Cross-Border Cooperation: Nepal-Bangladesh Trade and Its Impact on Local Economy

While major bilateral trade with high-GDP countries dominates headlines, a quieter but increasingly significant economic partnership is flourishing between Bangladesh and its landlocked Himalayan neighbor, Nepal. Both countries, Nepal and Bangladesh, possess a distinctive chance to enhance economic relations, notwithstanding the 52 km "Siliguri Corridor" of Indian territory that divides them. This corridor, formerly underutilized, is now experiencing increased commerce in agricultural products, textiles, and energy, propelled by recent legislative reforms and new connection projects. This cross-border collaboration, which navigates geographical complexities through India, is now demonstrably impacting local economies across Bangladesh, particularly in its border and port area, by creating jobs, boosting port activity, and diversifying markets.

Historically, trade between Bangladesh and Nepal faced substantial obstacles owing to the lack of a direct border, which necessitated transit through Indian territory. Since the establishment of diplomatic relations in 1972, Nepal–Bangladesh commerce has been guided by annual Commerce Secretary meetings and bilateral agreements. In April 2024, the seventh Nepal–Bangladesh Commerce Secretary-Level Meeting reviewed progress on trade, transit, and investment, and set in motion negotiations for a Preferential Trade Agreement (PTA) and a Bilateral Investment Promotion and Protection Agreement (BIPPA). Both countries are also active members of the South Asia Subregional Economic Cooperation (SASEC) program since 2001, which has channeled over US$13 billion into regional transport, trade facilitation, and energy projects. Persistent diplomatic efforts led to a significant deal in 2023, granting Nepal permanent access to Bangladesh's key ports of Mongla and Chattogram through the Bangladesh, Bhutan, India, and Nepal (BBIN) Motor Vehicles Agreement framework. The operationalization of the Nepal-Bangladesh Transit Treaty Protocol in early 2024 further streamlined procedures, significantly reducing transit times and costs. Although still tiny, bilateral trade is increasing steadily. in 2023, Nepal imported goods worth NPR 6,045 million (about US$40 million) from Bangladesh and exported goods worth NPR 574 million (roughly US$3.8 million) to Bangladesh, creating a trade deficit of about NPR 5.47 billion in Nepal's favor. The export of red lentils, ginger, cardamom, and other spices from Nepal and oil cakes, jute textiles, pharmaceuticals, and potatoes from Bangladesh accounted for a substantial portion of the about US$70 million in total trade between the two countries in 2022, according to Bangladesh's foreign ministry.

The impact extends inland; Nepali goods are now more widely available and competitive in Bangladeshi markets due to simpler import procedures. Lentils, ginger, herbs, fruits (like apples), and stone aggregates are examples of necessary goods. Nepali ginger is often fresher and cheaper now compared to supplies from other regions. Customers now have more options because of this inflow, which also helps to keep some goods' costs stable. From initial findings, far-western Nepalese lentil farmers who gained contracts with Bangladesh in 2023 should see a 15% boost in income. Additionally, Nepal is seeking to export yarn, handicrafts, coffee, tea, ginger, massive cardamom, herbal items, handicrafts, shoes, gems, and jewelry. The trade balance has historically favored Bangladesh, while Nepal imports necessities from Bangladesh, such as processed foods, plastics, ceramics, furniture, textiles, and pharmaceuticals. Bangladeshi manufacturers, especially SMEs, are seeing new opportunities as a result of easier access.  While digital connection projects under the BBIN (Bangladesh–Bhutan–India–Nepal) and SASEC frameworks promise longer-term gains in e-commerce and IT services, the upgrading of land customs stations at Banglabandha and Burimari has created jobs in the construction and logistics sectors. The emerging partnership has enormous promises for more than just conventional products. High-level talks are moving forward on Nepal exporting excess hydropower to Bangladesh, which is in dire need of energy. Although large-scale transmission is still a way off, its effective deployment would have a big impact on Bangladesh's industrial economy and national energy prices. 40 MW of hydropower currently flows yearly from Nepal into Bangladesh via the Indian grid (mid-June to mid-November) after the first-ever trilateral power-sales deal involving Nepal, Bangladesh, and India was signed in October 2024. Larger projects like the 1,040 MW Upper Arun hydropower facility and the 683 MW Sunkoshi III have been made possible by this pilot, which promises affordable, clean energy imports at about US$0.05–0.07 per kWh. Furthermore, Bangladesh and Nepal recently reiterated their devotion to enhancing cross-border tourism and fostering interpersonal connections during the Nepal-Bangladesh Tourism Meet on June 20, 2025.

The most visible local impact is concentrated around the Mongla Port in Khulna Division. Once operating below capacity, Mongla is experiencing a renaissance driven significantly by Nepal-bound and Nepal-originating cargo. Port authorities reported a 35% increase in direct and indirect employment over the past 18 months. Local logistics companies servicing the Nepal corridor are expanding their fleets and workforces. Increased trade volume has spurred investment in port infrastructure upgrades and new private warehouses and container yards sprouting up in the surrounding areas. Hotels, eateries, and other service providers catering to the influx of Nepali and Bangladeshi traders and transport crews are thriving in Mongla and nearby Khulna city. The city is evolving into a key logistics hub for handling Nepal-bound goods. Transport companies report a steady increase in demand for trucks moving goods between Chattogram/Mongla and the Indian border crossings at Banglabandha (for rail) and Burimari (for road), destined for Nepal.
A Model for Regional Cooperation?

The Nepal-Bangladesh trade tale, which is still evolving, is an interesting case study in overcoming geographical obstacles through diplomacy and economic pragmatism. Local economic benefits for Bangladesh, particularly the regeneration of the Mongla and southern regions, job creation, and varied markets, provide visible confirmation of the partnership's usefulness. This collaboration proves that even in the complex South Asian landscape, mutually beneficial business collaborations can thrive. The focus must now shift to eliminating the remaining barriers to realize its full potential for both countries, particularly for the communities directly involved in making trade a reality.

The trade route between Nepal and Bangladesh is no longer just a line on a map; it is transforming into a vital artery that pumps economic life into local communities, demonstrating that cross-border collaboration may bring very local benefits.


Imran Hossain teaches Business
Administration in Rabindra
Maitree University, Kushtia.