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CPD study on BBIN-MVA cited

Published in The Financial Express on Friday, 26 June 2015.

Right price for connectivity needed

Abu Ahmed

It seems Bangladesh is more enthusiastic than others in facilitating transit and connectivity to India and via India to Nepal and Bhutan. For long, the two land-locked countries, Nepal and Bhutan, could not connect with Bangladesh through land route as India stood in their way. Bangladesh for years wanted to import hydro-electricity from Nepal, but India’s cooperation was wanting in this case too. Delhi wanted transit and transshipment facilities through Bangladesh for bringing only Indian goods from its western areas to its eastern states. To ferry goods from India’s western parts to its seven eastern states by using any mode of transport through Indian land was too costly.

According to one estimate by the Central for Policy Dialogue (CPD), a private sector think-tank, for transporting one ton cargo by train between Calcutta and Agartala, India is to spend $30. The cost would be only $ 11 if transported via Bangladesh.

Transit for India has now been messed up with the notion of connectivity. Transit and connectivity seem to have become synonymous. For connectivity, the Motor Vehicles Agreement (MVA) was a SAARC agenda. Now that agenda, to an extent, is dead and four of the SAARC member countries – India, Bangladesh, Nepal, Bhutan – are proceeding with connectivity leaving other members, specially Pakistan, out.

Taking advantage of Bangladesh’s hesitation in demanding the right price for transit or undertaking a study as to which member state will benefit up to what in terms of money, India has apparently chalked out a strategy of paying Bangladesh the least price for transit in the name of connectivity.

Everybody talks about benefits of transit and connectivity, but very few raise the question whether Bangladesh is going to ask for the right price for allowing its land, rivers and sea ports for use as transit and connectivity routes.

What has been signed in the name of MVA on June 14, 2015 among Bangladesh, India, Nepal and Bhutan will clearly benefit last three countries, especially India, more than Bangladesh as they will be the users of Bangladesh’s land, roads, rivers and rails as transit facilities. Though Bangladesh has not yet calculated the price it should ask for, what we are hearing from the horse’s mouth is that the price would not be high.

For years Bangladesh wanted land transit to Nepal, but did not have it in the face of indifference from India. Now that facility will be opened up to Bangladesh at the behest of India as Delhi has seen the whole transit facility becoming too cheap for it.

What is the economic cost of transit for Bangladesh? The full cost of building transit infrastructure can be assessed when subsidy content is taken out. Bangladesh’s road, rail and port facilities are highly subsidised. One good way of apportioning the cost is to see which country benefits from what. The country which will be benefiting more shall have to bear more cost. Bangladesh can adopt a strategy of calculating full cost of providing such a facility to other three countries and then ask for the price.

Alternatively, Bangladesh can ask for the real price for transit and connectivity. For example, if India can save up to $ 19 per ton cargo trafficking via Bangladesh, then the latter can ask for a portion of it. Hard bargaining and negotiation are the recognised tools worldwide when it comes to issues relating to inter-country interest.

Bangladesh should remember that it is the transit- providing country, not the receiving one. If it fails to take into account the cost as the transit provider then it will not be a win-win situation for the country. It is calculated that $ 8.0  billion will be required to bring Bangladesh’s roads and rails up to standard for facilitating transit and connectivity.  Should Bangladesh make that investment alone? Or should Bangladesh spend the required money from a loan from India and other international sources? Also, Bangladesh should see that the transit and connectivity issues should not end up with the signing of the MVA with India, Nepal and Bhutan. This type of agreement should also be extended to include Pakistan and Afghanistan in the west and Myanmar and China in the east so that transit and connectivity become more meaningful for Bangladesh.

The very geographical location of Bangladesh is a strategic asset. If any country wants to use this strategic asset, Bangladesh should ask for the right price. Dilapidated roads, ports and rails of Bangladesh will not be suitable for providing good transit facilities to the MVA-signing countries. It should be a collective responsibility of the MVA signatories to see how to make Bangladesh’s transit structures up to standard.

The writer is Professor of Economics, University of Dhaka.



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