Economic Synergies Between Economic Synergies Between Bangladesh and North East IndiaBangladesh and North East India

13 March 200913 March 2009Guwahati, IndiaGuwahati, India

Dr. Atiur RahmanDr. Atiur RahmanProfessor, Department of Development Studies, Professor, Department of Development Studies,

University of DhakaUniversity of Dhaka& Chairman, Shamunnay& Chairman, ShamunnayE-mail: E-mail: atiur@sdnbd.org

North East India (NEI)☼ NEI is not only the next door neighbor of BD but

also shares a close relationship emanating from: Cultural Emotional and Historical heritage.

☼ This region is landlocked and distantly connected with the rest of India only through a narrow Siliguri corridor of 22 km stretch.

☼ BD is at the bridgehead point of SAARC and ASEAN.

Key Concerns

☼ Connectivity – the key concern.☼ Good prospects for Indian entrepreneurs to invest in

Bangladesh☼ NEI does not have any seaport. In fact, all the state

capitals are at a distance varying from 1080 km to 1680 km from Kolkata.

☼ NEI states have low production base for both manufacturing and agricultural goods.

☼ Tourism has a greater potentiality between Bangladesh and NEI states

Border Area of BD and NEI

☼ 1880 km long border is shared with 1880 km long border is shared with four NEI States namely :four NEI States namely :

AssamAssam

MeghalayaMeghalaya

Tripura and Tripura and

MizoramMizoram

☼ Out of total international border of NEI Out of total international border of NEI nearly 37% is with Bangladesh. nearly 37% is with Bangladesh.

..

State Land border

Reverivne Total

Assam 160 103 263Meghalaya 443 - 443Tripura 773 83 856Mizoram 58 260 318Total 1439 446 1880

Capital Cities (NEI) and Distance to BD:

Capital cities of NEI Kolkata(nearest port city from NEI)K.M.

Dhaka(Capital ofBD)K.M.

Chittagong (Seaport of BD)K.M. Sylhet (an important

divisional cities of Bangladesh)

K.M.

Agartala (Capital of Tripura)

1680 186 248 238

Aizawl (capital of Mizoram)

1550 555 655 (but if reverine route of Karnaphuli is used it will be less than 250)

255

Guwahati (capital of Assam)

1080 580 675 236

Imphal (capital of Manipur)

1565 635 735 335

Shillong (capital of Meghalaya)

1180 480 575 136

Kohima (capital of Nagaland)

1420 780 880 480

Transportation Cost:

☼ Trucking charge (per Kg ):Trucking charge (per Kg ): From Kolkata to Guwahati is Rs 3.00 and From Kolkata to Guwahati is Rs 3.00 and It takes 7-8 days time for transportation.It takes 7-8 days time for transportation.

☼ Per Kg transport charges from different LCS (Local Custom Per Kg transport charges from different LCS (Local Custom Station) along BD border to Guwahati are –Station) along BD border to Guwahati are – Sherpur: Rs 0.60Sherpur: Rs 0.60 Tamabil: Rs-0.70Tamabil: Rs-0.70 Agartala: Rs-1.25Agartala: Rs-1.25

Burimari: Rs-1.0Burimari: Rs-1.0..

Export – Import Situation

☼ Based on a hypothetical calculation the potential size of the export market in NEI may be at around US$700 million.

☼ But in reality the contribution of trade between BD and NEI is meager compared to its potential as the above table showed.

☼And over the years a clear downward trend of the exported items is also noticeable.

Export – Import situation

☼ The export from Bangladesh to NEI has never surpassed 10 percentage points of its import from the same region.

☼ Though the number of traded goods between BD and NEI is increasing, the volume and value are still much below the potential trade opportunities.☼ Almost 12 years ago the highest amount of import was recorded and after that the imported value has been showing a downward movement.

☼ As with India, trade with NEI is not at all balanced.

☼ In 1997-98 there was the highest trade gap. And the trade gap has been increasing in recent years.

Export – Import Gap

Informal Trade ☼ Total unofficial trade between BD and India is more than $2000 million per annum☼ More than 1/3 (over $800 million) of it takes place between BD and NEI.☼ Informal trade is many times higher than that through formal channel. ☼ This unofficial trade must be bridled in order to boost formal trade and woo investment.

