Indian Diplomacy

How Modi’s Dream of a Regional Transport Corridor Has Hit a Roadblock in Bhutan

Bhutanese legislators are worried the BBIN plan may cause environmental trouble for their country and are carefully weighing the pros and cons of the road agreement.

View of Paro from Dzong. Credit: Flickr/hewy CC 2.0

View of Paro from Dzong. Credit: Flickr/hewy CC 2.0

New Delhi: Over the past few weeks, the diary of Sonam Wangchuk, a 28-year-old member of parliament  in Bhutan’s upper house, has been filled with phrases like ‘border posts’, ‘passenger traffic’ and ‘repository’. As chairman of the upper house’s legislative committee, Wangchuk already presided over a series of meetings with various stakeholders that hold the key to the implementation of South Asia’s critical sub-regional pact – and to the success of Indian Prime Minister Narendra Modi’s pet foreign policy project.

The vision of a seamless cargo and passenger vehicles corridor moving across the eastern part of the Indian subcontinent has been at the heart of the sub-regional initiative of four South Asian countries, with the awkward acronym of BBIN – Bhutan, Bangladesh, India and Nepal.

Two years ago at the SAARC summit in Kathmandu, Modi had said that regional integration in South Asia would go ahead “through SAARC or outside it, among all of us or some of us”. By the time Modi made that speech, it was clear that the SAARC Motor Vehicles Agreement (MVA), whose text had been finalised would not be signed at the 2014 summit, as Pakistan had raised last minute objections.

Islamabad’s obstruction triggered India’s search in the eastern part of the subcontinent for a rare kind of animal in these parts – an efficient, effective model of regional cooperation in which all member states are on the same page. The Kathmandu Declaration also allowed for the initiation of ‘sub-regional measures’ for connectivity projects to South Asia and contiguous regions.

The BBIN motor vehicles agreement, with the help of technical assistance from the Asian Development Bank, was to be the first showcase pact for this new era of sub-regional cooperation in South Asia. Over five years, 30 road projects were to be implemented at a cost of $8 billion – to fill in, and upgrade, connectivity gaps.

Eight months after missing its deadline, it is clear that the BBIN motor vehicles agreement will take longer than expected to see the light of the day. Certainly, not this year.

It is obvious now that there was an over-estimation about Bhutanese enthusiasm for the motor vehicles pact, overlooking the instinctive vulnerability of a small state surrounded by much larger neighbours.

The BBIN motor vehicles agreement (MVA) had a contentious passage through the national assembly. Now, the spotlight has moved to the national council. The council, comprising of 25 ‘independent’ members with no party affiliations, has never been a mere rubber stamp. So, the decision of the national council on the legislation to ratify the BBIN motor vehicles agreement cannot be taken for granted.

“Till date, we haven’t reached any decision in the committee. We are still going on with stakeholder meetings and hearing the views from the public,” Wangchuk told The Wire.

Facebook photo posted by National Council MP Sonam Wangchuk/Facebook

Facebook photo posted by National Council MP Sonam Wangchuk/Facebook

In the last one month, the national council’s legislative committee has had at least four meetings on the MVA – with the line ministries, taxi operators, industry representatives and also the attorney general’s office. Wangchuk’s Facebook profile recorded his current insistence on understanding the nitty-gritty of the sub-regional pact. He even posted a photograph of a page of notes from his diary, recording his meeting on July 18, where his questions and clarifications given by ministry officials were legible.

“This is my personal concern [about the agreement], not on behalf of the committee. It is good to have such an agreement to strengthen our trade relations. However, I am concerned about the carrying capacities and infrastructure, since Bhutan is small country,” he told The Wire.

Wangchuk’s worries are a common one in Bhutan, which has for decades pursued a policy of calibrated opening up to the world. But the pace of integration with the outside world has accelerated in the 21st century.

Over the last 15 years, vehicle ownership in Bhutan has increased by 233%. Vehicle sales have again picked up since 2013, after the rupee crisis moved sale figures south. Incidentally, Bhutan, at 91, has the highest per capita vehicle ownership among SAARC countries. The road network has expanded exponentially – from just 1,500 kilometres to about 12,000 kilometres in 40 years.

As traffic congestion and jams become common place in Bhutanese conversation, there is rising alarm about vehicle growth out-pacing infrastructure, and causing serious damage to Bhutan’s green cover.

Concerns and concessions

The BBIN motor vehicles agreement has heightened those anxieties among a substantial population, with its imagery of borderless travel fueling the fear of being swamped by vehicles from populous India and Bangladesh.

