Bangladesh (Commonwealth Union)_ In a significant shift in its export strategy, Bangladesh, the world’s second-largest garment producer, has begun rerouting a portion of its textile exports through the Maldives, bypassing Indian ports and airports. Growing trade tensions between India and Bangladesh are likely to impact the revenue streams of Indian logistics and transportation hubs, including its ports and airports, as a result of this development. Notably, India has been Bangladesh’s primary trading partner for decades. However, the current Bangladeshi interim government has shifted trade routes to the Maldives, escalating tensions between the two nations.
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The new route for Bangladesh’s garment exports
Traditionally, a substantial volume of Bangladesh’s textile exports passed through Indian ports for onwards shipping to global destinations. However, in recent times, the country has opted to redirect shipments through the Maldives, where goods are transshipped via air to international markets. This route has been particularly attractive for major global retailers, including H&M and Zara, who rely on quick and efficient supply chains for their products. Accordingly, Deepak Tiwari, Managing Director of MSC Agency (India) Pvt Ltd, explained that the change in routing is already having a significant financial impact. According to him, earlier, the Bangladeshi goods were shipped through Indian airports, but now they are rerouting shipments from other locations. As a result, India’s ports and airports are seeing a reduction in cargo, leading to a loss of revenue that previously came from handling Bangladesh’s textile exports.
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The economic importance of textile exports
The textile industry is a cornerstone of Bangladesh’s economy, contributing about 80% of the country’s total exports and approximately 13% of its GDP. Despite its significance, Bangladesh has faced challenges in maintaining export growth. According to the Bangladesh Bank, the country’s garment exports fell by 4.34% in fiscal 2024, totaling $44.47 billion. This decline has prompted a reevaluation of Bangladesh’s export strategies, particularly with respect to its trade routes and international partnerships. This context views the rerouting of shipments to the Maldives as a strategic move to alleviate logistical bottlenecks and enhance efficiency, but it has sparked concerns about the wider implications for regional trade dynamics and India-Bangladesh relations.
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Impact on India-Bangladesh relations
This shift in Bangladesh’s export strategy has stirred controversy and raised concerns about the future of India-Bangladesh relations. Accordingly, experts and government officials have begun to scrutinize the potential effects of this change, which could exacerbate trade tensions between the two neighboring nations. India, which has long served as a key transit hub for Bangladesh’s exports, stands to lose significant revenue from port fees and other associated transit business. Bangladesh’s new shipping route through the Maldives could lead to reduced collaborative efforts between the two countries in infrastructure and logistics, further complicating their trade relationship.
However, the Maldivian route is not without its challenges. While it offers an alternative, it is a more expensive and less efficient option, involving sea-to-air transshipment. The Maldives Airports Company Limited, in March 2024, launched a sea-to-air cargo transshipment service to facilitate exports from Bangladesh. The first shipment included garments that were shipped by sea to the Maldives before being flown to Germany. This arrangement, while innovative, raises questions about the economic viability of such a logistics model, especially in terms of higher costs and potential delays.
Bangladesh’s official stance
Despite the mounting reports about the rerouting of its exports, Bangladesh has rejected claims that it is consistently using the Maldives as a transshipment hub for garment exports. Ziaur Rahman, the regional country manager for H&M in Bangladesh, noted that air shipments account for less than 1% of their overall transportation strategy and are used only for special promotional campaigns. Additionally, Nasir Ahmed Khan, vice president of the Bangladesh Freight Forwarders Association, dismissed the reports as false rumours, citing the logistical challenges of using the Maldives as a major transshipment point. Khan pointed out that there are no direct shipping routes from Chittagong, Bangladesh’s main seaport, to the Maldives, and that airlifting garments would significantly increase transportation costs, undermining the benefits of such a route.
The future of India-Bangladesh trade
As both nations navigate these shifting dynamics, the long-term effects on India-Bangladesh trade remain uncertain. While Bangladesh’s efforts to diversify its export routes could lead to greater control over its supply chain, they also risk straining relations with India, which has historically been an essential partner in regional trade and logistics. The rerouting of garment exports may signal a reorientation of Bangladesh’s export strategy, but it also highlights the broader geopolitical and economic shifts that both countries will need to manage. Furthermore, India will be closely monitoring the situation to gauge its impact on port revenue and broader trade relations. At the same time, Bangladesh should balance the need for efficient trade routes with the costs and logistical challenges that come with bypassing its traditional trade partner. In the coming months, the evolution of this trade dispute will likely serve as a bellwether for the future of India-Bangladesh relations and the economic stability of the broader South Asian region.
