The South Asian Association for Regional Cooperation (SAARC) process has been in limbo for the past decade, as Nepal has been unable to pass the chairmanship to Pakistan. While technical-level meetings are occasionally held, they lack momentum and effectiveness due to the indefinite postponement of high-level meetings and summits that guide the regional processes. SAARC has embraced diverse areas of cooperation, including trade and economy, social affairs, poverty alleviation, human resource development, energy, transport, and science and technology. It also houses four specialised bodies and five regional centres, indicating the potential strength of the organisation.

The 18th SAARC Summit, held in Kathmandu in November 2014, reaffirmed the commitment of the leaders in advancing regional integration, as outlined in the summit declaration. Their shared goal of establishing the South Asian Economic Union (SAEU) through a phased approach—progressing from a free trade area to a customs union, common market, and eventually a common economic and monetary union—was a promising step. Moreover, the leaders had pledged to deepen cooperation in areas such as investment, finance, energy, security, infrastructure, and people-to-people connectivity. The emphasis was on implementing programs, projects and initiatives in a prioritised, results-oriented, and time-bound manner.

However, the reaffirmations and commitments expressed in the Summit Declaration were overshadowed by tensions between the two largest economies in the region. Because of the growing hostility over territorial disputes and perceived security threats, the SAARC Motor Vehicle Agreement could not be signed during the 18th Summit, as Pakistani delegates refused to endorse it. This setback marked a turning point in the approach to transport connectivity as the agreement was pushed to a sub-regional level constituting four countries —Bangladesh, Bhutan, India, and Nepal (BBIN). The four nations continued negotiations and ultimately signed the BBIN Motor Vehicle Agreement on June 15, 2015.

The origins of BBIN can be traced back to 2001 when a sub-regional group of the four countries was formed. The need for such a group was driven by a shared desire to promote economic growth, improve infrastructure, and enhance connectivity in the sub-region, thereby laying the foundation for broader regional integration. The initiative received support from the Asian Development Bank (ADB), which provided both financial and technical assistance, as well as hosting an ad hoc secretariat for projects focused on trade, transport and connectivity.

Over time, the sub-regional collaboration expanded to include three more countries—the Maldives, Sri Lanka, and Myanmar—bringing the total membership to seven. By the end of 2023, the South Asia Subregional Economic Cooperation (SASEC) group had signed and implemented 86 Asian Development Bank-financed investment projects with an estimated cost of $20.54 billion. These projects largely focused on transport sector development, economic corridor initiatives, trade facilitation, and information and communication technology. Additionally, the ADB has supported efforts to strengthen Covid-19 recovery and funded two tourism-related projects.

Agreement in Limbo

The BBIN Motor Vehicle Agreement aims to facilitate the cross-border movement of passenger and cargo vehicles, enhancing trade, investment and the mobility of people. While the agreement was signed by all four nations, Bhutan has temporarily opted out, citing concerns over potential damage to its natural environment and transport infrastructure from the influx of foreign-registered vehicles. As a result, the responsibility for negotiating the protocol to operationalise the agreement now rests with the remaining three countries.

The signing of the agreement sparked hope for the creation of an interconnected transit and transport network across the sub-region. Efforts to improve transport infrastructure—such as roads, highways, bridges, and border facilities—have been initiated with the technical and financial support of multilateral and bilateral donors. However, the development of the Protocol, a crucial instrument for the agreement's implementation, has been stalled for nearly nine years, with no clear timeline for its completion. A few test runs of vehicles across borders have taken place, but they have done little to advance the finalisation of the Protocol. As a result, the broader objectives of boosting intra-regional trade and connectivity through the full operationalisation of the agreement remain elusive.

Bangladesh as the Transit Provider

Nepal signed a transit agreement with Bangladesh in 1976. The agreement grants Nepal access to two seaports and four land ports in Bangladesh. Additionally, the transit agreement with India allows Nepal to use the ports of Kolkata, Haldia, and Visakhapatnam for its transit traffic. However, transiting through Bangladesh involves double transit procedures and requires crossing three international borders and five customs checkpoints. As per the tripartite arrangements, Nepal can use one road border crossing (Banglabandha-Phulbari) and two railway crossings (Rohanpur-Singhabad and Biral-Radhikapore) to transport goods to Bangladesh via India.

