The BBIN Motor Vehicle Agreement was signed in June of 2015 to promote trade and connectivity by enabling seamless movement of cargo and passenger vehicles across the borders of Bangladesh, Bhutan, India and Nepal. The initiative aims to increase cross border trade, expand economic activities, generate employment opportunities and improve economic integration among the countries through the smooth flow of vehicles across this sub-region. Similarly, seamless movement of goods and people through multi-modal connectivity is also expected to contribute to cheaper and more sustainable logistics. Six years later, the agreement is still to be implemented, and the modalities of the protocols are still being discussed. While Bangladesh, India, and Nepal ratified the agreement, Bhutan had withheld its ratification citing environmental concerns. Bhutan, however, has given its consent to implement the agreement among the other three countries. In the last meeting of BBIN MVA held in February 2020, member countries discussed and finalized a draft Memorandum of Understanding (MoU) to be signed among the three countries to implement the Agreement.
The implementation of the BBIN MVA would not only improve the country’s economy by expanding trade, but also improve the local economies of the corridors through which trade is carried out. The seamless movement of vehicles within the sub-region would eliminate time-consuming procedures and reduce logistics costs of transshipments, making trade more efficient. Similarly, the initiative also facilitates multi-modal transport opportunities such as integrated roadways, railways, and inland waterways further reducing trade costs and carbon emissions at the same time. Facilitation of such connectivity would definitely open up various doors for Nepal may it be the improvement of sustainable supply chains, access to bigger markets for local MSMEs, expansion of Nepal’s electricity export market, or increased inflow of foreign investment and technology transfer.
Challenges for Nepal
Although the implementation of the BBIN MVA as a cross-border agreement in itself is a challenge in the current context, Nepal’s internal constraints has also capped the country’s potential to benefit from the initiative. Some of the existing hurdles are as follows:
Inadequate Infrastructure: It is unsurprising that Nepal lacks the required level of infrastructure to facilitate the ever-increasing volume of trade. The Inland Container Depots (ICDs) and Integrated Check Posts (ICPs) in key border points connecting Nepal to the BBIN sub-region such as Birgunj, Biratnagar, Bhairahawa and Kakarbhitta are in need of upgradation and additional facilities to handle increased trade. Most of the ICDs lack adequate storage facilities and warehouses, mechanized handling equipment, refrigerated container stations, freight stations and adequate parking space for trucks. Moreover, the areas around the ICDs and ICPs lack enough basic facilities like rest rooms, accommodations and refreshment centers.
Lack of coordination in policies: The asymmetry in regulations related to trade and transport among the BBIN countries has also posed as a hindrance for effective implementation of the BBIN agreement. For example, Nepal plans on facilitating its ICDs with railways for seamless multi-modal connectivity but there currently are no railway laws in the country. Similarly, although India has consented access to three of its inland waterways, there are no regulations to overlook waterways in Nepal yet. Even policies that do exist are most probably outdated and have not been reviewed to include changes in the trade environment such as the advancements in technology. The ambiguity related to concrete policies and regulations make implementation of the BBIN initiative challenging.
Underdeveloped technologies: Efforts have been made to integrate technology to improve trade procedures and reduce transaction costs. The progress in the Nepal National Single Window system, use of e-customs system by the Department of Customs and use of the Electronic Cargo Tracking System (ECTS) has contributed to some extent in moving towards paperless trade. However, in many areas, trade is still heavily paper based and going digital has been a challenge. Requirement of a number of paper-based documents, signatures, stamps, and clearance at multiple levels of bureaucracy has still been making international trade complex and expensive. Furthermore, the unreliability of support infrastructure such as computers, high-speed internet and 24/7 electricity can also be identified as hindrances in the integration of technology in the area aside from the fact that competent human resources to handle such technology and procedures are also in short supply.
Private-public collaboration: The lack of coordinated efforts between the private sector and government agencies to improve the sustainability and resilience of supply chains can be taken as a bottleneck for enhancing multi-modal connectivity. Lack of incentives, initiative, or support from the government to facilitate the capacity of private stakeholders to build sustainable and resilient supply chains by improving necessary infrastructure for seamless connectivity and trade procedures creates challenges for improving trade and connectivity. Collaboration and coordination between the private and public sectors to increase the involvement of relevant stakeholders while identifying the working modalities and policies are extremely low as per private stakeholders. Facilitating the private sector by promoting PPP model projects is necessary to formalize cross-border trade, which is largely informal at the moment.
Stakeholder perceptions: The perceptions towards the BBIN MVA among the stakeholders on the ground are varied with many viewing it as an Indian initiative with vested interest for India. The project is perceived as a threat to the jobs of stakeholders such as transporters, truckers who fear the loss of employment opportunities due to the seamless movement of containerized cargo aimed by the BBIN MVA. Similarly, the preference of Indian laborers and managers over Nepali ones, and the fact that Indian trucks are given a 72-hour permit to travel inside Nepal with limited regulations while Nepali trucks are strictly regulated and are required to unload upon crossing the border has also fueled negative perceptions.
Lack of awareness: Awareness and information among the stakeholders and the public regarding the BBIN MVA is limited. The lack of awareness and advocacy on the benefits arising out of the BBIN initiative for local economies and employment opportunities has shaped negative perceptions among the ground level stakeholders. Similarly, the absence of enough mass media coverage of the issues and developments on trade and connectivity has limited the interventions from relevant stakeholders to push government authorities to speed up infrastructural projects to improve seamless connectivity under the BBIN initiative. Likewise, lack of awareness and access to information has also hampered adoption of the required technologies. Furthermore, media houses and research organizations have also been unable to provide enough focus on cross border trade and issues surrounding it.
The Way Forward
Addressing the challenges of the implementation of the BBIN MVA for Nepal would include a number of interventions. First of all, political will, and intent from the people at the top is of the utmost importance. Initiation from the policy makers in improving trade infrastructure and connectivity and removing obstructions in collaboration with the private sector is going to be a key determinant for the smooth implementation of the BBIN MVA.
Unless there is political ownership and commitment from the decision-making authorities, the bureaucracy, the private sector or civil societies alone would not be able to effectively take the initiative forward.
Likewise, awareness and advocacy are equally necessary. Disseminating information regarding the benefits and concerns of the BBIN MVA to stakeholders on the ground as well as the general public would be required. Building awareness among stakeholders regarding various policy initiatives would ensure proper absorption of such initiatives by different groups and help identify concerns which can be addressed to ensure a win-win situation for all. Media, civil societies, and different trade associations would play a crucial role to build awareness. With the development of multi-modal connectivity options and reduced traffic on roads after the implementation of the MVA, unemployment for laborers engaged in transshipment, and reduced employment opportunities and earnings in highways would of course be of concern. Therefore, alternative employment opportunities should be provided to concerned stakeholders before implementation of the policies.
Similarly, the development of infrastructure is crucial for the success of the BBIN MVA for Nepal. Therefore, public-private collaboration in improving and upgrading the trade infrastructures both physical and digital will be critical. Efforts towards going paperless and increasing reliance on technology for smoothening procedures and ensuring transparency must be sped up, while making sure costs are not increased. Furthermore, ensuring that there are human resources who can handle the technology and procedures efficiently is also important, which is why skill development training and capacity building are required.
In order to take full advantage of the opportunities arising from the implementation of the BBIN MVA, Nepal first needs to overcome its internal constraints.
Sugam Nanda Bajracharya is an MBA graduate from Stamford International University. He has worked in the financial accounting field for a couple of years and has keen interest in corporate finance, financial planning, and investment management. Currently, he is working as a Beed fellow at Beed management.