Nepal-Bangladesh relations: Prognosis for the future

We must build linkages between the Himalayas and the Bay of Bengal, between hills and plains, and between markets and minds.

Ghanshyam Bhandari

  • Read Time 7 min.

The roots of Nepal-Bangladesh relations can be traced in times predating 1972, the year we established formal diplomatic relations. Even before Bangladesh’s Liberation War, (and even before Nepal’s recognition of Bangladesh as an independent country), our societies and communities were connected through profound linkages.

Hence, our relationship is characterized by these historical and cultural connections. This has been evident including in the centuries-old movement of people and goods between our societies, in the finding of the palm-leaf manuscript of the Charyapada in the Royal Court of Nepal, and in Sanskrit being the root of both Nepali and Bangla languages, and the list goes on.  We speak similar languages, eat similar foods, and have similar traditions and customs.

It is characterized by an idea of good neighborliness. Our relationship is a ‘trouble-free’ relationship based on trust, cooperation, and mutual respect.  We have stood by each other in times of need, including during the COVID-19 pandemic.  

It is characterized by a vision of development and partnership: This vision constitutes long-standing development aspirations of our people for well-being and prosperity.

There has been a steady growth in the economic and commercial ties between our two countries.

Strong links at the political, institutional, military, business, and cultural levels continue to foster respect and mutual understanding between the two countries.

Bangladesh is one of the preferred destinations for Nepali students to pursue higher education, especially in the medical field. Currently, about 3000 Nepali students are studying at various universities and colleges across Bangladesh.

Likewise, Nepal remains a popular destination for Bangladeshi travelers.  Over 25,000 people visited Nepal in 2022, which is close to the pre-pandemic level. Nepal-Bangladesh collaboration also extends to sub-regional, regional, and international forums, such as BBIN, SAARC, BIMSTEC, United Nations, Non-aligned Movement, and Group of 77 and China, among others.  

With just 51 years on the clock of our formal diplomatic relationship, we can of course take stock of, celebrate, and commemorate the achievements we have made together.

But as we look to the next fifty years and beyond, there is a need to build on the progress and consolidate our partnership with more focus on enhancing economic linkages.

First, on trade and investment. The bilateral trade between Nepal and Bangladesh is increasing but remains at a modest level. It was around USD 70 million in 2022. The figures show that trade is heavily skewed in favor of Bangladesh.

Nepal primarily exports red lentils, ginger, cardamom and other agricultural products, fruits, plants, and plant parts, among others. Major exports from Bangladesh include oil cakes, electrical and electronic items, jute and textiles, potatoes, and pharmaceuticals.

Nepal’s export basket is quite narrow. And, as a land-locked developing country, our transport cost is higher, and it takes a longer time to send and receive merchandise from overseas markets. On top of that, unlike Bangladesh (which was an original WTO member) we had to negotiate WTO accession by agreeing to lower the tariffs and almost eliminate other duties and charges.

All these realities erode Nepal’s competitive edge. And they are in play when it comes to our trade and investment negotiations. The Government of Bangladesh decided in December 2022 to lift a two-decade-long ban on Nepali yarns entering Bangladesh via Banglabandha Land Custom Station. We thank the Government of Bangladesh for that.

The private sectors–led by premier chambers of our countries FNCCI and FBCCI–are closely connected.  Nepali and Bangladeshi investors have collaborated to invest in some joint venture projects. The signing of the Double Tax Avoidance Agreement (DTAA) in 2019 has opened avenues for further expansion of trade and investment opportunities.

But given the closeness and proximity between our two countries, what we have achieved is nowhere close to the potential.

There is a need to further intensify our efforts to enhance trade and investment linkages, including by eliminating or reducing the other duties and charges (ODCs). We must address the non-tariff barriers including upgrading the facilities at land customs stations and standardizing the procedures.

Second, Nepal’s hydropower potential and Bangladesh’s increasing energy needs is a much-talked about subject. This has been on the table for quite some time.

Currently, Nepal has an energy surplus. But, what we are producing now is just over five percent of what is economically viable. This means, if fully realized, Nepal’s hydropower can make tremendous contributions to the clean energy solutions of South Asia.

Our concrete efforts to materialize bilateral energy cooperation began with the signing of an MoU on Power Cooperation in 2018.  Since then, we have made some progress. In fact, we have never been more hopeful than this year in terms of realizing power cooperation between our two countries.

Our two governments have agreed to start power trade at the earliest, even with a small volume of 40-50 MW to begin with.

We know power trade between our two countries cannot happen without India’s cooperation and collaboration. It was not least because of this that the issue also featured during  Prime Minister Sheikh Hasina’s visit to India in September 2022, and Prime Minister Pushpa Kamal Dahal Prachanda’s recent visit to India. 

We are encouraged by the decision of the Government of India to facilitate the first trilateral power transaction from Nepal to Bangladesh, through the Indian grid with an export of up to 40 MW. Transaction of 40 MW is just a baby step and a symbolic one. But this will be a huge milestone to kickstart a new drive for our bilateral and, in fact, the sub-regional cooperation in energy.

In addition, talks are also underway for the joint investment in 683 MW Sunkoshi III hydropower project in Nepal. We understand that Bangladesh authorities are engaged with GMR company of India in finalizing the deal for 500 MW of electricity from Upper Karnali.  These details aside, the importance of energy cooperation is immense–whether be it to better utilize our waters and meet the energy needs, or to ensure transition to clean energy solutions for Nepal and Bangladesh.

