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The recent withdrawal of transshipment permission by India to Bangladesh for third-country exports has sparked significant debate, particularly in Bangladesh, with some even advocating for retaliatory measures. This arrangement, initially established in 2020, was intended as a gesture of solidarity during the height of the Covid-19 pandemic when South Asia was grappling with severe disruptions. Bangladesh, heavily reliant on its garment manufacturing sector, faced challenges in fulfilling export orders for essential health gear due to flight and shipping restrictions. India's decision to allow Bangladesh to utilize its Land Customs Stations (LCSs) and Integrated Check Posts (ICPs) proved crucial in enabling the country to meet the rising demand for ready-made garments (RMG). This humanitarian act not only facilitated Bangladesh's export capabilities but also instilled confidence during a period of immense uncertainty. The vital Petrapole-Benapole border continued operations, ensuring the smooth flow of goods and bolstering trade relations between the two nations.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data highlights the positive impact of this arrangement, revealing that Bangladesh was among the few countries that witnessed an increase in global exports, including RMG, during the pandemic. Specifically, Bangladesh's exports rose from $33.67 billion in 2019-20 to $38.79 billion in 2020-21, with RMG exports increasing from $27.95 billion to $31.46 billion. This upward trend continued into 2021-22, with total exports reaching $52.08 billion and RMG exports soaring to $42.61 billion, representing a remarkable 35% increase. These figures underscore the significance of India's support in enabling Bangladesh to capitalize on the global demand for its garment products during a challenging period.
Furthermore, the BGMEA's records indicate that the garment industry in Bangladesh transshipped over 34,900 tonnes of apparel products, valued at $462.34 million, through India to 36 countries between January 2024 and March 2025. The primary destinations for these exports included the United States, the European Union, the United Arab Emirates, and Australia. Given the limitations of ocean shipping in meeting immediate global demands, the Dhaka-Delhi multi-modal cargo route provided a faster and more efficient solution for Bangladesh. This route proved particularly beneficial for sportswear giants like Decathlon and global garment brands such as Zara, H&M, and Gucci, enabling them to fulfill international orders with lower costs and timely deliveries. The Dhaka-Delhi route was also utilized by Japanese retail chains like UNIQLO, as well as Indian companies like Reliance and Aditya Birla Group, for the import of Bangladeshi cotton apparel. The establishment and utilization of this transshipment route represent a significant achievement in fostering stronger economic ties between India and Bangladesh, showcasing the potential for collaborative initiatives to drive growth and development.
However, the underlying challenges within Bangladesh's export infrastructure became increasingly apparent. The Dhaka International Airport, being the primary air export zone, faced capacity constraints, while the Chattogram port primarily handled ocean shipments. The Pangaon International Container Terminal in Dhaka, though operational, could only handle international cargo shipments on a limited scale. Although the Mongla and Ashuganj ports are part of the Indo-Bangladesh Protocol Route (IBPR), they primarily handle import shipments other than RMG. The cargo terminal at the new airport in Dhaka remains non-operational, further exacerbating the infrastructure deficit. In contrast, the cargo facility at Delhi Airport is strategically located and well-connected to Bangladesh via rail and road through Kolkata. Spanning 150 acres, the Delhi Airport facility boasts state-of-the-art infrastructure, including two integrated cargo terminals, an on-airport logistics centre, and a vast airline network comprising 67 international and 79 domestic destinations served by over 65 air carriers and 20 freighter airlines. Despite domestic opposition, India extended the use of this advanced infrastructure to Bangladesh. Delhi's air cargo terminal subsequently established the "Transshipment Excellence Centre" (TEC) to provide seamless and efficient transshipment services. Although this facility resulted in some congestion at the cargo terminals, India absorbed the environmental costs and did not charge any fees, further demonstrating its goodwill towards Bangladesh.
Therefore, India's decision to rescind the 2020 agreement on April 8 will inevitably have a significant impact on Bangladesh's third-country trade, increasing both costs and delivery times. It will also affect bilateral relations between the two countries. This supply chain disruption occurs against the backdrop of existing challenges in the Red Sea, where attacks on vessels have forced both Indian and Bangladeshi ships to reroute around the Cape of Good Hope, leading to increased travel times and costs. As Bangladesh aspires to become a $1 trillion economy by 2031, it is crucial to address its infrastructure deficit, a lesson learned from India's post-liberalization experience. Without significant improvements in infrastructure, Bangladesh's economic ambitions will be difficult to achieve. The global garment brands will need to rethink their sourcing strategies to accommodate these changes. Given the increasing uncertainties in the global trade order, particularly in the face of protectionist policies, Bangladesh must improve its trade infrastructure and the quality of its exports to maintain its global standing in RMG, pharmaceuticals, leather products, and processed foods. The need for faster airports and seaports is now more urgent than ever. The cargo terminal at the upcoming deep sea port at Matarbari, expected to be operational in 2027, will be a critical addition to Bangladesh's infrastructure. As a country with limited options in the silted Bay of Bengal coast, Bangladesh's transition to the developing world requires peaceful coexistence and deeper regional integration with India, South Asia, and Southeast Asia.
