CaPtAiN_pLaNeT
SENIOR MEMBER
Transit Facilities to India, Nepal, Bhutan
$2.3b net profit in 30 years projected
$2.3b net profit in 30 years projected
Bangladesh could reap a net profit of $2.3 billion in 30 years by giving transit facilities to India, Nepal and Bhutan, shows a study of the Centre for Policy Dialogue (CPD).
The country would have to invest $1.17 billion in capital expenditure, operation and maintenance costs for more than 30 years to develop corridors for transit traffic, says the independent study that will be made public on November 10.
Of the amount, $53.74 million and $769 m would be required to set up road and rail links, $79 m and $129 m to upgrade Chittagong and Mongla ports, and $99 million to operate and maintain them.
Transit revenue would be low in the first five years since many constructions and arrangements would be done during the period. Bangladesh would be able to reap about 10 percent of the full potential benefits at that time, says the study.
"From the sixth year onward, full potential benefits are assumed to be realised," it mentions.
A team of experts from Bangladesh, India, Nepal and Bhutan prepared the study report. Dr Rahmatullah, former director of the United Nations Economic and Social Commission for Asia and the Pacific, led the team.
Bangladesh could gain three benefits from transit services, says the study.
Freight charges within Bangladesh's transport network would go down and the country would receive revenue in port charges from international cargo at Chittagong and Mongla ports. Besides, transit fees to be earned by Bangladesh will be equivalent to 70 percent of India's transport cost saving, thanks to diversion of each route, it says.
The study covered 14 corridors -- eight road and five rail routes, and a waterway -- for transit traffic between Bhutan, India and Nepal through Bangladesh.
Dr Rahmatullah declined commenting on the study. He said the government would go through different studies including the one prepared by the CPD and decide its next course of action.
He said Bangladesh's investment would be required in the multi-modal transit including rail, road and river routes that are now under consideration. On the basis of this, Bangladesh could impose transit fees in a manner that would create a win-win situation for both Bangladesh and India.
The government wants to reach an agreement with India very soon on the issues of transit and transhipment, said a high official at the finance ministry.
The CPD report will be presented at a seminar on transit and transhipment to be organised by the National Board of Revenue in Dhaka on November 10.
Prime Minister's Economic Adviser Mashiur Rahman said the government has been working on a resolution on transit and transhipment.
He declined giving any detail.
In the CPD report, the results of aggregate Cost Benefit Analysis show that trade in transport services is an economically viable option for Bangladesh. The Internal Rate of Return is 33.46 percent, the benefit-cost ratio 2.86 and the Net Present Value $2.3 billion.
A debate is on whether there should be a transit and transhipment arrangement between Bangladesh and India, and what should be the charges for the facility.
Giving an example of the benefit of transit for the parties involved, CPD Executive Director Mustafizur Rahman said just assume that India has to spend $100 for transporting goods from one state to another in the North East. If Bangladesh allows India to use its transport network the goods could be transported for only $60. Now both the governments have to decide on the share of the amount saved.
Mustafiz said Bangladesh could impose charges in any form such as transit fees or toll.
Zahid Hossain, senior economist of World Bank, said policymakers could make the right decisions considering the options and can do much better at the negotiation table if equipped with solid information on costs and benefits of the alternative options.
Such analysis could help clarify many misconceptions about the transit issue, he said.
Prior to the partition of India in 1947, trade between the northeastern sub-region of South Asia and the rest of India was done through the territories of what is now Bangladesh.
Rail and river transit across the erstwhile East Pakistan continued until 1965. Only inland water transport transit was restored in 1972 after Bangladesh's independence.
Due to fragmented transport, Europe-bound consignments of Assam Tea now travel 1,400 kilometres through India's 'chicken neck' to reach Kolkata Port. Traffic from Tripura would have to travel only 400 km instead of 1,650 km to reach Kolkata port, if transit through Bangladesh was possible.
Bangladesh and India signed a joint communiqué in January 2010 creating a scope for introducing multi-modal transit and transhipment between the two nations.
