Potential Implications of the Bangladesh-Bhutan Transit Agreement

On March 22nd, 2023, Bangladesh and Bhutan signed a transit agreement. Under the agreement, Bhutan can use Bangladesh’s land, air, and waterways to move goods to and from a third country in exchange for transit fees. As Bhutan is landlocked, it generally relies on its neighboring states for transit. In this context, the transit agreement will bring benefits to Bhutan in several aspects. On the other hand, providing a transit facility to Bhutan will also financially and politically benefit Bangladesh. Bhutan is the second country after India to avail of transit facilities from Bangladesh. Against this backdrop, it is worth assessing the potential implications of this transit agreement for both Bangladesh and Bhutan.

The Agreement

The agreement was signed on March 22nd at Bhutan’s Capital, Thimpu. Bangladesh’s Commerce Minister Tipu Munshi represented Bangladesh while Minister for Industry, Commerce and Employment Lyonpo Karma Dorji represented Bhutan. Under the agreement, Bhutan will avail Bangladesh’s land, air, and water routes for moving goods to and from a third country. In return, it will pay Bangladesh required fees and taxes.

According to the newspaper report, Bhutan will mainly use Mongla Sea Port and land and waterways from there. The agreement is also important for bilateral relations as Bangladesh and Bhutan signed a Preferential Trade Agreement in 2021.

Potential Implications for Bhutan

As Bhutan is a landlocked South Asian state, it requires cooperation from bordering and neighboring states to meet its export and import. In this aspect, the transit agreement will increase its cooperation with Bangladesh. Bhutan mainly relied on India to move its goods for a long time. Signing a transit agreement with Bangladesh will diversify its trade route. Moreover, Bhutan will greatly benefit by reducing its transit dependence on India. Due to the Sino-Indian rivalry over Bhutan, reducing transit dependence on India will also benefit Bhutan politically by easing geopolitical tension. The transit agreement will also increase trade relations between Bangladesh and Bhutan as Bhutanese traders will maintain close contact with their Bangladeshi counterparts for logistical support.

Potential Implications for Bangladesh

The agreement will increase commercial activities at Mongla Port. As a result, the agreement will help Bangladesh to utilize Mongla Port properly. Apart from Mongla Port, the agreement will also likely to increase commercial activities at the river ports. Moreover, moving Bhutanese goods will also increase the Bangladesh government’s revenue through collecting taxes and transit fees.

Besides revenue, fees, and taxes, it will also contribute to the local economy. Moving Bhutanese goods will increase business for the transport sector of the country. New ventures of facilitating transit will also open new jobs at the local level. The ‘roadside’ economy also has the scope to find extra profit. It is worth mentioning that the agreement opens up the scope, but the benefits Bangladesh and Bhutan would receive depends on the volume of goods Bhutan moves through Bangladesh.

In terms of bilateral relations, the agreement will enhance relations between Bangladesh and Bhutan. This is the second agreement in two years for the countries. In 2021, Bhutan and Bangladesh signed Preferential Trade Agreement (PTA) among them. Both countries are also discussing currently the possibilities of increasing agricultural trade among them.

Apart from bilateral and financial gains, the agreement will also diversify Bangladesh’s transit obtainer list. Before Bhutan, Bangladesh only had one transit obtainer, India. A diverse transit list will allow other states such as Nepal to initiate negotiations.

The agreement will also serve as an influence on regional connectivity. For a while now, Bangladesh and other Asian states are promoting trans-Asian connectivity through a network of road connections, transit facilities, and transshipment facilities. Bangladesh’s opening its trade routes to other South Asian states would serve as an example and inspiration for future regional connectivity also.

The agreement will not only benefit the signatory countries but also the region, South Asia. In South Asian politics, there is an effort to promote connectivity and regional trade. In larger ‘Asian Politics’, there is also an effort to promote connectivity and regionalism. So, the transit agreement will inspire future efforts and serve as a reference for future negotiations. The agreement will also become a milestone for Bangladesh-Bhutan bilateral relations, especially after the PTA agreement of 2021. Therefore, it is a praiseworthy agreement.

Mufassir Rashid
Mufassir Rashid
MD Mufassir Rashid is an independent Research and Analyst on Political Economy. He has completed his B.S.S in International Relations from University of Dhaka. He has completed his M.S.S from same department with specialization in International Political Economy.