Reforms to boost revenue from border customs

India and Bangladesh can earn more revenue from the border customs houses only through taking some reform measures, even though the two sides do not reach any free trade agreement (FTA), the World Bank (WB) suggested.

In a recent report, the bank said better infrastructure, faster clearance and reduced transaction costs would also brighten the prospects for Bangladesh exporters' finding market niches in India, especially if they rely on importing inputs from that country.

"The economic interests of India and Bangladesh would be maintained if they take reform measures which would affect smuggling in the border areas, whether or not they participate in an FTA," the report added.

The WB report on Studies on India-Bangladesh Trade, Trade Policies and Potential of FTA mentioned the bank's findings of eight smuggling channels, including five smuggling-prone zones along Bangladesh's western borders with India, and three in its north and eastern borders with India.

"Informal and illegal trade between India and Bangladesh is substantial and by some estimates, it could be as high as three-quarters of recorded trade. It is mostly one way-- from India to Bangladesh," the report found.

The bank, however, suggested that Bangladesh should bring down its existing high tariffs protecting import substitution industries by reversing policies under which protection rates drastically increased over the last seven years through usage of para-tariffs and customs duties.

According to bank's report, Bangladesh's smuggled imports from India during FY 2002-03 were approximately $500million or about 40 percent of the recorded imports from India and approximately 30 percent of total imports from India.

The WB report further said the total value of goods imported by 'technical' smuggling -- under-invoicing, misdeclarations and other illegal practices at customs --is estimated to exceed total bootleg smuggling by a substantial margin and most of technical smuggling occurs at the land borders amounting to about 70 percent total land border imports.

Based on a survey at Chittagong which asked about under-invoicing and misleading practices, the report said total technical smuggling of imports from India by sea and air was about 17 percent of the total recorded value of this trade, compared to 32 percent of the total recorded value of imports by the land borders.

In the report, the bank suggested that both the countries take some measures to check the illegal trade in the border areas so that revenue collection increases.

The WB also pointed out that the two countries should improve the infrastructure of the customs posts in their land border areas.

The reforms would also benefit India, first by reducing 'black economy' activities India associated with the bootleg border trade through Bangladesh customs, and secondly by improving the access of Indian exporters to the Bangladesh market, the bank said.