14.11.2003
The potential of developing through freight transportation system for cross border trade:
the case of Bangladesh
Dewan M. Zahurul Islam
Senior Assistant Chief, Ministry of Planning, Government of Bangladesh and
Researcher at the Plymouth Business School, University of Plymouth, PL4 8AA, UK
Email: d.islam@plymouth.ac.uk & mzidewan@yahoo.co.uk
Abstract
Bangladesh trade with neighbouring countries in particular with India has increased
substantially. But the trade is one-way, imports from India. Another feature of her trade is the
presence of huge volume unofficial trade, also from India. The third feature is the presence of
non-tariff barriers. However, the increased volume of trade has required the use of surface
transportation modes. Road, rail and water transportation are available to serve cross border
trade. Among them road transportation is dominating the regional freight market alike domestic
market. But the service is fragmented requiring transfer of cargo from one truck to another at the
border crossing. Apparently some technical factors including differences in the road-load bearing
capacity, different load bearing capacity of trucks, lack of agreement in using through
transportation have restricted the development of door-to-door through transportation system for
regional cross borer trade. But an in-depth literature review suggests that trio factors (one-way
trade, illegal trade and tariff & non-tariff barriers) have restricted the development of the through
door-to-door transportation system. The study finds that both public and private sectors are
putting efforts to remove trade barriers and to develop an improved trade & investment regime in
the region. The study suggests that if the countries under discussion keep efforts continue then
by the year 2009-2014 a form of through transportation system can be developed. The paper
restricts its discussion about the transportation system of Bangladesh with her SAARC1
neighbouring countries (principally India, and also Nepal and Bhutan) and examines the
potential of developing through freight transportation system for cross border trade.
Key words: Cross border trade, barriers to trade, border crossing, surface transportation
system, Bangladesh & neighbours.
1. Introduction
Bangladesh, a least developed country (LDC) with only $350 GNP per capita in 1998,
sandwiched by India from three sides, with around a total of 4053-km land border; completely
from West and North and at the East major border area. The remaining border at the East is with
Myanmar (Burma) 193-km totalling 4246-km land border and the South is open to Bay of
Bengal with 580-km coastline2. The GNP per capital of India, Nepal, Bhutan were American $
430, $210, and £430 in 1998 (Subramanian and Arnold 2001). Burma has an estimated GDP/PPP
of $63 billion and per capita $15003 in 2001. Nepal and Bhutan are next-door neighbours of
Bangladesh and need transit through India (please see figure 1). Considering the nature of trade
and type of product exchanged between these countries it can be generalised that the products are
not so high value. So there is a little airfreight transportation and thus the costly air freight
1
SAARC stands for South Asian Association for Regional Co-operation consisting of Bangladesh, Bhutan, India,
Nepal, Maldives, Pakistan and Sri Lanka.
2
http://www.photius.com
3
http://www.infoplease.com
transportation is excluded in the present discussion. To reach Nepal Bangladesh needs at least
about 44-km transit (land) through India. The accessibility is limited to road and a limited rail
option. Accessibility to Bhutan is limited to road transportation. India can be reached by all four
modes of transportation: road, rail, water and air. Bangladesh and India both have natural
navigable inland waterways and a number of big rivers connect to each other. Also Bangladesh
and India inherited a rail transportation network from the British colonial era, although with an
inherent fragmentation of two rail gauges. The development of road network is comparatively
recent in particular in Bangladesh. Road freight service in the region is provided by private
sector. In contrast rail is owned and operated by government. However, Indian government setup a company named CONCOR (Containers Corporation of India Ltd4) in 1988 to serve the
national and international containerised cargo. In Bangladesh such development has not yet
occurred. Among the neighbouring countries India is the biggest trading partner. Among the
three surface modes: road, rail and inland water presently road is clearly dominating. But the
conventional trucks in a fragmented form provide service in the region and there is a capacitydifference between road networks and trucks. Most import–export between Bangladesh and
India takes place in the West and the major border crossing is Benapole at the West (see figure
1).
Transportation is an important element in international trade as it fills up the gap between the
organisations along the supply chain. Improved transportation and logistics services are critical
to competitiveness in the global market and also critical to regional economic developments and
foreign investment. The present paper examines the performance, issues & potential of the
transportation system for cross border trade of Bangladesh in a regional context. The discussion
is arranged in the following sections: 2) Assessment of demand for international trade, 3) Pattern
of international trade, 4) Pattern of trade with neighbouring countries, 5) Surface transportation
system for trade with neighbouring countries, 6) Transit facilities at border crossings, 7) Does
the transportation system help or hinder trade? 8) Will deregulation help developing through
freight transportation system? 9) Conclusion.
2. Assessment of demand for international transportation
Bangladeshi internationally traded goods increased from 9.92 million tonnes in 1984/85 to
13.2 million tonnes in 1997/98, and a pessimistic study estimated that this will increase to 23
million tonnes by 2014/15 (Planning Commission, 1998). In fact the estimated volume of 23
million tonnes of international trade cargo has nearly been achieved 2002/2003 (collected
informally from Chittagong Port and Mongla Port sources). Another study in 1998 forecasted 10
% growth of cargo for international trade during 2001-2006 and 7.5% growth during 2006-2010.
There would be 26.08 million tonnes of cargo (in which 872,000 TEUs of container throughput)
in 2005/206 and 43.11 million tonnes (in which 1,678,000 TEUs) container throughput) in
2016/17. (Chittagong Port Authority 1998). It is to note that Chittagong Port handled 0.56
million TEUs of containers in 2002/2003. Table 1 shows the major export/ import items in value
terms for 1984/85, 1990/91 and 2000/01. Imports show an irregular pattern. This can be
explained, in part, by the fact that some products (e.g. petroleum) are exclusively imported,
whereas others are domestically produced with any deficit imported (e.g. sugar, wheat, and rice).
Another important aspect of imports is the steady decrease in imports of rice, as the country
appears to be moving towards food self-sufficiency. The share of primary imports has fallen
from 31.6% in 1984/85 to 11.7% in 2000/01 (although in value term it has increased from 836
million to 1098 million American dollars). On the other hand the share of manufactured item has
remained stagnant (but in value term it has increased from 433 million in 1984/85 to 1436
4
http://www.concorindia.com
2
million American dollars in 2000/01). The yarn import has increased, more than ten times, from
31 million in 1984/85 to 325 million American dollars (in percentage from 1.2 to 3.5% of total
import value). This particularly reminds the importance of ready-made garments (RMG) in
imports as well. Capital goods import has increased in value term from 691 million in 1984/85 to
2400 million American dollars in 2000/01 although remained stagnant in percentage. Whereas
the import in the category of ‘other goods’ has substantially increased from 697 million in
1984/85 to 4429 million in 2000/01 (nearly doubled in percentage).
Overall, the main export items are raw jute, jute goods, tea, leather, frozen food, ready-made
garments and knitwear (see table 1). In 1984/85 raw jute (16.1%) and jute products (47.7%)
accounted for a total of 57.8% of total export earnings, followed by ready-made garments
(12.4%), but with no significant exports of knitwear. Then in 1990/91 the share of raw jute
(6.8%) and jute products (16.8%) fell down to a total of 23.6% whereas knitwear shared 7.7%.
Also there was an increase in the share of garments 42.8%. Sixteen years later the position of
jute and jute products had further decreased due to decline of demand in the world market,
replaced by a synthetic substitute. In 2000/01 they contributed only 9.8% of total export
earnings, whereas garments (52.1%) and knitwear (23.1%) together contributed 75.2%. The
contribution of tea has also fallen down from 6.5% in to 0.4% in 2000-01. The share of frozen
food (primary products) has also declined from 9.3% in 5.7% in 2000/01. Similarly the share of
leather has fallen from 7.5% in 1984/85 to 4% in 2000/01. Thus the feature of depending on one
or two export-item(s) has not changed over the 16 years. The physical movement of goods in
Bangladesh has increased at about half the rate of trade growth. This is because trade in high
volume and low value cargoes such as grains or fertilisers has increased at a lower rate than the
trade in manufactured goods, which in 1996/97 accounted for about 90% of export value
compared with 65% in 1982/83 (Chittagong Port Authority 1998). Table 2 shows how the
volume (in tonnes) of international trade suffers from fluctuations. For example, in 1985-86 there
was negative annual growth of international trade of -14.6%, but in 1987/88 there was a positive
annual growth of 24.4%. The latter was partly the result of severe floods in 1987 and 1988
requiring higher food imports. However, with 1984/85 as a base year, there was an average
annual growth (tonnes) of 2.98% up to 1995/96.
