BBIN agreement

Note4Students

BBIN is part of India’s ‘Look East Policy’. This initiative can also solve India’s longstanding problem of locational disadvantage and poor connectivity of its north-eastern states. Recently Bhutan upper house refused to ratify the agreement by citing various reasons. BBIN MVA can change the entire regional trade narrative. India can extend its trade routes with well-connected ASEAN market.

Introduction

  1. Bangladesh, Bhutan, India, and Nepal (BBIN) signed a Motor Vehicles Agreement for the Regulation of Passenger, Personal and Cargo Vehicular Traffic.
  2. Aside from facilitating the cross-border movement of passengers and goods, the agreement is expected to “promote safe, economical efficient and environmentally sound road transport in the sub-region
  3. It will help to create “an institutional mechanism for regional integration.”
  4. It may increase trade within the South Asia region by nearly 60% and trade by the region with outside partners by more than 30% over current levels.
  5. But nearly two years after ministers from Bhutan, Bangladesh, India and Nepal signed the BBIN MVA in Thimphu; the Bhutanese government withdrew from the agreement followed Bhutan’s domestic resistance to ratify the agreement.

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Analysis

WHY BBIN IS NEEDED.

  1. Connectivity: Although countries of South Asia are tied by shared history and culture, they are still not well connected with each other and integration remains one of the poorest in the world.
  2. Economic development: Sub regional initiative is envisioned to improve economic cooperation and connectivity among these four South Asian countries.
  3. Low trade: In spite of having an overarching regional free trade agreement in the form of the South Asian Free Trade Agreement (SAFTA) signed in 2004, and various other bilateral and regional trade agreements forged since then, intra-regional trade among South Asian countries accounts for only about five percent of their total trade.
  4. Regional integration: Low level of regional integration in South Asia is manifested by poor intra-regional investment, and even poorer intra-regional factor movements.
  5. The lack of regional integration hurts the region’s smaller countries more. Countries such as Nepal is least developed, access to regional and international markets is crucial for their development.
  6. Their very lack of economic and physical connectivity leaves them with little opportunity to create productive ties with the rest of the world, rendering them highly disadvantaged in a global economy where such relations help achieve development goals.
  7. New literature on trade within South Asia indicates that trade facilitation issues have emerged as key issues blocking the rapid expansion of intra-regional trade.
  8. Hurdles in the existing mechanism :Various travel restrictions at the border Land Customs Stations (LCSs), delays due to transhipment issues, poor and sometimes non-existent infrastructure at some LCSs, and other customs documentation and clearance-related problems are significantly adding up to the time and financial costs of conducting trade among these nations. In this context, the BBIN MVA is a welcome step.

Advantages of BBIN

  1. Seamless connectivity: The agreement will allow vehicles to enter each other’s territory and eliminate the need for transhipment of goods from one country’s truck to another at the border, thereby eliminating a time-consuming and costly process. This is not only going to reduce trade costs between nations and facilitate smoother transactions and boost trade, but it will also possibly reduce some of the informal trade that happens among these countries.
  2. Cargo movement: It will promote support for containerised movement of cargo. Containerisation of trade has lowered the cost of trade across the world significantly and it is likely that high trade costs among South Asian countries will be drastically reduced when containerisation gains more popularity.
  3. One of the biggest advantages of containerised trade is that it is multi-modal and therefore, an integrated and seamless road and rail network will further facilitate containerisation in South Asia and help reduce trade costs.
  4. Development of north eastern region: The north-eastern region of India will also benefit significantly from the BBIN MVA and rail network programmes. One of the major challenges faced by India’s Northeast has been poor connectivity. The BBIN agreements will reduce distance between the north-eastern states and the Kolkata port by about a thousand kilometres, as well as allow these states to access the Chittagong port in Bangladesh. This has the potential to unlock significant business opportunities in India’s northeast.
  5. A study by the ADB has proposed 10 regional road networks as South Asian Corridors, out of which seven have been identified in the BBIN region. These economic corridors will allow landlocked trading centres of Nepal and Bhutan to gain access to ports in India and Bangladesh. For example, Tripura can get access to Bangladesh’s Ashugunjport; Chittagong and Mongla ports can be accessed from Kolkata and the north-eastern state.
  6. Cultural contact: The BBIN initiative also promises to facilitate the movement of people across borders. This has huge implications for both business and trade as it can lead to improved people-to-people contact, encourage business travel and most importantly can give a huge boost to trade in various services.
  7. Development of trade related services: It is also expected that increased economic and trade integration among these countries will generate demand for supporting services such as logistics, shipping, banking and finance and express delivery. An integrated market will also boost e-commerce services in the region
  8. BBIN MVA can be seen as a first step towards a broader integration process. The locational advantage of South Asia implies that it can serve as a gateway for connecting to Southeast and East Asia. The BBIN MVA network has created the first step of this broader integration process.
  9. Improved connectivity will imply much tighter economic integration between India and other BBIN countries with ASEAN.

Challenges

  1. Attitude of Bhutan: Having unsuccessfully tried to ratify the proposal for more than a year, Bhutan finally declared that it was unable to proceed with the ratification process ‘for now’.
  2. The Bhutanese fear that the implementation of the deal would lead to an influx of vehicles from other countries impacting its own transporters and degradation of environment.
  3. Non-binding agreement: Being a non-binding agreement, the implementation of BBIN MVA may follow a best endeavour approach.
  4. Insufficient infrastructure: A surge in traffic may cause damage to the existing infrastructure in the sub region, since it is not equipped to handle the additional load.
  5. Managing cross border corridors is another challenge.
  6. Visa regime: A liberalised visa regime and efforts to improve synergy between markets in different countries (such as the pact to bring in sync India and Bangladesh’s product standardisation systems signed during the recent prime ministerial visit to Dhaka) are just some of the other steps that will have to be taken.
  7. Technical challenges: Many border crossing points do not have integrated check posts. Poor road conditions, the introduction of double-locking system on Nepalese trucks passing through Indian Territory, technical issues related to customs and tariffs, etc., are pose major challenges in this regard.
  8. Synergy between governments: Coordination between inter-ministerial departments as well as between central and state agencies, especially in India, has been a major problem in implementing agreements.

Conclusion

  1. The BBIN initiative fits well with the new wave of developing massive transnational road and rail connectivity networks. All these will facilitate intra- and inter-regional trade in goods and services.
  2. It also integrates well with India’s ‘Look East Policy’. This initiative can also solve India’s longstanding problem of locational disadvantage and poor connectivity of its north-eastern states.
  3. But India needs to utilize every possible platform to generate a favourable narrative for BBIN MVA among Bhutan political class as well as people of Bhutan.

Questions

BBIN Motor Vehicle Agreement will help in regional integration. Analyse

“Though BBIN MVA offers a greater regional integration, it has large number of hurdles to overcome”. Comment

BBIN MVA will reduce developmental inequalities of North eastern India ,critically analyse

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