Uninterrupted and increased cooperation would build up the trust
The Prime Minister's economic affairs adviser Mashiur Rahman says that if Bangladesh gives transit facility it will earn an enormous amount of money, but it depends on building up a relationship of trust with India. The Daily Star took a detailed interview of Mashiur Rahman on November 20.
The Daily Star (DS): Is Bangladesh going to give transit or transshipment facility to India?
Mashiur Rahman (MR): Transit and transshipment -- I have not been able to find a difference between the two. We already have an agreement -- the inland water protocol. We also have a railway protocol, but we do not have a protocol for truck movement. There is an ad-hoc arrangement for truck movement. So I am not referring to that. For inland water transport, as I said, the charges are fixed and they give us a fixed amount annually.
For railway, the agreement, which has been in existence since 1947-48, is that when Indian wagons come to the Bangladesh border the goods must be transferred to Bangladesh wagons, and the Bangladesh railway will be responsible for their maintenance. When Bangladeshi wagons go to the Indian border, the goods will be transferred to Indian wagons. It is their responsibility to maintain that.
There is a calculation based on usage. So, whoever uses more pays for the excess use based on the number of days and the quantity of cargo carried. Adjustments are made periodically and the payment is made. So, for railway and for road there is a protocol in existence.
DS: Now that we are expecting more cargo to move, what would be the modality and what is the difference between transit and transshipment?
MR: I have not been able to identify a significant difference between transit and transshipment. The WTO has a clause on transit and that clause includes transit and transshipment. Article 5 of WTO on freedom of transit says: "Goods, including baggage, and vessels and other means of transport shall be deemed to be in transit across the territory of a contracting party when the passage across such territory with or without transshipment, warehousing, breaking bulb or chain in the mode of transport is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes."
Traffic of this nature is termed traffic in transit. So, according to this WTO definition, what is transit is clear. It is movement of goods from one country across another country. Transshipment is only a part of transit involving change of the mode of transportation.
I think the government of Bangladesh should follow the definition. Our government should also insist that India also accept this, because these are agreed principles in WTO to which both the countries are signatories.
If we act on this then the problem becomes simpler. Then we only need to see whether there is a change of the mode of transport during transit, whether warehouses are used, etc. Bangladesh is legally entitled to impose a charge and collect it from the Indian vessels using this service. WTO also lays down the principles on which the charges shall be calculated. It says clearly that the charges shall approximately be equal to the cost of the services rendered and shall not be used for augmentation of revenue or for protecting domestic services.
According to the WTO Article, all hidden charges of whatever character, other than import and export duty and other than taxes within the purview of Article 3, imposed by contracting parties on all connections with the importation and exportation shall be limited in amount to the approximate cost of service and shall not inherently protect domestic products or imports of fiscal purposes. So the main question is that if a country allows transit facilities to another country and that country takes advantages of the facilities, the spirit should be not to put up impediments or difficulties, not to use it as a source of augmentation of revenue, not to use as a fiscal tool, but the charges which do not exceed administrative cost or the cost of services shall be collected. There is also some approximation because it may not always be possible to calculate precisely what is the cost.
So if you take our inland water protocol as a model -- we do not know what is the exact cost of maintaining the river routes for India. We do not know whether we would maintain these routes if India were not using them.
DS: Would you please elaborate on the river transit facility given to India?
MR: Our protocol with India talks about movement of Indian cargo through river routes in Bangladesh and India gives us a fixed amount for the use of these routes. The routes are designated. They used to give us Tk.2 crore until 2008-09. In 2009-10 it has been raised to Tk.4.52 crore. It is a fixed amount they give, regardless of whatever the use is. For actual use we collect from them different charges, which are at the same rate that we charge our own vessels. The original agreement indicated that the cargo would be split 50-50 between Bangladesh and India. But Bangladesh recently has been carrying 99%-100% of the cargo -- and India is mostly using privately owned vessels of Bangladesh.
I do not know how much private vessels earn from India. Canal charge, parking charge, landing and shipping charge are collected by BIWTA. In 2001-02, our income on charges was Tk.2 crore, and it is Tk.4.52 crore in 2009-10. This does not include the income to the ship owners for providing services. The quantity of cargo carried has also increased. In 2001-02 it was 47,858 metric tonnes. In 2009-10, it was 12 lakh 77 thousand 446 metric tonnes. Our expectation is that if the movement is facilitated, the charges collected by BIWTA and the quantity of cargo will also increase. The income through vessels hired by India will also increase and will contribute to the national income.