There is a Chinese proverb: ‘The best time to plant a tree was 20 years ago. The second best time is today’. This resonates so well when we talk about energy cooperation between our two countries and among countries in our region.  Once realized, it will be a much-needed springboard to take our bilateral relations as well as the sub-regional cooperation to the next level.

Third, we know energy trade,or any other aspect of economic engagements for that matter, will not be possible without connectivity. Connectivity–both in the physical and digital sphere–and through land, air and water is the beating heart of bilateral,regional, and sub-regional cooperation. Currently, two airlines–Biman Bangladesh and Himalaya Airlines–are operating 10 direct flights per week between Kathmandu and Dhaka.

The movement of goods and people between our two countries is done mostly through Banglabandha and Burimari land ports.

We thank the Government of Bangladesh for the offer to use port facilities at Mongla and Chittagong for Nepal’s trade with the third countries. The negotiations on the movement of cargo and passenger vehicles under the BBIN framework are underway. Successful conclusion of the negotiations, by addressing each other’s concerns, if any, will be a significant milestone towards achieving seamless road connectivity in the sub-region.

It is a bitter reality that our region is one of the least integrated regions. We started some ambitious initiatives under SAARC and BIMSTEC. But we have a long way to go in ensuring an integrated region. In this connection, digital connectivity is one of the emerging frontiers. The IT sector is flourishing both in Nepal and Bangladesh. According to a recent study by Institute of Integrated Development Studies (IIDS), a Kathmandu-based think tank, Nepal’s earnings from the IT-related exports last year were quite significant.

We need to explore this new area, promote collaboration, and enhance digital connectivity.

As two major proponents of the SAARC process and ardent advocates of overall regional cooperation, Nepal and Bangladesh need to work together to advance the agenda of connectivity and regionalism.

Fourth, historically tourism and people-to-people exchanges have been a strong connecting thread between our two countries.

Our two countries offer unique and diverse touristic products–be it in terms of Nepal’s majestic mountains, verdant valleys, beautiful waterfalls and historical and archaeological sites or Bangladesh’s fertile plains, exquisite sea beaches, captivating mangrove forests, and cultural and historical monuments.

We must build linkages between the Himalayas and the Bay of Bengal, between hills and plains, and between markets and minds.

There have been efforts under SAARC and BIMSTEC to establish tourism circuits connecting religious and archeological sites.  But much remains to be done to connect our religious and archaeological sites, and eco-tourism and adventure destinations through tourism circuits.  Thus, we must promote innovation, ignite entrepreneurship, and build stronger bonds between the peoples and business communities.

Fifth, both Nepal and Bangladesh are at the frontline of the climate crisis. We often talk about the ‘organic link’ between the majestic Himalayas–the water towers–and the Bay of Bengal–the water reservoir. However, the climate crisis has disrupted this natural link. The sea levels are rising and the high mountains are losing their snow covers. A report published by ICIMOD released  on 20 June 2023  suggests that the glaciers disappeared 65 percent faster in the 2010s than in the previous decade. On current trajectories, glaciers in the Hindu Kush Himalayas could lose up to 80 percent of their current volume; and snow cover is projected to fall by up to a quarter.

This has endangered the lives and livelihoods of 240 million people living in mountain regions and 1.65 billion living downstream.

In this context, we can prioritize climate action and build climate-resilient pathways in line with the pledges of Nepal and Bangladesh to reduce carbon emissions and in line with the global target of net-zero emission scenario by 2050.

We must continue to champion the climate agenda at the global stage, just like we did around ‘loss and damage’ at Sharm El-Sheikh. We need to continue raising voices, including for climate finance, share our experiences and best practices,and work together for protecting our peoples, and for conserving the ecosystems.

Finally, just like two ‘schoolmates of development’, we are both set to graduate from the Least Developed Country (LDC) category by 2026. Of course, graduation is an important development milestone for both of our countries. But going forward, our countries are sure to confront various challenges including due to the loss of international support measures. It is more so for Nepal as it will be the first and a unique case of graduation without meeting the per capita income threshold.

So, we must work together and push against any pushback to ensure a smooth, sustainable, and irreversible graduation. Sharing of experiences during the current preparatory period will be critical. Now, we must take up the graduation issue with the development partners and international community to ensure favorable measures in the transitional period after 2026.

Besides the development agenda, our two countries share a common commitment to the values of global peace. Currently, the first two largest troops and police contributing countries in UN peacekeeping operations, Bangladesh and Nepal continue to contribute to the noble cause of global peace and security. We must build on our excellent relations between our militaries back home and work together on UN peacekeeping to promote our common interests.

Our two countries also work closely around the SDGs, LDCs matters, south-south cooperation, climate change, digital divide, and many more. We are almost on the same page in most of the global issues. A great Bengali poet Jibananada Das said “Jadi thake bandura maan gang par haitekatokhan” meaning ‘if you have a friend’s hand, crossing a river won’t take long time.’

Ghanshyam Bhandari, a career diplomat, is ambassador of Nepal to Bangladesh. This article is an edited version of his speech delivered under the “Ambassadors’ Lecture Series” organized by the Cosmos Foundation in Dhaka on 22 June 2023.