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Macro Economy | Next


Time for India, Bangladesh to pursue free trade policy

G. Srinivasan

NEW DELHI, May 7

THE recent jolt to the bilateral relations between India and Bangladesh in the wake of killings of some Border Security Forces (BSF) personnel by members of the Bangladesh Rifles (BDR) apart, the two countries have much to gain if they bury the hatchet a nd pursue with vigour free trade policies.

Though bilateral trade is heavily loaded against Dhaka, it is Bangladesh, the economically fragile partner, who plumps for more openness from New Delhi in terms of a reduction of duties on goods from Bangladesh into India.

India's exports to Bangladesh during the first three quarters of 2000-01 (April to December) amounted to $580.99 million, against its imports from Dhaka of $49.57 million, leaving the trade balance tilted heavily against Bangladesh. In fact, India's impo rts from Bangladesh during this period showed a negative growth of 3.73 per cent.

A recent not-widely-publicised study of the World Bank titled `Forging Sub-regional Links in Transportation and Logistics in South Asia' underlines the urgent need for both of these countries to move in the free trade direction with zeal.

This is, however, predicated on the political will across the sub-continent to exploit the comparative advantages and complementarities to evolve synergies for reaping rewarding results. The ability of countries to grow rapidly depends on their capacity to link with global and regional markets.

In turn, this capacity depends markedly on connectivity and the efficiency and speed with which goods and services can be moved from production centres to final markets. Improvements in transport logistics therefore have important implications for povert y alleviation.

A notable roadblock in the logistics chains is excessive delays in moving cargo through the ports of Calcutta and Chittagong for international trade, inefficiencies at land border crossings and limitations on routes for transit cargo, regardless of which country the truck belongs to.

The road route between East India and Northeast India through Bangladesh reduces transport distance by more than 60 per cent in comparison to the current route around Bangladesh through Siliguri, but it is not open under current protocol. If access for t ransit cargo to or from Northeastern India were permitted through Bangladesh, the transportation requirements (the transfer of cargo from Indian to Bangladeshi trucks, and back to Indian trucks) and the cross-border processing delays at the two borders w ould offset any potential benefits from the reduced distance. The study concedes that however, if border-crossing procedures were significantly reduced and if transit access for Indian vehicles were allowed, there would be significant savings in time and cost.

Highlighting the bottleneck at the Indian-Bangladesh border, it said Benapole is the principal border crossing between the two and the facility is called a land port. Import traffic for Bangladesh is transferred from Indian trucks to bonded facilities wi thin Bangladesh while export traffic is transshipped into warehouses 500 meters inside the Indian border.

The average daily traffic exceeds 200 trucks loaded with cargo for Bangladesh and 50 trucks with cargo for India, as well as 2,000 passengers. Throughput is constrained by a single customs lane in each direction for clearing vehicles and emigrants.

As a result, there is acute congestion with lines of up to 1500 trucks and waiting times of one to five days. The study said that despite efforts to decongest the area, the most crucial issue pertains to ``simplifying customs procedures, eliminating the need for trans-shipment and increasing private sector involvement in operations'' which remain to be addressed.

For trade in high-value goods between India and Bangladesh, trucks would be the dominant, if not exclusive, mode. Travel time would be the major concern and route selection would be based on reducing door-to-door delivery time.

Coming down heavily on the low levels of mutual trust which are reflected ``in the transport and transit arrangements among the countries in the region,'' it cited the case of how no foreign vehicle is allowed on Bangladesh roads.

As a result, all products transported by road to Bangladesh from the neighbouring countries are transferred onto Bangladeshi trucks at the border, adding to the transportation costs and delays at the border crossings. Commodities between the Northeastern Indian states and the rest of India get routed around Bangladesh through India's narrow land corridor (adverted to as the ``chicken's neck'' in the sub-region).

By one reckoning, it takes 45 days to transport a container from Delhi to Dhaka, Bangladesh, because the container moves to Thughlakabad, then to Mumbai, India and Singapore. From Singapore, the container is shipped to Chittagong port and then to Dhaka. The distance of 2000 km between Dhaka and Delhi could be covered in two to three days by rail. But this does not happen because India and Bangladesh lack a proper pact to move container traffic.

Even though the countries in the region have begun to liberalise trade, make their industrial sectors more efficient, reduce government involvement in commercial activities and improve transportation networks, they have not been as ``assiduous'' in impro ving the logistics system to the same extent.

Failure to address logistics inefficiencies not only compromises the extent and depth of other reforms, but also risks loss in market share and could well weaken the current competitive edge of these countries in providing low-wage workforces. It is time New Delhi took the initiative in this regard and redress its trade surplus with Dhaka too.

Related links:
Bangladesh: Worrisome indicators
Assertive approach needed
Bangladesh plea for greater market access

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