Transit is worth less than the medal

Posted in economics by jrahman on July 27, 2011

The medal accepted by Sonia Gandhi on behalf of Indira Gandhi is valued at about 90 lakh taka.  I embellish a bit when I say that transit facilities that Bangladesh is giving India will be worth less that.  That’s just to get your attention.

And now that I have it, let me point out that transit is not going to be worth much to anyone for a long time to come.  Note, that’s the total surplus generated by the transit, not how the surplus is divided between India and Bangladesh.

According to this Prothom Alo report, investment of about 50,000 crore (500 billion) taka is needed before the full benefit of transit can be reaped. 

Let’s put all of this in context.

Total investment in 2009-10 (last year of full data) is 1730 billion taka, which is composed of 1400 billion taka in private investment and 330 billion taka in public investment.

Let’s say this infrastructure development is going to be 50-50 private public split.  That means, before transit can work, public investment will have to be 580 billion taka.

Over the past two decades, public investment has grown by 4% a year in real terms.  At that rate, even if the government invested in nothing else, it wouldn’t be until 2025 that it will have invested enough on this infrastructure.

The point about these numbers are not ‘oh look it’s going to cost a lot of money’.  The point is, we just don’t have the capacity to absorb this kind of investment in the timeframe we are talking about.  Even if the Indians were paying hefty transit fees, we were all fully satisfied about the state of relationship between the two countries, and the Indians agreed to finance these projects at zero interest loan, to build this in infrastructure any time soon is simply beyond the capacity of Bangladeshi institutions. 

And this is according to a panel that has people like Sadiq Ahmed, Rahmatullah and Mustafizur Rahman — not exactly your rabid anti-Indian rabble rousers like Mahmudur Rahman. 

Anyone excited about transit should find something else to tickle their fancy.  This ain’t worth your time and energy.

Update 28 July 12.10pm BDT: A longer write up on the issue is here.

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12 Responses

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  1. Udayan said, on July 27, 2011 at 11:45 am

    What about transit for China, Bhutan, and Nepal? Should that get people more excited?

    • jrahman said, on July 27, 2011 at 12:04 pm

      Nope. The link refers to transit to everyone, not just India. The Chinese will also need to use the roads etc that we will not be able to build anytime soon.

  2. Diganta said, on July 28, 2011 at 1:15 am

    Will these infrastructure be used by Indians alone or for internal Bangladesh purposes as well? Will the roads be exclusively used by Indian trucks and rail-tracks be used only by coaches carrying Indian goods?

    • jrahman said, on July 28, 2011 at 6:53 am

      I have no idea.

      In theory, investment on railways could be really benficial, though I am lot more sceptic about roads. For example, suppose siginicant investment is made on a Chittagong-Comilla-Sylhet-Guahati rail connection. Coaches can carry manufactured goods to Guahati and raw materials from there. But other coaches can carry manufacturing from, say, Comilla or Sylhet too. That would be a pretty good outcome. On the other hand, perhaps there won’t be any factories in Comilla or Sylhet because of financial and administrative concentration in Dhaka. In this scenario, if Dhaka is not linked to these improved rail-tracks, coaches will not carry much Bangladeshi goods even if there is no legal bars from doing so.

      But it seems to me that there is not much point in having that discussion because of the magnitude of investment required. This is not gacche kathal gofey tel, this is baganey kathal chara gofey tel.😦

      • Udayan said, on July 28, 2011 at 1:05 pm

        Gauhati = shamrajyobadi bangali. Guwahati, please🙂

      • Diganta said, on July 28, 2011 at 2:29 pm

        Investment on infrastructure doesn’t happen in a day. It happens slowly, by delta. Let me take the example you’ve provided. For first year, let’s say we only have improved Chittagong-Comilla Railway. That will carry some items from Guwahati, some other from Tripura. But toll will be obtained from those. Next would be connecting Comilla-Sylhet. By that time, the other part is generating some revenue. In the final phase, the link to India will be made. Till then, it will only be a trans-shipment mode. There’s a fair chance that the competing route through Myanmar’s Sittwe port will take some load off Chittagong. Bangladesh can abandon the whole process in the middle if it is understood that the project won’t benefit Bangladesh, but even that will leave Bangladesh with partial better infrastructure, which could help expand Chittagong’s industrial activities upto Comilla.

