures
The economies of India-Bangladesh need an impetus to pursue this through a series of trade facilitation measures including simplifying the movement of people and goods between both countries; greater use of one another’s seaports to explore the possibility of the Comprehensive Economic Partnership Agreement. India and Bangladesh need to undertake trade facilitation measures that will greatly reduce current physical and nonphysical barriers to transportation and transit to boost two-way trade.It can be done by two means. Firstly, through both visible infrastructural development (i.e. connectivity infrastructure,railroad and waterways, land ports, water ports); and then through invisible infrastructural development (such as reformed policies, procedures, and regulations).
These areas need special attention from policymakers and researchers in both Bangladesh and India.
Though Benapole remains the largest trading point between India and Bangladesh, congestion remains a major concern. It is important to have a four-lane road that connects Benapole. Construction of a second cargo gate to some extent will help in faster clearance of cargo.
Boosting trade through land ports
Infrastructural Development in the land ports of Bangladesh also needs immediate attention. Though the Petrapole land port on the Indian side has been modernized, Benapole requires attention. Under the World Bank Bangladesh Regional Connectivity Project, infrastructure in three land ports of Bangladesh -- Ramgarh, Sheola, and Benapole -- is being developed and Bhomra, Burimari, and Bholaganj are under consideration.Though Benapole remains the largest trading point between India and Bangladesh, congestion remains a major concern. It is important to have a four-lane road that connects Benapole. Construction of a second cargo gate to some extent will help in faster clearance of cargo.
Transport vehicles in Bangladesh have an average speed of 19 km an hour along main corridors, indicating roads are congested
Comparatively, Agartala-Akhaura has better facilities as it is connected to NH 8 through an arterial road. It is the second largest land port. Transit trade is greatly challenged by highway infrastructure in each of the countries. According to the World Bank, transport vehicles within Bangladesh have “an average speed of 19 kilometres an hour along main corridors”, indicating that the roads are congested.
This is very much evident from the fact that the handling capacity of both Bangladesh and India across the Benapole-Petrapole border is asymmetrical. Parking mafias that operate in the border area benefit from the delay in clearing the customs for loading and unloading of cargo. Moreover, not just Benapole able to clear a few cargo trucks but Bangladesh also prioritizes clearance of containerized cargo of cotton fabric and truck chassis.
More areas that need reform are reducing the high transaction cost of export and easing the complexity of cross-border trading procedures. Complex requirements in cross-border trade increase the possibility of corruption. For example, at the key border-crossing point between India and Bangladesh, as many as 1,500 trucks queue on both sides of the border with waiting times varying between one and five days to complete documentation requirements.
Invisible infrastructure
Both countries should emphasize administrative reform, governance, and security. Customs is an intrinsic element of India-Bangladesh's cross-border movement of goods and services and yields significant influence on bilateral trade. Not only that, customs perform other important functions such as revenue collection and protection against dangerous goods. The time taken for clearance of goods has an impact on the competitiveness of the products. So, India-Bangladesh should bring administrative reforms on both sides of India and Bangladesh.More areas that need reform are reducing the high transaction cost of export and easing the complexity of cross-border trading procedures. Complex requirements in cross-border trade increase the possibility of corruption. For example, at the key border-crossing point between India and Bangladesh, as many as 1,500 trucks queue on both sides of the border with waiting times varying between one and five days to complete documentation requirements.
Addressing trade disputes
Expediting customs clearance procedures reduces the discretionary power of customs officials, thus reducing the scope for corruption. Efficient, friendly, and corruption-free customs can help boost trade and investment.
The trade dispute with India is another issue Bangladesh needs to solve. Previously Dhaka has failed to move ahead to resolve the bilateral trade disputes by applying trade-remedial measures under the umbrella of the World Trade Organization (WTO).
Various non-tariff measures (NTMs) as well as non-tariff barriers (NTBs) regularly imposed by India also need serious attention. Bangladesh also imposes various NTBs. Dealing with NTMs and NTBs requires a rigorous approach as CEPA doesn't have to clear the threshold of WTO.
If Tipu Munshi and Piyush Goyal conclude their negotiation keeping these things in mind, then both India and Bangladesh can reap the maximum benefit of CEPA.
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*Researcher and Strategic affairs analyst, Dhaka
The trade dispute with India is another issue Bangladesh needs to solve. Previously Dhaka has failed to move ahead to resolve the bilateral trade disputes by applying trade-remedial measures under the umbrella of the World Trade Organization (WTO).
Various non-tariff measures (NTMs) as well as non-tariff barriers (NTBs) regularly imposed by India also need serious attention. Bangladesh also imposes various NTBs. Dealing with NTMs and NTBs requires a rigorous approach as CEPA doesn't have to clear the threshold of WTO.
If Tipu Munshi and Piyush Goyal conclude their negotiation keeping these things in mind, then both India and Bangladesh can reap the maximum benefit of CEPA.
---
*Researcher and Strategic affairs analyst, Dhaka
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