Banking on BIN

02 November, 2020


How Bangladesh-India-Nepal Initiative (BIN) can trigger connectivity and prosperity for Nepal, Bangladesh and India



The recent IMF World Economic Outlook report has drawn a bigger attention in India about the increasing Gross Domestic Product (GDP) growth rate of its neighboring country Bangladesh, despite COVID-19 challenges. Bangladesh has been able to recover its domestic economy. All eyes are on Bangladesh. IMF report says that Bangladesh has taken over India in terms of per capita GDP in current prices for 2020 at USD 87.97. IMF predicts India’s GDP growth for 2021 at 8.8 percent and Nepal’s at 2.5 percent.


Amidst the COVID-19 pandemic, the world economy is in deep recession. Nepal, India and Bangladesh are no exception.


But these three countries fall under the framework of Bangladesh-Bhutan-India-Nepal (BBIN) Initiative—a sub-regional cooperation group, with huge potential in terms of economic integration and connectivity between the countries. But BBIN has not been an effective grouping. Due to Bhutan’s reservations on certain provision in the “Motor Vehicle Agreement”, it has not been able to take off. In this context, Bangladesh, India and Nepal can come together to form BIN as a sub-regional group with a clear agenda for connectivity and business.


Connectivity prospects


There is a scope for partnership for electrification for Bangladesh-India-Nepal (BIN) grouping. Nepal could be the principal electricity exporter for India and Bangladesh, which could contribute to Nepal’s economic growth because both neighboring countries are capable of investing in Nepal’s hydropower. Bangladesh is waiting to sign the Bilateral Investment Protection Agreement (BIPPA) with Nepal. It has offered to invest USD 1 billion in power generation in Nepal and asked Nepal to identify two potential projects in the eastern part of Nepal. But Ministry of Energy in Nepal has not responded to the proposal. Meanwhile, Power Board of Bangladesh has signed an agreement with Indian private power producer, GMR, for the purchase of electricity from Upper Karnali but due to the insufficient funds GMR has been delaying the projects and asking for the license renewals with the Office of Investment Board, Nepal. In such a situation, Ministry of Energy in Nepal must take an initiative of establishing the BIN Energy Partnership framework to have the power trade under the G2G model and also setting up BIN-IPP Investment framework to bring the largest private power producers in one room for making the joint investments.


Bangladesh has given the special permission to Summit Power International and United Power—the largest power producers of Bangladesh—to make an investment outside, but those producers are also waiting for the BIPPA as the Embassy of Bangladesh in Nepal has advised them not to enter Nepal market until BIPPA with Bangladesh is signed. Ministry of Energy of Nepal can extend an invitation to Indian power producers such as Adani Power, TATA Power, JSW Energy and Torrent Power for the BIN energy partnership. Those companies have the ability to finance and influence their government in India for making an investment in Nepal under the PPP modality.


Nepal, India and Bangladesh need to establish a joint-platform, with the participation of private sectors, to construct and develop the dedicated power transmission lines for the electricity export. The development partners like ADB and World Bank may play a vital role in infrastructure financing.


The BIN governments also have to operate the railway projects for the cost-effective transportation of goods in the region. Till date, Nepal and Bangladesh have been facing the challenge in the export and import of goods to and from Nepal due to the transshipment issues at the Indian border. India does not allow Nepali trucks to transport goods up to Bangladesh border. Due to such transportation obstacles from the Indian side, the bilateral trade between Nepal and Bangladesh is paralyzed. Nepal does not seem to take this issue seriously though Bangladesh has been raising this matter with India continuously. Similarly, Nepal, India and Bangladesh can work together in the waterways connectivity to ease the trade in the region. Although Prime Minister KP Sharma Oli put this agenda on his top priority and Nepal and India already signed the agreement the protocol for operation modality has not been signed yet.


Nepal has also established the Nepal Ship Company in order to operate the waterways connectivity with India. Bangladesh Inland Water Transport Authority was established in 1958 which now is responsible for the overall management and operation of inland transport within Bangladesh and in the region. Bangladesh and India signed Protocol for Inland Water Trade and Transit (PIWT) in 1972.


There is a greater scope in BIN waterways transport for the cost-effective trade. The biggest advantage of all this will be for a “landlocked” Nepal, which can use seaports of Chittagong and Mongla for the global trade access. In 2018, former BJP General Secretary Ram Madhav had encouraged Nepal to use sea ports of Bangladesh for its global trade during the Nepal India Think Tank Summit in 2018. Also, the then Bangladeshi Ambassador to Nepal Mashfee Binte Shams was a strong advocate of the BIN cooperation for trade and connectivity. During her tenure in Nepal, she worked hard to bring Nepal’s top leadership in Dhaka for signing such agreements but Nepal did not show much interest.


Common Grounds


Around 14 million people follow Hindu religion and around one million people follow Buddhism in Bangladesh. It shows the cultural closeness between BIN countries. Ministry of Culture and Tourism in Nepal needs to take some initiatives to promote cultural ties in these three countries. Bangladesh has offered to establish Buddhist pilgrimage in Lumbini. In response, Nepal has allocated land plot in Lumbini for the construction of Bengali Buddhist Pilgrimage. Last year around 25,000 Bangladeshi tourists visited Nepal and there has been a strong feeling in Bangladesh that stronger connectivity with Province 1 of Nepal can be developed, where Kakarvitta is the main gateway for Bangladesh to enter Nepal. Bangladesh has also given the proposal to the Ministry of Foreign Affairs in Nepal to establish the Consulate Office in Birtamod, Jhapa but the proposal has not materialized yet.


There are joint venture banks between Nepal and Bangladesh and Nepal and India. We can establish BIN Bank to serve the financial and infrastructural needs of three countries. BIN countries can set up joint fertilizer plants in Bangladesh. Each year, Nepal faces acute shortage of fertilizers. This year the government of Nepal failed to supply the chemical fertilizers on time and it requested Bangladesh to support with the 50,000 metric ton of urea. Bangladesh had offered to set up the JV Plant in Chittagong 15 years ago but Nepal paid no serious interest. Later Bangladesh joined hands with Japan and formed the KAFCO plant in Chittagong for 100 percent export.


Country to look up


Once seen as a poor country, Bangladesh is now a rising economy of Asia. The new ‘Asian Tiger’ has maintained six percent growth rate since 2009. Its thriving garment industry has contributed to this success. Nepal could learn and replicate the successful model of Bangladesh but it has been only looking up to either China or India. Nepal should sign BIPPA with Bangladesh to increase investments from Bangladesh in Nepal. Most of all, we need to change the old notion that Bangladesh is a poor nation. It is not. It will probably never be.


Today Bangladesh exports rice, potatoes and other commodities to Nepal. At one time, Nepal used to be the sole net exporter of rice and potatoes to Bangladesh.


Nepal must take the lead for setting up the BIN Cooperation for the mutual economic growth. Let’s look at the prospects and viability of business, trade, money and global access under the BIN. There is a chance that Nepal will have more three billion dollar investment from Bangladesh on energy and infrastructure development. Bangladesh is an energy-hungry nation which will need more than 30,000 MWs of electricity by 2035. Nepal should be a country to meet that need of Bangladesh.


It was first published on MyRepublica