Nepal-Bangladesh Trade Relations: Great prospect for development partnership in South Asia

Mir Mosharref Hossain Pakbir

MNA Editorial Desk: Bangladesh, being a fast developing country holds significant position among the South Asian countries, one of the most prospective regions of the world. The economy of Bangladesh is slowly moving from import-oriented to export-oriented. We have been looking for opportunities to create a market for our products across the world and Nepal, another important South Asian country holding a great prospect for Bangladesh as a promising development partner. Moreover, Nepal, being the 6th nation and one of the first recognizing countries of independent Bangladesh shares a strong bond with Bangladesh, which can be enriched with the enhanced economic relation between the two countries.

Nepal is a country of 28.98 million people, a much smaller population base than Bangladesh. It is also among the poorest and least developed countries in the world, with almost one-third of its population living below the poverty line. It is a landlocked country with craggy geography, limited natural resources and most importantly poor infrastructure. Despite all of these, Nepal still holds high prospect economically.

Bordering China in the north and India in the south, east, and west, Nepal is the largest sovereign Himalayan state. Nepal does not border Bangladesh, which is located within only 27 km of its south-eastern tip. Neither does it border Bhutan due to the Indian state of Sikkim being located in between. Economically, Nepal is highly linked and dependent on India due to huge border it shares with the largest and most powerful South Asian country, but is trying to reduce this dependency for a long time now.

Nepal is considered among the least developed countries (LDCs), which are those that suffer from severe structural impediments to achieve sustainable development. It is measured based on the average gross national income, human assets and size of economy, among other factors.

Nepal’s relations with other South Asian nations were dominated by the search for alternate transit facilities and a reduction of India’s influence. Nepal’s focus shifted to Bangladesh as a permanent and much desired gateway to the sea.

The bilateral relations between Bangladesh and Nepal have been progressive since the independence of Bangladesh in 1971. Although it maintained a neutral stance on the Liberation War of 1971, Nepal recognized Bangladesh on January 16, 1972. In retaliation, Pakistan cut off relation with Nepal. Two nations are separated by the ‘Siliguri Corridor’ — a small drawn out the territory of the Indian state of West Bengal which lies between southern Nepal and northern Bangladesh. Both countries are members of the South Asian Association for Regional Cooperation (SAARC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

In April 1976, both nations signed bilateral agreements to develop trade, transit and civil aviation. The transit agreement exempted all traffic-in-transit from duties and other charges. Six points of entry and exit for Nepalese traffic were set up. However, the Nepalese goods had to be unloaded at the border due to the absence of an agreement allowing Nepalese trucks direct access to the ports.

Despite progress in bilateral ties, the volume of trade between the two countries was at less than 60 million USD per year in 2008-09 with Bangladesh’s exports to Nepal amounting to only 6.7 million USD. But the scenario has improved a lot since then. The export of Bangladesh to Nepal was 10 million USD in 2013, which increased to 47.5 million USD last year. Bangladesh’s export to Nepal is increasing day by day, but yet Bangladeshi export is at only 0.3 per cent of Nepal’s total import projecting huge opportunity for boosting market of Bangladeshi products in Nepal.

In 1998, the Phulbari treaty between India and Bangladesh allowed Nepalese goods access to Bangladesh through a transit route via India. In 2010, a joint communiqué issued by the Prime Minister of India Dr. Manmohan Singh and his Bangladeshi counterpart Sheikh Hasina assured giving Nepal and Bhutan access to the Bangladeshi ports.

Banglabandha is a major inland port in northern Bangladesh established to provide a trade link with India, Nepal and Bhutan. The three countries are separated by Siliguri Corridor – 52 km of Indian territory. On the Indian side of the border is Phulbari. The Nepalese part in the adjoining border is Kankarbhitta. Despite the geographical proximity of the borders of India, Bangladesh, Nepal and Bhutan, the issues of border control and territorial dominion prevented the founding of direct trade routes.