“We are for the BBIN motor vehicles agreement. We don’t oppose it as a private sector. We see it as something which will facilitate economic growth,” Bhutan Chamber of Commerce and Industry (BCCI) secretary general Phub Tshering, told The Wire on the telephone from Thimpu. “But, as an LDC and land-locked country, we would like to have special concessions under the protocols,” he added. The BCCI, along with the Tourism Council of Bhutan and All Bhutan Tour Operators, met with the council’s legislative committee members on August 2.

The transporters of Bhutan had been the main agitators against the agreement. When the taxi operators met with the council’s legislative committee on July 26, the complaints poured out in a torrent.

“Given the current road condition and infrastructure capacity, the taxi association expressed deep concern about the increasing vehicles from the neighbouring countries, the traffic congestion, air pollution, waste management and poor travel experience for the passenger,” said a communique issued after the meeting.

The taxi operators pointed out that there had been a sharp rise in road accidents as the surface of the road between Kharbandi and Phuntsholing had already been damaged due to heavy vehicles plying for the nearby hydropower projects under construction. “The situation could get worse with the agreement,” argued the taxi operators, referring to the higher traffic load which will be added onto Bhutanese roads.

A reprise of these concerns took place less than a month after Bhutan’s prime minister, Tshering Tobgay, and information and communications minister, D.N. Dhungyel, stood up in the national assembly and gave a solemn assurance.

For the Bhutan government, the main counter-argument has been that the protocols – which are still to be finalised – will take care of most these concerns by stipulating limits on the number and types of vehicles, the timing and entry points at border, and identify the corridors.

When four ministers from Bangladesh, Bhutan, India and Nepal signed the BBIN motor vehicles agreement at the Hotel Le Meriden, Thimphu on June 15, 2015, they also agreed on the road map, which now seems absurdly optimistic. The protocols were to be finalised by August 2015, and phased implementation would begin by October last year.

BBIN and the Bhutanese parliament

Four months after the signing of the pact, the bill to validate the BBIN motor vehicles agreement was first tabled in Bhutan’s parliament in November 2015, Bhutanese industry associations had not yet articulated their disapproval in an organised way, but the rumblings were growing louder.

On November 17, even as opposition members asked for a delay in the consideration of the bill to address their apprehensions, the national assembly endorsed the BBIN motor vehicle agreement with 22 votes in favour, 14 against and three abstentions. Within three days, the approval was revoked, on technical grounds. It was determined that the vote had violated the constitution which called for majority of all the 47 assembly members – not a majority of the sitting MPs.

Two days later, on November 22, the Bhutanese capital witnessed the entry of the maiden BBIN friendship rally.

At the function to welcome the rally participants, Gautam Bambawale, who was India’s ambassador at the time and is now posted to Islamabad, made a very unusual, direct appeal to Bhutanese MPs to approve the agreement – starkly demonstrating its importance to New Delhi.

The senior Indian diplomat said that studies have shown that ‘misgivings and concerns’ of a ‘huge influx of vehicles and tourists’ would not happen. “There is a slow but steady increase in trade, tourism and vehicular traffic which is quite manageable for smaller countries. Evidence shows that Luxembourg and Switzerland, the smaller countries in Europe have gained greatly from regional economic integration. The same is true in East and South-East Asia. So let me urge Bhutan’s leadership to ratify and endorse the BBIN motor vehicles agreement,” he advocated. Observers claimed that it was perhaps the first time that a foreign envoy had ‘advised’ Bhutan’s parliament.

India’s interest in BBIN finding its footing is partly to showcase a regional success story for Modi’s ‘neighbourhood first’ policy. It also has a deeper strategic dimension, as it finally gives options for shorter trade routes between the eastern and the north-eastern parts of India. While granting transit to India has been controversial in Bangladesh in the bilateral context, Dhaka and New Delhi have been able to develop the long-dreamt of corridor under the cover of the BBIN framework.

The deferring of the bill till the 2016 summer session of parliament allowed the government of Bhutan to hold a series of meetings with taxi owners, truck operators and businessmen. But, it also gave an opportunity to the Bhutanese opposition leaders to highlight inherent concerns about the agreement among the people.

Bhutanese social media was also active with quick ‘hot takes’, mostly highly critical of the agreement. One much-shared Facebook post was a long write-up on how vehicles from neighbouring countries would impact the environment and transport sectors. The attached pictures showed parked tourist buses with Indian number plates, traffic jams and an Indian traffic cop accepting a bribe. One of the pictures showed four wheel drives, with Indian number plates, parked cheek by jowl on a tourist site. It had a single telling comment, “Once I thought its in Sikkim”.

Ahead of the parliamentary summer session, Bhutan’s only English newspaper, Kuensel, wrote in an editorial that it was more important to “ensure local economic and social concerns are taken into account when the protocols of the agreement are determined”. “If this takes another year or two, so be it,” it added. The tone was much less celebratory than the earlier editorial a year ago – “win-win BBIN”.

