Time to Implement the BBIN Motor Vehicles Agreement

Economic Times, February 12, 2020

By Bipul Chatterjee and Arnab Ganguly

After a couple of years of lull, it was heartening to see that the governments of Bangladesh, Bhutan, India and Nepal (BBIN) discussed modalities for implementing the BBIN Motor Vehicles Agreement (MVA) for seamless passenger, personal and cargo movements. Due to some internal concerns, Bhutan decided to opt-out of the Agreement for the time-being but has offered its consent to the other three to go ahead. It must be thanked for its flexibility.

They met in New Delhi last week to discuss a draft enabling MoU (memorandum of understanding) among Bangladesh, India and Nepal for implementing the BBIN MVA, without obligation to Bhutan. This will usher in a new era of neighbourhood cooperation in this sub-region. They reaffirmed their understanding that the BBIN MVA safeguards the rights and obligations of all parties under other international agreements and bilateral agreements within the group.

The proposed enabling MoU is a step in the right direction for operationalising the BBIN MVA and should be designed as per “ease of running business” and not just for “trading across border”. This instrument for fostering cooperation among neighbours should be implemented in designated routes, particularly those linking Northeast India, and by keeping in mind products originating and having high demand in this sub-region. This will help us better understand its implementation challenges and impacts on the ground.

The BBIN MVA can be a game-changer for neighbourhood cooperation. For the first time these countries have decided to exchange their traffic rights and provides transit to cargo and passenger vehicles within and across international borders. The primary goal is to develop functional transport corridors and subsequently convert them to economic corridors. These economic corridors are expected to play an instrumental role in strengthening existing value chains and creating new ones.

According to the Organisation for Economic Cooperation and Development, a 10 per cent improvement in transport and trade-related infrastructure quality can increase agricultural exports of developing countries by 30 per cent.

Over the last several years CUTS International has undertaken studies (https://bit.ly/31KJRnF) across eight designated BBIN corridors and found that these countries can significantly gain both in terms of time and cost of doing trade by implementing the BBIN MVA. As a cargo originating in India will be allowed to go directly to its destination in Bangladesh, instead of waiting at the border for transhipment, it will reduce both time and cost involved in cross-border trade. There will be a win-win situation for all parties involved as they will be in a better position to capitalise their comparative advantages.

Possible implementation challenges

Effective implementation of the BBIN MVA requires addressing a number of challenges such as infrastructure deficits, particularly in designated border posts, harmonisation of regulations and customs procedures.

While they can be addressed through enhanced investment and better regulations, a number of on-the-ground political economy factors are to be addressed. For example, there are apprehensions among small transport operators and truck owners. They think that the implementation of the BBIN MVA will favour large logistics companies who enjoy economies of scale and will drive the smaller ones out of business.

Such apprehensions emanate from one of the provisions of this Agreement, which states that only containerised cargo carried by trucks, trailers, etc. will be allowed to move from one country’s territory to another country’s territory. Furthermore, each government will be required to prepare a list of authorised operators that would be exchanged among them for the purpose of cargo movements.

In addition, there are issues with cargo insurance as every vehicle plying in the territory of another country should have a comprehensive insurance policy. At present, such a policy of a country among the parties to the Agreement is not recognised in another country.

The Agreement allows carrying return cargo to its home country as it will significantly reduce the cost of transportation. This will help popularising it among the transport operators. However, local transport bodies, particularly those in Bangladesh and Nepal, are opposing this provision as they think that it will adversely affect their business. Most likely, most of the export cargoes from these countries to India will be carried by containers coming from India. Part of this apprehension stems from imbalances in trade volume from and to India to these countries.

Proposed solutions

Inland Container Depots (ICDs) are to be constructed at strategic locations to avoid loading and unloading at roadsides near the border posts and they should be designated as customs clearance points. They should be equipped with necessary infrastructure such as quarantine office with required testing facilities, uninterrupted internet connectivity, along with wide approach roads, parking facilities with restrooms, warehouses and cold storages so as to ensure off-border clearance of cargoes.

As in the case on Nepalese cargoes transiting through India, electronic cargo tracking system (ECTS) should be implemented in all cargoes, which will be plying as per the provisions of the BBIN MVA.

Small trucks should be allowed to take advantage of the BBIN MVA, provided they are covered and can be tracked as per ECTS. There should be a balance between large and small containerised/covered cargoes, which will be allowed to take advantage of the BBIN MVA. For that purpose, there should be some reservations for small truck owners as authorised operators. In addition, there should be mutual recognition of vehicular and cargo insurance policies.

In case of return cargoes from Bangladesh and Nepal to India, they should be allowed to operate from designated ICDs. Exports from these countries to India should be carried out from their origins to designated cargoes in small trucks and then they are to trans-shipped to large, containerised Indian cargoes.

Public and private sector investment should be encouraged to facilitate the modernisation of the transport sector for standardisation of vehicular dimensions including axel load and emission standards. Existing truck owners should be provided appropriate financial incentives for a smooth transition towards using containerised cargoes.

Over time, the provisions of the BBIN MVA should be aligned with those of the TIR (Transports Internationaux Routiers) Convention of the International Road Transport Union. That will further facilitate seamless cargo movement among these countries by reducing the number of physical checks and paper works. Provisions of the TIR Convention take care of issues like customs duties, insurance, tracking, liabilities, etc. India is a party to this Convention and it should encourage and support Bangladesh and Nepal to join it.

In short, while infrastructure deficits for effective implementation of the BBIN MVA are being and can be addressed through investments including public-private partnerships, they are not sufficient. On-the-ground political economy factors are to be addressed through innovative, customised solutions so that local stakeholders can realise how beneficial it can be for generating employment and other opportunities for their livelihood security.

Chatterjee is Executive Director and Ganguly is Assistant Policy Analyst, CUTS International, a global public policy think- and action-tank

* The authors work for CUTS International, a global public policy think- and action-tank having its centres in Geneva and Washington DC, among other capitals.

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