Direction of Trade Tk/Million percentage% US$/ Million

Informal Imports from NEI 1600 41 26

Formal Imports from NEI 2301 58.9 40Total Imports 3901 100 67Informal Exports to NEI 600 88.1 10

Formal Exports to NEI 81 11.9 1.4Total Exports 681 100 12Total Trade with NEI 4582 79

Source: Bayes, 2002

Year/product 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

Coal 7120 10210 9935 6260 8255 16640Fresh Fruit 95 305 105 35 45 125Food Grain 85 9070 3305 10 - -Stone 5 165 240 765 485 115Spice(Onion,Garlic,Ginger, Chill)

220 914 250 185 180 115

Limestone 615 615 640 595 875 1365 Total import from NEI 10252 21318 14744 10135 9924 18794

☼ Primary goods (minerals and Agricultural products) constitute Primary goods (minerals and Agricultural products) constitute more than 80% of our total import from NEI .more than 80% of our total import from NEI .☼ Coal is at the top of the list. Coal is at the top of the list.

Product ConcentrationProduct Concentration Import Items from NEI to BD

Product Base

☼ Export from BD to NEI Comprises:Export from BD to NEI Comprises:

Agricultural commodities Agricultural commodities Food ProductsFood Products Textiles Textiles Cosmetics Cosmetics ToiletriesToiletries Simple Engineering Goods Simple Engineering Goods Jute ProductsJute Products

☼ Imported from NEI to BD Comprises:Imported from NEI to BD Comprises:

Basically Primary ProductsBasically Primary Products-- Minerals and -- Minerals and -- Agricultural Products-- Agricultural Products

Product Base

Informally exported to NEI:Informally exported to NEI:

Mymensingh: Mymensingh: Wood and Vegetable oilWood and Vegetable oil

Sylhet:Sylhet: Hilsha and Dry fish, Winter cloths, Juice, Biscuits, Hilsha and Dry fish, Winter cloths, Juice, Biscuits, Medicine, Soap, Vegetable oil, Pulses, Fuel, RMG, and TeaMedicine, Soap, Vegetable oil, Pulses, Fuel, RMG, and Tea

ComillaComilla: Hilsha/ Small/ Dry fish, Garlic, RMG, Mosquito : Hilsha/ Small/ Dry fish, Garlic, RMG, Mosquito net, Bicycle, Electronics goods, Soyabean oil, Under cloths, net, Bicycle, Electronics goods, Soyabean oil, Under cloths, Toiletries, Cement, Pluses, Poultry, Feed, Juice, Soap, Battery, Toiletries, Cement, Pluses, Poultry, Feed, Juice, Soap, Battery, Show pieces, Potato, Brass pitcher, Eggs, and TurtleShow pieces, Potato, Brass pitcher, Eggs, and Turtle

KhagrachariKhagrachari: Bangla wine and Corrugated tin.: Bangla wine and Corrugated tin.

RangamatiRangamati: Rice, Garlic, Corrugated tin, Cement, Shallow : Rice, Garlic, Corrugated tin, Cement, Shallow engine and wooden boats.engine and wooden boats.

Potential Products

Major Heads Potential products for export (From BD to NEI) Textiles Zamdani saree ,Cotton waste, Fabrics, woven fabrics of paper

yearn, Staple fiber, Synthetic fibers RMG Readymade garments , Underclothes, sportswear,Ceramics and porcelain Ceramic productsJute Jute yarnCosmetics and Toiletries Soap

Agro- based and Food products

Biscuit, Dry fish, Fruit drinks, Ice cream, Mineral water, Molasses, Potato crackers, Waffles and wafers, Soyabean oil

Battery Dry CellElectric Applications Electrical and electronic goods, Brick crushing and cotton cutting

machineAgriculture Meat ( Chicken, Beef, Mutton), Eggs, Garlic, Potato, Pulses,

Hilsha,Puti and small fish, Tobacco leafFurniture Fittings for furniture, Foam, FurnitureConstruction Materials Cement, MS road, PVC pipe, Tiles, Toilets fittings, Stone chipsOthers Bicycle, Brass Pitcher, Filter, Mosquito net, Polythene(lay flat

tube), Tin foil, Poultry feed, Show piece

Barriers to bilateral trade

☼ Inadequate infrastructural facilities

LCS of both the sides are not at all trade friendly. Don’t have any warehouse or storage facility. Absence of electricity, telecommunication links, weighbridge, parking lot, cold storage and accommodation facility

Riverine: The route is few and not fully utilized. --Narayangonj, Bhairab, Ashugonj, Baghabari,Sherput-all need better facilities.