$2.3b net profit in 30 years projected
$2.3b net profit in 30 years projected
Bangladesh could reap a net profit of $2.3 billion in 30 years by giving transit facilities to India, Nepal and Bhutan, shows a study of the Centre for Policy Dialogue (CPD).
The country would have to invest $1.17 billion in capital expenditure, operation and maintenance costs for more than 30 years to develop corridors for transit traffic, says the independent study that will be made public on November 10.
Of the amount, $53.74 million and $769 m would be required to set up road and rail links, $79 m and $129 m to upgrade Chittagong and Mongla ports, and $99 million to operate and maintain them.
Transit revenue would be low in the first five years since many constructions and arrangements would be done during the period. Bangladesh would be able to reap about 10 percent of the full potential benefits at that time, says the study.
"From the sixth year onward, full potential benefits are assumed to be realised," it mentions.
A team of experts from Bangladesh, India, Nepal and Bhutan prepared the study report. Dr Rahmatullah, former director of the United Nations Economic and Social Commission for Asia and the Pacific, led the team.
Bangladesh could gain three benefits from transit services, says the study.
Freight charges within Bangladesh's transport network would go down and the country would receive revenue in port charges from international cargo at Chittagong and Mongla ports. Besides, transit fees to be earned by Bangladesh will be equivalent to 70 percent of India's transport cost saving, thanks to diversion of each route, it says.
The study covered 14 corridors -- eight road and five rail routes, and a waterway -- for transit traffic between Bhutan, India and Nepal through Bangladesh.
Dr Rahmatullah declined commenting on the study. He said the government would go through different studies including the one prepared by the CPD and decide its next course of action.
He said Bangladesh's investment would be required in the multi-modal transit including rail, road and river routes that are now under consideration. On the basis of this, Bangladesh could impose transit fees in a manner that would create a win-win situation for both Bangladesh and India.
The government wants to reach an agreement with India very soon on the issues of transit and transhipment, said a high official at the finance ministry.
The CPD report will be presented at a seminar on transit and transhipment to be organised by the National Board of Revenue in Dhaka on November 10.
Prime Minister's Economic Adviser Mashiur Rahman said the government has been working on a resolution on transit and transhipment.
He declined giving any detail.
In the CPD report, the results of aggregate Cost Benefit Analysis show that trade in transport services is an economically viable option for Bangladesh. The Internal Rate of Return is 33.46 percent, the benefit-cost ratio 2.86 and the Net Present Value $2.3 billion.
A debate is on whether there should be a transit and transhipment arrangement between Bangladesh and India, and what should be the charges for the facility.
Giving an example of the benefit of transit for the parties involved, CPD Executive Director Mustafizur Rahman said just assume that India has to spend $100 for transporting goods from one state to another in the North East. If Bangladesh allows India to use its transport network the goods could be transported for only $60. Now both the governments have to decide on the share of the amount saved.
Mustafiz said Bangladesh could impose charges in any form such as transit fees or toll.
Zahid Hossain, senior economist of World Bank, said policymakers could make the right decisions considering the options and can do much better at the negotiation table if equipped with solid information on costs and benefits of the alternative options.
Such analysis could help clarify many misconceptions about the transit issue, he said.
Prior to the partition of India in 1947, trade between the northeastern sub-region of South Asia and the rest of India was done through the territories of what is now Bangladesh.
Rail and river transit across the erstwhile East Pakistan continued until 1965. Only inland water transport transit was restored in 1972 after Bangladesh's independence.
Due to fragmented transport, Europe-bound consignments of Assam Tea now travel 1,400 kilometres through India's 'chicken neck' to reach Kolkata Port. Traffic from Tripura would have to travel only 400 km instead of 1,650 km to reach Kolkata port, if transit through Bangladesh was possible.
Bangladesh and India signed a joint communiqué in January 2010 creating a scope for introducing multi-modal transit and transhipment between the two nations.
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