Key Highlights:
- During the 9th Commerce Secretary Level meeting in Thimpu on April 24 and 25, officials from Bangladesh and Bhutan explored cooperation
- Bangladesh proposed Bhutan to rejoin the BBIN Motor Vehicles Agreement framework
- Bangladesh ranks as Bhutan’s 2nd-largest trading ally following India
Bangladesh and Bhutan have recently affirmed their commitment to strengthen bilateral trade by tackling both tariff and non-tariff barriers. Both countries have committed to conducting trial runs on exports and imports to implement the Traffic in Transit Agreement and its Protocols. They have also pledged to swiftly finalize a Customs Mutual Assistance Agreement (CMAA), aimed at exchanging information and reports related to customs matters between the two nations.
One significant proposal was Bangladesh’s call for Bhutan to rejoin the Bangladesh, Bhutan, India, and Nepal (BBIN) Motor Vehicles Agreement (MVA) framework, a move that would foster regional connectivity with neighboring countries and facilitate trade. Both sides expressed satisfaction with the notable increase in trade volume attributed to the Preferential Trade Agreement (PTA) already in place.
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During the two-day 9th Commerce Secretary Level meeting held in Thimpu, Bhutan’s capital, on April 24 and 25, officials from both nations discussed various avenues for cooperation. Leading the delegation from Bangladesh was Senior Secretary Tapan Kanti Ghosh from the Ministry of Commerce, while Bhutan was represented by Secretary Tashi Wangmo from the Ministry of Industry, Trade, and Employment. Among the topics covered were initiatives to enhance export facilities, investment, transit, communication, power, energy cooperation, and tourism. Additionally, they addressed challenges at customs and land ports.
Bangladeshi Exports Find New Home in Bhutan
Key Imports from Bangladesh to Bhutan
- Rice: 2.54%
- Soya Bean Oil: 1.27%
- Pharmaceutical Products: 0.99%
Bangladesh ranks as Bhutan’s 2nd-largest trading ally following India. Bhutan’s trade has consistently focused on its two neighboring nations, primarily India and Bangladesh, collectively comprising 86% of its total trade volume.
In 2020, Bangladesh established its inaugural preferential trade agreement with Bhutan, marking a significant milestone. This bilateral pact marked Bangladesh’s first such agreement with any nation since gaining independence in 1971.
Bangladeshi products now enjoy duty-free access to 100 products in the Bhutanese market. 3 key imports from Bangladesh’s priority sectors to Bhutan are rice, soya bean oil, and pharmaceutical products for medical purposes, constituting 2.54%, 1.27%, 0.8%, and 0.99% of the total respectively.
Conversely, 34 Bhutanese products were granted duty-free access to Bangladesh, encompassing items like fruits, ginger, juices, dairy products, and construction materials such as cement and wooden furniture.
Customs Delays: A Bottleneck for Bangladesh’s Trade
In 2018, Bangladesh ranked 100th in the Logistics Performance Index (LPI), contrasting with India’s 44th rank. Bhutan’s LPI rank declined to 149 in 2018 from 143 in 2014. A Time Release Study in 2022 by World Customs Organization (WCO)-trained customs officials revealed customs consumed 7-8% of release time, while port authorities took 12-20%. The study covered Chattogram seaport, Benapole landport, and Hazrat Shahjalal International Airport, with release times ranging from 7 to 11 days.
Food items took over 11 days in Chattogram and 5-6 days in Benapole and Dhaka. Benapole customs took 9 days for pharmaceuticals and 10 days for garment raw materials, while Dhaka customs took 8 and 5 days, respectively.
For food items, Benapole and Dhaka ports averaged 5-6 days, exceeding 11 days in Chattogram. For pharmaceuticals and garment raw materials, Benapole customs took 9 and 10 days, respectively, while Dhaka customs took 8 and 5 days, respectively.
However, all three customs averaged a 12-day release time for capital machinery.
Bhutan faces challenges accessing global markets due to transport and logistical constraints, hindering exports. One proposal suggests reassessing the BBIN Motor Vehicle Agreement to enhance connectivity among land ports, addressing some challenges.
MVA Agreement: A Game-Changer for Regional Trade, Despite Bhutan’s Hesitation
A framework, signed on June 15, 2015, among Bangladesh, Bhutan, India, and Nepal, aimed at enhancing regional connectivity and facilitating smooth transport to encourage trade among the BBIN countries. While Bhutan has yet to ratify the Agreement, Bangladesh, India, and Nepal have already done so.
However, citing concerns over its current infrastructure and to maintain a carbon-negative status, Bhutan opted out of the MVA agreement. But, the other 3 nations are deliberating on the subsequent steps to implement the agreement. Within the BBIN framework, Bangladesh is actively improving land port infrastructure and modernizing customs facilities in Chittagong and Dhaka.
This initiative is anticipated to yield significant benefits for Bangladesh’s economy by facilitating increased cross-border trade at reduced costs. Through BBIN, Bangladesh stands to gain from a seamless multimodal transport system, enhanced sub-regional trade collaboration, and improved trade connectivity.
Tourism Growth Projections for Bhutan and Bangladesh
Bangladesh’s Travel & Tourism market is set to grow by 4.80% annually from 2024 to 2028, reaching US$2,634.00 million by 2028, with revenue forecasted at US$2,184.00 million within the same period. To boost tourism, Bangladesh can emphasize its distinctive and authentic experiences, lesser-known destinations, and opportunities for cultural immersion. Bangladesh could attract a good number of Bhutanese tourists by developing and improving Buddhist tourist places.
On the other hand, Bhutan saw a significant increase in tourist arrivals, welcoming 25,003 guests from January to March 2024, a substantial rise from the 12,696 arrivals in the same period of 2023. The nation has set an ambitious goal of achieving 300,000 overall arrivals for 2024.
To enhance tourism, Bhutan could prolong tourist stays and streamline departure procedures. Offering discounts on the Sustainable Development Fee (SDF) for longer stays and ensuring reliable domestic flights are vital. The daily SDF per person was initially $200, reduced to $100 last year for international tourists.
The establishment of an international airport and the development of Gelephu Mindfulness City could further benefit the tourism sector by generating a spill-over effect.
Bangladesh’s Travel & Tourism Market Projection
- Projected Market Value by 2028: US$2,634.00 million
- Revenue Forecast for 2028: US$2,184.00 million
In conclusion, the recent bilateral talks between Bangladesh and Bhutan mark a significant step forward in their economic collaboration. By addressing trade barriers, enhancing regional connectivity, and simplifying customs processes, both nations are facilitating smoother cross-border trade and fostering economic development.
Additionally, the burgeoning tourism industries in both countries offer promising avenues for cultural exchange and exploration of heritage sites. By capitalizing on their strengths and promoting cooperation, Bangladesh and Bhutan are poised to embark on a new era of economic prosperity and mutual benefit.