DS: You are going to prepare a set of rules for fixing transit and transshipment fees and other related matters. How will you do that?
MR: The basic element of that is the cost for operation that is recovered, and there is a fixed amount of payment for maintenance, use of equipment and so on. If the same principle is applied, the only thing we need to look at is the method of calculation and the amount. What we should be careful about is that we don't inflate the amount.
We cannot underestimate, because we will not be able to recover the amount that we should. If we overestimate, we reduce India's incentive to use the facilities that we give to them. So there ought to be some balance. The question is, what is the additional cost Bangladesh will incur for providing that service? If India does not use the services will Bangladesh incur the cost? That is the additional cost.
For roads, right now, we do not have any problem because India will use the Ashuganj- Agortala road, which is already there. In order to carry the excess cargo some improvement and extension of the road is necessary, and the cost will be borne entirely by India. So we are not incurring any additional cost for that.
They are also bearing the cost for setting up the facility for transshipment at Ashuganj. The ODC cargo will be offloaded from vessel to a truck. The Ro-Ro ferry to be used will also be installed by India. So, we will not set up whatever will be used entirely by India. The entire cost will be borne by India.
So that part of the investment is not a problem now. All that India would give us is the berthing etc, which is the Indian protocol. If some additional measures that are not part of the investment are necessary the cost will be collected.
Finally, the rules will basically follow what is in the inland protocol. There is a railway protocol for movement of goods. For movement along the roads the WTO prescription should be applied and the numbers have to be calculated.
DS: Will you conduct a detailed study on what the pressure on our roads will be when heavy-duty Indian cargo trucks start plying? How much will we be benefited by this? How much load will our ports be able to take?
MR: The basic question is, do you start before the study or do you study first? The investment in all of this would depend on how much cargo will be transported through Bangladesh. There is, as of now, no basis for making calculations, so you make an assumption that x, y, z quantity will be transported.
Unless there is some basis for that calculation, all calculations have to be based on assumption. The critical factor is how much cargo can the Chittagong and Mongla ports handle?
If India, Nepal, Bhutan were not going to use these ports, would Bangladesh make an investment in these ports? So, these are difficult assumptions, difficult calculations. Supposing India, Nepal and Bhutan do not use our roads or ports, how much improvement and how much investment will we make? That will depend on our need. Then you add something for India, something for Nepal and something for Bhutan. So if we assume that we will handle, say, 10% more cargo, then the calculation should be on the additional cargo handled and an increase by 15% each year. That additional investment will be the on account of Bangladesh and10% will be for India, Nepal and Bhutan.
So that would be the additional investment required for that. That is something that we should collect. That calculation is based on an assumption. The important point right now would be to establish the principle and methodology of calculation. The calculations can be made once that is established and an approximate rate per unit is accepted.
DS: The government has charged the commerce ministry with the responsibility of formulating rules and related issues for giving transit and transhipment. How will the calculation be done? Will the help of an expert be taken in this regard?
MR: I do not know how much expertise and methodology is available with the commerce ministry. There may not be an expert available. So if necessary, we will take an expert.
DS: Will there be separate agreements for giving transit facilities for different modes and routes? For example, transit is going to be introduced at Ashuganj and Akhaura soon.
MR: For ODC cargo, they will use inland water routes. Ashuganj has been already declared as a port of call. And movement to Ashuganj does not need any significant additional investment for navigation. What is additional is the transfer of the ODC from a vessel to an automobile. That cost will be borne by India. Then the use of road -- the cost of whatever improvement is needed will be borne by India. Bangladesh will not incur any additional cost or investment.
So, for this, we don't need a new protocol. What we need is investment, and the additional cost involved for operation of that road. That is all that are needed. No additional protocol is needed for that additional cost.
DS: Will the amount of fees be fixed as per the new rules that will be formulated?
MR: I have not seen the terms of reference. This would be an extension of the protocol and the rules that we have now. If we follow the WTO, all that we need to do is to look at the cost for providing the service. And that cost has been defined in terms of efficiency.
