File Photo: MOICE Minister Karma Dorji

Adoption of Agreement on Movement of Traffic-in-Transit to boosts Bhutan’s trade opportunities

The National Council (NC) on 17 October 2023 adopted the Agreement on Movement of Traffic-in-Transit between the People’s Republic of Bangladesh and the Royal Government of Bhutan.

All the 23 members present in the house voted in favor.

The agreement opens up new avenues for trade and economic development. It allows Bhutan to export its goods to other countries via Bangladesh, expanding its trade options beyond its bilateral agreement with India.

The Minister of Industry, Commerce and Employment (MoICE) shared that previously, Bhutan relied solely on India for both imports and exports. However, with the adoption of the traffic-in-transit agreement, Bhutan now has access to waterways, airports, and seaports in Bangladesh, providing alternative transit routes for third-country trade.

He said, “The agreement is expected to have a positive impact on Bhutan’s economy, reducing its dependence on a single country and introducing competition, in terms of the cheapest and fastest routes. It offers business individuals the flexibility to choose the most suitable route for their trade activities.”

“While Bhutan retains the privilege to choose its trading partners, any charges related to trade activities with other countries will be borne by the respective parties involved. Despite the possibility of signing agreements with other nations, Bhutan will predominantly conduct trade through India and Bangladesh due to their geographical proximity.”

“The agreement also allows for future improvements and additions to transit points, including ports and airports. Currently, Phuentsholing, Gelephu, and Samdrupjongkhar have been identified as key exit points, but additional points can be added in the future. Similarly, if new airports are built, they can also be incorporated into the transit routes.”

The adoption of the Agreement on Movement of Traffic-in-Transit marks a significant milestone for Bhutan, providing new opportunities for trade, strengthening international relations, and enhancing regional connectivity.

The ten-year agreement, which can be renewed, strengthens bilateral trade and political relations between Bhutan and Bangladesh. It also facilitates Bhutan’s access to Bangladesh’s seaports, providing new opportunities for regional connectivity and economic cooperation.

The implementation of the agreement is expected to align with existing domestic laws, avoiding the need for major amendments. Extensive stakeholder consultations, involving government agencies, the business community, and other key stakeholders, have ensured comprehensive deliberations on the agreement’s provisions.

The Joint Technical Committee will play a crucial role in overseeing the agreement’s implementation and serving as a platform for future improvements and discussions.

Background

The first transit agreement between Bhutan and Bangladesh was signed in 1980 and was valid for ten years, with the possibility of extension. However, the agreement expired in 2000, leading to Bhutan’s proposal for its renewal on multiple occasions.

In 2013, Bhutan was informed during a Commerce Secretary Level Meeting that the expired transit agreement could not be further renewed. As a result, a new Framework Transit Agreement was proposed by the Government of Bangladesh to address contemporary transit issues.

After several meetings and delays, the agreement and its protocol received endorsement during the 8th Commerce Secretary Level Meeting in September 2022.

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