There are few topics that spark more emotions and irrational thinking
than the issue of transit access through Bangladesh for neighboring countries. Due to the dominant presence of the large neighbor India, the discussion of transit issue in Bangladesh has been hijacked by politics contributing to the confused thinking and rationale. Transit is seen by many as “concession to India” and by some as “loss of sovereignty”. This confused thinking has clouded the underlying economic issues of transit. When the rest of the world is getting better integrated through transport network, trade and investment, Bangladesh and rest of South Asia remain isolated as a region. Legal trade among South Asian countries is very limited,investment flows are negligible and physical connectivity is highly restrictive. The lack of transit agreement for traffic between Bangladesh and other neighboring countries is a reflection of this broader anomaly. Deep suspicion, historical baggage and unhealthy politics remain as major constraints to strengthening economic relations between South Asian countries. Similar difficulties have also constrained the relationship between Bangladesh and India.
This is a lose-lose situation. An important breakthrough happened in January 2009 in the context of the visit of the Bangladeshi Prime Minister to India and the resulting joint communiqué issued in New Delhi on January 12, 2009 by the Prime Ministers of the two countries. Among other areas of cooperation, the communiqué provides the political framework for developing a broad-based transit agreement involving initially the two countries with provisions for broadening it to include Nepal and Bhutan. Nevertheless, controversy over the transit issue continues to prevail in Bangladesh, which is constraining the implementation of the agreements.
The objective of this article is to provide a framework that looks at the economics of transit and asks in what ways this is a right policy decision for Bangladesh. The article will show that transit is a part of a sensible economic policy that seeks to help Bangladesh accelerate economic growth and reduce poverty. More broadly, it is a good policy for South Asia in general and for the North-east sub-region of South Asia in particular. The economics of transit, the article will argue, also makes good politics. Transit access for neighbors opens up a whole host of political opportunities for addressing long-term difficult regional issues relating to immigration, water sharing, and security issues. The gains are win-win for all parties.