The transportation of raw jute is mainly in break-bulk form but jute products are by both
break bulk and container transportation. Important share of raw jute is exported to India thus
mostly in break-bulk form by conventional truck. On the other hand jute products are exported to
American and European market thus requires use of containers. Tea is exported in box and thus
in container by overseas. India is also a big tea producer and exporter. Thus there is no scope of
export of tea to India. North America and Europe are the main markets for tea, garments and
knitwear, which are transported by container. In contrast the imports for garments are from
Asian countries where India at the top followed by China, Singapore, Korea. Also the imports
are in containers (except border import from India). Bangladesh has imposed a ban on imports of
cotton from India by land. Thus now imports of cotton and cotton fibre are by overseas. Thus, it
can be assumed that there has been a shift in demand for international transportation from breakbulk to containerised transportation. This is also reflected in the higher growth containerised
cargo handling in Chittagong Port, on average 15.6% over the period 1995-96 to 1999-2000
(Chittagong Port Authority 2000). The growth in container traffic does not apply to trade with
India, Nepal and Bhutan, since it takes place by road transportation in break bulk form using
conventional truck of about 12 gross vehicle weight GVW. The average tonnage per vehicle is
around 6.5 tonnes (Chittagong Port Authority 1998). Very rarely articulated vehicles are used in
this trade.
3
4
Figure 1. Bangladeshi freight transportation network for cross border trade with neighbouring countries
5
Table 1. Major export/ import items over 16 years (in American million $)
Export
Import
Commodities
1984/85
1990/91
2000/01
Commodities
1984/85
1990/91
2000/01
(%)
(%)
(%)
(%)
(%)
(%)
Raw jute
151 (16.1)
104 (6.8)
67 (1.1) Rice/ wheat
498 (18.8)
331 (9.5)
380 (4.1)
Tea
61 (6.5)
43 (2.5)
22 (0.4) Crude petroleum
226 (8.5)
212 (6.1)
273 (2.9)
Frozen food
87 (9.3)
142 (8.3)
363 (5.7) Raw cotton
106 (4.0)
93 (2.7)
375 (4.0)
Other primary commodities
19 (2.0)
18 (1.0)
18 (.3) Oil seeds
6
(-)
1 (-)
70 (.75)
Total primary commodities
318 (34.0)
307 (17.9)
484 (7.5) Total primary
836 (31.6)
637 (18.3) 1098 ( 11.7)
goods
Jute goods
390 (41.7)
290 (16.8)
230 (3.6.2) Edible oil
103 (3.9)
208 (6.0)
230 (2.4)
Leather
70 (7.5)
134 (7.8)
258 (4.0) Petroleum products
133 (5.0)
207 (6.0)
575 (6.1)
Chemical products
7 (0.8)
40 (2.3)
97 (1.5) Fertiliser
137 (5.2)
91 (2.6)
132 (1.4)
Ready-made garments
116 (12.4)
736 (42.8)
3368 (52.1) Cement
26 (1.0)
106 (3.1)
132 (1.4)
Knitwear
131 (7.6)
1496 (23.1) Staple fibres
3
(-)
6 (-)
42 (0.4)
Other manufacturing
35 (3.7)
80 (4.7)
521 (8.0) Yarn
31 (1.2)
72 (2.1)
325 (3.5)
products
Total intermediate
433 (16.4)
690 (19.9) 1436 (15.3)
& manufactured
goods
Total manufacturing
618 (66.0)
1411 (82.1)
5983 (92.5) Capital goods
691 (26.1)
1231 (35.5) 2400 (25.6)
products
Other goods
697 (26.3)
914 (26.3) 4429 (47.3)
Total export
936 (100)
1718 (100)
6467 (100) Total import
2647 (100)
3472 (100)
9363 (100)
Source: 1) Ministry of Finance, 1998. Bangladesh Economic Review 1998, Economic Adviser’s Wing, Finance Division, Government of
Bangladesh, Dhaka: 127-128
2) Ministry of Finance, 2002, Bangladesh Economic Survey 2002, Economic Adviser’s Wing, Finance Division, Government of
Bangladesh, Dhaka: Appendix 41-43/ 45
3) Ministry of Finance, 2003, Bangladesh Economic Survey 2003, Economic Adviser’s Wing, Finance Division, Government of
Bangladesh, Dhaka
6
Table 2. Volume of international trade of Bangladesh (Tonnes 000s)
Financial
Exports Imports Total Trade Annual Growth
Year
1984-85
971
8949
9920
1985-86
1100
7375
8475
-14.6%
1986-87
1136
7393
8529
+0.6%
1987-88
1266
9344
10610
+24.4%
1988-89
1471
9000
10471
-1.3%
1989-90
1391
8691
10082
-3.7%
1990-91
1476
8187
9663
-4.2%
1991-92
1365
8323
9688
+0.3%
1992-93
1748
8255
10003
+3.3%
1993-94
1657
8202
9859
-1.4%
1994-95
2123
10758
12881
+30.4%
1995-96
2189
10993
13181
+2.3%
Source: Planning Commission, (1998), Bangladesh Integrated Transport System Study
1998: 133
3. Pattern of international trade
In 1984/85, 99% of international trade by volume went overseas, in other words only 1% of trade
required surface land transportation for trade with neighbouring countries. Since then, this share has risen
(by volume) to 3.6% in 1994/95 and 4.5% in 1995-96 (Planning Commission, 1998). Thus, there is a
positive, although slight, change towards the use of surface land transportation. This change is mainly the
result of an increased volume of imports from India (2.6% of total imports in 1985 to 15.3% in 1995)
(Zingel 1998). The international trade of Bangladesh is disadvantaged in three main areas first, a longstanding trade deficit, which has been present since just after its independence. Secondly an export
dependency on only a few products, also mentioned before. Whereas jute and jute products shared 47.7%
in 1994/95 the position has been taken by ready-made garments (RMG) sharing three-fourth of total
exports in 2000/01. Recently some manufactured items such as dry cell battery, cement and fruit juice are
struggling to get a market in her neighbouring countries particularly in India. However, this one-itemshow particularly reminds the threat of losing exports market due to a number of reasons including the
gradual phase out of the multi fibre arrangement (MFA) from January 2005 and Mexican exports of
garments to American market under North American Free Trade Agreement (NAFTA) with preferential
treatment. And thirdly, an export dependency on only a few countries (America and Europe absorb about
four-fifths of total export) leads to uncertainty and vulnerability of market. Example includes the
enactment of the American TDA 2000, which provides duty-free and quota-free market access to
garments exports from Sub-Saharan African and Caribbean Basin Initiatives countries. So export basket
extension and market diversification are major long-standing challenges for her balanced international
trade (CPD, 2001, CPD 2003). The list of import-partners5 include India at the top (21% of total- this
excludes the unofficial trade, which is assumed equal to official trade) followed by China (17% including
Hong Kong), Western Europe 8% and Singapore (6%) in year 1995-96.
4. Pattern of Trade with neighbouring countries
The pattern of trade with neighbouring countries in particular India is different that international
trades. The trade has shifted from a fairly balanced to one-way imports. The one-way traffic results in
5
Source: http://www.bangla2000.com
7
under-utilisation of transportation and logistics services due to costly empty running. The second nature
of the regional trade is a huge amount of illegal border trade, strongly believed to be equal to the official
trade. This prevents the development of formal transportation system, as primitive transportation means
are more important in such illegal trade. Third nature of regional trade is the presence of a number of nontariff barriers. This factor also discourages the development of cross border trade through land
transportation and logistics system. The trio-factors (one-way flow, illegal trade, and presence of nontariff barrier) discussed more detailed in the next sub-section.
