Bangladesh-Nepal Trade Relations: Influences of Economic Diplomacy

Bangladesh and Nepal, countries of South Asia, in spite of having different ecological conditions, social systems, and historical and cultural backgrounds, have quite sound and smooth progress in their bilateral relations.

Bangladesh-Nepal bilateral relations, featuring equal and sincere treatment, mutual support and friendship for generations, can be an example of cooperative relations between two countries.

Nepal’s relationship with Bangladesh is unique and economic and commercial relations between the two have been growing steadily over the years.

However, the volume of bilateral trade has not seen much improvement despite tremendous potentials for expanding and diversifying trade between them.

Nepal-Bangladesh commercial and economic relations are increasingly growing and exchanges at the grass-root level have been expanded.

Thus, the essential thrust of economic diplomacy should be increased in an effort to enhance the image of the country through their bilateral exchanges.

Relations based on mutual trust and confidence

It is noticeable that since the very beginning of the establishment of diplomatic relations, Bangladesh-Nepal relations were characterized by ties and contact at the people-to-people level.

The relations have improved and the major stake in the relationship lies in strengthening the border areas and in improving people-to-people contact and furthering economic relations and trade.

For instance, India and Bangladesh have opened immigration offices on their respective sides of the Fulbari-Banglabandha border point enabling Nepal and Bangladesh to expedite their trade exchange.

The setting up of the offices has enabled passenger movement through the route-so far being used only for cargo movement. Since the establishment of diplomatic ties, the bilateral relations between Nepal and Bangladesh have been characterized by cordiality, goodwill, mutual understanding, and shared values and aspirations of the people.

Nepal and Bangladesh share similar views on various issues of common interests and work closely in various regional and international forums, including the United Nations, Non-Aligned Movement, South Asian Association for Regional Cooperation (SAARC), and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

Trade Relations: Influences of Economic Diplomacy

The two countries have signed four agreements in April 1976 related to trade, transit, civil aviation, and technical cooperation.

Nepal-Bangladesh commercial and economic relations are increasingly growing and exchanges at the grass-root level have been expanded.

Nepal imports around 90 percent of goods to meet local demands where the market is dominated by India. Hence, Bangladesh has a big opportunity to grab a considerable market share.

Bangladesh Government has permitted Nepal to use the port facilities at Mongla Port since September 1997, subsequent to the opening of the Kakarbhitta-Phulbari-Banglabandha transit route. Nepal-Bangladesh Joint Economic Commission (JEC) was set up in 1978 at the level of Finance Ministers.

Since the activation of JEC, both countries have been keen on working together to further strengthening their economic ties. The areas of such cooperation have been joint ventures sectors like banking, finance and insurance.

It is now evident that Nepal’s exports stood at Rs 2.14 billion last year, down from Rs 2.73 billion in the previous year. However, new initiatives are being undertaken in the field of readymade garments, leather goods, pharmaceuticals and PVC pipes.

Though Bangladesh and Nepal enjoy strong relations, the volume of bilateral trade has been much despite tremendous potentials for expanding and diversifying trade between the two countries.

The prevailing relations between two neighboring countries are also guided by the SAARC mandate and diplomatic affiliation with the regional force of South Asia, India.

Even though India has agreed to allow Nepal to trade with Bangladesh through its territory, the bureaucratic hurdles and lack of infrastructure have not allowed the arrangement to work. Perhaps the India-Bangladesh memorandum of January 2010 indicates New Delhi’s commitment to forcing compliance by its bureaucracy, and kick-start a process on infrastructure building.

Nepal imports around 90 percent of goods to meet local demands where the market is dominated by India. Hence, Bangladesh has a big opportunity to grab a considerable market share.

Consumer goods, plastic products, batteries, construction materials, furniture, electronic goods including refrigerator, television and home appliance, motorcycle, melamine products and footwear are being exported to Nepal.

Bangladesh needs to ensure that its imports are not held hostage to the monopoly of a selected group of producers, but are instead received through rigorous international competition.

Even though the economic logic is to strengthen trade and transit between Nepal and Bangladesh, little has happened so far other than policy concessions which seem different from the ground reality. Nepal and Bangladesh are separated by 22 kilometers of the Indian Territory.

Discussion and concurrence of both countries in principle for use of Mongla port in Bangladesh for transporting goods to and from Nepal at a concession rate would help promote tourism.

The positive attitude of both the countries to give the final shape to a deal on operational modalities for goods-carrying vehicles in order to ease transit facility to Chittagong and Mongla port remains to assent sign in strengthening trade relations.

Similarly, both the countries have proposed bus service between Dhaka and Kathmandu to facilitate trade and tourism.

Way Forward

Economic diplomacy is one of the most important means by which governments comprehend their national interests.

Bangladesh Government has to focus on convincing people, even some of her neighbors, as well as the South Asian Free Trade Area (SAFTA) framework of SAARC that Bangladesh offers excellent investment opportunities and that the overall investment climate is conducive to foreign investment.

Bangladesh is striving hard to attain her maximum economic benefit through the instigation of economic diplomacy which is evident from closer relations of the government of Bangladesh with different global and regional economic forums.

Nepal and Bangladesh need to work to bring India fully on board in helping to develop new trade and transit routes. Today Bangladesh has emerged as a regional hub for RMG pharmaceutical, ceramic tiles, chinaware, cement, and light engineering products.

The Nepalese business community should not miss out on excellent investment opportunities there, which could multiply benefits. Similarly, Export Processing Zones in Bangladesh are other success stories.

(The writer is is an Associate Professor of Government and Politics at Jahangirnagar University, Bangladesh)