Rail: Most of the rail lines are still snapped. -- Rail is the least utilized transport facility.

Barriers to bilateral trade

☼ Permit and License, Pre-Shipment Inspection: The average time taking for issuance of the IEC (Import Export Code) number is 10-30 days

There is no office at all the state capitals of NEI for PSI☼ Changing H.S. Code:

In case of Fruits juice the Indian customs authority has changed the H.S. Code of the product from 2009.80 to 2202.90

Which has a 20% higher duty from the earlier H.S. Code.

In fact, Bangladesh has been exporting the same product to 43 different countries under the same H.S. Code of 2009.80.

Barriers to bilateral trade

☼ High Tariff, Para-Tariff , Non-Tariff Barrier and Others charge:

India imposed high tariff on some Bangladeshi goods, which have good prospects to export to Northeast Region.

RMG and CI sheet are the two examples of it.

It is reported that tariff value on CI Sheet is about US$ 590/MT whereas the export value is simply US$ 450/MT.

☼ Inadequate Banking Right& High L/C margin provision:

No direct corresponding relationship of the bank of NEI and BD. Sometimes it takes 20-40 days to reach a L/C

☼ Non-tariff and Para-tariff barriers: -- Antidumping Duty-- Sales Tax-- Health Test Report-- ISI Certification requirement -- Retail price marking-- Lab Test Report etc.

☼ India imposed-- 16% CUD (Countervailing Duty) for agro products and

cosmetics-- 4% SAD (Special Additional Duties) for Agro products, ceramics

and cosmetics

-- 16% Additional Duty for ceramics -- 15% surcharge for dry cell battery.

Barriers to bilateral tradeBarriers to bilateral trade

  Strategies for Cooperation

☼ Negotiations needed: Reducing/ removing CUD and SAD under bilateral or regional trade agreements.

Expanding the list of commodities receiving concessions by India in the next route of SAPTA concessions.

Tariff reduction on potential export products on bilateral basis

Product standards and tests can be harmonized between two countries for facilitating trade.

☼ LCS which have emerged as important export routes will have to be developed. These are:

Akhaura, Bibirbazar, Juri and Sheola.

☼ Roads need to be developed: Construction/ Widening/ StraighteningBharkhar to Akhaura ( 30 Kms) and alternative route Sultanpur ( Brahmanbaria) and Akhaura

Phultali to Batuli( Juri) and alternative route connecting Kulaura and Phultali via Gazipur

Sheola bridge to sheola LCS including the culvert on the road

Comilla to Bibirbazar

  Strategies for Cooperation

☼ Facilities need to be provided/ reopened:

Using the facilities of Chittagong Port

Air link between Dhaka and Guwahati

Both BD and India should issue multiple entry visa for one year to business persons.

Bangladesh should open a visa office in Guwahati in addition to the one now existing in Agartala.

Easing the restriction for banks in NEI in dealing foreign currency Direct bus service from Sylhet to Guwahati and Shillong

  Strategies for Cooperation

Setting up of Port Health office in every state of NEI > presently it is only in Kolkata

Signing Multi-modal transport Agreement and declaration of Ashuganj as Port-of-Call

Restoration of Agartala-Akhaura and Shahbazpur-Mohisashan rail link

Movement of vehicles up to transshipment point

Bridge over Ragnachera

Consulate Office at Sylhet

  Strategies for Cooperation

☼ Facilities need to be provided/ reopened:

Bangladesh can adopt policies which can encourage investment from Indian companies.

It is required to create goodwill between the two countries by bridging the trust deficit.

For that matter, there should be a regular consultation between economic ministries of both countries.

Encourage track –II diplomacy to remove ‘mindset’ barrier.

Explore the potential for greater energy cooperation (particularly electricity) between the two countries.

  Strategies for Cooperation