Move over land border agreement; it's all about coastal shipping in Modi-Hasina era

Move over LBA (Land Boundary Agreement). The next big thing on the radar screens of Indo-Bangladesh is coastal shipping.

This is a sector which offers myriads of opportunities not only to boost bilateral trade, economic cooperation and people-to-people contacts, but also take this process beyond the shores of India and Bangladesh and integrate Bhutan and Nepal also in the India-Bangladesh growth story.

 Move over land border agreement; its all about coastal shipping in Modi-Hasina era

Prime Minister Narendra Modi with his Bangladeshi counterpart Sheikh Hasina in Dhaka. PTI

In other words, coastal shipping is the key sector for kick starting the concept of BBIN (Bangladesh, Bhutan, India and Nepal) a sub-regional developmental approach within the eight-nation SAARC (South Asian Association for Regional Cooperation).

This was a major thrust area of discussions between Prime Minister Narendra Modi and his Bangladeshi counterpart Sheikh Hasina in their two-hour-long delegation-level and restricted format talks in Dhaka on 6 June.

True, in terms of the 22 agreements and MoUs that were signed between India and Bangladesh on 6 June obviously the most important was the exchange of Instruments of Ratification of the Land Boundary Agreement (LBA) and its Protocol.

The two sides also exchanged letters spelling out the shared understanding of the two governments on how to go about implementing the provisions of the Agreement and Protocol, a complicated and time consuming exercise entailing the job of re-aligning the boundary, exchanging the enclaves and enabling the movement of those enclave residents who choose to relocate with minimal inconvenience.

The important thing is that the two sides went far beyond the LBA and its Protocol and concluded a major agreement on coastal shipping. Foreign Secretary S Jaishankar highlighted the importance of the coastal shipping agreement as follows, “We see this as really a very key understanding that would allow us to use our common bay and each other’s waterways for movement of cargo. As of now, the bulk of our trade takes place across the land border, and to the extent that we have sea trade this is done through distant ports. The goods are taken to distant ports and then they are reloaded into feeder vessels which then bring them into Chittagong. What this Coastal Shipping Agreement would do is basically enable the direct regular movement of ships between India and Bangladesh, which would bring the shipping time down from 30 to 40 days on average to seven to 10 days.”

The impact of the coastal shipping agreement would be two-fold: (i) it would relieve the congestion on Indian Land Customs Stations which is an impediment to trade; and (ii) it would contribute to the growth of the shipping industry in Bangladesh as well as the ancillary services sector.

To ensure the success of the coastal shipping agreement, the two sides also agreed on several related agreements. For example, they renewed the Protocol on Inland Waterways and Transport which will boost the Bangladeshi shipping industry and would provide more certainty and predictability to the industry and its investors.

Simultaneously, the two sides also inked a key MoU in this sphere relating to access to Chittagong and Mongla ports for the movement of goods to and from India. "With the proposed bridge over Feni river on India-Bangladesh border, there will be road connectivity from Chittagong to Agartala which will allow the movement of goods from Indian ports to Chittagong and Mongla ports which would then obviously could move on to Tripura and other regions of the North East through road,” Foreign Secretary Jaishankar elaborated.

All these should be seen in the larger context of the bilateral trade agreement which was also renewed. It allows India on its part to improve access to its northeast region and allows Bangladesh access through India to Nepal and Bhutan.

This is the real big picture. Once the tangible benefits of coastal shipping agreement and all the above mentioned agreements start trickling in, two other important and contiguous neighbours of India, namely Bhutan and Nepal, will also start reaping the fruits of development and connectivity.

Improved connectivity will enhance mutual trade which in turn will bring a new spurt of growth to the entire region and a new vigour to India’s trade ties in the immediate neighbourhood.

India and Bangladesh have also agreed that Indian Special Economic Zones will be established in Bangladesh, a point specifically mentioned by Sheikh Hasina in her remarks at the conclusion of her talks with PM Modi. This would inevitably help Bangladesh in substantially restoring the bilateral trade balance which is currently loaded heavily against Bangladesh. Of the $6.5 billion bilateral trade, Bangladeshi exports to India account for a mere half a billion dollars.

Moreover, the above measures would spark off greater export-led growth in diverse sectors like textiles, leather goods, pharmaceuticals, auto components, ship building and marine food processing, to name a few.

All this is aimed at capacity building through land transit and connectivity. Over and above this, India’s offer of a new line of credit to Bangladesh worth $2 billion will provide the necessary financial cushion to take bilateral trade to a new level. Significantly, the new proposed LoC is broader than the first LoC and includes new areas like roads, ports, power, education and health.

The bottom line is this. While the LBA is now glorious past, costal shipping agreement beckons an even more glorious and bright future for India and Bangladesh.

It is time for Bhutan and Nepal to get on to this new bandwagon called BBIN which is low on politics and high on growth-oriented development.

The writer, Firstpost Consulting Editor, is a strategic analyst who tweets @Kishkindha.

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Updated Date: Jun 08, 2015 13:25:51 IST