$1b Revenue if Bangladesh Allows Movement of Indian Goods

Trade body study finds

By Pallab Bhattacharya

New Delhi, Jan 19 : Bangladesh stands to earn one billion US dollars in transit fee if it allows free movement of Indian goods through its territory, views the Federation of Indian Chambers of Commerce and Industry.

This, says a study by the trade body, will help reduce trade imbalance between the two countries.

It further pointed out if goods from northeast and other parts of India were to pass through Bangladesh, it would fetch considerable transit revenue for Bangladesh besides cut in transportation time and cost for Indian goods.

The study also asks Bangladesh to identify new products for exports to Indian market and diversify its export, particularly in non-traditional sectors.

A detailed analysis of India-Bangladesh trade shows that while India's exports to Bangladesh is fairly diversified including agricultural commodities, manufactured items and heavy and medium machineries, Bangladesh's exports to India is confined to primary and resource-based products, the FICCI study finds.

Asking Bangladesh to widen its manufacturing base, the study stresses the need for increasing productivity in all sectors of that country through research and development and transfer of technology and market-based effective pricing system.

It suggests huge investment in increasing the productivity of Bangladesh's industrial sector and building its technical and technological capacity.

The recent signing of the bilateral investment protection and promotion agreement would lead to greater Indian investment in Bangladesh and greater imports to India, says the study.

To attract more investment from India, FICCI recommends single window clearance for investment proposals, setting up an industrial park for India outside Export Processing Zone with all infrastructure facilities, upgradation of tax holiday system and augmenting availability of power.

Pointing to Bangladesh's severe infrastructural bottlenecks relating to power, ports, gas and telecommunication, the study says that it significantly pushes up the cost of production, impede productivity growth and affect export competitiveness.

Another problem highlighted by FICCI about India-Bangladesh trade enhancement is that banks in northeast India ask for 100-140 percent L/C margin in case of import. Sometimes, this content depends upon the type of products to be imported and the discretion of the bank official concerned.

This problem is most prevalent in Tripura, which has better prospects for cross border trade with Bangladesh, the study says adding that this “rigid condition of depositing the entire or more value of the imported items certainly discourages the prospective importers to initiate import through land customs stations despite having substantial price competitiveness”.

Indian banks lack direct correspondence arrangements with banks in Bangladesh and banking infrastructure in the northeastern region (NEI) of India for international and border trade is quite inadequate, says the study.

At present, the correspondence relationship of banks functional in the NEI are restricted to and maintained by the bank branches in Kolkata and this tremendously hampers the bilateral trade between Bangladesh and NEI as all state capitals are 1080-1680 kilometres away from Kolkata.

This huge distance as well as physical communication bottlenecks of the region make it very difficult for the exporters of both Bangladesh and northeast India to get the L/C in time, says the study, adding that sometimes it takes 20-40 days to reach an L/C to the hand of the exporters of both the sides after its opening.