With a population of around 1.8 billion people and a proposed growth target of 6.7%[i], South Asia is one of the largest consumers of goods and services and the fastest-growing region in the world. However, the region’s export basket is too fragile to sustain its high growth. Currently, the intra-regional trade accounts for only 5% of South Asia’s total trade, which is a very trivial figure as compared to the intra-regional trade in East Asia or the Pacific, which stands at 50% and 22%, respectively[ii]. Existence of significant man-made barriers, high tariffs and para-tariffs, poor transportation and logistics infrastructure, non-transparent non-tariff measures (NTM) and inadequate foreign direct investment (FDI) has severely affected the value chain in this region. Hence, South Asian economies are progressively finding it to be more beneficial to engage in trade activities with the rest of the world rather than with their immediate neighbours.
Enhancing economic integration and remodeling regional connectivity is crucial for growth and development in the new global economic landscape. Recognizing this, four countries of South and South-West Asia (SSWA) – Bangladesh, Bhutan, India, and Nepal, on 15 June 2015, had signed a regional framework agreement for the easing of the traffic rules as well as the smooth movement of cargo, passengers, and other personal vehicles amongst them[iii]. The Bangladesh, Bhutan, India, and Nepal Motor Vehicles Agreement (BBIN MVA) aims to facilitate cross-border trade by mitigating the presence of border congestion and by reducing route and counter-signing fees. Such understanding has not only led to the widespread development of intra-sectoral constituent of such economies but has also contributed towards strengthening of the socio-political and diplomatic alliance amongst them, whilst, boosting their comparative edge and accelerating their economic growth. If administered properly, the agreement promises to yield decent employment opportunities all the while lowering the prices of goods and commodities.
The importance of developing transport infrastructure and transit facilities, especially between landlocked countries has resulted in the establishment of numerous regional and sub-regional initiatives such as the Economic Cooperation Organization (ECO), South Asian Association for Regional Cooperation (SAARC), South Asia Free Trade Agreement (SAFTA), and the Bay of Bengal Initiative for Multi-Sectoral Technical, and Economic Cooperation (BIMSTEC) etc. However, all these agreements have relatively been in a state of comatose, as no fruitful outcome has been realized in the past few years.
The BBIN MVA had encountered a huge obstruction when Bhutan had refused to align with the agreement, hereby preventing smooth implementation of the same. This had stalled many operations under the agreement, as it required anonymous ratification from all the contracting parties. Hence, the other remaining countries have decided to move ahead and have drafted various protocols, for both cargo and passenger’s movement. If signed, the MVA would be effective in Bangladesh, India, and Nepal and could stimulate its intra-regional as well as global trade.
- Under the BBIN-MVA agreement, any movement of cargo vehicle carrying bilateral and third country goods would be based on the arrangements made under the ‘Fiscal Act of Nepal’,
- Cargo vehicles coming into Nepal need clearance from the border custom points and can traverse only through certain specified routes and ‘Land Custom Stations’ (LCS),
- Additionally, the government of Nepal has also made it mandatory for the cargos to carry their ‘Mutual Recognition of Permits’ (MRP), which is issued in coordination amongst the other three nations,
- Similarly, passengers and cargo vehicles must have a ‘Comprehensive Insurance’, to expeditiously settle down claims, and,
- Cabotage i.e. the transportation of local passengers and goods in the territory of host countries is not allowed and the number of cargo or personal vehicles and volume of traffic is to be mutually agreed upon by the three members, etc.
- National Laws of Nepal can be applied in matters other than those covered in the agreement like- foreign vehicles to obey the domestic traffic rules and regulations, authorized personnel’s can inspect and search foreign cargo-vehicles-goods, once inside their territory so sensitive or prohibited goods can be detained from the border point,
- The agreement does not affect the rights and obligations under other international commitments of the contracting parties,
- Authorized foreign operators can open bank accounts, new business branches or ventures and appoint agents on mutually agreed basis, etc.
- Seamless connectivity into each other’s territory would eliminate the previous time-consuming and costly process,
- Containerized trade would promote multi-modal bill of lading, thereby providing an integrated road and rail network to further reduce trade cost,
- Renewal of Trilateral Transit Agreement (TTA) between Nepal, Bangladesh, and India could expand cross-border connectivity as well as to facilitate Nepal’s full utilization of riverine and seaports in India (Haldia, Visakhapatanam, and Kolkata) and Bangladesh (Chittagong and Mongla).
- Enhancement of cultural contact to strengthen people-to-people connection as well as to invigorate the socio-cultural linkages and economic interdependence among the member nations.
- Furthermore, studies have also found that MVA could potentially boost intraregional trade within these three nations by almost 60% and with the rest of the world by another 30%.
- Early operationalization of the MVA among the consenting parties,
- Finalization and signing of the draft protocol for movement of passenger and cargo vehicles,
- Infrastructural development through- budget priority project, cost up gradation of roads and their maintenance etc.,
- Provision of multi-modal transport connectivity.
- Preparedness for any kind of insurgency or national threat like- drugs and narcotics smuggling, human trafficking or bonded labour,
- Development of ‘Neighborhood first, Act East’ approach[iv].
Although endowed with abundant natural and human-made capital, Nepal is yet to tap on potential trading possibilities due to its internal constraints. The presence of fault lines in its domestic economy along with its political and financial instability renders the nation vulnerable to any foreign investment or trade agreement as such inflows bring in unwanted or negative volatility in the economy.
The working dynamics of South and South West Asian Countries (SSWA) has its own set of complexities and hurdles, which can only be resolved through a systematic approach in the end. The BBIN initiatives and other regional agreements such as SAARC, BIMSTEC, and BCIMEC must collaborate so that they can function together as allies to maximize their gains. In addition, Nepal as a member nation of such alliances will have to navigate very cautiously around such emerging geo-politics so that it can appear less euphoric and more pragmatic in its performance.
[i] “Economic Outlook for Southeast Asia, China and India 2019: Towards Smart Urban Transportation”, 2019, OECD Development Centre. Retrieved from – https://www.oecd.org/development/economic-outlook-for-southeast-asia-china-and-india-23101113.htm
[ii] “United Nations Conference on Trade and Development”, UNCTADSTAT 2019. Retrieved from – https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=24397
[iii] “BBIN Motor Vehicles Agreement Regains Momentum”, 2017, Press Information Bureau, Government of India, Ministry of Road Transport & Highways. Retrieved from – https://pib.gov.in/newsite/PrintRelease.aspx?relid=175638
[iv] “BBIN MVA Implication for Nepal”, 11 August 2019, Rabi Shankar Sainju, South Asian Watch on Trade Economics and Environment.