Executive summary
The North East Indian Ocean Region (NEIO), encompassing the Australia, Bay of Bengal and Andaman Sea triangle, is an increasingly contested geopolitical space marked by infrastructure deficits, maritime security challenges, and climate risks. While the region holds strategic importance for Australia and India, Australia’s engagement has lagged behind other like-minded countries in the region, including India, Japan, and the United States, who are advancing ambitious initiatives through financial, technical, and governance support. However, with growing strategic and developmental opportunities, Australia can reshape its regional role by focusing on port development. The Bay of Bengal, a critical hub for maritime trade and security, faces significant infrastructure gaps despite handling half of global maritime trade and a third of global cargo. With an estimated US$6.3 trillion required for climate-resilient infrastructure by 2030, enhancing port infrastructure emerges as a vital focus for fostering sustainable growth and boosting regional trade capacity.
This report examines Australia and India’s engagement across various stages of port development in the Bay of Bengal, particularly in Sri Lanka, Bangladesh and Myanmar, extending beyond port construction and including port operations and logistics. Port development is a complex, multi-stage process that includes spatial and cargo planning, regulatory procedures, operational considerations, trade facilitation, governance structures, terminal leasing for public-private partnerships, financial modelling, and more. Based on this, the report assesses the state of port development in the region, identifying gaps and key areas of intervention. It also proposes collaborative policy options for India and Australia to maximise their strengths for economic development in the region, while also enabling economic security linkages.
This report proposes collaborative policy options for India and Australia to maximise their strengths for economic development in the region, while also enabling economic security linkages.
This report outlines four specific areas for Australia-India collaboration on port development: port decarbonisation, smart ports, trade facilitation, and capacity building.
Specific activities for Australia-India engagement in port development include:
1. Bridging knowledge gaps between Australia and India about strengths and capabilities
Closing knowledge gaps between Australia and India would allow India to leverage Australia’s expertise in port automation and green shipping, while Australia can benefit from India’s extensive market and infrastructure experience.
2. Expanding the Australia-India Infrastructure Forum (AIIF) to the Bay of Bengal region
Broadening the AIIF to include Bay of Bengal states could drive regional development and attract increased investment opportunities.
3. Increasing the resources available for the South Asia Regional Infrastructure Connectivity (SARIC) framework
Expanding and aligning Australia’s SARIC program with India’s regional projects could strengthen regional connectivity, especially as SARIC considers a five-year extension.
4. Mobilising Australian and Indian private sector for infrastructure financing
Australia and India could stimulate infrastructure financing for the Bay of Bengal by mobilising private sector resources and reducing investment risks through public-private partnerships.
5. Engaging through regional and global institutions: BIMSTEC, IORA, and CDRI
Regional organisations like the Bay of Bengal Multisectoral Technical and Economic Cooperation (BIMSTEC), Indian Ocean Rim Association (IORA), and the India-led multi-regional Coalition for Disaster Resilient Infrastructure (CDRI), provide Australia and India with platforms to coordinate their efforts, engage a wider range of stakeholders, and promote shared objectives.
6. Promoting Australia’s role in standards and quality infrastructure
By promoting high infrastructure standards in collaboration with India, Australia could enhance trade and investment in the Bay of Bengal region.
Australia’s strategic advantage lies in its positive reputation in the region, often perceived as a trustworthy partner in comparison to other states due to its lack of historical baggage. This, combined with India’s regional experience, places them in a strong position to contribute meaningfully to the region’s development needs. Focusing on port infrastructure development offers a relatively low-risk, high-reward opportunity for Australia and India to generate substantial impact without overextending their resources. By building on their respective strengths, they can forge a collaborative framework that supports sustainable growth and stability in the Bay of Bengal and the broader NEIO.
Introduction
The North East Indian Ocean Region (NEIO) — encompassing Australia, the Bay of Bengal and Andaman Sea triangle — has become an increasingly contested geopolitical space within the broader Indian Ocean region. The host of challenges faced in the region, from infrastructure deficits to maritime security and climate change, has catalysed a complex landscape of geopolitical and geoeconomic competition.
The NEIO holds considerable importance for Australia in its neighbourhood, as emphasised in several foreign and defence policy documents over the years. Yet, Australia’s engagement in the region, particularly in the Bay of Bengal, has lagged compared to that of other like-minded partners in the region. India, Japan, and the United States (US), for instance, have been actively advancing various initiatives through financial and technical support. By contrast, Australia’s contributions often remain understated, despite the Bay of Bengal being a key focus area in the larger Indian Ocean region. However, with growing regional opportunities — particularly in infrastructure development — Australia has a chance to redefine its role. By leveraging its strengths and engaging with India, the central player in Canberra’s Indian Ocean strategy, Australia can make a meaningful impact. This report examines one promising but underexplored avenue for such engagement: port development.