Let us say, if the efficiency cost is calculated at Tk.100 and the inefficiency requires Tk.10 more, you cannot ask them to pay more. If you take the case of Chittagong port -- there will be demurrage charge and a waiting charge.
That is the loss because of inefficiency. If you are competing in the international market, you cannot ask anyone to pay for your inefficiency. You can only ask them to pay for your efficiency.
As for inefficiency part, you can say, OK, this is additional cost for inefficiency. If you use our port, that is something that cannot be avoided, and it is for you to decide. But your principle is very weak.
DS: Transport expert Dr Rahmatullah has shown in a study -- which is still in draft form -- that Bangladesh can make a profit of $2.3 billion over the next 30 years by giving transit and transshipment facility. If the calculation is correct, how beneficial will it be to the country?
MR: I have not seen that report, so I cannot comment on it. But as I said, these are all based on assumptions. If the assumptions are valid, then there is a use for them. If the capacity of Chittagong and Mongla ports does not increase significantly, you cannot handle one additional unit. So this assumes efficiency of the ports, efficiency of the transport from port to inland borders and across the Indian border. All these are assumptions. Dr. Rahmatullah had worked in Escap and he was also a very important player in the Asian railway and Asian highway. If Escap had made some assumptions, then some calculations are there. If the adjustment is consistent with the price changes so far, that might reflect the use of it. But as I have said I have not seen it, so I cannot comment.
DS: In your opinion how and to what extent can Bangladesh benefit by giving transit and transshipment facilities? Do you have any data in this regard?
MR: You can earn an enormous amount. I cannot accept any of the calculations done on so many assumptions. My accepting or rejecting does not reflect on the quality. But these are all based on assumptions. For instance, if the assumption is that all import to the northeastern states will be through Bangladesh, it will be a wrong one. These are wrong assumptions because if you want northeastern states to import everything through Chittagong port then you have to build up a relationship of trust, which is not there. Uninterrupted and increased cooperation, let us say for 10 years, would build up the trust. Then India can start importing all the goods for its northeastern states through Chittagong and Mongla ports.
The Prime Minister's economic affairs adviser Mashiur Rahman says that if Bangladesh gives transit facility it will earn an enormous amount of money, but it depends on building up a relationship of trust with India. The Daily Star took a detailed interview of Mashiur Rahman on November 20.
The Daily Star (DS): Is Bangladesh going to give transit or transshipment facility to India?
Mashiur Rahman (MR): Transit and transshipment -- I have not been able to find a difference between the two. We already have an agreement -- the inland water protocol. We also have a railway protocol, but we do not have a protocol for truck movement. There is an ad-hoc arrangement for truck movement. So I am not referring to that. For inland water transport, as I said, the charges are fixed and they give us a fixed amount annually.
For railway, the agreement, which has been in existence since 1947-48, is that when Indian wagons come to the Bangladesh border the goods must be transferred to Bangladesh wagons, and the Bangladesh railway will be responsible for their maintenance. When Bangladeshi wagons go to the Indian border, the goods will be transferred to Indian wagons. It is their responsibility to maintain that.
There is a calculation based on usage. So, whoever uses more pays for the excess use based on the number of days and the quantity of cargo carried. Adjustments are made periodically and the payment is made. So, for railway and for road there is a protocol in existence.
DS: Now that we are expecting more cargo to move, what would be the modality and what is the difference between transit and transshipment?
MR: I have not been able to identify a significant difference between transit and transshipment. The WTO has a clause on transit and that clause includes transit and transshipment. Article 5 of WTO on freedom of transit says: "Goods, including baggage, and vessels and other means of transport shall be deemed to be in transit across the territory of a contracting party when the passage across such territory with or without transshipment, warehousing, breaking bulb or chain in the mode of transport is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes."
Traffic of this nature is termed traffic in transit. So, according to this WTO definition, what is transit is clear. It is movement of goods from one country across another country. Transshipment is only a part of transit involving change of the mode of transportation.
I think the government of Bangladesh should follow the definition. Our government should also insist that India also accept this, because these are agreed principles in WTO to which both the countries are signatories.