4.1. Trade with India
Bangladesh has a huge trade deficit with its large neighbour India and in 1999-2000 she had a trade
imbalance to the ratio of 1:13 (The Daily Star 2001a). An unpublished study6 (reported in The Daily Star
2001a) found that unofficial trade, which is discussed below, increases Bangladesh’s rank as an export
destination of India from eighth to third place. The study also revealed that:
‘Six items including Jamdani sari, chemical fertilisers, raw jute and frozen fish accounted for
about 95% of the country’s total export to India in 1999. This trend has been remained more or
less the same over the 1990s, as India expanded its export base. Bangladesh has imported as many
as 2,129 commodities from India during 1990s including cereals, textiles, machinery, equipment,
chemicals and base metals’.
With so few major export items, there is a strong argument that Bangladesh need to diversify and
expand its export base to include goods and services suitable for the Indian as well as other South Asian
markets. It also needs to increase production of those items already sold in India. Another important
reason behind this large trade deficit is the faster liberalisation of trade in Bangladesh compared to the
neighbouring countries, a source of government complaint in Bangladesh (The Daily Star 2001b). The
import tariff in India was reduced from an average of 71% in 1993 to 35% in 1998 (World Trade
Organisation 1998) whereas the tariff in Bangladesh was reduced from an average of 23.6% to 16%
during the same period (World Trade Organisation 2000). Moreover, the internal tariff structure of
Bangladesh also encourages imports of final consumer goods from neighbouring countries. For example,
the average weighted tariffs for intermediate inputs and final consumer goods were 24.1% and 47.3% in
1991, reduced to 21.4% and 11.2% in 1999 (World Trade Organisation 2000). As a result, Indian final
products enter easily into the Bangladeshi market, whereas Bangladeshi products face difficulties entering
the Indian market due to higher tariff and non-tariff barriers.
The non-tariff barriers as many as fifteen includes among others bureaucratic harassment at entry
points, dispute over classification of goods for customs purposes, inadequate facilities at land customs
posts, imposition of ad-hoc surcharges and arbitrary health certification requirements, imports fees,
requirements of chemical tests an higher letter of credit margin. Bangladesh also imposed a restriction,
also mentioned in section 2, on yarn import through land port (The Daily star 2003a). In international
trade Bangladesh, India and Nepal are competitors in the production of the main export items of
Bangladesh. Table 3 shows that India’s export earnings are more than those of Bangladesh for the main
export items of Bangladesh, suggesting that the main export items of Bangladesh are unable to obtain a
good market in India. Furthermore, other items on the very short list of products exported from
Bangladesh have difficulty entering the Indian market because of high tariff and non-tariff barriers. So,
exporters think twice before deciding to enter into Indian market. For example, India has approved anti-
6
Presented by Dr. Mostafizur Rahman, Research Director of the Centre for Policy Dialogue at the Indo-Bangla Dialogue in
January 2001 in Dhaka.
8
dumping duty on lead acid battery import from Bangladesh. Until October 2003 it has not been
withdrawn (The Daily Star 2001d, The Daily Star 2003b).
4.2. Trade with Nepal and Bhutan
Table 3 shows that Nepal exports only ten of the 28 main export products of Bangladesh resulting in a
balanced export-import trade between the two countries. However, trade with Nepal faces transportationrelated barriers as it is a landlocked country and the export-import trade flow needs to pass through a third
country, India, which also exports the same items to Nepal. The main export items to Nepal are products
of the chemical or allied industries, and textiles, and the main import items are live animals, animal,
vegetable and mineral products, and products of the chemical or allied industries (Bangladesh Bureau of
Statistics 1999). Bangladesh only imports from Bhutan. The main import items are vegetable products,
prepared foodstuffs, beverages, spirits and vinegar, tobacco, mineral products, wood and articles of wood
(Bangladesh Bureau of Statistics 1999). As with Nepal, trade with Bhutan faces transportation-related
barriers.
Table 3. A comparison of the main exports of Bangladesh with India and Nepal (US$’000)
Product Group
Bangladesh
India
Nepal
034 Fish, Live/ Fresh/Chilled/ Frozen
16604
283515
-036 Crustacean Molluscs etc
260719
910538
-054 Vegetables Fresh/ Chilled/ Frozen
24748
197845
13178
074 Tea and Mate
47398
504,985
178
264 Jute/Bast fibre Raw/Retd
83023
2806
-334 Heavy Petrol/Bitum Oils
11239
352916
-562 Manufactured Fertilizers
36886
6808
-611 Leather
106013
295907
6286
612 Leather Manufactures
3
112118
-634 Veneer/ Plywood/ etc
13877
23127
-651 Textile Yarn
59345
1993971
-652 Cotton Fabrics woven
60441
974505
-653 Man-Made Woven Fabrics
33128
375355
-654 Woven Textile Fabric Nes
72455
268011
-657 Special Yarn Fabrics
50399
69154
-658 Made-up Textile Articles
149657
845512
-723 Civil Engineering Plant
10929
36632
4095
728 Special Industries Machinery Nes
20067
87062
-813 Lighting Fixtures etc
10887
4811
-841 Men/Boys Wear, Woven
2083510
966854
57544
842 Women/Girls Wear, Woven
640787
1641565
15492
843 Men/Boys Wear, knitted/ crocheted
103486
307851
3337
844 Women/Girls Wear, knitted/ crocheted
81739
210619
697
845 Articles of Apparel Nes
867601
592024
18267
846 Clothing Accessories
6823
160039
755
851 Footwear
39003
537721
-893 Articles Nes of Plastics
18414
135611
-894 Baby Carr/Toy/Game/Sports
44414
86836
-Source: compiled from International Trade Centre (ITC) Database: International Trade Statistics,
Exports 1995-1999, Geneva.
Note: Exports from Bangladesh and India represent the data for 1997. Exports from Nepal show the
data for 1998 (1997 not available). Only the main export items from Bangladesh (US$ 10 million and
9
above) are included (apart from leather manufactures and clothing accessories, which are included
because garments and leather are the main export items of Bangladesh.) Exports from Bhutan were not
available.
The SAARC Chamber of Commerce and Industry (2001a) points out how the countries under review
have almost the same comparative advantage without strong complementarity in bilateral trade. For
example, Bangladesh, India and Nepal have comparative advantage in food, live animals, basic
manufactures, and miscellaneous manufactured goods. However, India differs from the other countries
by having comparative advantage in a wider range of products. None of the countries have comparative
advantage in the greatly demanded imports of capital intensive and high value-added products.
Although Burma (Myanmar) is outside the focus of this paper, it should be noted that Bangladesh has a
trade deficit with Burma as well, with exports decreasing from US$ 6.60 million in 1990-91 to US$ 4.40
million in 1997-98, but imports rising from US$ 10.50 million to US$ 70.40 million during the same
period (Huq 2001).
4.3. Informal (unofficial) trade with neighbouring countries
Official trade among South Asian Countries is low compared to other regional blocs, but should be
examined in the context of significant informal trade (Subramanian and Arnold 2001). In 1992-93 official
trade with India was US$ 357 million and unofficial trade was US$ 313 million (Taneja 1999).
Obstructions to normal trade, whether for economic or other reasons often lead to unofficial trade,
especially where there is a long land border to make it easier. In some circumstances it may even
dominate trade between certain countries (Rahman and Razzaque 1998). Such trade takes place either
through authorised and / or unauthorised channels (Taneja 1999). A number of sources indicate that (e.g.
Subramanian and Arnold 2001) unofficial exports from India to Bangladesh are approximately equal to
official exports. They claim that:
‘The composition of unofficial trade flows is generally complementary to, but markedly different
from, official trade flows. A large portion of unofficial exports (85%) takes place through West
Bengal, comprised largely of food items, live animals (mainly cattle) and consumer goods. The
unofficial flow from Bangladesh to India is dominated by a few major products, including
synthetic yarn, electronic goods, and spices. A sizeable percentage (44%) of the unofficial imports
consists of gold and / or Bangladesh currency to pay for Indian goods that are smuggled into
Bangladesh. There is also an unofficial flow of consumer item, ready-made garments from
Bangladesh to Tripura (one of the seven Eastern states of India). By some estimates this flow is
eight to ten times higher than the official flow’.
