Construction Minister Maj-Gen Saw Tun in Dhaka, July 27.

THE agreement last month to build a connecting road between Myanmar and Bangladesh is crucial to expanding bilateral trade ties, sources in the Myanmar business community said.

“With better transportation infrastructure, we are sure border trade between the two countries will increase significantly,” a deputy director with the Ministry of Commerce told The Myanmar Times on condition of anonymity.

“Border trade plays an important role in trade between the two countries. So an increase in border trade will contribute to both countries’ overall trade development,” he said.

Bangladesh is also hoping the agreement to go ahead with the long talked about road link will lead to a new economic era between the two countries.

“This is going to be a milestone in our bilateral relations,” Dhaka’s communications adviser, Major General M.A. Matin, said after the cross-border road agreement was inked on July 27. Myanmar Construction Minister Maj-Gen Saw Tun signed the agreement to build the 25-kilometre road link during a trip to Dhaka.

The road will connect Bangladesh’s southeastern Ramu frontier town to Bolibazar, 23 kilometres inside Myanmar’s Rakhine State.

“The area for construction was chosen well,” the Ministry of Commerce official said. “Transport costs and delivery times will be reduced.”

The three-year construction project has been estimated to cost US$21.75 million and is to be financed by the Bangladesh government. Work will begin later this year, Bangladeshi officials said.

There are hopes China will support the expansion of road links in the region, with Bangladesh keen to lure Chinese traders to its major port at Chittagong and Myanmar eyeing earnings from transit trade.

Maj-Gen Saw Tun told reporters in Dhaka that Myanmar had grand plans for the 25km stretch of paving.

“We hope to continue the project to connect it with the ‘Asian highway’ to go up to China, Thailand and India,” he said, referring to the proposed network of 140,000km of roads criss-crossing Asia and connecting with Europe.

Extending road links to Bangladesh increases Myanmar’s chances of benefiting from transit trade, said U Win Thein, a Yangon-based merchant involved in border trade with Bangladesh.

“However, we should prepare in advance,” he cautioned. “We should have well-developed trade and logistics services for roads in Myanmar that will be used for transit trade.”

But the agreement to build the two countries’ first-ever road link was a good first step, he said.

“There are a lot of transportation and smuggling problems in border trade at the moment.

“Once there’s a proper road link we’ll be better able to overcome those challenges and trade will develop further,” U Win Thein said.

Border trade accounts for a significant portion of trade between Myanmar and Bangladesh. According to the Ministry of Commerce, border trade made up $26 million of total bilateral trade of $70 million in the 2006-07 fiscal year, which ended on March 31. This was up from $17 million out of $60 million the previous year.

The Ministry of Commerce official predicted the volume of border trade would come to surpass normal trade once the road link was completed.