Bangladesh's Economic Relations with India, Pakistan and China an Overview

India is an immediate neighbor of Bangladesh and surrounds it on all sides except for a small portion which the latter shares with Myanmar to the south. Bangladesh shares a long historical, cultural and geographical linkage with northeast India, which has more association with Bangladesh than to its mainland. Bilateral relations between India and Bangladesh have never been free from impediments that have hindered the expected economic and cultural association and transportation network whereas Pakistan and China have been enhancing their economic relations with Bangladesh.

India and Bangladesh

In order to improve India- Bangladesh economic relations, efforts had been made, both bilaterally and in the regional organization. The chief beneficiary of South Asian Preferential Trade Agreement (SAPTA) is Bangladesh because India already has free trade agreement with Nepal and Sri Lanka and has a customs union with Bhutan. Officially in 2006-7 imports from India to Bangladesh were US $1.6 billion while its exports to India were US $ 228 million. According to the International Monitory Fund Report 2007, Bangladesh's export to India accounts for less than seven percent of its total import from the latter. However, informal trade may be twice as much.

Over 80% of bilateral trade is currently routed through Benapole-Petropole land port. Efforts are being made to develop additional road, train, water and air links between the two countries. Incidentally, rail links have been re-established in 2007. Further, better connectivity can include linking national power grid, gas pipelines, and telecommunications, to generate synergy. The main hurdles in this regards are Bangladesh's demand to allow transit facility to Nepal and Bhutan where India has shown its reluctance due to China factor. On one hand Bangladesh has expressed its reservations on the proposed Asian Highway Network (AHN) as its route enters Bangladesh from India and goes back to India before connecting Southeast Asia, thus it will connect northeast India to the rest of India. On the other hand Bangladesh has suggested that the route to pass through Chittagong before entering Myanmar. Bangladesh has also shown its reluctance to the Myanmar-Bangladesh-India tripartite gas pipeline as Bangladesh wants to resolve all the issues in a single enclosure. Interestingly, Bangladesh seeking permission for setting up Trade Mission in Guwahati and direct trading with the northeastern states of India.

Bangladesh is facing problems arising out of food shortage, health problems, unemployment as well as shrinking farmland and water bodies, and depleting forest resources etc. India, being an immediate neighbor has been providing huge food and other relief aid to Bangladesh in the time of crisis. In fact, both poverty and unemployment have been forcing the Bangladeshis to migrate to India. This has been a major irritant between the two countries.

In case bit countries wish to develop close bilateral economic relations, they have to not only allow cross-border investment and transfer of technology, but also to facilitate market access to a wide range of small and middle-sized businesses. Bangladeshi handicrafts, ethnic clothing, JAMDANI SAREES, marine, poultry and dairy products, fruits and vegetables could then be easily exported to India. It is more convenient to buy goods and services from each other than from distant sources.

Pakistan and Bangladesh

The religious affinity could not keep Pakistan united for a long period and thus Bangladesh emerged as an independent country in 1971. However, Pakistan established full diplomatic relations with Bangladesh on January 18, 1976 and their relations improved considerably in the 1980s and 1990s.

During the 8th meeting of Joint Economic Committee (JEC) held in Dhaka on 12-13 September 2005, both countries decided to increase the bilateral trade to US $1 billion by 2007. It has already increased from about US $147 million in 2001-2002 to US $267 million in 2004-2005 to US $217 million during the eight months (July-Feb) of financial year 2005-2006.

Major imports from Bangladesh to Pakistan include tea, jute, medical and pharmaceutical products. There is a duty-free import of Bangladeshi tea by Pakistan. There are also prospects for the development and establishment of direct shipping service between the two countries in order to promote commercial and trade links.

Efforts to expand technical cooperation in various fields were identified by Joint Working Group. In 2006, four MoUs on cooperation in areas of agriculture, tourism, promotion of trade, and product standardization and quality assurance were signed during the visit of Begum Khaleda Zia, Prime Minister of Bangladesh to Pakistan.

There are MoUs signed between Pakistan Agriculture Research Council, Ministry of Food, Agriculture & Livestock and Bangladesh Agricultural Research Council. They have also signed MoUs on tourism.

China and Bangladesh

China is a distant neighbor of Bangladesh and China supported Pakistan against Bangladesh Liberation War (1972) as well as exercised its veto power as a permanent member of United Nations Security Council to block Bangladesh's entry into the UN. However, the relations between the two countries were formally established in 1976 and by mid-1980s the political, commercial, educational, and cultural ties were established. At the same time, military aid and equipments were supplied by China. The relations are driven by both economic and perceived security threats arising from New Delhi.

China is providing training to Bangladesh's armed forces and in shaping Dhaka's security apparatus. Recently, China has assured to help Dhaka in developing peaceful use of nuclear technology for the implementation of Rooppur nuclear power plant. China has also built six 'friendship bridges' across various rivers in the country. In addition, China has been making huge investments in Bangladesh economy as it realizes the importance of untapped resources of Bangladesh. Bangladesh has offered to set up a special economic zone for China. There are ambitious plans of building road linking Bangladesh with China through Myanmar meant for enhancing trade and people-to-people contact.

China-Bangladesh Friendship Centre in Dhaka remains the most significant symbol of Chinese presence and commitment.

In the recent past, China has emerged as the largest trading partner of Bangladesh. In 2006-2007, imports from China stood at US $3 billion while the exports to China were only US $200 million. There is a huge trade gap prevailing in China's favor. It is also giving competition to Bangladeshi garment industry within Bangladesh.

In changing geo-strategic environment, ties between Bangladesh and United States cannot be ignored. Since its inception, Bangladesh has had deep relations with the US, notwithstanding the change of regime. US policy of containment of China and its budding relations with India may have some long term impact on China-Bangladesh relations. In addition, Bangladesh depends on India with regard to people-to-people trade where political interests have hardly any roles to play might also benefit in India's favor provided Bangladesh comes out of its fear psychosis and India provides more trade concessions to Bangladesh. Pakistan and Bangladesh have been making efforts to further strengthen their bilateral economic relations but the distance and inability to provide substantial trade benefits restrict their active involvement.

The writer is an Associate Fellow at Centre for Land Warfare Studies, Delhi, India and can be reached at: mansime@gmail.com

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Bangladesh's Economic Relations with India, Pakistan and China an Overview

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