Table 4. Change in modal share (tonnes) in Bangladesh over the period 1974-1997
Mode /Year
1974/75 1984/85 1996/97
Road
35
48
63
Rail
28
17
7
Water
37
35
30
Source: Planning Commission, 1998, Bangladesh Integrated Transport System Study 1998, page
21.
N.B. This includes domestic as well as international transport.
10
Table 5. Regional Trade of Bangladesh with SAARC countries (Figure in Million US$)
Coun
-try/
Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
India
Export
30
8
11
9
11
22
23
4
13
24
36
20
Import
65
57
74
90
121
170
189
284
380
467
994
1138
Pakistan
Export
42
36
28
33
23
23
39
30
26
19
26
35
Import
18
26
37
63
26
70
57
88
90
110
138
87
Sri-Lanka
Export
1
18
6
8
6
11
9
4
11
2
Import
5
8
5
8
14
8
5
6
7
7
11
11
Nepal
Export
5
10
5
5
10
7
12
7
14
10
1
Bhutan
Import
1
2
Export
Import
2
7
4
4
3
8
4
5
1
4
5
SAARC(% of trade
with world)
Export
Import
77(8%)
88(3%)
55(6%)
91(4%)
44(4%)
116(4%)
65(5%)
161(5%)
50(4%)
164(5%)
60(4%)
257(7%)
80(5%)
255(7%)
45(2%)
382(10%)
55(2%)
480(12%)
61(2%)
593(13%)
83(3%)
1151(18%)
58(2%)
1246(18%)
World
Export
999
889
1077
1291
1305
1672
1687
2037
2277
2650
3129
3350
Import
2,536
2,550
2,730
3,034
3,618
3,656
3,421
3,731
4,015
4,584
6,496
7,074
Source: Zingel, W-P. 1998 On the economics of regional co-operation in South Asia. Paper presented at the
15th Conference on Modern South Asia Studies, Prague, September 8-12.
Note: Exports to and imports from Maldives omitted because amount is negligible. Blank cells also indicate negligible amounts.
11
5. Surface transportation system for trade with neighbouring countries
Transportation is a fundamental component to fill up the physical gap(s) among the organisations
along supply chains, including those for exports and imports. Owing to geographical features and
historical developments, a varied and complex transportation system has developed in Bangladesh over
the centuries. The share of the total tonnage7 for the three surface transportation modes over the period
1974-1997 is shown in table 4. From the table it is clear that the share of road transportation has increased
at the expense of rail and, to a certain extent, inland waterways. The transportation system of Bangladesh
ranges from a modern transportation system using containers to primitive means of transportation by bullcart, bicycle or rickshaw. Most man-made transportation systems, as opposed to the vast natural navigable
inland waterways, date from the middle of the nineteenth century when railways were constructed under
British colonial rule. Until 1947 the rail and, subsequently, road systems focused on Calcutta in the wider
context of British India, but from 1947 the internal transportation network was developed to serve East
Pakistan (Bangladesh from 1971) (Sharif 1986).
Bangladeshi goods are transportationed to and from SAARC countries by road, rail, water and air.
Among them India is the main trading partner of Bangladesh (see table 5), and most of this trade is
through the western border particularly through Benapole Dry Port. Trade with Nepal and Bhutan is
mainly by road. The trade with other SAARC countries requires an overseas transportation service. Two
seaports: Chittagong (handles about 83% of total overseas cargo) and Mongla (the remaining) serves the
overseas international trade. However, the proposed Asian Highway (AH) passes through, and connects
Pakistan, India, Nepal, Bangladesh and Sri Lanka. The proposed Trans-Asian Railway (TAR) also
connects these countries. Bhutan has access to AH & TAR only through the Indian highway & railway
network. The total length of AH in Bangladesh is 1834 km, including missing sections of about 81 km. Of
the existing routes, 96% are of two or more lanes and can be classified as of AH standard classes II, and
the remaining 4 % are single lanes, which fall below AH standard (SAARC Chamber of Commerce and
Industry 2001b).
The discussion in this paper is restricted to the three surface modes of road, rail and water. India and
Bangladesh use all modes of transportation for trade with neighbouring countries, whereas Bhutan and
Nepal have mainly road transportation (Subramanian and Arnold 2001) with the exception of 52 km of
rail route in Nepal (SAARC Chamber of Commerce and Industry 2000d). Recently Nepal is planning to
develop rail transportation system countrywide. However, Nepalese one of the three inland clearance
depot (ICD Birganj) is constructed for rail and road of international transportation. But some stakeholders
also consider to declare it rail-dedicated ICD (World Bank, 2001 and The Hindu Business Line, 2002).
The other ICDs of Nepal are accessible by road but also can BE accessed by road–rail combined
transportation. Both in Bangladesh and India the rail network has a mix of broad gauge (1.68 metres) and
one metre gauge. India has a rail network of 62, 915 km of which 12,307 electrified and 12, 617 double
track. Of the total network 40,620 km broad gauge and 18, 501 metre gauge. The remaining is smaller
than one metre gauge8. At the time of the partition of India in 1947, the previously united Bengal and
Assam Railway was broken up and Bangladesh (then East Bengal and later called East Pakistan) gained
part of the network. Since then the western part of Bangladesh has mainly broad gauge consisting of 914
route km, and the eastern part one metre gauge consisting of about 1820 route km. The rail network
consists of 2734 route km mainly single track (Chittagong Port Authority 1998, Planning Commission
1998; Bangladesh railway 1999). In the case of trade with the north-eastern states of India there is no rail
gauge problem as there is one-metre gauge rail system and Chittagong port can be reached, if both
countries agree, directly. The other links are by road through the main border crossings Akhaura
Weights in this paper are in some cases metric ‘tonnes’ and in some cases imperial ‘tons’. The paper retains the terminology
of the original source.
8
World Factbook at http://www.education.yahoo.com
7
12
(Bangladesh) to Agartala (India), or Dauki (Bangladesh) to Tamabil (India) and by waterways through
Zakigonj-Karimganj or Chilmari (Bangladesh) to Dubri (India).
Intermodalism in Bangladesh has not been developed. As a result although nearly 60% of the container
traffic arriving at Chittagong port is for the Dhaka area, only about 10-15% of the containers move to and
from Dhaka, by rail (Planning Commission 1994; Chittagong Port Authority 1998; Planning Commission
1998). However, rail does not carry containerised goods to and from the neighbouring countries although
developments are afoot. The recent establishment of a dual-gauge rail track across the Jamuna Bridge is
expected to provide a significant increase in inland movement of containers. Also Bangladesh has taken a
plan to introduce dual gauge between Chittagong, Akhaura (border crossing point opposite to Agartola,
India) and Dhaka. The network in Eastern India (West Bengal) is broad gauge and she is concentrating on
converting into a broad gauge network in eastern provinces. Example includes the extension of broadgauge up to Aragtala. This will provide direct link to eastern provinces of India and also to Nepal. Nepal
can be reached at Birganj, ICD by using a mix of broad-gauge & metre gauge link through India. Barging
is connected in the Trans-Asian Railway (TAR) link, which connects Asia with Europe from China
through Burma, Bangladesh, India, Nepal, Pakistan, Iran, Turkey and then to Bulgaria. Once Birganj is in
TAR then Bangladeshi ports will gain a potential of achieving Nepalese business in particular the
transhipment of containers at seaports and the use of road/ rail link (The Asian Age 1999). Biratnagar
ICD of Nepal can be reached by road, which is nearer than Birganj to both Mongla and Chittagong port.
(Chittagong Port Authority 1998). But, Biratnagar requires either a road connection or road & a onemetre gauge rail link through India. For this ICD Bangladesh rail needs to change its journey from broad
gauge to one metre gauge.
Third party road freight services in all countries under review are almost entirely from the private
sector. Medium-size trucks (seven to ten ton payload) operate over two-lane asphalt roads (5.5 metres
wide in Bangladesh and 5.5 to 7 metres in India) at a relatively low speed over 200 to 400 km per day.
