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Sri Lanka’s port connectivity potential 

By Pathik Hasan

Sri Lanka is located ideally for direct maritime or short sea connectivity with many countries in the region. As an island economy, Sri Lanka’s regional connectivity has been mainly through its main seaport in Colombo, for South Asian countries.

The ports of Chittagong in Bangladesh and the ports of Colombo and Hambantota in Sri Lanka are located nearly 1,515 nautical miles from each other. Robust, smooth connectivity and linkages between these ports would ensure and facilitate more shipping, tourism, and investments between the two countries. Education and sports are other areas of collaboration between the two nations.

On the other hand, Bangladesh and Thailand are near neighbors, connected by the Bay of Bengal. The development of these maritime ties would benefit both countries in terms of trade, investment, and regional communications. 

The two countries are in talks to sign a free trade agreement (FTA) to boost trade and investment. Bangladesh is geographically positioned as a gateway between the Association of Southeast Asian Nations (ASEAN) and the South Asian Association for Regional Co-operation (SAARC) with potential access to both for each other’s export-driven manufacturers. ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam, while SAARC includes Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka.

The Chittagong seaport is the main seaport in Bangladesh. 90% of Bangladeshi trade is conducted through the Chattagram Port Terminal, with the rest being taken up by Bangladesh’s ports at Mangla and Payra.

Thailand’s Ranong Port is situated on the Kraburi River of the Kra Peninsula, across from Myanmar and on the Indian Ocean coast, and lies 1,220 km from Chittagong. 

Thailand’s Southern Economic Corridor project, approved by the government in August 2018, emphasises the development of Ranong Port as a gateway to trade with Bangladesh, India, Myanmar, and Sri Lanka. Using Ranong Port for trade with Bangladesh’s Chittagong, Payra, and Mangla ports will reduce the distance between the two countries and boost trade. This connectivity can then be extended to India’s Kolkata, Chennai, and Mumbai ports, up to Iran’s Chabahar through Sri Lanka’s Colombo Port. 

The launch of direct shipping services amongst Colombo, Mumbai, Chennai, Chittagong, and Ranong ports has received a new push as trade amongst the countries is increasing.

Sri Lankan Foreign Minister Prof. G.L. Peiris recently met his Bangladeshi counterpart A.K. Abdul Momen in Dhaka and expressed interest in collaborating in the shipping field, with co-operation between the ports of Chittagong and Colombo and Hambantota. He emphasised on feeder services and coastal shipping arrangements. Both discussed bilateral commercial ties.

Co-operation on a transshipment hub would be beneficial to Bangladesh because of the reduction of time and nautical miles, a Bangladeshi newspaper reported.

Sri Lanka’s investment in Bangladesh is around $ 2.5 billion. About 110 Sri Lankan companies are operating in Bangladesh. The annual bilateral trade volume is now around $ 200 million.

Sri Lanka is keen on a preferential trade agreement (PTA) with Bangladesh and is happy that technical negotiations have commenced and are proceeding, Prof. Peiris said.

On the other hand, bilateral trade between Bangladesh and Thailand reached$ 837.08 million in 2019-20. Bangladesh’s total exports to Thailand in 2020 were $ 35.46 million while imports from Thailand were worth$ 801.3 million, very much in Thailand’s favor.

Bangladeshi exports to Thailand are on an upward trend, however. This year’s exported values are expected to reach just under $ 40 million, a 12% increase year-on-year (YoY). 

According to foreign direct investment (FDI) stock data in Bangladesh, Thailand is the 15th largest investor in the country. This however would increase significantly if an FTA can be agreed upon, and the two countries build direct maritime connectivity between Chittagong and Ranong ports.

There is precedent. When Bangladesh signed a FTA with the SAARC members in 2006, its imports and exports doubled within 10 years, being a relatively constant (there was a dip in 2011) and sustainable 10% gross domestic product (GDP) growth in trade per annum. 

In terms of commodities, Thailand mainly exports cement, cereals, plastics, man-made staple fibres, sugar and sugar confectionery, machinery and mechanical equipment, cotton and cotton cloth, salt, sulphur, clay, stone, and mineral fuels to Bangladesh.

In the reverse direction, Bangladesh exports garments, vegetables, textile fibres, garments, animal products, electrical and electronic equipment, frozen fish, and crustaceans to Thailand. 

Direct sea connectivity between Chittagong and Ranong can be expected to play an important role in expanding trade and commerce between the two countries. The time and cost of transporting goods between them can be reduced by 30% and are likely to play a key role in building ties with other Southeast Asian countries, including Myanmar and India. The introduction of direct shipping between the two countries will encourage traders from both to expand their regional trade and investment.

Thailand could increase trade ties with India, Bangladesh, and Sri Lanka under the framework of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation (BIMSTEC).

The establishment of trade and economic corridors through co-ordination between the “Look East Policy” of India and Bangladesh and the “Look West Policy” of Thailand and the establishment of connectivity through coastal shipping is likely to bring prosperity for all. 

Dhaka is additionally counting on Bangkok’s support for Bangladesh’s bid for membership in the Mekong-Ganga Co-operation Forum as well as the ASEAN Sectoral Partnership.

Thailand and Bangladesh are also both active partners in the Belt and Road Initiative (BRI). If Chittagong and Ranong port connectivity can be extended to Iran’s Chabahar port through Sri Lanka’s Colombo and the International North South Transport Corridor project (INSTC) through Central Asia and Turkey, this will create significant trade potential.

Although the Maritime Assistance Agreement between Bangladesh and Thailand was completed in 1986 and is currently in force, changes need to be made to bring these opportunities to fruition. Bangladesh and Thailand can renew the agreement for ensuring their business interests.

Progress is being made. Thai Ambassador to Bangladesh Makawadee Sumitmor stated at a bilateral business meeting with the Chittagong World Trade Centre in September this year that there is a trade gap between the two countries. She also said that the expansion of the India-Myanmar-Thailand trilateral route will boost trade in this region and that she was waiting for the signing of a Memorandum of Understanding (MoU) between Thai authorities and the Chittagong Port Authority to establish direct shipping links by sea.

There are huge opportunities for Thai investors in infrastructure, light engineering, agriculture and food processing, tourism, and healthcare. Thailand and Bangladesh both could and should utilise these potentials. But smooth connectivity is needed to boost the trade. Colombo, Mumbai, Chennai, Chittagong, and Ranong port connectivity would boost trade and expansion of tourism. India, Sri Lanka, Bangladesh, and Thailand can both benefit from this mutually rewarding sea connectivity project.

(The writer is a Dhaka-based NGO activist, researcher, and freelance writer on contemporary international issues whose work has been published in many local and international publications. He holds a BSS in Peace and Conflict Studies and an MSS in International Relations under the University of Dhaka. He can be reached at pathikhasan1141@gmail.com. This article was first published by Eurasia Review on 21 November 2021)

The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.