South Asia, home to one-fourth of the world’s population, is the least integrated region in the world. Despite historical and cultural commonalities, it is yet to experience the real benefits of regionalism. Connectivity is crucial for regional convergence, but trading costs between member states are higher than between countries outside the region. The South Asian Free Trade Area (Safta) was envisioned and enforced by the South Asian Association for Regional Cooperation (Saarc) a decade ago with the aim of fostering trade liberalisation. However, persistent non-tariff barriers have prevented the expansion of intra-regional trade.

New regional grouping

South Asia is itself a huge market for economic activities. Notwithstanding this huge potential for shared prosperity, it continues to face challenges like poverty, unemployment and underdevelopment. Very little has been achieved in the 30 years that Saarc has been around, and it is high time for South Asian countries to rethink and act differently with a pragmatic complementary approach which can reinvigorate regionalism. Nepal-India-Bangladesh trilateral cooperation can be one such approach.

The deeply-rooted and multi-dimensional Indo-Nepal and Indo-Bangladesh relations are widely known. Though Nepal and Bangladesh do not share a common border, the two countries have ancient historical, cultural and religious ties. Nepal was one of the first countries to recognise Bangladesh’s independence. On the economic front, India is a giant economy and Bangladesh is the third largest economy in South Asia. India is the largest and second largest trading partner for Nepal and Bangladesh respectively. There is great potential for increasing Nepal-Bangladesh trade. In order to unleash the full potential of trilateral cooperation, cross-border transport and energy connectivity is key. This will stimulate trade, tourism, investment and people-to-people contacts.

Landlocked Nepal depends on its neighbours for access to the sea for third county trade. The Siliguri Corridor, a 45-km-wide strip of Indian territory, separates Nepal from Bangladesh. The Trade and Transit Agreement with Bangladesh allows Nepal to use six transit points including Mongla and Chittagong ports. The Khulna-Mongla railway project of Bangladesh is expected to be completed soon. If the proposed Mongla-Khulna-Rohanpur-Katihar-Biratnagar railway materialises, it will reduce transportation costs for Nepal. Biratnagar to Khulna is 561 km while Biratnagar to Kolkata is 600 km.

In fact, Mongla Port can be a commercially viable sub-regional port offering cost-effective transit facilities to Nepal, Bangladesh, Bhutan and India’s northeastern states. Nepal’s business community desires to use Chittagong Port to export their goods to the Middle East, Europe and America because a large number of containers go vacant. Thoroughly examining the existing and potential connectivity routes and working jointly to promote mutual interests is crucial for convergence.

Need for energy is growing

Nepal’s vast untapped hydropower resources, and the exponentially growing energy needs of India and Bangladesh, point to the colossal potential in energy cooperation. According to the Central Electricity Authority of India, the country had an installed capacity of 330,861 MW as of 2017. Of this, thermal energy (coal, gas and oil) accounts for 66 percent, renewable energy sources 18 percent, hydropower 13 percent and nuclear power 2 percent. With a growing GDP, industrial development, population and standard of living, observations show a high growth trajectory of power demand, with demand for hydroelectricity expected to swell to 97 percent by 2035.

Likewise, Bangladesh has an installed capacity of around 15,000 MW, and the energy demand is projected to reach 35,000 MW. Meanwhile, Nepal cannot even fulfil its domestic electricity demand of 1,350 MW which exposes the dire situation of its energy sector. A joint study conducted by the National Planning Commission and Investment Board Nepal has forecast Nepal’s internal energy demand to reach 8,000 MW by 2030. Cooperation between Nepal, Bangladesh and India will allow all three to meet their increasing power demand. India has already invested in hydropower projects in Nepal, the 900 MW Arun 3 and 900 MW Upper Karnali projects. The government of Bangladesh has formally submitted a proposal to invest $1 billion in Nepal’s hydroelectricity sector. Private hydropower developers from Bangladesh have also expressed their desire to put money in energy. Bangladesh is waiting for probable project offerings from Nepal. As India has agreed to provide electricity transmission facilities from Nepal to Bangladesh through its territory, there will be no hurdles to energy exports. 

Meanwhile, India’s enormous hydropower capacity lies in the northeastern states, and Bangladesh can provide the shortest route for evacuating electricity to its states of West Bengal, Bihar and Uttar Pradesh, where demand is growing rapidly. A recent report of the International Renewable Energy Agency has revealed that hydropower is the cheapest source of electricity worldwide at $0.05 per kilowatt hour (kWh). So cooperation in hydroelectricity to meet the increasing energy demand is the best way to obtain high economic returns and tackle emerging challenges like climate change. Also, water resource management is another crucial area of cooperation.

Synergetic efforts by all countries is a must. However, considering the geographical structure and asymmetrical power dimension between Nepal, India and Bangladesh, India will have to play the principal role in the trilateral engagement. An intense game of push and pull is unlikely to serve the interest of any country. Considering the changes in the international power configuration, delivering a solid example of cooperation will definitely contribute to enhancing India’s image as a regional power. In fact, if this prospective trilateral cooperation can be exploited to its optimum potential, it will be taken as the real beginning of India’s neighbourhood first policy. Essentially, cooperation between Nepal-India-Bangladesh can be ‘pragmatic complementarism’ to stimulate regional integration in South Asia.

KC is the founder and chief executive officer of the Asian Institute of Diplomacy and International Affairs