The Hindu Business Line : Trading with Bangladesh

THE COMMERCE MINISTER, Mr Kamal Nath, was nothing if not over-optimistic when he told his visiting Bangladeshi counterpart, Mr Altaf Hossain Choudhury, that a trade turnover target of $5 billion (now, $2 billion) between the two countries can be achieved in two years "if we really set our sights on it with single-minded devotion". Despite the great potential that exists between the neighbours, the stark fact is that formal trade — as opposed to the informal border business — has not made much headway the past three decades. Can the two countries really drum up the determination to increase the bilateral trade exchange and deepen the investment ties if Mr Kamal Nath's objective is to be attained in the time-period envisioned?

This is a difficult question to answer because India-Bangladesh ties have always been clouded by a host of extra-economic considerations that have invariably disrupted the healthy growth of business relations. The latest example of this was the cross-border exchange of fire between the Bangladesh Rifles and the Border Security Force, which led to the postponement of the visit to Dhaka by the Tata boss, Mr Ratan Tata. The continuing dither over the issue of gas exports from, and transportation through, Bangladesh is another piece of evidence which goes to show that unless Dhaka is able overcome its small-neighbour syndrome vis-à-vis India, it will still take quite a while for Mr Kamal Nath's dream to be realised. The silver lining is that the future is not uniformly bleak. Indeed, the proposed Tata group investment of around $2 billion in Bangladesh — said to be the biggest FDI ever in that country — over the next few years could play an important role in changing the current perception in the host country that the sole Indian objective is to exploit it economically. The Tatas plan to set up a $700-million steel unit and two power projects worth $700 million in the western part of Bangladesh along with a $600-million fertiliser plant in the Chittagong port area. Much will depend on the price of the gas that will be required to run the plants and, clearly, this will be the litmus test for Dhaka's long-term intentions on the larger issue of doing business with India.

The proposed free trade agreement between the two countries is another important development ahead though it is clear that such an agreement will, in the long run, benefit India more because of the sheer weight and preponderance of its economy. In fact, the current bilateral trade exchange is strongly marked by the trade surplus in India's favour which, seen objectively, simply cannot be avoided if trade is conducted freely. All this strengthens the argument that, among other things, Dhaka should focus on increasing its royalty and freight earnings from gas exploration and production (mainly from the Bibiyana fields in the eastern part of the country) and cross-country transport of gas from Myanmar where Indian companies such as GAIL and ONGC are prospecting. For Dhaka, this would mean not only leveraging its comparative economic advantage but also securing for itself an important position in New Delhi's economic scheme of things.

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