Border haats as a platform for cross-border value chains

The Financial Express, September 30, 2020
By Indranil Bose & Bijaya Roy

The ‘Neighbourhood First’ policy, enunciated by the government of India under the Prime Minister Narendra Modi, prods India to improve its ties with her immediate neighbours. It focuses on cooperation based on requirements and needs of neighbouring countries. In keeping with this disposition, the government of India is keen to strengthen its relations with Bangladesh.

Keeping this in perspective, the governments of India and Bangladesh arrived at a consensus about establishing meeting points where people of the two nations could engage in mutual trade of commodities produced locally, without having to navigate through documentation processes that are usually entailed by international travel and trade. Border haats, thus, happened.

Four such border haats have been operationalised since 2011. Two of these are in Tripura (namely, Kamalasagar-Kasba and Srinagar-Chhagalnaiya) and the other two are in Meghalaya (namely, Balat-Dolora and Kalaichar-Baliamari). They offer a number of benefits to the local residents. First, residents in the border areas get access to a much-needed forum to exchange their local produce. Secondly, they created a number of alternative livelihood opportunities for both men and women, provided additional income to the stakeholders and in many ways restricted out-migration. Thirdly, they helped reduce informal trade in these areas.

Based on success stories that emerged from the operational border haats, the governments of India and Bangladesh have decided to set up more border haats along the India-Bangladesh border. Consequently, six additional locations have been identified for establishment of the haats (namely, Nolikata-Sayedabad, Shibbari-Bhulyapara, Ryngku-Baganbari, Kamalpur-Kurmaghat, and Palbasti-Paschim Batuli). There are several other locations as well along the long border between the two countries, which hold the promise of establishment of such rough-and-ready markets.

Alongside border haats, there exists a domain where bilateral relations between the two countries can be further buttressed. This requires one to delve into mutual dependencies of the border residents with respect to production and/or consumption processes in various sectors, which are pregnant with the possibility of forging bilateral cross-border value chains.

Over the years, bilateral trade between these countries has soared, yet official statistics indicate that cross-border value chains are confined almost entirely to the textile and clothing and cement manufacturing sectors. But a closer look at the pattern and data regarding informal trade reveals the existence of cross-border value chains in respect of several products, albeit in small scales. A more intense look into the preferences and skill bases of the residents of the two countries, particularly among the border residents, brings to light the immense potential for forging value chains in respect of several products.

Several factors contribute towards the development of effective and economically viable cross-border value chains. These include availability of resources, efficient transport and logistics services, efficient customs procedures and border management, harmonious regulatory standards and a regime that facilitates trade without imposing restraints like tariff or non-tariff measures.

It is unfortunate that both in India and Bangladesh, tariff and non-tariff measures continue to inhibit the growth of value chain linkages. Although the Agreement on South Asian Free Trade Area (SAFTA) has led to reduction in tariffs, non-tariff barriers persist in the form of cumbersome customs procedures and informal payments. They increase the total cost of trade and prices of commodities and militate against the formation of value chains and in the process force many into informal trade.

The World Customs Organisation enunciates provisions on inward and outward processing with the objective of encouraging and facilitating cross-border value chains. These provisions are also mandatory under the WTO Trade Facilitation Agreement (Article 10.9) and they came into effect in February 2017. The inward processing procedures provide conditional exemption from import duties and taxes on goods that are temporarily imported and which will be exported after due manufacturing, processing or repair.

In the case of outward processing procedures, intermediate goods may be temporarily exported for further processing, manufacturing or repair abroad, and the processed products are re-imported with full or partial exemption from import duties and taxes.

The main purpose of the inward processing procedure is to make it possible for national enterprises to offer their products or services in foreign markets at competitive prices, thereby promoting economic growth and creating further employment opportunities for national labour. But this rule is hardly implemented in respect of trade between India and Bangladesh.

