Commentary: Bangladesh Needs to Expand Trade with Its Neighbors

24 November 2021

Bangladesh has 23 land border crossings, but trade with its neighbors accounts for only 10% of national trade. With the country set to graduate from the United Nations’ least-developed countries list, it needs to expand its export destinations and diversify its products. Mr. Yasushi Tanaka, Principal Transport Specialist, Transport and Communications Division, South Asia Department, Asian Development Bank (ADB), explains how small investments in land customs stations and land ports, trade facilitation policy reforms, and cooperation between government agencies can help make Bangladesh a trade and transport hub in South Asia. This commentary first appeared on the ADB blog.

 

Bangladesh Needs to Expand Trade with Its Neighbors

By Yasushi Tanaka

With the right policies and investments, Bangladesh can become a trade and transport hub in South Asia.

In 2026, when Bangladesh is expected to graduate from the United Nations’ least-developed countries list, it will lose preferential access to many of its global trading partners. Bangladesh needs to immediately expand its export destinations to its neighbors and shift away from ready-made garments to more diversified exports.

This will be challenging for a variety of reasons. While Bangladesh has 23 land border crossings, trade with its neighbors accounts for only 10% of national trade. Trade with neighbors is hindered by underdeveloped customs stations, outdated trade policies and operations, and bureaucratic government agencies.

Underdeveloped trade facilities at borders means that the average time required from entry to exit is about 4 hours for import and 3–6 hours for export at crossings such as Akhaura, Sonamasjid, and Tamabil, according to an ADB study. About half of this time is spent waiting for inefficient procedures to be completed. Perishable goods cannot be traded under such slow and unpredictable operations.

How can Bangladesh make trade with its neighbors faster and more efficient?

Roads in Bangladesh are being developed, but border crossings remain as bottlenecks. Bangladesh needs to build well-equipped land customs stations and modernize land ports to make cross-border trade faster, less costly, more predictable, and more secure.

Trade facilitation policy reforms are required to improve cargo clearance processes, including pre-arrival processing, perishable cargo handling, paperless transaction by using e-payment, and post-clearance audit. Government agencies need to do their part by strengthening policy reforms, integrating cross-border trade operations, and coordinating with neighboring countries.

Trade facilitation policy reforms and infrastructure improvement may translate to shorter border-crossing time and lower trade cost, which will increase trade volume and value, expand trade areas, and diversify traded goods. As a result, production expansion is expected in the agriculture, textile, food, and services industries in Bangladesh and even in India’s nearby states.

Under the current trade facilitation policy, international transit cargoes whose origin and destination are outside of Bangladesh are not accepted. The use of an electronic cargo tracking system in the release and clearance of international transit cargo should be introduced. In 2020, a pilot test on international transit cargo operations was held at Chattogram port, where almost all maritime cargo of Bangladesh is handled. Current practice is that international cargo unloaded at Chattogram port can tentatively be transported to the northeastern region of India through Bangladesh without customs clearance.

Policy reforms and improved infrastructure will expand international transit cargo operations to the whole country and further enable cargo transportation between the northeastern region and other regions of India through Bangladesh. This will also enable Bhutan, India, and Nepal to use Chattogram port for export and import. Chattogram port could become a model gateway for trade in South Asia.

Transporting cargo between Kolkata and Imphal through Bangladesh is much shorter, at about a 700 kilometers distance, as compared to transporting cargo along India’s domestic route via its “Chicken’s Neck” road running around Bangladesh at about 1,250 kilometers. The international transit cargo operations will reduce vehicle operation cost, travel time, and greenhouse gas emission of the transport sector in the subregion, and the transport sector companies in Bangladesh will receive huge benefits from increased cargo throughput.

Bangladesh can become a trade and transport hub in South Asia with small investments in land customs stations and land ports, trade facilitation policy reforms to comply with the international standards, and cooperating between government agencies. These activities will lead to greater trade with neighboring countries and help stimulate economic growth of the country.

 

 

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