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This Saturday, India reached out to Bangladesh through a link which is the first of its kind between two countries in South Asia. It started supplying electricity to its power-crunched neighbour through a new transmission line, making it the first such high voltage, direct-current interconnection between two nations in the region. For Bangladesh, this help comes at a critical time when power outages are resulting in a loss of annual industrial output worth $1 billion.
With relations between the two countries getting better and better, India too is looking at hitherto unexplored avenues, such as transporting foodgrain to the Northeast via Bangladesh. As of now, Food Corporation of India transports foodgrain from Punjab and Haryana for public distribution by rail. It's a long, time-consuming journey which is often interrupted by natural calamities. The route via Bangladesh's Ashuganj port would be a useful alternative.
Bilateral trade and investment ties between India and Bangladesh have grown in leaps and bounds in the last five years. This has happened mostly because of several trade liberalisation initiatives taken by India under the South Asia Free Trade Agreement, or SAFTA, framework. What's more, this has happened despite the compulsions of domestic politics.
Take the example of Bangladesh's young foreign minister, Dipu Moni, who belongs to the post-liberation generation of politicians in that country. She is considered very close to Prime Minister Sheikh Hasina and is seen as a star of Hasina's Awami League party. Moni is conscious of how much she has achieved at a very young age, and like many young people, tends to believe she has the answer to all problems. That was until she met West Bengal Chief Minister Mamata Banerjee.
Banerjee initially went along with the United Progressive Alliance (UPA) government on the proposed agreement between India and Bangladesh on the sharing of the Teesta river waters. Conscious that water sharing is an intensely political issue, Prime Minister Manmohan Singh sent a succession of persons to persuade Banerjee that the agreement would not rob West Bengal of any water. Banerjee kept making noises that she understood and the then water resources minister, Pawan Bansal, as well as National Security Advisor Shivshankar Menon thought they had swung the deal.
Banerjee claims she saw the fine print in the agreement only on the eve of the Prime Minister's Bangladesh visit in 2010. The agreement could not be signed because Banerjee threw a hissy fit and the PM had to tell a deeply disappointed Hasina that last minute problems had prevented India from agreeing to water sharing.
Moni thought she would have a stab at resolving the issue. So during a visit to Bangalore, she decided she would also visit Kolkata and meet Banerjee. Indian officials tried to dissuade Moni, saying this was a bad idea. But the young woman had made up her mind. She met Banerjee and argued aggressively for Teesta waters. "We thought you were a friend of Bangladesh? What has happened to you?" she asked Banerjee who was furious at being ambushed and declared publicly that she would not give Bangladesh even a cusec of Teesta waters.
Future generations of policy analysts will ponder gravely about how domestic political issues influence and impede foreign policy. But in South Asia, the best of India's foreign policy intentions can fall a victim to competitive domestic politics. Bangladesh is no exception. Yet, the two countries have succeeded in tiding over these issues.
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During the prime minister's 2010 visit to Bangladesh, although the Teesta waters agreement could not be signed, he announced that all 46 textiles lines which are of interest to Bangladesh would be taken off India's negative list, thereby reducing the applicable duty rate to zero.
Some of the major items that India exports to Bangladesh are cotton, vegetables, automobiles, iron and steel, mineral fuels, cereal and organic chemicals. On the other hand, India imports from Bangladesh paper yarn and woven fabrics, fish, cement, copper and copper-related products, inorganic chemicals, raw hides and fertilisers.
Bangladesh is now India's largest trading partner in South Asia and twelfth largest in the world, with bilateral trade reaching $5.14 billion in 2012-13 from $3.78 billion in 2011-12 and $3.24 billion in 2010-2011.
"We have taken a lot of trade liberalisation measures with Bangladesh and it has also reciprocated, paving the way for a much more enhanced and robust bilateral relationship," says a senior official from the ministry of commerce and industry. "India enjoys a trade surplus of $4.5 billion with Bangladesh, so in terms of financing the widening current account deficit, it is a valuable trading partner," he adds.
