- Nepal’s allocation of land for monastery construction in Lumbini appreciated by Bangladesh
- Signed between Foreign Service Academy of Bangladesh and Foreign Service Institute of Nepal
- Nepal seeks more trade and investment cooperation, urges removal of ODCs on exports to Bangladesh
Bangladesh and Nepal have affirmed their commitment to enhance trade and investment collaboration, with a focus on implementing the BBIN motor vehicle agreement framework. Additionally, the signing of a Memorandum of Understanding (MoU) between the foreign service academies of both nations highlights the importance of fortifying institutional bonds.
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During the third round of Foreign Office Consultations held in Kathmandu on April 19, 2024, delegations led by Nepal’s Foreign Secretary Sewa Lamsal and her Bangladeshi counterpart Masud Bin Momen convened. They assessed bilateral relations and expressed contentment with the strong rapport between their countries, as stated by the Ministry of Foreign Affairs.
The foreign secretaries deliberated on various mutual interests, agreeing to foster collaboration across multiple sectors such as trade, transit, energy, tourism, culture, and education.
Expanding Trade and Connectivity
Both secretaries emphasized the operationalization of the BBIN (Bangladesh, Bhutan, India, and Nepal) motor vehicle agreement framework to expand trade and connectivity and create more opportunities to promote people-to-people contacts. The BBIN is a sub-regional initiative among the four South Asian nations.
Foreign Secretary Lamsal stressed the exploration of untapped potential in economic, cultural, and educational areas and proposed establishing meaningful collaborative partnerships, including in the private sector. Nepal seeks to pursue more trade and investment cooperation with Bangladesh. Lamsal urged the Bangladeshi side to explore investment opportunities in Nepal, including in the hydropower sector.
Nepal-Bangladesh Energy Collaboration
The foreign secretary of Bangladesh emphasized an expeditious conclusion of a tripartite power agreement between Bangladesh, India, and Nepal soon, which will help Bangladesh import power from Nepal. Momen thanked Nepal for allocating land for the construction of a monastery in Lumbini, calling it a milestone in the bilateral relations.
Nepal and Bangladesh are focusing on energy collaboration, with Nepal aiming to increase its electricity production to over 5,000 MW in five years, becoming an energy surplus nation. Bangladesh seeks to invest in and import surplus energy from Nepal, aligning with its summer peak demand.
The two countries signed an energy cooperation agreement in 2018, planning to import up to 9,000 MW of hydropower from Nepal by 2040.
A Joint Steering Committee meeting in 2022 saw Nepal agreeing to export 40-50 MW of energy to Bangladesh.
However, successful power trade requires Indian consent, highlighting the strategic importance of trilateral cooperation. Both nations are exploring investments in hydropower and gas, with plans for dedicated transmission lines and solar energy collaborations.
This energy partnership signifies a significant step towards sustainable development and regional energy security.
Nepal-Bangladesh Economic Cooperation
Economic Cooperation Overview
Exports: Nepal’s key exports to Bangladesh are lentils, oil, cardamom, wheat, vegetable seeds, handicrafts, pashmina and other agricultural products whereas industrial raw materials, medicine, chemicals, textiles and clothing, jute products and electrical and electronic goods make up the majority of Nepal’s imports from Bangladesh.
Export Growth: Nepal’s exports to Bangladesh grew annually by 13.2% over 24 years, reaching US$12.1 million in 2019. Bangladesh’s exports to Nepal grew by 17% annually, totaling US$48.6 million in 2019.
Recent Trade: In 2021, Nepal exported US$5.94 million to Bangladesh and imported US$128.8 million.
Education Exchange: Around 4,000 Nepalese students study in Bangladesh, while Bangladeshi students pursue higher education in Nepal.
Tourism: In 2017, Nepal welcomed 29,060 tourists from Bangladesh, though numbers reduced due to the COVID-19 pandemic. Biman and Himalaya Airlines operate regular flights between Dhaka and Kathmandu.
Nepal-Bangladesh Hydropower Deal Nears Finalization
Bangladesh has been offered a new opportunity to explore the import of cost-effective electricity from Nepal shortly. This opportunity arises as Nepal prepares to commence construction on a new 1,040MW hydropower plant along the Arun River.
Nepal, seeking approval for the project, reached out to Bangladesh for their ‘no objection’ on December 28, 2023, following the World Bank’s requirements, which is partially funding the $1.9 billion Upper Arun Hydroelectric plant project.
The plant’s construction, located 200 kilometers east of Kathmandu, will begin in November 2024 targeting completion by 2034. Bangladesh is presently engaged in negotiations to determine the power tariff for its initial import of 40MW of hydropower from Nepal via India. Nepal has proposed a tariff of $0.07 per kilowatt hour (kWh), while Bangladesh is aiming for a lower tariff of $0.05.
The agreement for this 40MW power import is expected to be finalized before June 15. This proposed tariff highlights the cost-effectiveness of Nepal’s hydropower in comparison to coal or Liquefied Natural Gas (LNG) based power, which currently costs Bangladesh between Tk 14-15 per unit.
July 2023 saw Nepal’s electricity production surge to 10,536 GWh, a significant increase from the previous year’s 9,521 GWh, with a steady annual average of 1,243 GWh leading up to July 2023. The proposed Upper Arun Hydroelectric plant, with an optimal capacity of around 1,040MW, aims to ensure consistent energy supply domestically during dry seasons and facilitate clean electricity export to India and Bangladesh during monsoon seasons, according to the World Bank document.
Regional Cooperation and Multilateral Engagement
The foreign secretary of Bangladesh advocated for the expeditious conclusion of a tripartite power agreement involving Bangladesh, India, and Nepal, which would facilitate power import from Nepal and contribute to regional energy security. Both countries reiterated their commitment to revitalizing SAARC and strengthening BIMSTEC to promote regional cooperation. Additionally, they pledged to cooperate at various multilateral forums, with a focus on common interests such as-
- LDC graduation
- poverty alleviation
- climate change and
- safety and security of migrant workers
As the South Asian Association for Regional Cooperation (SAARC) faces challenges due to bilateral tensions between India and Pakistan, Nepal and other member states are exploring alternative avenues for regional collaboration. Nepal’s impending graduation from the UN’s Least Developed Country category underscores its evolving role on the global stage. In light of these developments, the signing of a memorandum of understanding between Nepal’s Institute of Foreign Affairs and Bangladesh’s Foreign Service Academy signifies a commitment to enhancing diplomatic cooperation and capacity building.
Conclusion
The third round of Foreign Office Consultations between Nepal and Bangladesh highlighted the importance of expanding trade and connectivity, exploring untapped potential, and promoting regional cooperation. The two countries agreed to pursue more trade and investment cooperation, emphasizing the operationalization of the BBIN motor vehicle agreement framework.