Over the past decade, India and Bangladesh have strengthened their transit and transshipment arrangements to connect mainland India with its landlocked northeastern states through Bangladeshi territory. These agreements include the transshipment of goods via Chattogram and Mongla ports (2018), a protocol for using Bangladesh’s inland waterways (2015), and several memorandums for the development of energy infrastructure, roadways, bridges, and port facilities, alongside expanded bilateral railway connectivity. These infrastructure and connectivity projects are expected to link landlocked countries like Bhutan and Nepal to the blue economy of coastal nations. Another key initiative is the 2015 Coastal Shipping Agreement, which enables direct shipping between designated Indian and Bangladeshi ports without transshipment through third-party ports like Singapore or Colombo.

The foundation for transit trade through Bangladesh, connecting India's northeastern states, was laid by the 2010 transit agreement and its 2015 protocol. This arrangement is expected to boost trade between India and Bangladesh, particularly by increasing Bangladesh’s exports to India’s northeastern regions. On the positive side, Bangladeshi goods such as clothing, cement, and food products can now be directly exported to Nepal and Bhutan and vice versa. There is a potential of extending this trade to Myanmar. However, some groups in Bangladesh, including political parties, have voiced concerns over the asymmetric distribution of benefits, arguing that India gains more from the arrangement. They say that the agreement serves India's strategic and economic interests more than that of Bangladesh.

Political Upheavals and Possible Impacts

Opposition politics in Bangladesh had been simmering under the repressive rule of then Prime Minister Sheikh Hasina. The Bangladesh Nationalist Party (BNP), the major opposition force, boycotted the general election held last January, while other smaller parties were either marginalised or suffered significant losses. Hardline Islamist groups, such as Jamaat-e-Islami, were staunchly opposed to Hasina's liberal policies. The country was sitting on a powder keg, which exploded when the government decided to allocate quotas in government services to the families of veterans who fought for Bangladesh’s independence in 1971. This sparked peaceful protests by students and activists in Dhaka and other major cities, which the Hasina government attempted to suppress through internet shutdowns, curfews and violent crackdowns. The escalating violence led to the deaths of over 300 people, yet the protests continued unabated. Eventually, then Prime Minister Sheikh Hasina was forced to flee the country, and an interim government was formed with Nobel laureate Dr Muhammad Yunus as its head.

Though it may be too early to fully assess the new government's stance on regional integration and cooperation, the interim administration in Dhaka is cautiously navigating its relationship with its immediate neighbours. Fundamentalist Islamic groups and opposition parties, which heavily criticised the policies of the previous government, may steer away from the path taken by Hasina’s regime. Social challenges, such as protecting the lives and property of religious minorities from extremist attacks, remain pressing issues. Preventing vandalism in temples and monasteries is another key concern for the interim government. It is also not certain how the BBIN Motor Vehicle Agreement, which aims to create an interconnected road transport network across the sub-region, will fare under the new administration. Many fear that the foundation of sub-regional trade, transport, and connectivity—still in the process of being established—could be torn apart under the current political instability.

Conclusion

Bangladesh is an important trade partner for Nepal with multidimensional relations that span trade, transit, tourism, culture and social exchange. In recent years, cooperation in the energy sector has seen significant progress. Bilateral discussions and trilateral cooperation on exporting electricity from Nepal via India are well underway. There is also potential for expanding bilateral trade, as both Kathmandu and Dhaka are exploring the possibility of negotiating preferential trade agreements. Nepal's key exports to Bangladesh include medicinal herbs, lentils, tea, ginger, and handicrafts, while its imports consist of readymade garments, jute and textile products, pharmaceuticals, and electronic goods.

Tourism is another important facet of this relationship, with a significant number of Bangladeshi tourists visiting Nepal, while many Nepali students pursue higher education in Bangladesh, particularly in fields such as engineering, medicine, science, and technology. The bilateral relationship is set to expand further with the development of improved connectivity, including enhanced road, rail, bridge, and inland waterway links.

Both Nepal and Bangladesh are on track to graduate from Least Developed Country (LDC) status in 2026, and they share similar approaches to addressing market access challenges during the transition. In this context, bilateral and sub-regional collaboration is more crucial than ever, particularly in strengthening connectivity and promoting digital integration and people-to-people exchanges. As political changes unfold in Bangladesh, there is hope that the spirit of promoting mutual welfare will prevail, ensuring that the gains made through sub-regional cooperation continue to advance.

(Ojha is a former secretary of the government of Nepal)

(The opinion article was originally publihsed in the   October, 2024 issue   of the New Business Age Magazine.)