Transit and trade
Continued....
The occasionally argued proposition that denial of transit would preserve the North East as a captive market for Bangladesh is another questionable proposition. Trade with our "captive" market today may be growing but still remains modest as may be expected from one of India's most underdeveloped regions.
Opening up the North East through better transit facilities would expand our opportunities for trade not reduce it, because it would stimulate economic growth in this region. Indeed, in the near future improved connectivity with the North East would ensure that Eastern Bangladesh could emerge as a more competitive source of supply to the North East than the rest of India. Indian businessmen would, thus, within a more open trading system, find it more economic to set up joint ventures across the border in Bangladesh, to supply the North East or to process the abundant raw materials of the region. The operative issue is to use improved transport connectivity to establish stronger economic links between the North East and Bangladesh. The fact that four chief ministers from North East India are accompanying Dr. Manmohan Singh to Dhaka for the summit indicates that such a prospect has not escaped the attention of the government of India, which is adopting a more inclusive approach to these negotiations.
It is notable that 2 of the 4 ministers from the North East in Dr. Singh's delegation are from opposition parties!
At CPD we have, for many years in the course of various Indo-Bangladesh and regional dialogues, argued that Bangladesh should situate the issue of Indo-Bangladesh transit in a broader regional context associated with our commitment to the establishment of an Asian Highway and Railway. Bangladesh should, accordingly, project its future as the Singapore of the land routes, connecting Yunnan Province and South East Asia with South Asia.
Transit traffic between West Bengal and North East India or across Bangladesh, to our ports in Chittagong and Mongla, should be viewed as a part of such a programme of improved regional connectivity. This transit facility should also involve Nepal and Bhutan who should be encouraged to treat Chittagong and Mongla as their own ports.
In developing Bangladesh's strategic location as a major economic resource Bangladesh should not just limit itself to renting out our land mass to earn revenues from transit. We should certainly negotiate the best terms we can for the use of our transit facilities. However, in my assessment Bangladesh would sell itself short if we did not seek to add value to our offer of these facilities to India. Our principal economic gains should be derived from exporting transport services to those countries that would use our transit facilities. Both Chittagong and Mongla port authorities would, thus, be able to earn substantial revenues from the use of their facilities. Eventually, the economic benefits from our prospective investment in a deep sea port would be enhanced by serving a regional rather than just a national market.
Bangladesh Railways as well as the private road transport industry in Bangladesh should aspire to extract the maximum benefits from transit traffic by preparing to carry the transiting cargo and passengers across Bangladesh to and from North East India. Bangladesh Railways as well as our container trucks, should aim to pick up cargo from Kolkata and points beyond, for delivery across Bangladesh to Agartala and other locations in North East India. Similarly, Bangladesh's IWT industry should establish itself as the principal cargo carrier across our waterways to and from the North East. Indeed, if we resume export of IWT services to India it would also provide a stimulus to Bangladesh's fast growing shipbuilding industry which would build the carriers to service this enhanced river traffic. Exporting such transport services to India would contribute to the development of industry in Bangladesh which could draw in partners from abroad and would generate employment and investment in the transport sector as well as in support services for the transport industry in Bangladesh.
Establishing Bangladeshi transport companies as the principal carriers of India's transit traffic would have the advantage of eliminating controversy over heavy Indian trucks transiting Bangladesh with its implications for their high load factor damaging our roads, as well as the less relevant issue of national security. I am not sure if we have seriously raised this issue of Bangladesh exporting transport services to India, in our official negotiations with India. When such an issue was raised in civil society-based Indo-Bangladesh dialogues, the idea received a positive response from our Indian colleagues. If we can package this proposal intelligently this can be presented to India for consideration in the next round of negotiations, as a win-win proposition. By the time Bangladesh has enhanced the carrying capacity of our local transport infrastructure, a number of well equipped transport companies should be fully prepared to provide competitive transport services to Indian customers serving the North East or engaged in Indo-Bangladesh trade.
Similar joint venture trucking companies could be set up in partnership with Nepal and Bhutan. Bangladesh railways could also enhance its revenues by offering it services to transit traffic from India, Nepal and Bhutan. The end result of opening up such opportunities to Bangladesh's transport sector would be the graduation of an as yet minor domestic industry into a major multinational industry exporting transport services as well as developing a transport manufacturing industry and servicing sector for transit traffic.
We should keep in mind that while India has much to gain from transit it has managed quite well without it for the last 45 years. It has invested in building land and river links with Myanmar to connect the North East with Sittwe Port. It has negotiated with both Thailand and Myanmar to develop the Asian Highway so it can bypass Bangladesh. It is now up to Bangladesh to reconnect ourselves with these transport opportunities. It requires an exceptionally negative mind set to punish ourselves by not availing ourselves of the enormous advantages available to us by our fortunate geographic location. The answers again lie not in disconnecting ourselves from our neighbours but in identifying all possible ways of benefitting from our location.
Statesmanship over trade
Trade cooperation between India and Bangladesh has moved forward, though this process has taken much longer than was necessary. In this area, India's tardiness to move forward has been costly to both sides. India's exports to Bangladesh have grown exponentially over the years so that, along with China, it is Bangladesh's largest source of imports. Indeed, if we take into account unofficial exports across our borders, India is the largest source of imports into Bangladesh. Whilst Bangladesh's exports to India have lagged behind it has also expanded five-fold over the last 5 years and has crossed $500 million in 2010-11.
India's export growth to Bangladesh has little to do with special preferences provided to India. After all, the biggest growth in Indian exports was registered during the two BNP regimes in 1991-96 and 2001-2006. 
