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Dhaka Tribune

Indo-Bangla economic relations

Opening up trade and spearheading projects with a lasting legacy. This is the third of a four-part series on the early history of Indo-Bangla relations (1972-1975)

Update : 18 Feb 2024, 02:30 AM

Connectivity, industrial development and trade were the key themes in discussions over economic cooperation between Bangladesh and India. The Planning Commissions of both countries were at the forefront of negotiations to envision a new economic and industrial future. 

After 1971, Bangladesh set up a newly minted planning commission with economists trained from Cambridge and Harvard. The new commission sought to adapt best practices from both India and Pakistan. The Indian model was a research-centric commission, whereas the Pakistani model was a centralized commission overseen by the head of state.

 

Diversifying exports

The trade deficit with India was one of the areas identified by the Bangladesh Planning Commission for redressal. Professor Rehman Sobhan, who served in the first planning commission with the rank and status of a state minister, wanted to expand Bangladesh’s export capacity by producing value-added products from imported Indian raw materials. Towards this end, a proposal was drawn up for a cement factory in Sylhet to produce cement made from limestone imported from Northeast India. 

Given the substantial natural gas reserves within Bangladesh, the commission also wanted to export fertilizer produced with Bangladeshi natural gas at a proposed joint venture fertilizer plant in Chittagong. Iron and steel projects were also planned to develop and diversify Bangladesh’s export basket. 

In the realm of connectivity, Bangladesh wanted to export inland shipping services through the Bangladesh Inland Water Transport Corporation (BIWTC). Heavy cargo, including iron ore, steel and fertilizer, would also complement the proposed industrial projects in Bangladesh. Transit trade between West Bengal and Assam would have been lucrative, given the abundance of minerals and natural resources in India’s northeast and the demand for such products in India’s mainland, as well as in Bangladesh and potentially beyond. A blueprint for a new regional economy was beginning to take shape.

 

From informal talks

At the Indo-Bangla summit in March 1972, discussions focused on political issues and the new friendship treaty, while economic issues took a backseat. Economic relations were not high on the agenda as the two countries basked in the afterglow of winning the Liberation War. Talks on the economic aspect of the relationship took place in an informal setting during a river cruise on the Shitalakshya River. The river cruise was a retreat for the delegations of Bangabandhu and Indira Gandhi following official talks in Dhaka. The cruise was on the Mary Anderson. 

On board the Mary Anderson was Professor Rehman Sobhan, along with other members of the planning commission, including Professors Nurul Islam and Mosharraf Hossain. PN Haskar, who was Indira Gandhi’s principal secretary, engaged in discussions over future economic relations. Haskar and Professor Sobhan had previously touched on the economics of Indo-Bangla relations during their meeting in Delhi in the months of the Liberation War. 

In his memoirs, Rehman Sobhan recollects a light hearted moment with Indira Gandhi during the river cruise. Mosharraf Hossain, Rehman Sobhan and Indira Gandhi engaged in much personalized banter at one corner of the Mary Anderson, before Bangabandhu whisked Indira Gandhi away. 

Bangladesh and India signed a Protocol on Inland Water Transit and Trade in 1972. During the bilateral summit in 1974, Bangladesh and India finalized plans to build joint venture industrial projects for cement, iron and fertilizer. The Delhi declaration in 1974 outlined plans for these joint venture industrial projects.

Economic aid 

India emerged as the largest aid provider to Bangladesh during the first six months of the post-liberation period, committing approximately $220 million till June 1972. If adjusted with inflation, the amount would stand at $1.6 billion at current market rates. 

These funds were vital for the reconstruction and relief efforts underway in Bangladesh, including restoring infrastructure, feeding the population, rehabilitating returning refugees, and organizing the machinery of the state.   

As a developing country itself, India sourced a part of the funds from the aid it received from donor nations. India was followed by the US, USSR, Canada, Sweden, Japan, Norway and the UK in providing the largest amounts of aid to Bangladesh in this period.

 

Legacy 

The projects finalized in 1974 for cement and fertilizer did not see the light of day. But Bangladesh eventually received substantial foreign investment to develop the two sectors. Indeed, the French company Lafarge took up the idea of a cement plant in Sylhet which uses limestone from Northeast India. The Lafarge Surma cement factory uses a conveyor belt to bring limestone from the Indian state of Meghalaya to produce cement in Sylhet. Bangladesh also emerged as one of the world’s top 20 cement producers. Similarly, large-scale fertilizer plants have been set up in different parts of the country.  

The Indo-Bangla planning commission dialogues envisaged projects for iron ore and steel. The local steel industry in Bangladesh has rapidly expanded in the past fifty years. Today, local steel brands are dominating the market for steel products. The dynamic local steel industry is based in the port city of Chittagong, with new and large plants on the pipeline. 

Since 2009, Indo-Bangla relations have been undergoing a renaissance. This has led to a renewed focus on economic ties, particularly transport links and connectivity. The agreement on inland shipping continues to be in force and has complemented the renaissance in transportation that is taking place between Bangladesh and India. New routes for inland shipping are being identified by the two governments. The full potential of robust trade via inland shipping is yet to be realized.

There is much potential to build on the economic plans of the 1970s. India and Bangladesh share the heritage of the Assam Bengal Railway, which historically connected Bangladesh and Northeast India, with Chittagong as the main port and gateway to the region. Japan has called for an industrial corridor in Bangladesh and Northeast India, which would be linked to global supply chains in the Indo-Pacific.  

Like the early visionaries of Bangladesh’s first government, Dhaka must envision the best for its hinterland, which in today’s case would be cutting edge industries and financial centres. 

 

Umran Chowdhury works in the legal field. 

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