Prospering Together

Along with a struggle to find political stability, Nepal and Bangladesh share multiple similarities. They are the members of the South Asian Association for Regional Cooperation (SAARC) and South Asian Free Trade Area (SAFTA), are graduating to 'developing nation' status from the Least Developed Country by the end of this year, and are pursuing strategies for industrial and export growth. 

However, differences are stark – Bangladesh is a rapidly industrialising coastal country with maritime access, a large market with 170 million people with average per capita income (PCI) of US$ 2,820, against landlocked Nepal's 30 million people with average PCI of US$ 1,490. Nepal was the seventh country to recognise Bangladesh as an independent country when it was created in 1971. They signed the Transit Agreement and Trade and Payments Agreement and offered favour to each other in customs duties and other charges on export and import of goods between them. 

Recently, after years of hiatus, Nepal started supplying electricity to Bangladesh in 2024. Bangladesh has shown interest in investing up to Rs. US$ 1 billion in the first phase of Nepal's hydropower projects, and importing electricity in a large amount. Currently, Nepal is exporting 40 MW of electricity to Bangladesh. Despite having good trade relations, Nepal is witnessing a huge trade deficit with Bangladesh. In the last Fiscal Year 2024/25, Nepal imported merchandise worth Rs. 5.18 billion from Bangladesh and exported goods worth only Rs. 666.1 million, creating a trade deficit of Rs. 4.51 billion. 

Nepal's major export goods include lentils, oil-cake, cane molasses, bran, food, and medicinal plants, while it imports soyabean, oil-cake, raw jute, parts of engines, medicines, and potatoes. Experts in Nepal say that the tariff and para-tariff imposed by Bangladesh on Nepali products have made the latter less competitive in the markets there. Unfortunately, the two developing nations of the same region haven't resolved the complexities in bilateral trade exchanges. 

A study conducted by South Asia Watch on Trade, Economics and Environment and published last year identified that minerals and metals, textiles, chemicals, clothing, agricultural products, oilseeds and fats, wood and paper, and leather and footwear have high potential for export to Bangladesh. However, Nepal lacks a country-wide policy to promote exports and has a poor economic diplomacy exercise. Various strategies devised for trade integration couldn't alter the existing unfavourable environment in foreign trade.   

Amidst such a situation, the commerce secretary-level meeting between the two countries held last week in Dhaka aptly underscored the need for deepening bilateral economic partnership, including joint-venture investment and trade. Nepali delegation led by Commerce Secretary Dr. Ram Prasad Ghimire stressed on enhancing bilateral trade by reducing trade-related barriers, including the tariff and non-tariff ones. 

In response, Bangladesh expressed its readiness to collaborate in trade and investment, connectivity, and tourism. Bangladesh's Commerce Secretary Mahbubur Rahman reaffirmed commitment to simplifying customs procedures and enhancing trade facilitation. Nepal also maintained that there is a need for close cooperation to promote collective interests at the regional and international forums, as both countries are graduating to 'developing country' status. 

Likewise, the two countries have agreed to expedite negotiations on the Preferential Trade Agreement (PTA), rules of origin, and product list. Nepal should take this opportunity to simplify the entry process of Nepali products into the Bangladeshi market. Meanwhile, efforts should be boosted to attract investment in hydroelectricity and industry and attract more Bangladeshi tourists to Nepal. 

Nepal should prepare a comprehensive list of products that can have competitive and comparative advantages, and focus on their production and development. It is high time that the two neighbours collaborate at the regional and international level to promote each other's interests to achieve shared prosperity.