In a 2020 interview with ApEx, Mashfee Binte Shams, Bangladesh’s outgoing ambassador to Nepal, had pointed out the culprit behind the paucity of bilateral trade: “Businesspeople in Bangladesh think of Nepal as a very small and hence an unprofitable export market. They think Nepali markets are dominated by Indian exports… In the case of Nepali people, they think Bangladesh is a poor, starving, poverty-ridden country which does not have purchasing power”. Perceptions die hard. There was thus skepticism over the recent state visit of President Bidya Devi Bhandari to Bangladesh.
The two countries at their closest are just 27 km apart, making Bangladesh Nepal’s second closest neighbor after India. Bilateral trade between them was worth just over Rs 6 billion in 2019/2020, with Nepal importing nearly five times as much as it was exporting to Bangladesh in this time. Trade experts say the volume could easily rise tenfold. By 2040, Bangladesh hopes to import 9,000 MW of electricity from Nepal, and has already pledged over $1 billion for hydropower development here. A Nepal-India-Bangladesh power transfer agreement is in place as well.
Yet progress in bilateral relations has been slow, partly because of India. New Delhi has been reluctant to give free passage to goods between Nepal and Bangladesh over security concerns. The 27-km stretch between the two countries falls within India’s ‘chicken-neck’, the narrow strip of land connecting mainland India and its northeastern states. The corridor also touches Bhutan and China’s Tibet. Heightened India-China border tensions could further restrict free movement in this region.
This means Nepal and Bangladesh will continue to feel unjustly victimized by the regional ‘big brother’. It was in order to collectively fight India’s regional hegemony that the two countries took the initiative for the formation of the seven-country SAARC in late 1970s. If smaller countries in the region didn’t together fight for their interests, they calculated, India would continue to expand its hegemony at their expense. China was not a big part of their calculus back then. It is now.
The establishments in both Nepal and Bangladesh feel secure in China’s embrace. Make no mistake. They also want cordial ties with India. It could hardly be otherwise given their historical legacies and their location. But China has emerged as a partner of choice for an increasingly authoritarian Sheikh Hasina government, who is getting all the money she needs from China, no questions asked. To an extent, the same dynamic is at play in Nepal, which too has long chaffed at being surrounded—in every imaginable way—by India.
China has emerged as a useful bargaining chip for them. India has been reluctant to open its chicken-neck for more Nepal-Bangladesh trade. But it has had to concede that if it does not facilitate regional integration and trade under its watch, China will do so under its own initiative like the BRI. This explains the greater willingness in New Delhi for regional connectivity initiatives (minus Pakistan).
Rivalry between big powers often opens up maneuver-room for smaller actors. The old axiom that Nepal will not look to play off India against China is repeated so often precisely because we are not being completely honest with India, and they know it. Yet India often plays along because of its own limited hard power and the improbability of stopping China’s rise. Tactful diplomacy in Kathmandu and Dhaka could thus open many new opportunities for bilateral trade, travel and investment.