Saifur Rahman, finance minister in those two periods, could hardly be termed as a special friend of India, for stimulating their exports to us, though he played an important role in liberalising Bangladesh's global import regime. Within a competitive global system Bangladesh's private sector has found it profitable to do business with India. Bangladesh's RMG as well as textile sector is today an important customer of Indian fabrics, yarn and cotton which are then converted into garment exports to the US and EU, our principal markets.
When we feast on seekh kababs we are quite possibly using beef extracted from a smuggled Indian cow; when we tune in to our private TV channels much time is spent in watching Indian movies and other such entertainment programmes. Large numbers of Bangladeshis travel to India to utilise their health care, education and tourism services as well as make pilgrimages to religious shrines. All these choices are made by private Bangladeshi consumers so that the growth of India's exports is an essentially market driven process. As the improving quality and competitiveness of India's economy further adds value to their proximity our imports of goods and services will also continue to increase.
As it stands, Bangladesh cannot hope to match this growth of imports from India nor does it make much economic sense to complain about our growing trade deficit.
I have yet to know of any newspaper article or seminarist raise any concern about the fact that China's trade surplus with Bangladesh exceeds that of India and will also continue to grow in the future. Bangladesh's export capacity is constrained by our production structure.
75% of our exports in fact consist of RMG where India also has a highly competitive and indeed much larger industry, than ours.
While India has been slow to open up its import opportunities for Bangladesh and has operated a variety of non-tariff barriers (NTB) which have constrained our export opportunities, we should not get too carried away by the possible gains to us from the lifting of these restrictions. The constraints to expanding exports to India do not originate exclusively from India's restrictive trade regime. After all India's import market now exceeds $300 billion and is being accessed by a variety of exporters from Asia, such as China, Vietnam, Thailand and Indonesia without the benefit of any tariff concessions. Indeed, even Pakistan's exports, which are exposed to a variety of restrictions by India, exceed those of Bangladesh. Our small and rather undiversified industrial and export structure limits our export opportunities no less than India's import restrictions.
As it transpires, India has already permitted duty free exports from Bangladesh under the Saarc concessionary provision for least developed countries (LDC). The real problem is the size of India's negative or sensitive list which denies this tariff concession for a variety of goods of export interest to Bangladesh. Over the years and through intense negotiations this negative list has been cut down to 460 items. Even this figure is ridiculously high for a country with one of the world's largest economies. This list still includes RMG, Bangladesh's most competitive export. India has recently offered us a quota of 8 million garments which we can export, duty free, to India, which has now been raised to 10 million items. Our competitive RMG exporters have already utilised this quota within the first 7 months of the calendar year 2011. We have, in recent negotiations prior to the visit of Dr. Manmohan Singh, presented a list of 61 commodities of export interest to Bangladesh, to be removed from the negative list. Of these, 47 items are from the RMG sector for items where Bangladesh is particularly competitive. It is reported that such a concession may be offered by India during the forthcoming summit in Dhaka which would significantly enhance our exports to India.
Rather than continue with this dance of the seven veils, where India offers export opportunities to Bangladesh on a piecemeal basis, the time has come for a bold and decisive gesture on the part of India which has little to lose in opening up its markets to Bangladesh. Ideally, I would like Dr. Manmohan Singh, who is not only a reasonable and decent human being but is also a distinguished professional economist, to make the following announcement during his visit to Bangladesh:
"On the occasion of this historic visit I wish to declare before the people and particularly the business community of Bangladesh that, as of today, Bangladesh should treat India's market as its own domestic market. I guarantee your exporters unrestricted access to this market and invite you to build partnerships with India's business sector to make full use of this market. We will constitute a committee of Indian and Bangladeshi experts to work out, within the next 6 months, the modalities of fully implementing such an arrangement."
Such a statement which should, ideally, have been made by an Indian prime minister at least 20 years ago, will not immediately lead to a surge of exports from Bangladesh into India. Our exports, led by our RMG exports to India, may possibly cross the $1 billion mark in the next year which will partly reduce our trade deficit. The more significant outcome of Dr. Singh's statesmanlike gesture will be to change the business horizons of Bangladeshi entrepreneurs who will begin to explore all possible opportunities to access this market of 1.2 billion people. In this task they will seek out not just partners from India but from the rest of the world from those companies who will hope to use Bangladesh's geographical proximity as an export platform to access one of the largest and fastest growing markets in the world. The enormous business opportunities across our immediate borders will not just encourage the flow of foreign investment into Bangladesh but would significantly enhance and diversify our industrial structure. Such a transformation in the horizons of our business sector will make large numbers of one of Bangladesh's most influential and resourceful communities into stakeholders in the improvement and sustainability of Indo-Bangladesh relations.
Commonsense should have persuaded the Indian leadership that the political gains from opening its economy to Bangladesh would be significant whilst the economic costs to its much stronger economy would be negligible. By dragging their feet on the issue of duty free exports from Bangladesh, India gratuitously built up antagonism in areas where they had prospective friends. This was poor politics as well as economics. It remains to be seen whether Dr. Manmohan Singh, on September 6, 2011, will rise to the occasion through an act of statesmanship which could have a transformative effect on Indo-Bangladesh relations.
---------- Post added at 09:16 PM ---------- Previous post was at 09:15 PM ----------
Now I know who is responsible for dumping Indian goods in Bangladesh 
and why Bangladeshis don't talk about increasing trade deficit with China. 
Besides, transit was not the main issue for India, the only thing that was a concern for India was the ULFA and other separatist organizations for which they were seeking the support of Bangladesh, and ask your govt. what kinda support they got!!