If we act on this then the problem becomes simpler. Then we only need to see whether there is a change of the mode of transport during transit, whether warehouses are used, etc. Bangladesh is legally entitled to impose a charge and collect it from the Indian vessels using this service. WTO also lays down the principles on which the charges shall be calculated. It says clearly that the charges shall approximately be equal to the cost of the services rendered and shall not be used for augmentation of revenue or for protecting domestic services.
According to the WTO Article, all hidden charges of whatever character, other than import and export duty and other than taxes within the purview of Article 3, imposed by contracting parties on all connections with the importation and exportation shall be limited in amount to the approximate cost of service and shall not inherently protect domestic products or imports of fiscal purposes. So the main question is that if a country allows transit facilities to another country and that country takes advantages of the facilities, the spirit should be not to put up impediments or difficulties, not to use it as a source of augmentation of revenue, not to use as a fiscal tool, but the charges which do not exceed administrative cost or the cost of services shall be collected. There is also some approximation because it may not always be possible to calculate precisely what is the cost.
So if you take our inland water protocol as a model -- we do not know what is the exact cost of maintaining the river routes for India. We do not know whether we would maintain these routes if India were not using them.
DS: Would you please elaborate on the river transit facility given to India?
MR: Our protocol with India talks about movement of Indian cargo through river routes in Bangladesh and India gives us a fixed amount for the use of these routes. The routes are designated. They used to give us Tk.2 crore until 2008-09. In 2009-10 it has been raised to Tk.4.52 crore. It is a fixed amount they give, regardless of whatever the use is. For actual use we collect from them different charges, which are at the same rate that we charge our own vessels. The original agreement indicated that the cargo would be split 50-50 between Bangladesh and India. But Bangladesh recently has been carrying 99%-100% of the cargo -- and India is mostly using privately owned vessels of Bangladesh.
I do not know how much private vessels earn from India. Canal charge, parking charge, landing and shipping charge are collected by BIWTA. In 2001-02, our income on charges was Tk.2 crore, and it is Tk.4.52 crore in 2009-10. This does not include the income to the ship owners for providing services. The quantity of cargo carried has also increased. In 2001-02 it was 47,858 metric tonnes. In 2009-10, it was 12 lakh 77 thousand 446 metric tonnes. Our expectation is that if the movement is facilitated, the charges collected by BIWTA and the quantity of cargo will also increase. The income through vessels hired by India will also increase and will contribute to the national income.
DS: You are going to prepare a set of rules for fixing transit and transshipment fees and other related matters. How will you do that?
MR: The basic element of that is the cost for operation that is recovered, and there is a fixed amount of payment for maintenance, use of equipment and so on. If the same principle is applied, the only thing we need to look at is the method of calculation and the amount. What we should be careful about is that we don't inflate the amount.
We cannot underestimate, because we will not be able to recover the amount that we should. If we overestimate, we reduce India's incentive to use the facilities that we give to them. So there ought to be some balance. The question is, what is the additional cost Bangladesh will incur for providing that service? If India does not use the services will Bangladesh incur the cost? That is the additional cost.
For roads, right now, we do not have any problem because India will use the Ashuganj- Agortala road, which is already there. In order to carry the excess cargo some improvement and extension of the road is necessary, and the cost will be borne entirely by India. So we are not incurring any additional cost for that.
They are also bearing the cost for setting up the facility for transshipment at Ashuganj. The ODC cargo will be offloaded from vessel to a truck. The Ro-Ro ferry to be used will also be installed by India. So, we will not set up whatever will be used entirely by India. The entire cost will be borne by India.
So that part of the investment is not a problem now. All that India would give us is the berthing etc, which is the Indian protocol. If some additional measures that are not part of the investment are necessary the cost will be collected.
Finally, the rules will basically follow what is in the inland protocol. There is a railway protocol for movement of goods. For movement along the roads the WTO prescription should be applied and the numbers have to be calculated.
DS: Will you conduct a detailed study on what the pressure on our roads will be when heavy-duty Indian cargo trucks start plying? How much will we be benefited by this? How much load will our ports be able to take?
MR: The basic question is, do you start before the study or do you study first? The investment in all of this would depend on how much cargo will be transported through Bangladesh. There is, as of now, no basis for making calculations, so you make an assumption that x, y, z quantity will be transported.