The Banglabandha land port is located at the tip of the north-western region of Bangladesh. It is 57 km north of the Panchagarh town and 7 km from Siliguri and Jalpaiguri, in the Indian state of West Bengal. Kakarbhitta, the India-Nepal border transit point for third countries, is 61 km away and the India-Bhutan border is 68 km away from the Indo-Bangladesh boundary near which Banglabandha stands.

The Banglabandha port was formally inaugurated in May 2004 but has not been fully functional owing to the absence of a transit agreement for the use of Indian territory as a transport route for Bangladeshi, Nepalese and Bhutanese trade cargoes.

India has been held responsible for preventing development of South Asian road connectivity due to anticipation of regional conflict, for which the benefits of decades long Bangladeshi initiatives to promote regional trade, remains unrealized. But India without development in that particular region cannot achieve their overall development goals as well. If India fails to establish their roles as the development partner of its neighbours Bangladesh, Nepal and Bhutan, then it will be hard for them to become a global power where they are headed to. We believe India have already realized that as they are portraying positive mindset towards its neighbours of this region.

Nepal is a prospective economy of South Asia, but the trade volume between Nepal and Bangladesh is still very low against the prospect and the bilateral trade is confined to agricultural products with lentil being the major export of Nepal to Bangladesh. Poor connectivity, transit infrastructure, railway costs, non-tariff technical barriers to trade, large sensitive lists, high tariffs, a lack of time suggestion and solution to these challenges have been identified by the experts and analysts as the greatest barriers to expand the trade between these two countries. Moreover, the SAFTA agreement of 2006 has not been implemented till today.

Bangladeshi businesses can create a strong market for their products in Nepal. There are lucrative sectors like; manufacturing, pharmaceuticals, energy, food products, fertilizers, technology-based products etc. which can generate huge revenues from Nepal. Though a great prospect lies in Nepal for Bangladesh, there is no proper workforce to facilitate that as a very small team under the visionary leadership of Ambassador of Bangladesh to Nepal Mrs. Mashfee Binte Shams is working hard to realize this opportunity.

A tourism plan, including Bangladesh and Nepal has a great prospect to attract the tourists all around the world. So many visitors come to visit the Himalayas every year, but they can also visit the Bay of Bengal at Cox’s Bazaar, the world’s longest natural sea beach, world’s largest Mangrove the Sundarbans and Kuakata to enjoy an unobstructed view of both sunrise and sunset over the Bay of Bengal — all located at a short distance from Nepal. It can be an attractive option for the global tourists and great prospect for both the countries.

Importantly, Bangladesh has declared plans to jointly invest in a hydroelectric plant in Nepal and import electricity from that plant in 2016. Both the economies of Bangladesh and Nepal will be greatly benefitted from that investment.

Moreover, many students from Nepal visit Bangladesh for higher studies, especially for medical education and Bangladeshi institutes can provide them sponsorship programs which will enable us to exchange our cultures to a much greater extent.

On the contrary, while Nepal is striving to upgrade from LDC to developing country, by increasing trade in Bangladesh they can move along with that goal. Here, Bangladesh can play a great role as a development partner of Nepal. Many similarities among the people of these two countries; especially sharing lives along the coasts of the same rivers sourcing from Nepal to flow across Bangladesh and India, creates a strong bond already and a sympathetic and helping attitude exists which will facilitate in this endeavour.

To solicit existing problems, few initiatives are required like; a comprehensive regional economic partnership program among the countries of this region can help to address the challenges. Moreover, the engagement of both public and private sectors of Bangladesh and Nepal to a much larger extent can bring out good result while dedicated institutions in both Bangladesh and Nepal to promote the trade between the two countries can develop forums to solicit the problems.

Creating an advantageous position in building strong trade relation between Bangladesh and Nepal is faced with the biggest challenge named transit and connectivity. Though regional politics and conflict cannot be completely outset, a motioned regional cooperation treaty is highly required in this matter. If we can create this opportunity, a noteworthy trade ties can be built between Bangladesh and Nepal which will be beneficial to the people of both countries.

The writer is Chief Editor at Mohammadi News Agency (MNA) and Vice Chairman, Democracy Research Centre (DRC).