Most cross-border movements are in two to three-axle trucks with payloads up to 18 tons. The load limit
for India, Bhutan and Nepal is 10 tons per axle or similar, and Bangladesh is expected to increase its
current limit of 8.2 tons per axle to 10 tons (Subramanian and Arnold 2001, SAARC Chamber of
Commerce and Industry 2001b). There is, however, a problem with flooding during the monsoon season
for about 20% to 35% of the land area, so that roads require embankments up to 15 feet high (Sharif
1986). The cost of road building and maintenance, based on alluvial soil, is 60 % higher per km in
Bangladesh than in India (Howe 1996). Speed and connectivity are usually advantages for shippers using
road freight transportation, but such benefits have been restricted due to a number of factors including
transhipment at border crossings, load restrictions, overcrowded roads and an absence of unitised loads
and above all empty running due to imbalance load.
Government-owned railways carry goods and passengers in Bangladesh and India. Passenger and
goods trains operated from Calcutta to Khulna until the India-Pakistan war in September 1965, when all
railway links were severed. After Bangladesh’s independence, a goods-only service was reintroduced in
1972 for a brief period but was again closed due to the low volume of goods (The Daily Star 2001a).
Therefore, most goods are transported by road through the Benapole border crossing, resulting in
congestion and delays. Higher volume of trade led the re-commencement of goods rail transportation
along the Benapole-Petrapole route in January 2001 (The Daily Ittefaq 2001). Goods trains between
Bangladesh and India also operate on four other routes (Shahbazpur-Mahishasan (at the East), RohanpurSinhabad, Birol-Radhikapur and Darsana-Gede) (at the West). The main advantage of rail transportation
is that it does not need transhipment at the border, although it does need to be loaded and unloaded at
each end of the transit, when it becomes dependent on the services of road transportation. However, the
inferior road infrastructure, which is poorly maintained and highly congested, and in particular has
13
restrictive weight limits on bridges, means that rail could offer a better and cheaper containerised door-todoor service for a wider range of goods than at present. But both railway authorities have failed to utilise
such potential. An information on goods-train (accessed in October ’03) from the web site9 of Bangladesh
Railway suggests that there is no regular goods-train service for cross-border trade. It is questionable as to
whether with so many routes for rail with low volume cargo can attract a regular service or not. The
problem is related with long border with India with many border-crossing points. This is more of a
problem for rail transportation since a crossing point needs a large volume of cargo to be economically
viable.
It is also questionable if the existing rail service could be reliable whether under government
management or not. In India, rail-road container services have grown substantially following the
formation of the Container Corporation of India and the introduction of a large fleet of rail-cars to carry
ISO containers. There are several ICDs and terminals for domestic as well as international containerised
cargo. In contrast, Bangladesh has experienced a 40% decline in rail tonnage over 25 years with a lack of
cars and no commitment to containers (Subramanian and Arnold 2001; Bangladesh Railway 1999). There
has been little change in track length since 1947 when there were 2604 route-kilometres, with 2858 km in
1970 and 2734 km in 1999 (Bangladesh Railway 1999, Planning Commission 1998).
Bangladesh has a network of 5150-8046 km navigable natural waters of which 2575-3058 km main
cargo route. In contrast India has a network of 16180 km navigable waterways of which 3631 km
navigable for large vessels (World Factbook 2003). When Bangladesh was governed by Pakistan, it
agreed a ‘Protocol on Inland Water Transit and Trade’ with India in the late 1950s allowing use of each
other’s waterways for transit of goods through the other country’s territory. This continued until
September 1965, when it was suspended due to the India-Pakistan War. Following the independence of
Bangladesh in 1971 the governments of Bangladesh and India revived the agreement in 1972 and it is
updated from time to time (Bangladesh Inland Water Transport Authority 1999).
6. Transit facilities at border crossings
The traditionally low regional trade volume has prevented the development of a regional transportation
network from gaining priority in South Asia. However, as the share of regional trade, particularly import
trade from India, is increasing, the development of a regional transportation network is now in the
spotlight. Accordingly, Bangladesh has developed some border crossings, particularly Benapole and
which handles 80% of the trade with India. The facilities at Benapole dry port is shown in table 6. Four
types of border crossing can be identified: rail, road, river ports and seaports. In the case of regional and
international trade goods have to pass through border crossing points. Delays caused by transhipment
procedures, inefficient customs clearance and physical infrastructure constraints create substantial
inefficiencies and poor use of transportation capacity at border crossings. Subramanian and Arnold (2001)
cite the case of the Benapole-Petrapole crossing where cargo flow is severely congested, with queues of
up to 1500 trucks and waiting times of up to five days in both directions.
A free market requires liberalised and dynamic international transportation (Reynaud 1998). Although
Bangladesh has been following a market economy since mid 1980s, the transportation sector has not
progressed accordingly, particularly where international opportunities exist. The seaports of Bangladesh
could be the gateway to a vast area including Nepal, Bhutan, and the eastern part of India (see figure 1).
This could attract a huge foreign direct investment (FDI) in transportation infrastructure and services.
Bangladesh could develop its freight transportation industry and create employment opportunities for
many people in the service sector just by providing access to seaports for seaborne transit cargo. For
9
http://www.bangladeshrailway.com
14
example, Nepal could have alternative access to the sea through Bangladesh other than through India.
Mongla Port is the shortest distance through road link from Kathmandu in comparison to any existing
ports (including Calcutta). Thus Nepalese manufacturers, exporters, importers consider this port & route
as highest potential. Indeed, a transit agreement between Bangladesh and Nepal was signed in September
1997. Under an agreement with India, the transit route of 44 km between Kakarbhitta (Nepalese border
town) and Banglabandh (Bangladeshi border town) should remain operative twice a week on Saturday
and Sunday. However, the route has still not become operational in the true sense for a number of
reasons. They are the failure to sign a motor vehicle agreement between Bangladesh and Nepal, poor road
communications during transit, lack of a regular transit customs point, and lack of auxiliary facilities such
as banking or warehousing at the transit point (The Daily Star 2000a; The Telegraph 2001).
Table 6. Facilities at the Benapole Dry Port in 2000
Type of Facility
Number Capacity (where known)
Storage/ truck handling facilities
Warehouses
26
Open Storage Area
3
Transhipment Area
1
150 trucks can be handled at a time
Truck Terminal
1
1000 trucks can be handled at a time
Cargo Handling Equipment
Mobile Crane
4
10-35 tons
Forklift
6
3-5 tons
Weigh Bridge
3
20 tons
Source: Mongal Port Authority 2000. Mongla Port an Overview
50 Golden Jubilee 1950-2000, Mongla, Bagerhat, Bangladesh.
The success of the transit cargo for Nepal and Bhutan would need to pass through India (Chittagong
Port Authority 1998). The problem remains that ‘India’s primary interests lie in transit/ transhipment
facilities for easy access to the north eastern states in a bilateral framework, not transportation cooperation in a multilateral or sub-regional framework’ (SAARC Chamber of Commerce and Industry
2001b). Apart from moves by government, private initiatives among the South Asian countries are in
process to make border crossings more efficient. In the ‘Business Leaders Summit’ of SAARC held in
Bangalore, India in August 2000, leading businessmen of the region considered that a joint intergovernmental private company should be established to build road links to connect all important
territories and areas of the region. Chittagong Port could be a regional hub for the trade of Nepal, Bhutan
and north-eastern states of India. The business leaders also called for a new rail and road network
connecting important areas in South Asia for overall economic development of the region (The Daily Star
2000b). Another initiative is also on about forming South Asian Growth Quadrangle (SAGQ), consists of
Bangladesh, Bhutan, Nepal and India, with necessary transportation infrastructure. For this initiative a
regional technical assistance (RETA), under the initiative of Asian Development Bank, is working to
serve as a private sector advocacy platform for economic co-operation in the sub-region. It arranges
workshops/ seminars to identify projects and areas of co-operation. Recently (December 2001) working
group has been formed for different sectors e.g. transportation sector-working group. One of the main
plans of this initiative is to trade facilitation through identification and reduction of non-tariff barriers.