Unless there is some basis for that calculation, all calculations have to be based on assumption. The critical factor is how much cargo can the Chittagong and Mongla ports handle?
If India, Nepal, Bhutan were not going to use these ports, would Bangladesh make an investment in these ports? So, these are difficult assumptions, difficult calculations. Supposing India, Nepal and Bhutan do not use our roads or ports, how much improvement and how much investment will we make? That will depend on our need. Then you add something for India, something for Nepal and something for Bhutan. So if we assume that we will handle, say, 10% more cargo, then the calculation should be on the additional cargo handled and an increase by 15% each year. That additional investment will be the on account of Bangladesh and10% will be for India, Nepal and Bhutan.
So that would be the additional investment required for that. That is something that we should collect. That calculation is based on an assumption. The important point right now would be to establish the principle and methodology of calculation. The calculations can be made once that is established and an approximate rate per unit is accepted.
DS: The government has charged the commerce ministry with the responsibility of formulating rules and related issues for giving transit and transhipment. How will the calculation be done? Will the help of an expert be taken in this regard?
MR: I do not know how much expertise and methodology is available with the commerce ministry. There may not be an expert available. So if necessary, we will take an expert.
DS: Will there be separate agreements for giving transit facilities for different modes and routes? For example, transit is going to be introduced at Ashuganj and Akhaura soon.
MR: For ODC cargo, they will use inland water routes. Ashuganj has been already declared as a port of call. And movement to Ashuganj does not need any significant additional investment for navigation. What is additional is the transfer of the ODC from a vessel to an automobile. That cost will be borne by India. Then the use of road -- the cost of whatever improvement is needed will be borne by India. Bangladesh will not incur any additional cost or investment.
So, for this, we don't need a new protocol. What we need is investment, and the additional cost involved for operation of that road. That is all that are needed. No additional protocol is needed for that additional cost.
DS: Will the amount of fees be fixed as per the new rules that will be formulated?
MR: I have not seen the terms of reference. This would be an extension of the protocol and the rules that we have now. If we follow the WTO, all that we need to do is to look at the cost for providing the service. And that cost has been defined in terms of efficiency.
Let us say, if the efficiency cost is calculated at Tk.100 and the inefficiency requires Tk.10 more, you cannot ask them to pay more. If you take the case of Chittagong port -- there will be demurrage charge and a waiting charge.
That is the loss because of inefficiency. If you are competing in the international market, you cannot ask anyone to pay for your inefficiency. You can only ask them to pay for your efficiency.
As for inefficiency part, you can say, OK, this is additional cost for inefficiency. If you use our port, that is something that cannot be avoided, and it is for you to decide. But your principle is very weak.
DS: Transport expert Dr Rahmatullah has shown in a study -- which is still in draft form -- that Bangladesh can make a profit of $2.3 billion over the next 30 years by giving transit and transshipment facility. If the calculation is correct, how beneficial will it be to the country?
MR: I have not seen that report, so I cannot comment on it. But as I said, these are all based on assumptions. If the assumptions are valid, then there is a use for them. If the capacity of Chittagong and Mongla ports does not increase significantly, you cannot handle one additional unit. So this assumes efficiency of the ports, efficiency of the transport from port to inland borders and across the Indian border. All these are assumptions. Dr. Rahmatullah had worked in Escap and he was also a very important player in the Asian railway and Asian highway. If Escap had made some assumptions, then some calculations are there. If the adjustment is consistent with the price changes so far, that might reflect the use of it. But as I have said I have not seen it, so I cannot comment.
DS: In your opinion how and to what extent can Bangladesh benefit by giving transit and transshipment facilities? Do you have any data in this regard?
MR: You can earn an enormous amount. I cannot accept any of the calculations done on so many assumptions. My accepting or rejecting does not reflect on the quality. But these are all based on assumptions. For instance, if the assumption is that all import to the northeastern states will be through Bangladesh, it will be a wrong one. These are wrong assumptions because if you want northeastern states to import everything through Chittagong port then you have to build up a relationship of trust, which is not there. Uninterrupted and increased cooperation, let us say for 10 years, would build up the trust. Then India can start importing all the goods for its northeastern states through Chittagong and Mongla ports.
Funny that you indian crybabies highlighted the WTO part.