After long hours of debate, the national assembly again voted for the second time on the bill on June 22. It sailed through with 28 votes, 10 against and three abstentions.

It was not a smooth passage again, with the government having to answer several questions.

“We asked the government for some detailed report on the possible impact of joining BBIN on the economy, environment, culture and law and order, governance issues… So, we had a set of questions for the government on all these aspects. The report that they have submitted or informed us is not adequate enough to satisfy our concerns,” Pema Gyamtsho, leader of the opposition in Bhutan’s national assembly told The Wire. “Till now, we have been able to maintain a reasonable quality of environment. We are also taxing our vehicles heavily, green tax, to deter increase in vehicles. So all this needs to be sorted out”.

“How will it increase regional trade for us?”

In parliament, Prime Minister Tobgay assured MPs that the protocols, which are under negotiation, will enshrine the principle that cargo vehicles from Bangladesh and Nepal will remain parked at the border, but there won’t be such reciprocal restrictions on Bhutanese vehicles.

But, Gymatsho was sceptical as to whether other member states will accept this kind of bargain. “That is the kind of understanding that we have been given (by government). If that is the understanding, then what is the advantage of signing BBIN? You should know that Bhutan imports a lot. Apart from some agricultural products and electricity, we hardly export anything. So, we have to also ask this questions. What goods can we take to some of those other countries? How will it increase regional trade for us?”

When The Wire asked BCCI secretary general about the main benefit for Bhutan from the BBIN MVA, he said that it would lower prices of goods. “If the agreement is implemented, the cost of transportation will come down substantially,” he said.

A report published in the Economic and Political Weekly in December 2015 found that trade among BBIN countries was “plagued by high costs and wastage of time”. The author, Prabir De of the Delhi based think-tank, Research and Information System for Developing Countries (RIS), studied three regional trade corridors and found that they involved a relatively higher number of procedures and documents.

One of the three corridors was from Bhutan’s Phuentsholing to Jaigon in West Bengal and lastly Burimari in Bangladesh. The export of Bhutanese oranges through this corridor to Bangladesh requires 32 procedures, 95 documents, 18 days and cost $569.84 per TEU (container).

Even if the benefits of the MVA are tangible in the future, scepticism is widespread.

Gyamtsho felt that the Bhutanese government had not done enough to consider the concerns of the people. “Consultations was done mostly with the transport operators, truck owners, taxi drivers and so on. And even they were not satisfied by the views of the government and of course, we have to be representative the views of the public. And if there have serious concerns, we cannot blindly vote for the BBIN motor vehicles agreement”.

He asserted that Bhutan’s main priority should be to work out a better protocol for vehicle movement in Bhutan – with India. “What we said is that is that our biggest concern is relations with India, as we share immediate borders with India. Basically we need to work out a suitable agreement that will be mutually beneficial to India and Bhutan in terms of number of vehicles in terms of types of vehicles, given Bhutan’s unique situation, small, mountainous and of course, our distinctive policy”.

India, Gyamtsho stressed, “should understand Bhutan’s situation in terms of the lack of competitiveness, size of economy, be it the number of vehicles, the inflow and outflow of trade”.

Bhutan’s leader of opposition felt that the BBIN initiative should have started with cooperation in less complicated areas like education and agriculture and climate change. “A motor vehicles agreement is a more complex one in terms of its implications, as it cuts across all sectors, people to people, transportation, tourism, trade”.

Logistical concerns 

On June 29, the Paro Taxi Association sent a letter to the national council chairperson to not approve the agreement.

An industry expert, who has been closely involved in the talks over the sub-regional pact, felt that the “biggest mistake” was to include ‘individual’ passenger vehicles at the initial stage. “Typically, it is very easy to monitor cargo vehicles which are not very large in number and what are called scheduled passenger vehicles, basically buses. When you have unscheduled passenger vehicles, that is, apna gadi to cross the border, there will be hundreds… All of that is very complicated,” he explained to The Wire.

The advice from private industry to regional policy makers has been to make country-specific prescriptions. “In case of Bhutan, you can do away with passenger vehicles altogether… Or designate Paro and one other as entry points”.

Currently, trucks from India are allowed to carry goods until Phuentsholing within a range of five kilometres. The goods are then lifted by local trucks and transported to the rest of the country.

“If you take out the main entry points like Paro, in the interiors of Bhutan, the volumes (of cargo) do not justify heavy traffic. Road infrastructure will not support it, any way,” he said.

Incidentally, at the meeting of the BBIN nodal officers in Dhaka on March 29, Bhutan had apparently got a nod from the other three countries that cargo vehicles will run till the border town of Phuentsholing. There was no understanding reached on a passenger vehicles protocol at that time.