7. Does the transportation system help or hinder trade?
Both external and intra-regional trade in South Asia depends critically on the time and cost of goods
movement and, in particular, the efficiency of the cross-border transit of cargo. Even to maintain the
15
region’s current position in the global market, it would appear necessary to reduce transportation and
trade logistics costs. Logistics inefficiencies translate into higher commodity costs and reduce the trading
credibility and status of the countries in the regional and international market. It is important to have a
regional strategy to ensure effective and efficient transportation corridors (Subramanian and Arnold
2001). Kopicki (1999) stresses the importance of integrating customs procedures into commercial supply
chains, rather than delaying international trade to ensure collection of customs duties and other taxes or to
impose veterinary or agricultural quarantine procedures. Facilitation of international trade must be seen to
be as important as collecting revenue. High road freight transportation costs result from the transhipment
of all consignments at the border and the restriction on through transportation. All Bangladeshi export
traffic is transhipped into warehouses 500 metres inside the Indian border (Chittagong Port Authority
1998). A similar requirement exists for India’s exports to Bangladesh at Benapole Dry Port.
Other specific infrastructure factors can also cause delays. For example, in road transportation between
India and Bhutan landslides create temporary blockages. Because of the terrain of Nepal, building and
maintaining roads are both difficult and expensive (Taneja 1999). The road infrastructure (particularly
bridges) in Bangladesh is not built to bear the weight of heavy road goods vehicles, especially crossborder payloads up to 18 tons. A typical road freight maximum payload in Bangladesh is seven tons,
whereas it is ten tons in India (Subramanian and Arnold 2001). In effect this means that the movement of
Indian heavier vehicles on Bangladeshi roads is constrained by infrastructure restrictions. In order to
increase the regional movement of road freight vehicles, there will need to be a consensus on the
truckload tonnage limit so that the Bangladeshi road infrastructure can bear the load.
Illegal cargo movements tend to use very traditional transportation modes while crossing the border.
Taneja (1999) describes how road trucks bring goods to border villages, a variety of forms of
transportation (cycle-rickshaw vans, bullock carts, tongas etc.) then take them to the border, and then
transhipment across the border is by head-load porters. The closer to the border, the higher the number of
people involved. The cost of this form of transportation is negligible, but the subsequent delivery of
illegal goods to local markets within Bangladesh is organised on a bigger scale requiring the hire of large
vehicles (Rahman and Razzaque 1998). Thus the success of regional transportation system is constrained
by:

Documentation and procedural inefficiencies: the procedures involved in customs inspections,
excessive documentation requirements, and multiple signatures, lack of transparency, informal
payments etc. lower the efficiency of goods movement and regional competitiveness. Table 7 shows a
comparison of transit documentation and procedures.

Constraints caused by protocol: these include the various restrictions on cross-border movement of
trucks and restrictions on route choice. The protocol does not permit through transportation and
containerised cargo movement.

Physical infrastructure gaps: poor, inadequate and incompatible physical transportation links, lack of
physical facilities at border crossings (e.g. warehouses, parking and storage), and terminal facilities.

Natural barriers: there are hundreds of rivers flowing through Bangladesh and its neighbours.
Although since 1972 many road bridges have been built, in 1998 about 80 unbridged river gaps on the
road network required ferries (Planning Commission 1998). These rivers also restrict road and rail
transportation in the rainy season through flooding, even where there are bridges.
16

Knowledge and institutional inefficiencies: efficient trade facilitation, lack of knowledge on modern
logistics management and its benefits, and customs management are lacking.

Illegal/ unofficial trade: accounts for about equal volume of official trade but avoids formal border
crossing/ transportation route and put emphasis on manual/ primitive means of transportation as
approaches to border.
Table 7. Comparison of transit documentation and procedures
Country
Types of Documents Copies Signatures
Bangladesh
India
22
29
116
118
55
256
Source: Subramanian, U. 1999. South Asian Transport: Issues and Options. World Bank/
UN-ESCAP Regional Technical Workshop on Transport and Transit-Facilitation,
Bangkok, April 19-21.
8. Will deregulation help developing through freight transportation system?
Hindly and Smith (1986) are in the opinion that regulation may take the following forms: 1) control of
the rates charged by utilities, 3) control of entry and out of the market, 3) control by licensing or in the
name of other numerical, safety or environmental restrictions of entry into many professional and other
services and 4) detailed supervision of the structure and practices of operating companies. It has been
noted that Bangladeshi truck can not ply on the Indian road. Similarly Indian trucks are not allowed to
operate in Bangladeshi road. The transit protocol singed between the two countries does not permit to run
foreign trucks. Also the protocol does not include the containerised cargo transportation (Subramanian
and Arnold 2001). In a normal condition deregulation (i.e. allowing the operation of foreign trucks)
would yield the following benefit:







Reduction in freight rates
Greater efficiency of freight transportation operation
But loss of rail traffic
Worse services for rural areas
Increased bankruptcy of Haulage Company
Lower wages for haulage employees
Poorer safety record in road freight operation (Cooper et al. 1994 p.157 )
It is questionable as to whether such benefits could be yield at all or be yield by only one country
depriving or damaging other country’s freight transportation service. Some factors need to be considered
including the present pattern of trade. It has been discussed in section 4 that there is a big imbalance of
cargo flow between the two countries, basically one-way trade from India to Bangladesh. Thus the
problem of empty running (i.e. return haulage from Bangladesh to India) will remain, which is applicable
to both road and rail transportation modes and even in the case of combined service when somebody
consider through door to door service.
The deregulation may result in the capture of Bangladeshi freight transportation market by Indian fleet
due to at least three reasons:
17
a) Indian trucks are newer than Bangladeshi trucks. On average the Indian trucks are less than 5
years old whereas the average age of Bangladeshi trucks is 15 years. The use of older trucks in
Bangladesh along with other factors such as over capacity in the market, rampant overloading
results in lower freight rate than Indian operator (truck operating cost $0.33/ km in India & $0.27
in Bangladesh) (Subramanian and Arnold 2001). Some may use this statistics to exaggerate
Bangladeshi operators’ strength. But that will not be effective due the facts discussed in (c).
b) Indian trucking companies get wider domestic market and thus are generally supposed to be
able to apply economies of scope and scope. In contrast Bangladesh has a small freight market.
Thus Bangladeshi trucking companies would not be able to compete with such superior
companies. Due to deregulation in return journey Indian trucks might transportation Bangladesh
freight, if the deregulation allow such service. Even in the case of cabotage Indian trucks will take
Bangladeshi fright as it can enter into India either in West, North or East alike the occurrence of
illegal trade. It is notable again that Bangladesh is sandwiched by India. Thus Indian truck can
move to East, North or west to enter India. Ultimately Indian companies would capture the
Bangladeshi freight market, both international and national.
c) Most trucks in Bangladesh are bought from India, basically used to a certain period in Indian
road and then sold to Bangladeshi companies. Thus Bangladeshi companies can not compete with
this lower quality but bought from the competitor. Another factor must be considered that Indian
companies are buying newer trucks from the domestics market with comparative lower price.
Considering the present style of imposing non-tariff barriers by Indian Authority discussed in
section 4 experts fear that Bangladeshi freight companies will face licensing or other barriers as
the trucks are older.
Figure 2 may help understanding the implication of deregulation of freight transportation market for
cross border trade between Bangladesh and India. In the figure we have shown three scenarios in
descending order. Scenario 3 describes the present transportation system for cross border trade. The
imports from India are transported to Benepole Dry Port (border crossing point) by Indian trucks and
enter into Bangladesh and transfer the cargo in a bonded warehouse. The handling of the transhipment
function is performed manually from a conventional 10 tons per axle truck to a maximum 8.2 tons per
axle capacity, although most carry over capacity. To get such load the Bangladeshi truck was waiting
beforehand, which vary due to cumbersome two-sets of customs procedures & law enforcing/ border
guarding agencies but range up to five days. This handling/ transfer results in delay and damage to cargo.