  3. Udayan said, on July 28, 2011 at 1:22 pm

    How much is this argument (yours in this piece) discussed or appreciated? I haven’t followed the discussion closely but it seems to me that the loudest opposition to transit to India as currently understood focuses on the following types of arguments:

    1. Why just India, should be other countries as well (Nepal, Bhutan etc), those agreements should be in place concurrently etc
    2. We aren’t getting paid enough for this and losing a huge opportunity (so, if the fees were higher or more transparent it would be ok)
    3. India can use transit to supply military in NE and this is dangerous (potential means of invasion) or offensive (not under supervision of BD govt)
    4. BD loses strategic lever by helping colonial racist India oppress freedom loving people in the North East (transit improves connectivity to NE India, helps NE economy, integrates population through easier contact etc)
    5. No / unclear reciprocity (Why aren’t we getting transit facilities in return? To Nepal, China, Bhutan, Pakistan etc via land or air rights)


    None of the above are really linked to the basic feasibility of the concept or capacity/investment issues

  4. jrahman said, on July 29, 2011 at 12:05 pm

    Udayan/Diganta, let me reply to both of you together.

    a. Someone should tell Mahmudur Rahman / Farhad Mazhar about what the ULFA ‘freedom fighters’ think about Bengalis, particularly Bengali Muslims. More pertinent to the transit issue, here is what KAS Murshid (research director of BIDS, a major Bangladeshi think tank) says:

    “Much more analysis is needed in one key area: to what extent is Assam likely to participate in this new/emerging economy? The deep-rooted obsession and anxiety with “ foreigners” in Assam and the rest of the NES is the most potent threat on this journey.”

    b. Diganta, this kind of incremental way is exactly how economic integration and evolution works. In addition to the Chittagong-Guwahati route, one can think of Kathmandu-Bogra-Jessore-Khulna and Calcutta-Jessore-Dhaka-Comilla-Sylhet-Guwahati routes and apply similar logic. And it is hard to see how this kind of incremental progress could go wrong for any of the stakeholders. It would not raise Bangladesh’s growth rate to 8-9% a year, but nor would this turn Bangladesh into a Sikkim.

    However, this kind of process may make economic sense, but it does not meet the political needs of anyone. For years, the pro-transit camp (in AL or among the supporters of the 1/11 regime) drummed up the benefit of transit, while the anti-transit camp (mostly in BNP and among the mullahs) made a lot of noise about sovereignty. This was particularly visible in January 2010 when Hasina quoted Tagore and claimed ‘victory’. And this continues even today.

    This post is a rather crude attempt at bursting that bubble.

    c. Udayan, as an observer of the Bangladeshi scene, surely you are aware that we don’t like to talk about numbers and nuances — transit = Bharat-er golami vs transit = rapid development, that is sufficient for Bangladeshi discourse. 😦

    That said, it is actually quite interesting to observe how the debate has evolved in the past 12-18 months. Daily Star / Prothom Alo and their civil society friends in CPD etc were hugely pro-transit. Two people contributed most to the “transit will get us 8% growth” line — CPD’s Mustafizur Rahman and BEI’s Faruq Sobhan. Sobhan is still peddling that nonsense, but CPD and its media friends have changed their tune heavily. Debapriya Bhattacharjya has been quoted as saying transit without proper preparation would be ‘suicidal’, while PA-DS have run several anti-transit pieces in the past few months. On the other hand, I had expected BNP to come out full swing against transit, calling hartal and long march etc. But its reaction has been far more modest. The official party position is ‘transit okay as long as we get good money’, and Mahmudur Rahman has called this position ‘suicidal for the nation’.

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