For former Bangladeshi diplomat Tariq Karim, the news about Bhutan’s lower house finally endorsing the BBIN motor vehicles pact was quite welcome. “I am overjoyed… I am not unduly worried by the slight delay. It is more important that these initiatives have popular support, as all SAARC countries are functioning democracies which must respect the will of the people,” said Karim, who is now an adviser to the World Bank on South Asian regional integration.

“The fact that the Bhutanese parliament took time to carefully consider all aspects of the agreement before giving assent to it imparts greater strength and lends intrinsic resilience to this land-mark and game-changing agreement, in the same way that the unanimous ratification by both houses of the Indian parliament of the historic Bangladesh-India LBA and its protocol had done last year,” he added. Karim had been the Bangladesh high commissioner to India from 2009 to 2014 when the two government finally mustered the political will to work towards implementation of the long-pending land boundary agreement.

While the MVA is the first sub-regional pact in South Asia, the BBIN countries are already branching out into railway connectivity and power grids. Karim hopes that they will also consider joint river basin management.

“Our region has been left far behind by the rest of the world; but I am confident that if we can demolish the divisive mindsets that held us back and work collectively towards our mutually shared goals of development and all-round well-being, all peoples engaged in these endeavours will benefit immensely and the quality of their lives will improve vastly. The BBIN MVA is, hopefully, a good start in that direction,” he told The Wire.

The efficacy of customs checks

Bangladesh has been the most enthusiastic supporter of the BBIN motor vehicles agreement, pushing to get it off the ground at the earliest. And they have been using all their diplomatic capital to persuade Bhutan to sustain the momentum. Even when Bangladesh’s president, Abdul Hamid, visited Thimpu in early July, BBIN was on top of his mind.

In November last year, the Indian government contracted international logistics company DHL Global Forwarding to do the pilot cargo run for the BBIN motor vehicles agreement. The route chosen for the truck carrying both international and domestic cargo was Kolkata to Agartala, via Dhaka – replacing a previous circuitous road of 1550 km to less than half of 640 kilometres. As per DHL, the entire journey took only 52 hours, including customs checks.

An official involved in the pilot run admitted that the timing may not be the best indicator, as the process was “highly facilitated”. “There was a pilot car escorting the truck. Then the customs officers were very efficient. That’s not exactly how things work in real time”.

In fact, DHL has suggested that the best case scenario to make cargo runs more efficient would be to eliminate customs checks at the border. It will save a half a day while moving across each border.

Instead, the trucks should be checked and sealed at a big city like Kolkata. “At the border, only the seal is checked. Then at Dhaka, Bangladeshi custom opens the seal and whatever is meant for Bangladesh is cleared at Dhaka. Maybe, Bangladesh is sending some stuff to India’s north-east. Those would be loaded and resealed. Again at Indian border, only the seal is checked and then another last customs check is done at Agartala,” Deutsche Post-DHL’s senior director for corporate public policy in South Asia, Pritam Banerjee explained.

While the Indian side seemed open to considering this proposal, it can only be formalised after all the four BBIN countries agree to include this in the protocols.

And, the negotiations for the protocols have not progressed significantly in recent months, as per sources.

“After we did the pilot cargo run, we got hundreds of calls. People were interested to move cargo to Bangladesh. Actually, the India-Bangladesh route is the one which has the maximum volume. Nepal-Bhutan has more modest volume. All of us in the industry want the protocols to be finished fast,” Banerjee said.

According to Prabir De, even if the all formal guidelines and corridors are in place, the implementation will suffer if the border set-up is not upgraded.

“Why do we need these connectivity corridors? These will facilitate trade, so the price of goods will be cheaper and the quality will be better. People will be buying the goods, trade increases and more money circulates in the region, ultimately improving the quality of life. But, if the border infrastructure does not improve, these corridors don’t work,” said De, an expert on intra-regional trade and transport facilitation.

He noted that South Africa and Mozambique had identified several trade corridors, but they remain non-functional. “The technology capital to manage these corridors, we don’t have these… It will be taken up,” he said.

But the first step towards that envisioned future will only be completed, once both houses of Bhutan’s parliament ratify the BBIN motor vehicles agreement.

For now, the dates for the winter session beginning in November have not yet been decided, but the tentative agenda is already out. On day 8 of the national council’s 18th session, there is only one item listed for consideration – “Ratification of Motor Vehicles Agreement for the Regulation of Passenger, Personal and Cargo Vehicular Traffic between Bangladesh, Bhutan, India and Nepal”.

The decision of the national council’s legislative committee will be presented as a report to the upper house, and the full house will debate and vote on the bill. Till then, the region will see a lot of collective holding of breath, as the fate of one of South Asia’s key connectivity pacts hangs in balance.

[UPDATE: On November 15, Bhutan’s National Council rejected the bill to ratify the BBIN motor vehicles agreement]