Bhutan-Bangladesh Traffic-in-Transit Agreement to bolster trade

On 9 June 2023, Lyonpo Karma Dorji, Ministry of Industry, Commerce and Employment (MoICE) as the member in-charge of the agreement introduced the Agreement on the Movement of Traffic-in-Transit between the People’s Republic of Bangladesh and the Royal Government of Bhutan.

The minister submitted that the Agreement will provide the framework to ensure greater connectivity with and through Bangladesh by road, rail, air, river and coastal waterways.

Being a landlocked country, Bhutan has had only one transit agreement with India, making the new agreement with Bangladesh significant. The Agreement strengthens trade relations between the two countries and complements the Preferential Trade Agreement already in effect since 1 July 2022.

After the support of the House to deliberate on the Agreement, it was referred to the Legislative Committee for further review. The Committee will report back to the House with its findings and recommendations on 12 June.

Bhutan’s second-largest trading partner is Bangladesh. Although the two nations enjoy existing good political support, however, with the uncertainty of future political support, there is a sense of urgency to ratify the Agreement promptly.

The Agreement also allows for the withdrawal of either party and provides provisions for amendment and dispute settlement through mutual consultation.

Advantages of the agreement include strengthening bilateral trade and political relations with Bangladesh, providing alternative transit routes for third-country trade, and facilitating Bhutan’s access to Bangladesh’s seaports.

The Agreement also offers opportunities for future improvements and discussions through mechanisms like the Joint Technical Committee.

However, there are potential challenges, including the reliance on India’s support for transit trade through Bangladesh and competition from established transporters within India and Bangladesh. Additionally, it may take time for Bhutan’s private sector to adjust to the alternate route through Bangladesh.

The Agreement’s implementation is not expected to incur additional costs for the RGoB, and it is designed to align with existing domestic laws without requiring major amendments.

It has undergone extensive stakeholder consultations, involving relevant government agencies, the business community, and other key stakeholders. Their inputs have been considered throughout the negotiation process, ensuring comprehensive deliberations on the agreement’s provisions.

The Agreement opens up new opportunities for Bhutan’s trade and economic development, bolstering its international relations and providing access to essential seaports. The Agreement’s successful implementation is expected to enhance economic cooperation between the two nations and contribute to regional connectivity.

Background

The first Agreement on Transit between Bhutan and Bangladesh was signed on 8 September 1980, in Thimphu. Initially valid for ten years, it could be extended for another ten years. However, the Transit Agreement expired on 7 September 2000, and Bhutan proposed its renewal to the Government of Bangladesh (GoB) on multiple occasions.

In March 2013, during a Commerce Secretary Level Meeting (CSLM), Bhutan was informed that the expired Transit Agreement could not be further renewed. The GoB suggested a new Framework Transit Agreement that covered contemporary transit issues. Bhutan shared its comments on the draft Transit Agreement in May 2014 but made no further progress.

The 1st JWG meeting took place in Dhaka in 2017, followed by the 2nd meeting in Thimphu in 2018. Due to various reasons, there was a significant delay before the 3rd meeting, which finally occurred in Dhaka in June 2022.

The 8th CSLM took place in Dhaka in September 2022, where the Agreement and its Protocol received endorsement.

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