India and Bangladesh have also vowed to undertake several initiatives in freeing up trade through the land ports. As a result, India has built a state-of-the-art modern integrated check-post at Agartala, which is expected to become operational by the end of the month or early November. It is also building another integrated check-post at the Petrapole border which will be launched by the middle of next year.
According to the official, both sides are also jointly working towards opening up the sea-route and waterways for a cheaper way of sending goods and reducing congestion at the borders. The two sides are also contemplating reviving railway connectivity for transaction of goods.
India and Bangladesh are also expected to sign a Motor Vehicles Agreement soon. Under this historic agreement, trucks from Bangladesh will be permitted to unload their shipments directly at their destination. Similarly, Indian trucks will be allowed to move inside Bangladesh and deliver goods right at the buyers' doorstep. At present, trucks from both sides are allowed to enter only 200 km inside each other's border.
"We want to enter India's main market with our goods. Today our products are ending up in the Northeastern parts of India. We want to export cement to India but it is subjected to various tests," an official from the Bangladesh High Commission says.
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Earlier this year, commerce and industry minister Anand Sharma met his Bangladesh counterpart Ghulam Muhammad Quader to grant multiple entry visas to reciprocate India's gesture to Bangladesh businessmen. He also highlighted the issue that even though India had allowed investments from Bangladesh in 2007, Bangladesh business had taken little in investing in India. Bangladesh has other complaints. There are problems relating to land customs stations and non-tariff barriers imposed by India, like standard and testing requirements.
According to a study by the Confederation of Indian Industry, infrastructure bottlenecks related to power, ports, energy and telecommunication need to be addressed. These significantly increase the cost of production, impede productivity growth and thus, hamper export competitiveness of Bangladeshi firms.
But all this is insignificant before the political problems between Bangladesh and West Bengal. The land boundary issue is the biggest. Ever since Bangladesh came into being in 1971, there has been a struggle over the land that borders India and Bangladesh. As a result, around 200 enclaves have developed, essentially islands within the boundaries of another country. The people of these areas struggle for identity and, due to a lack of citizenship, often find they have land but are stateless.
India is required to seek parliamentary ratification for a permanent solution to this problem. This is in the form of the Land Boundary Bill, which calls for India to exchange 111 of its enclaves in Bangladesh in return for 51 Bangladesh enclaves in India. Under the agreement, India would give up claims for just over 17,000 acres of land which will be transferred to Bangladesh. In turn, Bangladesh would cede around 7,000 acres, which would then join Indian territory. A land swap agreement would also give citizenship rights to close to 52,000 people: 37,000 on the Bangladesh side and close to 15,000 on the Indian side.
This deal could particularly benefit the Northeast and Assam. Resolving the land issues would enable borders in these areas to be secured. India would be able to talk officially about the issue of migrating Bangladeshis, a thorny problem for Assam for nearly three decades that will only grow.
But all countries are sensitive about giving up land. Both Assam and West Bengal feel strongly possessive about their state boundaries. Hence the Land Boundary Bill is stuck in Parliament.
The cherry on the sundae is, of course, a transit deal with Bangladesh. In 2011, the two countries were supposed to sign an agreement, with Bangladesh offering transit access to India. Had that happened it would have been a historic breakthrough in India-Bangladesh relations. But because the Teesta water sharing agreement failed to be signed, Bangladesh held back on the transit agreement. Transit access through Bangladesh would reduce the cost of moving goods to the Northeast significantly with Bangladesh earning millions of dollars as transit fee.
But despite this disappointment, as Prime Minister Manmohan Singh advised Moni recently, it was better to consolidate the gains of the 12-14 pacts the two countries were able to sign, instead of crying over the two pacts they were not able to. "Why highlight the downside and give a handle to the opposition when you have achieved much that you can be justly proud of?" the PM counselled the Bangladesh Foreign Minister recently.
India and Bangladesh relations is a story of rapidly improving ties between two countries in South Asia. It is a theme you don't see very often in this part of the world.