The break-up of transportation haul doe not help to achieve lower transportation cost. Many Bangladeshi
experts accept this as ‘good at bad situation’. Because the part of the transportation haul is performed by
Bangladeshi freight companies and thus contribute in the economy. Some argue that both countries
should sign protocol agreeing the operation of foreign truck. This position is explained in Scenario 3 at
the present context of one-way trade. So, such deregulation or liberalisation would not benefit much
Bangladesh alike the result of liberalisation of economy in general in Bangladesh capitalised by Indian
companies/ exports. The empty running of trucks will continue unless there is a significant return load.
One example might help to explain the situation. The international shipping lines (also know as main line
operator-MLO) charge extra amount (American $ 350 in 1998) on Chittagong-Dhaka rail transportation
haul for an import cargo of 20 ft container claiming that the return journey of container would be empty.
In reality about 50% contains returns with load (Chittagong Port Authority 1998). Similar situation would
be occurring in the Scenario 2. On the other hand the deregulation would result in the disappearance of
Bangladeshi trucks. Although the scenario 2 does not allow the Indian trucks to carry Bangladeshi
domestics cargo in reality they would be able to do so. The simple reason is that Bangladesh was number
18
one (Champion) in year 2001, 2002 and 2003 in the list of Transparency International and Law enforcing
agencies are always in fore front in such work. Thus at present and in near future the scenario 3 would be
out of consideration.
Full Truckloads destined for Bangladesh
originated from India
Indian Hauliers
Scenario 1
_ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ___ ___ _
Three possibilities: Full or partial truckloads (for bordering destination of Bangladesh or Indian freight)
or empty trucks enter into Indian freight market
Scenario 1: Deregulated with cabotage freedom.
Result: Bangladeshi operators lose business
Achievement: within 15-20 years
Full truckloads destined for Bangladesh
Indian Hauliers
originated from India
Scenario 2
____ ____ ____ ____ ____ ____ ____ ____ __
Empty trucks (or rarely return load) run on Bangladeshi road and enters into Indian freight market
Scenario 2: Deregulated but with cabotage (restriction on carrying Bangladeshi domestic cargo)
Result: Not much benefits due to empty running but
Bangladeshi operators lose business
Achievement: within 5-10 years
Bangladeshi national hauliers 
Inidan National haulier
Scenario 3
Empty Bangladeshi trucks
Empty Indian trucks
____ __ ____ ____ ____ ____ ____ ____ ____ __ ___ ____ ____ ___ ___
Bangladeshi domestic freight market
Indian domestic freight Market
Benapole Dry Port (border-crossing)
Scenario 3: Present restricted freight system for cross-border trade between Bangladesh and India
Result: Benefits are lost due to empty run on both sides & transhipment at the border crossing but the
loss/ benefit is shared and domestic and foreign cargo markets are served by domestics operators.
Figure 2. Options of developing through door-to-door freight transportation system for cross-border trade
between Bangladesh and India (Adapted from Cooper et al. 1994 p 253)
9. Conclusions
Bangladesh trade with neighbouring countries is increasing, particularly imports from India which are
much higher than exports to that country. The trade deficit with India has widened at a faster rate than the
overall trade deficit. In fact the trade has come one-way and from India only. On the one hand
Bangladesh needs to both diversify and expand its export base, particularly for goods that already have a
steady market in India. India also needs to come forward to remove tariff and non-tariff barriers and
liberalised its market. However, the increased trade volume has resulted in greater use of the surface
19
transportation system. But the transportation system is operating in a conventional fragmented form. This
has resulted negatively in the development of national & regional economies, foreign direct investment
and in particular product price. Typically transportation and logistics costs for high-value products 5-7%.
Even 1 % price difference may result in the loss of international market where price elasticity is very high
(Kondo 2001). Rail, road and inland waterways transportation are available to serve trade with India, but
road transportation plays the dominant role. The load restriction on road freight operations has apparently
prevented the development of through transportation and thus requires costly transhipment at border
crossing. This presents rail transportation with the opportunity of offering through service in particular
containerised cargo. Although five rail routes are in operation for trade with India, and do not require
transhipment at border crossings, rail has not yet been able to attract substantial traffic. The lack of rail
traffic puts into question the service quality provided by government-owned rail operating organisations
in both Bangladesh and India. The reliance of importers or exporters on road transportation, despite high
congestion, supports this view. Also it might be questioned as to whether five corridors for rail are
economically viable or not. Concentration of one or few route may yield higher volume of cargo, which is
a prime condition for commercial rail freight operation.
In general the advantage of road freight over other modes is supposed to be flexibility and door-todoor service, but it is not so in this context. As road hauliers do not have the right to carry cargo on the
roads of neighbouring countries, the required transhipment results in longer transit times, higher
transportation costs and greater damage to goods. Moreover, factors such as the imbalance in traffic, the
lack of facilities at border crossings, the inferior road infrastructure in Bangladesh, and the absence of
other trade facilitation measures work as barriers to trade with neighbours. Because of its dynamic nature
& necessity of lower volume of cargo compared with rail, and the existence of more than one dozen
border crossings, road is expected to continue dominating the transportation of higher-value goods for
trade between Bangladesh and India. The consensus on load limits on roads will help this mode to offer
through transportation, although restricted to one mode. Road can also offer combined transportation,
with short haul road collection and delivery and rail or waterway for the longer haul as in Europe. This
requires greater co-operation towards developing the infrastructure for an integrated transportation system
(SAARC Chamber of Commerce and Industry 2001b). This will be possible by establishing confidence
and co-operation among the countries under review, and by improved relations between private parties.
Apart from the present bulk cargo, rail can capture some medium-value cargo. To do so the rail network
needs to be integrated. For example the broad gauge should be extended to Dhaka, there should be
compatible rolling stock, and cargo handling equipment, rail cars and locomotives should be adequate.
The rail service may need to be privatised or be more commercially autonomous and capable of offering
an efficient door-to-door containerised transportation service. The prospect for inland waterway
transportation is not so bright, mainly because of longer transit times. The low availability of cargo for
inland waterway transportation also questions this mode’s service quality and demand.
The measures taken by private –public initiative in the name of SAARC, SAGQ or SABF (South
Asian Business Forum) would not be effective unless there is a substantial two-way traffic flow. As long
as there is one-way traffic flow empty running would continue. At present the empty running cost or loses
(profits in question) is shared by both countries fleet operators. Even a substantial (about 50%) return
cargo could not prevent the main line operators to charge the empty running cost in the Chittagon-Dhaka
railway route (Chittagong Port Authority 1998). Bangladesh has the experience of faster liberalisation/
deregulation, which many consider bane rather than boon for her economy (Bayes 2003), steps since mid
1880s & in particular mid-90s. The market is practically captured by Indian products. The removal of
restriction of foreign trucks movement would result in the capture of freight market by Indian trucking
Fleet. Obviously the Bangladeshi fleet will disappear from the market. Efforts are going on to sign a free
trade agreement with India. Experts think that such agreement would increase the export to India and also
20
increase foreign direst investment in Bangladesh alike the free trade agreements between Nepal and India
and Sri Lanka and India. But sufferers (e.g. battery manufacturers and exporters) emphasis on removal of
non-tariff barriers as it may be present or newly imposed despite a free trade agreement (The Daily Star
2003b). Considering all existing factors Bangladeshi stakeholders have not much choice left but to
continue with this restriction of fleet movement for another five to ten years to see whether India removes
non-tariff barriers and there are substantial exports to India or not. During this period the upgradation &
harmonisation of transportation infrastructure must continue. With present capacity of transportation
infrastructure, in particular road, the movement of Indian heavier vehicles will damage the road in
particular road-bridges. Thus a time frame, from beginning of 2004, can be drawn to achieve scenario 2 in
2009-2014 (see figure 2) where trucking operator will be able to delivery goods from origin (own
country) to the destination (i.e. through transportation system) of neighbouring countries with cabotage
system. This will restrict the vehicle of transporting domestic freight of the neighbouring country in
return journey even in the case of empty haul. Then after another five to ten years say in 2019-2024 the
scenario 1 with the free movement of foreign vehicles may be achieved where the operators will deliver
goods from origin to destination door-to-door services and also will be able to take load in return journey.
Such development would also allow the development of through transportation to and from Nepal and
Bhutan.
