Editor's Pick

Agreements and arguments

17 February 2010, 18:00 PM
EDITORIAL
Abdul Bayes
IT is unfortunate that any discussion on the relations between Bangladesh and India generates more heat than sense; evokes more emotions than economics; and allows rhetoric to reign over the reality on the ground. For example, our bilateral trade deficit with China is more than that with India, but deficit with India is more sensitive an issue. A politically motivated anti-Indian sentiment on the part of a segment of politicians in our country might have caused it, or a big-brotherly attitude in some on the other side of the fence might have fueled the fire. Whatever the reason, the implications of such a negative outlook are not far to seek. Mistrust and misgivings between these two neighbourly countries stalled the process of negotiations on bilateral issues of mutual interest since 1975. Politicians might have won the battle but the people of both the countries lost. However, the momentum for peaceful, stable and welfare-oriented development of the people of the two countries gathered steam after the PM's recent visit to India and signing of agreements on a few key issues. Such agreements have long been overdue. But we need to see that they are in line with our national interest; that our people will be better off than before; that the craze for regionalism does not raze our national sovereignty. Thus, sensible debates and dialogues are needed to bring the agreements under what Amartaya Sen called "public reasoning." The Policy Research Institute (PRI) organised a workshop recently in Dhaka on the pros and the cons of the agreements. It was moderated by noted economist Professor Wahiduddin Mahmud, and Finance Minister A.M.A. Muhit graced the occasion as chief guest and Foreign Minister Dipu Moni was special guest. The presence of advisers to the PM, H.T. Imam, Dr. Masihur Rahman, M. Azizul Islam (former adviser), M. Syeduzzaman, M.K. Alamgir along with eminent economists, diplomats, representatives from donors and business enriched the workshonp. Before we take up the issues, let us remember that the concept of regional cooperation or integration of the economies of Bangladesh and India is not new. These two economies were more integrated before the partition in 1947 when protective walls were erected to restrict the flow of goods and services across the border. After our independence, Bangabandhu Sheikh Mujibur Rahman visualised Bangladesh as "Switzerland of Asia," implying that the country would be the hub of trans-country trade. Switzerland is a country with the highest density of transit facilities, but the country is still one of the most secured and developed countries in Europe. Dr. Masihur Rahman pointed out that the aims of cooperation with India are: (a) well-being of the people through sustained economic development, accelerated via cooperation with neighbouring countries. Peace and stability are prerequisite for sustained growth, and hence require regional cooperation; (b) getting rid of extremism, cross-border crimes and secessionists movements, and diverting scarce resources to productive pursuits; (c) use of the weapon of language (diplomacy/consultancy) rather than language of weapon (war/enmity) to solve emerging problems, and (d) replacement of reciprocity by broad-based (comprehensive or holistic) approach to cooperation. The benefits from such agreements could be higher FDI from India, more access to the markets of the north-eastern states, reduction of acute power shortage in northern part of Bangladesh (due to import of 250 MW electricity), more cargo at Mongla port (which may contribute to the growth of the lagging southern region), the credit line of $1 billion equivalent IRS (at 1.7 percent interest rate for 20 years with a grace period of 5 years) along with its fungibility and lack of conditionality could be spent on welfare oriented projects at Bangladesh's will. The dredging of our rivers with Indian assistance is another "only win" game. Dr. Sadiq Ahmed identified low labour productivity, weak trade logistics, and infrastructural constraints as the reasons for Bangladesh's backwardness. He observed that of the 30 border districts, some 29 districts are a part of the lagging regions, and growth and investment in the lagging regions will benefit tremendously from reducing cross-border restrictions on trade, transport and investment. Removal of these restrictions will also facilitate agglomeration economies and production sharing arrangements, as in East Asia under Asean plus 3. The sea could be a vast source of revenue and economic growth as renowned sea ports of Rotterdam, Singapore and Hong Kong have shown. Through better land, air and sea connectivity, Bangladesh can become an Asian commercial hub. The improvement of bilateral relations with India could increase Bangladesh's exports from $350 million to $800-900 million. The overall integration could enhance GDP growth rate by 2 percentage points. Trade and investment opportunities in the north-eastern part of Bangladesh are huge as agro-processors of our country can take advantage of the raw materials lying there. By and large, we are in a win-win situation through the Agreements reached with India. Bangladesh has agreed to allow India to use our ports at a price for the services rendered. Like any other country of the world, we had been allowing our airports to be used by other airlines in exchange for a payment; tenants have been cultivating land; owners rent out houses for rent etc. None of them implies a hand-over of assets. Empirical evidences shows that relatively more open economies are relatively better off than closed ones. Trade is always a positive-sum game. We should see whether our overall welfare improves from transit and trade rather than estimating whether we gain less than others or vice versa. There are many countries in world that provide transit facilities to others (e.g. Switzerland) but hardly face any security problem. High-tech scanners could make the job simple. The imperative now is to implement the agreements as fast as possible, with the proviso that long-term engagement is required to make the outcome sustainable. In each stage of the graduation, the steps taken must be transparent, accountable and widely discussed.
Abdul Bayes is a Professor of Economics at Jahangirnagar University.
E-mail:abdulbayes@yahoo.com)

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