Mongla Port Management Only Prudent Business Decision, Not Geopolitics

India has secured operational rights for the Mongla port terminal in Bangladesh, which is touted as a 'strategic' win over China. This move is seen as an attempt to limit Beijing's regional influence. The Mongla port will be managed by Indian Port Global Limited (IPGL), a private limited union government company under the administrative control of India's Ministry of Shipping.

This comes after India also won bids to operate the Chhabar port in Iran and the Sittwe port in Myanmar. The Mongla port is Bangladesh's second-largest seaport after Chittagong. IPGL is also partners with the Iranian Chhabar Port.Bangladesh already allowed India access to Chattogram and Mongla ports in 2023 for transit and trans-shipment of cargo, helping India significantly cut the time and cost of transporting goods to its northeastern states and West Bengal while facilitating regional connectivity in the Bay of Bengal.

High-quality, efficient port infrastructure is crucial for successful export-driven growth strategies. It builds confidence to attract investment in production and distribution systems, supports manufacturing and logistics, creates jobs, and boosts income. Seaports play a crucial role in facilitating trade and the transportation of goods and people. Proper governance and regulation of seaports are of utmost public interest. Governments usually establish, develop, and operate ports to facilitate trade. Various port governance models exist, from public to privately managed port activities. The four primary forms include - Privatization, which involves transferring asset ownership to a for-profit entity, with the government regulating the entity; Commercialization, which involves governments withdrawing from operation while retaining ownership, commonly through concessions to third parties; Decentralization, which shifts oversight responsibility to the local level, often accompanying commercialization; Corporatization creates a separate legal entity with shares to provide mandated functions or services. There is ongoing debate about its success. Mixed governance models with contracted management are also available. Many ports remain government-owned and government-managed, although they may have been decentralized. Commercialized or corporatized governance structures are implemented in most of the largest ports.

Governments use commercialization as a tool to improve port efficiency and performance. A public enterprise may decide to contract certain operations through a tender-bid procedure. Also, a separate contract for managing the public port authority or public terminal operator within the commercialization framework may be awarded. A management contract is usually entered into for a specified period, generally between three and five years. Upon expiration of the contract period, it may either be renewed or awarded to another party. A management contract may also be a stepping stone toward granting a more extensive concession. When entering into a management contract, the government or ministry must have the right to impose financial penalties or terminate the contract if the private operator does not meet specified levels of efficiency, financial performance, or throughput.

Thus, the Mongla port management award to an Indian company is not unusual, given the aforementioned context of regional trade and connectivity. India Ports Global Limited (IPGL) operations contract of Mongla Port reflects the growing economic ties between India and Bangladesh. IPGL's interest in operating the port highlights the potential for enhanced trade cooperation and infrastructure development between the two countries. Mongla Port currently operates container and bulk carrier vessels at five jetties, with plans to construct two additional jetties to accommodate increased cargo volumes due to transshipment activities from India, Nepal, and Bhutan.

Mongla Port's positioning at the confluence of the Pasur River and the Mongla River, close to the Sundarbans mangrove forest, makes it strategically important for trade and commerce in the region. For India, Mongla Port provides a vital route for accessing its northeastern states, such as Assam, Tripura, and Meghalaya. These states are geographically isolated from the mainland, and having access to Mongla Port significantly reduces transportation costs and distance for goods destined to and from these regions. India has over 7,516.6 km of coastline with 200 ports. Cargo ships traveling between East Asia and other continents pass through Indian waters. In FY23, major Indian ports handled 783.50 million tonnes of cargo, with a 3.26% CAGR from FY16 to FY23. India has the longest coastline on the Indian Ocean. The Indian Ocean got its name from the country. The seaports are the lifeline of the country's economy. The Indian government considers the Indian Ocean an essential strategic and economic theatre, critical for its diplomatic, military, and regional engagements. The importance of the maritime domain and the Indian Ocean as an essential strategic theatre in Indian strategic calculations is mainly due to growing competition with China.

Bangladesh's Mongla Port, which was expected to gain a new lease on life due to export and import after the opening of the Padma Bridge, has yet to become a port of choice for businesses. Media reports from February this year underscore a decline in trade indicators through the Mongla port. On the other hand, reports on July 31 inform that Swedish fashion company H&M took the initiative to ship goods from Mongla port through the Padma Bridge, aiming to reduce lead time, as reported by industry insiders and buyers eager to capitalize on the time and cost savings. Among other exporters, Team Group, a garment manufacturer, shipped 500,000 pieces of apparel through Mongla port. Over the last year, five ships exported a substantial volume of ready-made garments through Mongla port. According to Mongla port (traffic) officials, garment exporters based in Dhaka and its surrounding areas are increasingly utilizing Mongla port due to its proximity to Dhaka, which is only 170 kilometers away, compared to 260 kilometers to Chattogram. Within this mixed scenario, businesses continue to underline the need to increase the port's capacity, particularly in container handling. The management of the port is also a key factor. Thus, having a company with experience managing multiple ports internationally is a good idea. Moreover, regionally, Nepal, Bhutan, and India have the most potential.

Thus, the Indian management of the Mongla Port is essentially suitable culturally and regionally. Bangladesh is passively pressured by the regional competition between India and China to endorse or silently agree that awarding the Mongla Port management to India is a geostrategic victory in India's favor. However, having India manage the port is just prudent business because of the mere regional and cultural affinity, regional connectivity interests, strategic importance, and transshipment agreements. There are, in total, 15 ports on the coast of the Bay of Bengal, with eight on India's coast (including Port Blair off the coast of Myanmar), Sittwe under Indian management, and is now the Mongla Port. The Indian company managing the Mongla Port does not allow India any strategic advantages unless Bangladesh allows it, mainly through the contract provisions under which the management or commercialization of this port is taking place. Allowing such unreasonable provisions would be not only imprudent but also strategically detrimental. It is recommended that the government of Bangladesh maintain a higher level of transparency regarding the conditions of the commercialization agreement and now allow a core business decision to turn into an unwanted geostrategic tug of war.

Author: Political and International Affairs Analyst.