Acknowledgement
The author greatly acknowledges the contribution of Dr. Richard Gray, Plymouth Business School,
University of Plymouth, PL4 8AA, UK, and the co-operation from Mr. Abdur Razzak, Joint Chief,
Ministry of Water Resources, Dhaka, and Mr. Hadi Hossain Babul, Chief Planning, Chittagong port,
Bangladesh.
21
References
BANGLADESH BUREAU OF STATISTICS, 1999, 1998 Statistical Yearbook of Bangladesh, Dhaka
BANGLADESH INLAND WATER TRANSPORT AUTHORITY, 1999, Annual Ports and Traffic
Report 1997/98. Dhaka
BANGLADESH RAILWAY, 1999, Information Book 1999, Rail Bhaban, Dhaka.
BAYES, A., 2003, ‘Beneath the surface – Does Bangladesh benefit from the trade liberalisation?’ in The
Daily Star an on-line edition Bangladeshi English language newspaper http://www.dailystarnews.com, 5th
November 2003.
Centre for Policy Dialogue, 2003, ‘National Policy Review Forum’, Dhaka 1209, Bangladesh
(http://www.cpd-bangladesh.org)
Centre for Policy Dialogue, 2001, ‘’Election 2001: National Policy Forum’, Dhaka 1209, Bangladesh
CHITTAGONG PORT AUTHORITY, 1998, Bangladesh Port System Development Project Master Plan
and Trade Facilitation Study. Final Report Part, Chittagong
CHITTAGONG PORT AUTHORITY, 2000, Chittagong Port: an Overview
COOPER J. BRONE, M. AND PETTERS M., 1994, European Logistics: Markets, Management and
Strategy. Second Edition.
DE CASTRO, C. F., 1999, Containerisation, logistics cost and facilitation. World Bank/ UNESCAP
Regional Technical Workshop on Transport and Transit Facilitation, Bangkok, April 19-21.
HOWE, J., 1996, Road infrastructure investment in Bangladesh: environment under threat? World
Transport Policy and Practice, 2/3, 28-33.
HUQ S. M., 2001, Prospects of economic cooperation between Bangladesh and Myanmar. THE
INDEPENDENT on-line Bangladeshi English language edition newspaper 4th January
http://www.independent-bangladesh.com.
INTERNATIONAL TRADE CENTRE, Database: International Trade Statistics, Exports 1995-1999,
Geneva. http://www.intracen.org/tradstat/sitc3-3d/indexre.htm
KONDO, T., 2001, Issues and Opportunities for Subregional Cooperation in the Transportation Sector.
Asian Development Bank, March 22 (http://www.adb.org)
KOPICKI, R., 1999, Government support of efficient supply chains. World Bank/ UN-ESCAP Regional
Technical Workshop on Transport and Transit-Facilitation, Bangkok, 19-21 April
MINISTRY OF FINANCE, 2003, Bangladesh Economic SURVEY 2003. Government of Bangladesh,
Dhaka
MINISTRY OF FINANCE, 2002, Bangladesh Economic SURVEY 2002. Government of Bangladesh,
Dhaka
MINISTRY OF FINANCE, 1998, Bangladesh Economic Review 1998. Government of Bangladesh,
Dhaka
MONGLA PORT AUTHORITY, 2000, Mongla Port an Overview 50th Golden Jubilee 1950-2000.
Bagerhat, Bangladesh
MUNDLE, S. S., 2002, TIPWG Trade, Investment and Private Sector Cooperation Working Group.
Asian Development Bank, Manila (http://www.adb.org)
PLANNING COMMISSION, 1994, Bangladesh Transport Sector Study. Ministry of Planning,
Government of the People’s Republic of Bangladesh, Dhaka
PLANNING COMMISSION, 1998, Bangladesh Transport Sector Study. Ministry of Planning,
Government of the People’s Republic of Bangladesh, Dhaka
PROTHOM ALO, 2001, Bengali online daily newspaper. http://www.prothom-alo.com, 15th May
RAHMAN, A. AND RAZZAQUE, A., 1998, Informal Border Trade Between Bangladesh and India: An
Empirical Study in Selected Areas. Bangladesh Institute of Development Studies. Sher-E-Banglanagar,
Dhaka
22
REYNAUD, C., 1998, Regional flows: new orientations in a context of globalisation and the opening of
Europe. Paper presented at the seminar New Trade Patterns: New Transport Demands in the Black Sea
Region. European Conference of Ministers of Transport, Antalya, Turkey, 21-22 October.
SAARC CHAMBER OF COMMERCE AND INDUSTRY, 2001a, South Asian Growth Quadrangle
emerging opportunities for economic expanding trade among SAGQ countries: problems and prospects
presented by Binod K Karmacharya
(http://www.saarcnet.org/saarcnetorg/sagq/chap1/comparativeadvantage.htm)
SAARC CHAMBER OF COMMERCE AND INDUSTRY, 2001b, South Asian Growth Quadrangle
emerging opportunities for economic partnership infrastructure cooperation in SAGQ Region Framework
for exploiting the potentials presented by Abdur Rob Khan.
( http://www.saarcnet.org/saarcnetorg/sagq/chap2/index.htm)
SHARIF, A.H.M.R., 1986, Transport and Regional Development in Bangladesh: A Geographical Study.
Unpublished thesis for PhD, Department of Geography, University of Sheffield, UK
SUBRAMANIAN, U., 1999, South Asia: transport issues and options. World Bank/ UN-ESCAP Regional
Technical Workshop on Transport and Transit-Facilitation, Bangkok, April 19-21.
SUBRAMANIAN, U. AND ARNOLD J., 2001, Forging Subregional Links. In Transportation and
Logistics in South Asia, (Washington, D.C: IBRD and The World Bank)
TANEJA, N., 1999, Informal Trade in the SAARC Region. Indian Council for Research on International
Economic Relations (http://www.icrier.res.in/public/47.html accessed on 11/01/01)
THE ASIAN AGE, 1999, Trans-Asian railway plan runs into. Daily newspaper, 4th June, accessed on
15/09/03 in http://www.ibiblio.org/obl/reg.burma/archives/199906/msg0095.htm
THE DAILY STAR, 2003a, on-line edition Bangladeshi English language newspaper 21st October
(http://www.dailystarnews.com)
THE DAILY STAR, 2003b, on-line edition Bangladeshi English language newspaper 30th October
THE DAILY STAR, 2001a, on-line edition Bangladeshi English language newspaper 25th January
THE DAILY STAR, 2001b, on-line edition Bangladeshi English language newspaper 15th January
THE DAILY STAR, 2001c, on-line edition Bangladeshi English language newspaper 10th January
THE DAILY STAR, 2001d, on-line edition Bangladeshi English language newspaper 15th December
THE DAILY STAR, 2000a, on-line edition Bangladeshi English language newspaper 18th April
THE DAILY STAR, 2000b, on-line edition Bangladeshi English language newspaper 25th August
THE HINDU BUSINESS LINE, 2002, Birganj ICD commissioning – Can the delay be contained?. 01st
April (http://www.blonnet.com)
THE DAILY ITTEFAQ, 2001, Bangladesh Bengali Internet on-line newspaper, 22nd January
http://www.ittefaq.com,
THE TELEGRAPH, 2001, ‘Nepal’s access of sea route of Bangladesh through India. English Weekly
from Kathmandu, 9th May at http://www.nepalnews.com accessed on 3/11/03
WORLD TRADE ORGANISATION, 2000, Report by the Government. Part I and III’, Trade Policy
Review Body: Bangladesh.
WORLD TRADE ORGANISATION, 1998, Report by the WTO Secretariat: Summary, Trade Policy
Review Body: India.
WORLD BANK, 2000, Trade Blocs. A World Bank Policy Research Report (Co-publication of the
World Bank and Oxford University Press)
WORLD BANK, 2001, Nepal Multimodal Transit and Trade Facilitation Project.
(http://www.worldbank.org) accessed on 27.07.01
WORLD FACTBOOK, 2003, Economy of Bangladesh at http://www.education.yahoo.com
ZINGEL, W-P., 1998 On the economics of regional co-operation in South Asia. Paper presented at the
15th Conference on Modern South Asia Studies, Prague, 8-12 September
23