Policy Research Institute - PRI Bangladesh

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All Press Release for Workshop on Economics of Transit

News Published: Wednesday, Jun 29, 2011

All Press Release for Workshop on Economics of Transit
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Political consensus on transit is vital

Making the facility a win-win regional deal highlighted

FE Report

June 29, 2011


Transit facilities should be considered from a broader regional context, instead of making it a mere bilateral deal with neighbouring India, speakers said at a workshop organised by local think-tank, Policy Research Institute (PRI) of Bangladesh on Tuesday at a city hotel.


Discussants also underscored the need for a political consensus to derive benefits and explore the full potential from the transit facilities in a win-win situation for all.

Former finance advisor Dr ABM Mirza Azizul Islam was the moderator of the programme.

Vice chairman of the of the PRI Dr Sadiq Ahmed presented a keynote paper on the Economics of Transit in South Asia's North East Sub-region at the workshop.

Addressing as a panel discussant, director general of state-owned Bangladesh Institute of Development Studies (BIDS) Dr Mustafa K Mujeri said the transit issue should be looked at, from a broader perspective.

"We should not consider it as a bilateral issue with India. It will ensure much benefit if we consider it beyond bilateral dimension," Mr Mujeri added.

He said successful implementation of the transit will depend on a political consensus.

Mr. Mujeri said harmonization of standards with the neighbouring countries is needed for operationalising transit to benefit all. Improvement of human capacity is also a must to derive benefit form the transit or regional connectivity, he noted.

Mr. Mujeri said countries like Nepal and Bhutan should also be taken into consideration while dealing with the issue.

Another panel discussant, chairman of Bangladesh Tariff Commission Dr Md Mozibur Rahman said all governments since the fag end of 1980s, have agreed in principle on the transit issue in south Asia.

"Governments of Jatiyo Party, BNP and Awami League, all are in favour of transit under SAARC and BIMSTEC," he noted.

He said: "We view that transit for better market access and market expansion for Bangladesh products," Mr Mozibur added. "This is a regional transit."

Mr Mojib said at least 60 per cent trade of Assam, a north-eastern state of India, will be dealt by Bangladesh, once the regional connectivity is established.

He said transit will ensure better revenue earnings for Bangladesh seaports. "Chittagong seaport earns annually Taka 7.0 billion by only using 50 per cent of its capacity. Transit will help augment its revenue earnings significantly," he observed.

Mr. Mojib said transit should be offered on a sustainable basis.

"We cannot withdraw such transit overnight. So it should be on a sustainable basis," the chief of tariff commission added.

He said: "I don't understand why they (political parties) are quarrelling on the issue."

He expressed the hope that political parties and the civil society would support offering of transit facility for greater market access.

Ambassador Humayun Kabir said there is a need for proper cost benefit analysis, prior to implementation of the transit.

He asked: "Has Bangladesh benefited under the existing river protocol with India?"

Mr. Humayun said the opportunity cost is also important while considering the issue.

He said building a national consensus on regional connectivity is furthermore important.

Expressing disappointment over the India-Bangladesh rail-link, Humayun said the trains are carrying a very small number of passengers on both the ways. "For this reason, I favour for a regional transit, instead of giving transit to India alone."

Talking part in the discussion, president of the Metropolitan Chamber of Commerce and Industry (MCCI) Amjad Khan Chowdhury said Bangladesh needs horizontal expansion of its market and vertical expansion of its products with a view to creating jobs for the new job-seekers.

Mr Amjad, also the chief executive of the country's leading agro-processing company, PRAN-RFL, said the eastern part of India is very important for Bangladesh for its economic sustainability.

"I am telling you that it is like Hong Kong to China," he added.

The chief of the MCCI said Bangladesh now needs to ensure food security to its over 160 million people. 

"India is attracting foreign direct investment for its farm lands."

"I think this is a good chance for Bangladesh while addressing its food security-related problems," he added.

He, however, stressed the need for changing the mindset of the people in Bangladesh on transit and regional connectivity.

Ambassador Ashiqur Rahman said the transit issue should be re-visited. "I think this is a bilateral," he stated.

While presenting his keynote paper, PRI vice chairman said unfortunately the discussion on the transit issue in Bangladesh has been overshadowed by politics with often confused rationale and thinking.

He said transit is seen by many as a "concession to India" and by some as a "loss of sovereignty".

He said the transit issue has too narrowly been focused on, as a mater of transit fee.

"The transit fee issue is also cast in a misleading way -- as a discussion on getting rent from the point of view of geography as opposed to a fee on export of services," Mr Sadiq added.

He said to avoid rent-seeking behaviour owing to geographical locational advantages, there are a range of international conventions under the World Trade Organisation (WTO) that guarantee freedom of transit.

He said global evidence shows that countries with access to sea, ceteris paribus, do better than the land-locked countries.

"By opening up existing ports and attracting further investment, Bangladesh can tap a dynamic source of revenue and economic growth. He observed"

He said the true potential of transit is illustrated by development performance of internationally renowned seaports of Rotterdam, Singapore and Hong Kong.

He said Bangladesh is conveniently located as a bridge between central and east Asia.

"We think that through better land, air and sea connectivity Bangladesh can become an Asian commercial hub," Mr Sadiq added.

Mr. Sadiq said growth and investment in the lagging regions will benefit tremendously from reducing cross-border barriers to trade, transport and investment.

He said even with existing port capacities, there is a scope for handling substantial additional cargo traffic.

Mongla in particular is grossly under-utilised, he said.

He said the concept of deep sea-port in Chittagong will become a real prospect and not just a dream.

Mr Sadiq said the principles of transit between two points of India through Bangladesh make no difference for the use of port services for the third-country trade.

"Bangladesh will be exporting a service-use of road, rail and waterway infrastructure - to India and the traffic will pay a service charge that is again based on the principles of cost recovery and rate of return on investment," Mr Sadiq added.

This principle is fully consistent with the WTO guidelines, he said.

He said infrastructure to be built for transit will reduce the cost of trading within the north-East sub region and promote more trades.

Quoting an estimate of a study, he said a 10 per cent fall in transaction costs at border has the effect of increasing a country's export by about 3.0 per cent.

He said the total investment needed over the next 10 years is US$ 10 billion.

He said transit access not only makes good economic sense for Bangladesh, it could also unleash dynamic gains from better regional cooperation and integration.

These gains could result from greater flow of investment and stronger trade in services including health, education and energy, he noted.

"This could also unlock the political difficulties relating to security and immigration," Mr Sadiq added.


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Speech