On transit: The shortest route should not be the “free-est”

Indian mainland wants to utilise the shortest route to access its eastern "Seven Sister" states via Bangladesh. The desire for the shortest route gave birth to relentless pressure on successive Bangladeshi governments to provide transit facilities. Shorter routes are usually convenient and cheaper. We hope that India reasonably and willingly compensates Bangladesh for getting such convenience through transit. Without proper compensation, India may still get the shorter transit. But this may not be cheaper when the cost of dealing with an unhappy Bangladeshi population kicks-in.

Let's think practically. For an Indian businessman, to let millions of rupees worth of merchandise ply through Bangladeshi territory is not an anxiety free process. Think about the anxiety a mother goes through as she thinks about letting her child stay the night alone with a baby-sitter. Now think about the suffocating feeling that ensues if the mother knows that the baby-sitter is underpaid and unhappy. We can now replace the thought of the baby-sitter with Bangladesh, and replace the thought of a child with truck-load of merchandise. Do you see the linkage?

The above analogy makes it very clear that a transit contract between Indian and Bangladesh is better off when it is mutually beneficial. We know that the demand for transit from India has been a strong and reasonable one from that country's perspective. Making it reasonable for the Bangladeshi context has been the struggle all along.

There were significant noise around Indian Prime Minister Monmohan Singh's recent Bangladesh visit and many thought that we would have a signed transit deal. Due to various reasons already known, we ended up having a broad-based and cancellable "Memo of Understanding". We agreed on, among many things, future corridor facilities for India over Bangladesh.

As we already know, under relentless demand from India for transit, various Bangladeshi governments explored ideas like, 1.) Providing "transhipment" instead of "transit", 2.) Providing transit to India in return of getting transit to Nepal and Bhutan, 3.) Providing India access to Mongla and/or Chittagong sea ports and relevant waterways, 4.) Attach transit to India within a greater plan of Asian Highway etc.

Some of these ideas did not last long as they did not make mutual economic sense for India and Bangladesh.

Take the example of "transshipment". Under such an agreement, Indian goods would have been carried by Bangladeshi transportation within Bangladeshi territory and then change hands at the borders en-route to eastern Indian states. Despite its appeal to Bangladeshi nationalists, transshipment was less appealing to Indian interests due to operational reasons. Such an arrangement would have involved multiple loading-unloading of goods and would have failed to reduce transport cost/time for India. The concept of transshipment died.

It appears that it is now a matter of time where India gets land or water based transit through Bangladeshi territory. To make it mutually beneficial for Bangladesh, currently there is a "package of sweeteners".

One of the sweeteners allows Bangladesh to get land based transit and electricity access to Nepal and potentially Bhutan. These small landlocked nations may also be permitted to access Chittagong or Mongla port. It deserves mention that Nepal is situated less than 50 miles north of Bangladesh, separated by India. In theory, the idea of importing Nepalese electricity is appealing to Bangladesh. However, it is still premature to expect any of these benefits to fully materialise. For example, India has done little to improve road communications in the land separating Nepal and Bangladesh. There is also very little data available about current quantity of exportable Nepalese electricity or the potential cost for Bangladesh to get such electricity.

The extent to which Nepalese businesses truly need Mongla port will depend on how much trading the country needs beyond its overwhelming land based trade with India and China . Besides conceptual agreement and encouragement, there is insufficient statistics as to how much revenue Bangladesh can realistically make by letting Nepal use Bangladeshi ports.

Bangladesh's incentives from the Indian transit treaty needs to come primarily from India and needs to be instantaneous. It cannot be something far-flung as is the case for Nepalese electricity or port usage.

Let's start thinking about profitability. For the Indian side profits will come from increased trade between mainland India and its eastern states at reduced transport cost. For the Bangladeshi side, profitability is currently not very clear.

For starters, Dr. Gowhar Rizvi, the adviser to the Bangladeshi Prime Minister and one of the chief executioners of a potential transit treaty, went as far as saying Bangladesh should not charge toll or transit fees to Indian transportation. He came out with the "Hotel/Restaurant Theory" where Bangladesh would get economic boost through increases in hospitality based business activities. All kidding aside, this is indeed no trivial economic boost considering the millions of trips Indian truckers will have to make through Bangladeshi territory.

However, due to its privatised nature, the hospitability based revenue generation will result in a slow-track money stream for Bangladeshi government exchequer. But the Bangladeshi exchequer will have to front-pay a lot of the necessary costs for transit. For example, Bangladesh's current roads and waterways are barely equipped to carry the country's burdens. Increased traffic due to Indian transit will cost billions in terms of infrastructure enhancement and constant future repairs.

Beyond costs to rebuild roads and periodic repairs, increased foreign traffic would mean increased law enforcement costs, highway/waterway patrol, drugs and smuggling prevention costs etc. In short, there are more costs than we currently can see and many of these may eventually fall on Bangladesh's shoulder.

The only solution to hedge such cost uncertainty is to add fees to Indian vehicle and personnel as they cross into Bangladeshi territory.  This can be done through per person or per vehicle entrance fees and supplemented with tolls soon after entering Bangladeshi border. Such practice will ensure collection of necessary operational and maintenance costs for Bangladesh.

It is hard to assess whether it was India who pressed for zero-fee entry into Bangladesh or Dr. Rizvi was trying simply to be ultra-nice. But like any business deal, no party should suffer economic loss to entertain the other.

Besides costs, there are civil and law-enforcement issues that need to be addressed on a mutually respectable manner.

Do we clearly know what type of traffic rules and regulation, vehicle fitness certificates, and vehicle insurance will be honoured for Indian traffic that goes through Bangladesh? If Bangladesh decides to honour Indian documents, will such honour be reciprocated by Indian law-enforcement if Bangladeshi traffic enters India? For that matter, will Bangladeshi traffic at-all be able to enter Indian territory in the same way Indian traffic will enter Bangladesh?

How about identification of Indian drivers and transportation personnel? Will Bangladesh have database connectivity to Indian traffic enforcement records? How would we know an unlicensed Indian driver is not driving while in Bangladesh? Or an Indian felon is not on the wheels? Will the two nations provide access to each other's database records to validate identities and legal records?

Transit is not a mere paper-contract, it is like a living organism with many different layers of human involvement. This is crucial that we achieve solutions to the above cost sharing and legal issues in a mutually respectable manner. If India pushes Bangladesh for an unbalanced treaty, this may eventually give rise to Bangladeshi resentments. Protests, vehicle damage, and hostility towards Indian transportation while in Bangladeshi territory may ensue. Besides proving to be a political disaster for the Bangladeshi government, a one-sided treaty may create diplomatic nuisance in the future.

At the end of the day, India needs to realise that the shortest route via Bangladesh is not necessarily the cheapest, without reasonably compensating Bangladesh and its people.

———————————
Shafquat Rabbee is a freelance contributor from New York, USA. He is currently a vice president of a global bank.