‘Trust deficit’ hampering seamless movement of goods between India, Bangladesh: World Bank

The World Bank report found that it is about 15-20 per cent less expensive for a company in India to trade with a company in Brazil or Germany, than with a company in Bangladesh.

Seamless movement of vehicles between the two neighbouring countries for trade could raise India’s national income by eight per cent and Bangladesh’s by 17 per cent; provide faster and cheaper access to products from Northeast and boost real income in states such as West Bengal, Uttar Pradesh and Maharashtra, a World Bank report has said.

Commenting that a “broad trust deficit throughout the region” was a major reason behind lack of seamless transport between the two countries, the report found that it is about 15-20 per cent less expensive for a company in India to trade with a company in Brazil or Germany, than with a company in Bangladesh, despite the two neighbours being party to an international motor vehicles agreement.

The release of the report, “Connecting to Thrive: Challenges and Opportunities of Transport Integration in Eastern South Asia,” coincided with Prime Minister Narendra Modi and his Bangladesh counterpart Sheikh Hasina inaugurating the Maitri Bridge on river Feni via video conferencing on Tuesday. The bridge significantly reduces the distance between the southern tip of Tripura and Ramgarh in Bangladesh.

In 2015, both India and Bangladesh signed the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement. For the first time, the World Bank has analysed the pact from the perspective of the two countries and said that a “trust deficit” between the two countries was a major reason why there was, despite the pact, no seamless movement of cargo between the two countries.

“In the case of Bangladesh and India, the low level of trust is reflected in the fact that vehicles from one country are banned from plying the roads of the other. Removing these constraints and integrating South Asia have the potential of delivering significant economic gains improving transport connectivity between the two countries,” the report says.

Among the major “gaps” that the two countries need to address in the MVA include inadequate transport infrastructure, protective tariffs and nontariff barriers, and a broad trust deficit throughout the region, it says.

Without these gaps, free movement of cargo between the two countries could yield a 297 percent increase in Bangladesh’s exports to India and a 172 percent increase in India’s exports to Bangladesh, it says.

The report found that along with Northeast states seeing overall benefits, other states like West Bengal, Uttar Pradesh and Maharashtra could see the most rise in real come from free movement of cargo between India and Bangladesh.

Currently, despite the agreement, trucks from one country are not allowed to enter the other. The cargo is transloaded, adding to transport and trade costs.

“On average, crossing the India–Bangladesh border at Petrapole–Benapole, the most important border post between the two countries, takes 138 hours, including 28 hours spent transloading cargo. In contrast, the time to cross borders handling similar volumes of traffic in other regions of the world, including East Africa, is less than six hours,” the report says. Cargo by rail faces the same treatment while those on sea vessels have to undergo this process at ports in other neighbouring countries like Sri Lanka and Singapore.

Free movement could also cause a significant modal shift of cargo from India to roadways from other modes and drive down transport costs.

The study makes a case for a shorter route through Bangladesh, instead of through India, for products from Northeast states reaching a port.

India’s northeast states are connected with the rest of India only through the Siliguri corridor, or the “chicken’s neck”.

“The transit restriction leads to long and costly routes between northeast India and the rest of India and the world. Goods from Agartala, for example, travel 1,600 kilometers through the Siliguri corridor to reach Kolkata Port instead of 450 kilometers through Bangladesh. If the border were open to Indian trucks, goods from Agartala would have to travel just 200 kilometers to the Chattogram Port in Bangladesh, and the transport costs to the port would be 80 percent lower,” it says.

The report says that if free movement is allowed without restriction on which routes that cargo must take, shippers would prefer to take alternate, shorter routes through Bangladesh.

“Shippers in the region have a strong preference for road corridors through Bangladesh,” it says.

It estimates that almost all road-based freight movements between Northeast India and the rest of India are expected to go through Bangladesh if the restrictions to free movement of freight are removed. “A significant share of freight currently moving on rail through the Siliguri corridor is expected to shift to the road corridors through Bangladesh. Even some freight currently traveling between Northeast India and the rest of India on inland waterways through Ashuganj is expected to shift to road corridors once they are open to Indian trucks. Changes in freight flows are driven by significant reductions in transport time and costs,” it says.

Chief gaps that operate in the implementation of MVA include lack of standards in the design of the infrastructure, absence of rules on drivers’ training and license, restrictions on visa, entry and exit points and even routes that drivers can take, the report has found.

In the Northeast, the overall benefits from integration would be greatest in Assam, Meghalaya, Mizoram, and Tripura, largely because of their proximity to Bangladesh, it says, adding that as easternmost states experience greater competition from western states and Bangladesh, some of their economic activity would move to more competitive states.

The Motor Vehicles Agreement (MVA) between Bangladesh, Bhutan, India, and Nepal (known as the BBIN countries), signed in 2015, seeks to facilitate the unrestricted cross-border movement of cargo, passenger, and personal vehicles between BBIN countries. Under the agreement, trucks carrying export-import or transit cargo can move inside the territories of other countries without transshipping to local trucks at border land ports. Implementation of the MVA has been delayed as the countries work to clarify some of the provisions that are supposed to be elaborated in protocols.

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