The decision highlights the precarious nature of relying on temporary measures and the importance of self-sufficiency in infrastructure. While India's initial gesture was undoubtedly helpful, it also exposed the vulnerability of Bangladesh's export sector to external factors. Moving forward, it is imperative for Bangladesh to prioritize investments in its own air and sea infrastructure to enhance its competitiveness and resilience in the global market. This includes expediting the construction of the new cargo terminal at Dhaka Airport, upgrading the Chattogram and Mongla ports, and ensuring the timely completion of the Matarbari deep sea port. Furthermore, Bangladesh should explore alternative trade routes and partnerships to diversify its export options and reduce its dependence on a single transit route. The current situation presents an opportunity for Bangladesh to address its long-standing infrastructure challenges and emerge as a more robust and self-reliant trading nation. The government should work closely with the private sector to attract investments in infrastructure projects and streamline customs procedures to facilitate trade. Additionally, fostering closer cooperation with regional partners, including India, through initiatives such as the BBIN (Bangladesh, Bhutan, India, Nepal) framework, can help create a more integrated and efficient trade ecosystem in the region. By taking proactive measures to strengthen its infrastructure and diversify its trade relationships, Bangladesh can mitigate the impact of disruptions like the recent transshipment withdrawal and secure its long-term economic prosperity. The need for a comprehensive and sustainable trade strategy has never been more apparent, and Bangladesh must act decisively to address its challenges and capitalize on its opportunities in the evolving global landscape.
Building upon the analysis of the India-Bangladesh transshipment dynamics, it is essential to delve deeper into the implications of this development for the broader regional trade landscape. The withdrawal of transshipment permission not only affects Bangladesh's export competitiveness but also raises questions about the future of regional connectivity initiatives. The BBIN (Bangladesh, Bhutan, India, Nepal) Motor Vehicles Agreement, for instance, aims to facilitate seamless cross-border movement of goods and people, but its implementation has faced numerous challenges, including infrastructure bottlenecks and bureaucratic hurdles. The current situation underscores the need for a more holistic approach to regional integration that addresses these underlying issues. One of the key areas that requires attention is the harmonization of customs procedures and documentation requirements across borders. The existing discrepancies in these areas often lead to delays and increased transaction costs, hindering the smooth flow of trade. By adopting standardized procedures and leveraging technology to streamline customs processes, regional countries can significantly reduce these barriers and enhance the efficiency of trade. Another important aspect is the development of multimodal transport infrastructure that connects different modes of transportation, such as roads, railways, and waterways. This requires strategic investments in infrastructure projects that improve connectivity between key economic centers in the region. For example, the development of inland waterways and the expansion of railway networks can provide alternative routes for transporting goods, reducing reliance on congested road networks. Furthermore, it is crucial to foster closer cooperation between the private sector and the government to identify and address the specific challenges faced by businesses involved in cross-border trade. This can involve providing access to information, facilitating access to finance, and creating a conducive regulatory environment for trade. By working together, governments and businesses can create a more vibrant and dynamic regional trade ecosystem that benefits all stakeholders. In addition to these measures, it is important to promote greater awareness and understanding of the benefits of regional integration among the general public. This can be achieved through educational programs, public awareness campaigns, and media outreach activities. By fostering a sense of shared identity and promoting a common vision for regional prosperity, countries can build stronger bonds of cooperation and create a more resilient and sustainable regional economy. The India-Bangladesh transshipment situation serves as a wake-up call for the region, highlighting the urgent need to address infrastructure gaps, streamline trade procedures, and foster closer cooperation to promote regional integration.
In light of the complex interplay of factors influencing the India-Bangladesh trade relationship and regional economic integration, it is imperative to explore potential strategies that could mitigate the negative impacts of the transshipment withdrawal and foster a more resilient and sustainable trade environment. One such strategy involves the proactive diversification of export markets by Bangladesh. While the United States and the European Union remain significant destinations for Bangladeshi exports, exploring new markets in Asia, Africa, and Latin America could help reduce the country's dependence on traditional trade partners. This diversification strategy would require Bangladesh to conduct thorough market research to identify potential opportunities, adapt its products and services to meet the specific needs of different markets, and establish strong trade relationships with new partners. Another crucial strategy involves investing in technology and innovation to enhance the efficiency and competitiveness of Bangladesh's export sector. This could involve adopting advanced manufacturing techniques, implementing automation and robotics in production processes, and leveraging digital technologies to streamline supply chain management. By embracing technology and innovation, Bangladesh can improve its productivity, reduce its costs, and enhance the quality of its products, making them more attractive to global buyers. Furthermore, promoting sustainable and ethical business practices is essential for maintaining Bangladesh's reputation as a reliable and responsible trading partner. This includes ensuring fair labor practices, protecting the environment, and combating corruption. By adhering to high ethical standards, Bangladesh can build trust with its trade partners and attract investments from socially responsible businesses. In addition to these strategies, it is important to strengthen regional cooperation and dialogue to address trade-related issues and promote a more harmonized regulatory environment. This could involve establishing joint working groups to identify and resolve trade barriers, sharing best practices on trade facilitation, and promoting the adoption of common standards and regulations. By working together, regional countries can create a more conducive environment for trade and investment and foster greater economic integration. Finally, it is crucial to ensure that trade policies are aligned with broader development goals, such as poverty reduction, job creation, and environmental sustainability. This requires a holistic approach that takes into account the social and environmental impacts of trade and promotes inclusive and sustainable growth. By integrating trade into broader development strategies, countries can ensure that trade benefits all segments of society and contributes to long-term prosperity. The India-Bangladesh transshipment situation underscores the need for a proactive and comprehensive approach to trade policy that addresses both immediate challenges and long-term opportunities. By diversifying export markets, investing in technology and innovation, promoting sustainable business practices, strengthening regional cooperation, and aligning trade policies with broader development goals, Bangladesh can build a more resilient and sustainable trade environment that benefits all stakeholders.