A possible reason could be that goods exported temporarily must be subject to suitable identification measures making it possible to establish that the compensating products were obtained totally or partially from the temporarily exported goods. Even if this policy gets implemented, one remains apprehensive that the small traders and illiterate farmers/traders will not be able to carry on trade along lines spelt by these complicated procedures and will either continue to trade through informal channels or will limit themselves to domestic trade.

It is in this context that one has to understand the complementary role that ‘border haats’ can play in facilitating cross-border value chains, which often exist in border regions due to mutual dependencies and a shared  history.

In India-Bangladesh border haats local people from both the countries in those areas are allowed to trade in vegetables, fruits, spices, food items, agri-implements, cosmetics, toiletries, garments, melamine products, aluminium products, bamboo products, plastic products, fruit juice, processed food items and other such indigenous products. Such haats or markets are located on the zero line of the border between India and Bangladesh, and each buyer is allowed to buy commodities up to US$200 a day.

As per CUTS research findings, prior to the establishment of the border haat, informal trade in raw betel nut from Kalaichar, Meghalya to its mirror village Baliamari in Bangladesh, and of dried or processed betel nut from Balaimari, back to Kalaichar was predominant. In Kalaichar and its neighbouring villages production of betel nut is abundant and there are good processing facilities on the Bangladeshi side. Yet the demand for processed/dried betel nut is significant in India.

Following the establishment of the Kalaichar-Baliamari border haat, informal trade in betel nut stopped completely and the betel nut trade got routed through the border haat. Trade in betel nut flourished subsequently between the two countries benefitting the border residents.

Exploring this issue one understands that in the absence of the haat, the betel nut farmers had to go to Mankachar, Assam to sell their produce and their to-and-fro journey would involve a transportation cost of approximately USD 64, which was not affordable to all, especially the female farmers. But in the post border haat scenario, those farmers sell their produce at the border haat, which saves their transportation cost and enable them to earn about USD 5-10 on a haat day.

As per official data, per month betel nut worth Indian Rupees 700,000-900,000 is traded from India to Bangladesh and dried betel nut worth INR 900,000- 1,700,000 is traded from Bangladesh to India through this border haat.

Thus, the establishment of the Kalaichar-Baliamari border haat has facilitated and strengthened the cross-border value chain in betel nut, not only diverting this trade through a formal channel, but also boosting its volume, thereby creating various income opportunities for border residents of these remote and economically backward areas, and ensuring market access and better prices to the betel nut farmers.

It has generated livelihood options for betel nut farmers and thrown up an array of opportunities for absorbing the local workforce — vendors selling processed betel nut in this border haat, workers in the processing units, workers for grading and sorting, traders, labourers and transporters involved in the entire process.

The border haats have also created several opportunities for employment. Trading in border haats generally allows three to four labourers/staff/helpers for each of the 25 officially authorised vendors from either side. This results in the participation of at least 200 people from both sides of the border in each of the border haats. In addition to these people who are largely attached with the sellers, there are also vendees who get involved in such trade not just for self-consumption but for securing an income by selling goods purchased at the haats, in other places outside.

Therefore, it is imperative that such mutual synergies in border areas are leveraged and cross-border value chains facilitated through existing and upcoming border haats. This will also lead to development of border areas and ensure long-term peace, security, stability and prosperity through border haats.

The governments of India and Bangladesh had initiated the idea of border haats along the India-Bangladesh border with the objective of helping border inhabitants to market their local produce and also to promote people-to-people connect. It is acting as one of the best confidence-building measures among the citizens of the two countries.

The case of the Kalaichar-Baliamari border haat demonstrates how effectively border haats can also function as platforms for promoting cross-border value chains. One hopes that in the days to come, border haats will have a growing role to play in the lives of the border residents.

Indranil Bose is Associate Professor of Political Science, St. Xavier’s College, Kolkata;

Bijaya Roy is Senior Research Associate, CUTS International.

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