The Indian Factor

NIA says Indian Support crucial for success of Transit Agreement with Bangladesh

The National Assembly (NA) has announced that the long-awaited transit agreement between Bhutan and Bangladesh will be presented for discussion in the upcoming parliamentary session. The agreement, which aims to enhance trade and cooperation between the two countries, has garnered significant attention as it opens up new avenues for transit and commerce.

However, in the National Interest Analysis (NIA) conducted, it is mentioned that the success of Bhutan’s transit trade through Bangladesh will depend on the level of support from the Government of India (GoI), and in particular the State Governments, while passing through their territory. This reliance raises questions about the autonomy and flexibility of Bhutan’s trade routes.

Minister of Industry, Commerce, and Employment (MoICE), Lyonpo Karma Dorji, stated that Bhutan has a transit agreement with the GOI that predates the agreement with Bangladesh. This implies that the memorandum of understanding (MoU) signed with India already specifies the ports, customs ports, and waterways in India that will be utilized.

He said, “All those details are currently being formalized, although we have been using them for centuries, and both governments have already accepted them.” Lyonpo Karma Dorji also mentioned that since Bhutan and Bangladesh do not share a border, even if Bangladesh has agreed to a transit route, it must pass through India.

He further clarified, “However, we have identified a port on the border between Bangladesh and India, and we have discussed it with both countries, and they have agreed. Therefore, there are no issues in that regard.” He also confirmed that there are no issues with India.

Lyonpo Karma Dorji explained, “We have been in discussions with India, and it has been positive. Additionally, according to international transit rules, even if there is a bilateral agreement between two countries, transit must be allowed if the country is landlocked or classified as a least developed country.” He emphasized that international rules regarding transit will also be applicable.

A Bhutanese exporter also said that support from the Indian government is important as goods need to be taken through Indian Territory. “The Suvidha fee imposed in West Bengal is an example of how things go wrong,” he said, while adding that he does not see why the Indian central and state governments would not support Bhutan.

 “We have excellent ties with India. But the main problems are created by people in the Indian territories, who have been making a living by harassing Bhutanese vehicle drivers for years. They are like the local mafia and there is nothing that the Bhutanese or even the Indian government can do,” he said.

Rinchen Dorji, a freelance writer, who has been following the development said that the inclusion of the statement that Bhutan’s transit trade through Bangladesh will depend on the level of support from the Government of India, and in particular the State Governments, should not be taken negatively. “The government has to give the right information and our law makers while discussing the Bill should know the important issues, which in project management is called ‘assumptions.’” Rinchen further mentioned that even if the government has talked with the Indian government, by informing the people about this, everyone will know that a comprehensive effort has been made in drafting the Bill. “It also provides the government a leeway to talk with the state and local governments, if they have not done it,” he said, while emphasizing that Indian support is important.

Additionally, the analysis underlines the competition that may arise from more organized transporters in India and Bangladesh, posing a challenge to Bhutan’s private sector. However, these drawbacks are outweighed by the perceived benefits of the agreement.

According to the NIA, the transit agreement also offers notable advantages. It is expected to strengthen bilateral trade and political relations between Bhutan and Bangladesh, fostering a more robust economic partnership. Moreover, the agreement provides alternative transit facilities for Bhutan’s trade with third countries, offering new pathways for commerce. It establishes a legal framework for the movement of Bhutan’s transit goods through Bangladesh and creates an opportunity to utilize various modes of transport available in Bangladesh.

 Additionally, the agreement complements existing trade agreements and allows for potential improvements through periodic reviews and mutual consultations.

 The transit agreement is particularly significant for Bhutan as a small landlocked country. It grants access to the seaports of Bangladesh, which could significantly enhance Bhutan’s trade capabilities. Furthermore, the agreement enables Bhutan to establish a secondary or alternate agreement to address contingencies, promoting commerce and economic activities with Bangladesh.

Preliminary cost analysis suggests that the ratification and implementation of the agreement will not impose additional financial burdens on the Royal Government of Bhutan. (RGoB) However, it is important to allocate resources for Commerce Secretary Level meetings (CSLM) and Joint Technical Committee meetings (JTCM) depending on their necessity.

The social, economic, cultural, environmental, and political implications of the agreement are generally positive. It is expected to enhance friendly relations and mutual cooperation between the two countries, without posing adverse effects on Bhutan’s social, cultural, and environmental ecosystem. Moreover, the agreement complements existing trade instruments and promotes the adoption of economic best practices.

Importantly, the transit agreement does not require amendments to existing domestic laws but is subject to compliance with the requirements of domestic legislation. It prohibits the trade of prohibited goods, arms, and substances used in the illicit manufacture of narcotic drugs or psychotropic substances, ensuring the agreement aligns with Bhutan’s national policies and regulations.

The agreement is closely associated with other instruments, including the Memorandum of Understanding (MoU) on the Use of Inland Waterways for the Transportation of Bilateral Trade and Transit Cargos, the Agreement on Trade, and the Preferential Trade Agreement between Bhutan and Bangladesh. These instruments work in conjunction to facilitate and promote trade between the two nations.

The initial transit agreement (TA) between Bhutan and Bangladesh was signed in 1980 in Thimphu, with a validity of 10 years. After an automatic extension for another 10 years, the agreement expired in 2000. Since then, both countries have expressed their interests and aspirations to establish a new TA on multiple occasions.

 The process of initiating the new TA began in 2015 during the fifth CSLM held in Bangladesh. During this meeting, both sides agreed to establish a Joint Working Group (JWG) in 2017 to work on the new agreement. It took three rounds of meetings to finalize the new agreement and its protocols. However, due to the pandemic, the signing of the agreement, which was anticipated to occur by 2020, was delayed.

The outcome of the JWG’s efforts was presented during the 8th CSLM in September 2022 in Dhaka. At this meeting, the commerce ministers of both countries endorsed the agreement and its protocols for signing. Finally, the transit agreement between India and the People’s Republic of Bangladesh was signed on March 22, 2023.

Tshering Pelden from Thimphu