Indian Prime Minister Narendra Modi's upcoming visit to Bangladesh is a new dawn in trade relations between the two countries, said Abdul Matlub Ahmad, the newly elected president of the country's apex trade body.
“I hope the visit will strengthen relations between India and Bangladesh, as both the countries have taken a lot of positive initiatives to increase trade and investment,” Ahmad told The Daily Star in an interview on Tuesday at the office of the Federation of Bangladesh Chambers of Commerce and Industry in Dhaka.
Ahead of Modi's visit to Dhaka on June 6, Ahmad, who has been doing business with India for decades now, discussed various issues related to bilateral trade. Ahmad imports nearly 2,000 commercial vehicles a year from India.
In recent years, the relationship between India and Bangladesh has been improving fast with effective initiatives being taken by the leaders of both the countries, he said.
The wheels of progress began rolling with the visit of Bangladeshi Prime Minister Sheikh Hasina to India in January 2010. The immediate past Indian prime minister Manmohan Singh paid his reciprocal visit to Bangladesh in September 2012, when he announced massive trade and investment programmes.
After Singh's visit, India allowed duty-free benefit for all Bangladeshi products, except 25 alcoholic and drug items, in November 2012.
This time, Hasina will sign an agreement with Modi to ease the visa system for people of both countries, and renew the trade agreement by instilling easy options in trade, transit and transhipment.
The trade deal will allow Bangladeshi trucks and vehicles to ply through Indian territory to transport goods to Bhutan and Nepal. Similarly, vehicles of Nepal and Bhutan will also be allowed to use Bangladeshi territory to carry goods to other countries.
Indian goods-laden trucks are already allowed to use Bangladeshi territory to carry goods from one province to another, especially the northeastern states of India, as Bangladesh allowed both transit and transhipment to India.
“The Bangladeshi business community wants that the South Asian region would grow like the European Union, having the option of easy movement of vehicles and free mobility of people in the region,” Ahmad said.
Bangladesh will benefit immensely, if India starts massive development projects in its northeastern states as the demand for goods will increase and Bangladesh will be able to export to India, he added.
“We prefer transhipment to transit for Indian carriers as this option will facilitate the use of more Bangladeshi trucks and vehicles, which will also boost earnings.”
It is better that there is transit in waterways and transhipment in road communication, as Bangladeshi infrastructure is in a poor condition, he said. If transit is allowed through roads, Bangladesh will have to improve its infrastructure and recruit new people to run operations smoothly, he added.
For transhipment through roads, Bangladesh will not require additional costs on human resources and infrastructure, he said.
For example, trucks with heavy load are not allowed to cross the Bangabandhu Bridge over the Jamuna river in Sirajganj to avoid risks, he said.
“This is why we prefer transhipment in roads and transit in waterways.”
Similarly, Bangladeshi goods-laden vehicles will also have to pay fees to ply the Indian terrain for transportation purposes.
“But for both transit and transhipment, India will need to pay fees to Bangladesh, as they will use Bangladesh terrain to carry goods from one state to another,” Ahmad said.
“As transit fee, we proposed Tk 10,000 per container or Tk 1,000 per tonne. But this rate is not finalised. The leaders of both the countries will finalise the transit fees soon.”
“Transit is not free of cost, although the fees may be negotiated,” he said.
Ahmad suggested the countries should construct an adequate number of warehouses along with bordering areas to facilitate transhipment efficiently.
On signing the agreement to launch a coastal shipping line between India and Bangladesh, he said the new deal will help slash more than 10 percent of transportation costs, as waterways are still cheaper than the roadways.
If 10 percent is saved on imports worth more than $6 billion from India, Bangladesh could save more than $600 million a year using the coastal line, he said. Through the coastal shipping line, small vessels will ferry goods between India and Bangladesh directly.
It will also create an avenue of business as Bangladeshi entrepreneurs will be able to run the business of coastal shipping lines, as the demand for small vessels will be on the rise then, he said.
The deal is expected to benefit Bangladesh more as the country imports more from India, paying a lot for goods transportation, he said. Indian businessmen will use the country's Mongla Port, the potential of which is still almost unutilised, he added.
The balance of trade between the two countries in heavily tilted towards India as Bangladesh is a net importer of industrial raw materials, basic commodities like onion, garlic, rice, lentil, cotton, and machinery.
Bangladesh's imports from India were recorded at $6.03 billion in fiscal 2013-14 and $4.78 billion in year before that, according to data from the commerce ministry.
On the other hand, Bangladesh's exports to India were worth $456.63 million in 2013-14 compared to $563.97 million in the previous year.
However, it is believed that India exports goods worth nearly $6 billion to Bangladesh through informal channels anywhere through the 4,096 kilometres of bordering areas between the two countries, according to industry insiders.
Many Indian entrepreneurs are interested in investing in Bangladesh; Indian conglomerate Adani Group is scheduled to come with Modi and it is interested in infrastructure and energy, Ahmad said.
Total Indian investment registered with the Board of Investment in Bangladesh is more than $2.5 billion as of 2013, according to the Indian high commission in Dhaka.
The amount has probably crossed $3 billion by now as some investors have expanded their investment or new entrepreneurs have come up with their projects, he said.
Major Indian investors in Bangladesh are Airtel, Tata, Sun Pharma, Asian Paints, Dabur, Marico, Aditya Birla, and Godrej.