WHILE major bilateral trade with high-GDP countries makes the headlines, a quieter but increasingly significant economic partnership flourishes between Bangladesh and its landlocked Himalayan neighbour Nepal. Both the countries possess a distinctive chance to enhance economic relations notwithstanding the 52-kilometre Siliguri Corridor in the Indian territory that divides them. The corridor, previously under-used, now experiences increased commerce in agricultural products, textiles and energy, propelled by recent legislative reforms and new connection projects. This cross-border collaboration, which navigates geographical complexities through India, is now demonstrably impacting the economy of Bangladesh, particularly in its border and port area, by creating jobs, boosting port activities and diversifying markets.
Forging pathways
TRADE between Bangladesh and Nepal faced substantial obstacles because of the lack of a direct border, which necessitated transit through the Indian territory. Since the establishment of diplomatic relations in 1972, Nepal–Bangladesh commerce has been guided by annual commerce secretary meetings and bilateral agreements. In April 2024, the seventh Nepal–Bangladesh commerce secretary-level meeting reviewed progress in trade, transit and investment and set in motion negotiations for a preferential trade agreement and a bilateral investment promotion and protection agreement. Both the countries have also been active members of the South Asia Subregional Economic Cooperation programme since 2001, which has channelled more than $13 billion into regional transport, trade facilitation and energy projects.
Persistent diplomatic efforts led to a significant deal in 2023, granting Nepal permanent access to Bangladesh’s key ports of Mongla and Chattogram through the Bangladesh, Bhutan, India, and Nepal motor vehicles agreement framework. The Nepal-Bangladesh Transit Treaty Protocol in early 2024 further streamlined procedures, significantly reducing transit time and costs. Although still small, bilateral trade is increasing steadily. In 2023, Nepal imported goods worth NPR 6,045 million (about $40 million) from Bangladesh and exported goods worth NPR 574 million (roughly $3.8 million) to Bangladesh, creating a trade deficit of about NPR 5.47 billion in Nepal’s favour. The export of red lentils, ginger, cardamom and other spices from Nepal and oil cakes, jute textiles, pharmaceuticals and potatoes from Bangladesh accounted for a substantial portion of the about $70 million in total trade between the two countries in 2022, according to Bangladesh’s foreign ministry.
Impact on economy
THE impact extends inland. Nepali goods are now more widely available and competitive on the Bangladesh markets because of simple import procedures. Lentils, ginger, herbs, fruit such as apples and stone aggregates are examples of necessary goods. Nepali ginger is often fresher and cheaper now compared with supplies from other regions. Customers now have more options because of this inflow, which also helps to keep costs of some goods stable. From initial findings, far-western Nepalese lentil farmers who gained contracts with Bangladesh in 2023 should see a 15 per cent boost in income. Additionally, Nepal is seeking to export yarn, handicrafts, coffee, tea, ginger, cardamom, herbal items, shoes, gems, and jewellery. The trade balance has favoured Bangladesh while Nepal imports necessities such as processed food, plastics, ceramics, furniture, textiles and pharmaceuticals from Bangladesh. Bangladeshi manufacturers, especially SMEs, see new opportunities as a result of easier access.
While digital connection projects under the BBIN and SASEC frameworks promise longer-term gains in e-commerce and information technology services, the upgrade of land customs stations at Banglabandha and Burimari has created jobs in the construction and logistics sectors. The emerging partnership has enormous promises for more than conventional products. High-level talks are moving forward on Nepal’s exporting excess hydropower to Bangladesh, which is in dire need of energy. Although large-scale transmission is still a way off, its effective deployment would have a big impact on Bangladesh’s industrial economy and national energy prices. Forty megawatts of hydropower now flows from Nepal into Bangladesh via the Indian grid (mid-June to mid-November) after the first-ever trilateral power-sales deal involving Nepal, Bangladesh and India was signed in October 2024. Larger projects such as the 1,040MW Upper Arun hydropower facility and the the 683MW Sunkoshi III have been made possible by this pilot, which promises affordable, clean energy import for about $0.05–0.07 per kWh. Furthermore, Bangladesh and Nepal have recently iterated their commitment to enhancing cross-border tourism and fostering interpersonal connections during the Nepal-Bangladesh Tourism Meet on June 20.
Mongla’s renaissance
THE most visible local impact is concentrated around the Mongla port in the Khulna division. Once running below capacity, Mongla now experiences a renaissance driven significantly by Nepal-bound and Nepal-originating cargoes. Port authorities reported a 35 per cent increase in direct and indirect employment in the past 18 months. Local logistics companies servicing the Nepal corridor are expanding their fleets and work force. Increased trade volume has spurred investment in port infrastructure upgrade and private warehouses and container yards sprouting up in surrounding areas. Hotels, eateries and other service providers catering to the influx of Nepali and Bangladeshi traders and transport crew are thriving in Mongla and nearby Khulna city. The city is evolving into a key logistics hub for handling Nepal-bound goods. Transport companies report a steady increase in demand for trucks moving goods between Chattogram/Mongla and the Indian border crossings at Banglabandha (for railway) and Burimari (for road), destined for Nepal.
Model for regional co-op
THE Nepal-Bangladesh trade tale, which is still evolving, is an interesting case study in overcoming geographical obstacles through diplomacy and economic pragmatism. Local economic benefits for Bangladesh, particularly the regeneration of the Mongla and southern regions, job creation and varied markets provide visible confirmation of the partnership’s usefulness. This collaboration proves that even in the complex South Asian landscape, mutually beneficial business collaboration can thrive. The focus must now shift to eliminating the remaining barriers to realise its full potential for both countries, particularly for the communities directly involved in making trade a reality.
The trade route between Nepal and Bangladesh is no longer a line on a map. It is transforming into a vital artery that pumps economic life into local communities, demonstrating that cross-border collaboration may bring very local benefits.
Imran Hossain is a lecturer in business administration at Rabindra Maitree University, Kushtia.