In South Asia and the Bay of Bengal regions, there is a requirement of approximately US$6.3 trillion in climate-adjusted infrastructure investments by 2030 for regional growth.1 The Bay of Bengal in particular, sits at a crucial juncture for maritime trade and security. Despite handling half of global maritime trade and almost a third of global cargo, the region’s port infrastructure and shipping channels have not been able to capitalise on the eastward shift of supply chains in the 1990s. They now risk missing out on the recent wave of supply chains reallocation away from China.2 Key ports in the region like Chennai, Kolkata (India), Chattogram (Bangladesh), and Colombo (Sri Lanka) suffer from low cargo handling capacity and inefficiencies, fuelling geo-economic competition for port development.
Despite handling half of global maritime trade and almost a third of global cargo, the region’s port infrastructure and shipping channels have not been able to capitalise on the eastward shift of supply chains in the 1990s.
The potential impact of improved infrastructure and connectivity is substantial. A 2022 World Bank report estimates that enhanced connectivity and trade facilitation could boost GDP from 0.4% to 10.6% in South Asia and from 0.1% to 0.4% in Southeast Asia.3 While countries are aiming for port upgrades, there is a growing need for collaborative efforts to build competitive, resilient, and secure supply chains across the region.
India recognises the strategic importance of ports and has prioritised their development as critical assets in its regional strategy.4 In recent years, India has accelerated port infrastructure projects to bolster economic development in its neighbourhood and counter China’s Belt and Road Initiative (BRI), which has expanded into key Bay of Bengal ports in the neighbourhood such as Hambantota (Sri Lanka), Gwadar (Pakistan), and Kyaukpyu (Myanmar). More recently, India has built a consortium of state-run port ventures to acquire and develop terminals globally.5 This consortium is looking at building port infrastructure, port operations and raising financing. This also provides an opportunity for like-minded partners, such as Australia, to engage with India in port development in the Bay of Bengal region.
This report examines Australia and India's engagement across various stages of port development, extending beyond building port infrastructure. Port development is a complex, longitudinal, multi-stage process that includes spatial and cargo planning, regulatory procedures, port operations, trade facilitation, governance, terminal leasing for public-private partnerships, financial modelling, and more. This nuanced focus is purposeful for two reasons.
First, as highlighted by a 2018 World Bank report, infrastructure investments only realise their full potential when paired with complementary reforms such as trade facilitation.6 Infrastructure is only as effective as its weakest link, as demonstrated by Sri Lanka's Hambantota Port. Despite its modern facilities, it struggles to attract business. Second, the report seeks to identify scalable opportunities for Australia-India cooperation in the region, specifically in areas where both countries can achieve tangible progress. It focuses on areas that do not require extensive financial or human resources, which are limited compared to China's capabilities.
Based on this, the report assesses the state of port connectivity in the region and identifies gaps and key areas of intervention. It also proposes collaborative policy options for India and Australia to maximise their individual strengths for economic development in the region, while also enabling economic security linkages. This report contributes to the understanding of port development in the Bay of Bengal by highlighting the region's unique challenges, exploring the motivations behind India and Australia’s engagement, and presenting a framework for effective cooperation.
It outlines four specific areas for Australia-India collaboration on port development:
- Port decarbonisation
- Smart ports
- Trade facilitation
- Capacity building
By focusing on these areas, Australia and India can leverage each other’s strengths to address the region’s infrastructure needs.
The report is divided into four sections. Section 1 delves into the challenges faced by ports in the region, in terms of infrastructure development, port logistics, efficiency parameters, governance structure and beyond. Section 2 looks at the drivers for Australia and India’s engagement in port development in the region. Section 3 highlights four key areas where India and Australia could focus for port development. Finally, section 4 offers a framework for cooperation and policy options for Australia-India engagement in port development. This analysis aims to provide insights into how Australia can support India’s ambitions for port infrastructure and regional connectivity in the Indo-Pacific.
1. Key challenges in port infrastructure and connectivity in the Bay of Bengal region
Historically, ports in the Bay of Bengal region were not just hubs of trade but also led to the establishment of port cities that facilitated cultural exchange.7 In the 20th and 21st centuries, ports in the Bay of Bengal region saw varied levels of development, leading to uneven development today. While some challenges are common across ports in the region, others are very specific to each port. This section delves into some challenges at key ports in the Bay of Bengal — Chennai, Kolkata (India), Chattogram (Bangladesh), Sittwe (Myanmar), and Colombo (Sri Lanka).
Infrastructure deficit
The increase in cargo volumes in recent years at key ports such as Chennai, Kolkata, Chattogram, and Colombo has led to increase in congestion due to limited and outdated cargo handling infrastructure. This further leads to delays at the ports and increased freight rates and logistics cost. Broadly, the region’s port infrastructure needs to include deeper drafts for larger vessels, upgraded berths, better multimodal hinterland connectivity, and new port development where expansion of existing ports is limited.
In Bangladesh, Chattogram Port struggles with long vessel turnaround times and inadequate berth infrastructure, affecting its ability to handle the current and growing trade volumes.8 With only 19 jetties — a relatively small number, Chattogram port can dock up to 15 vessels daily, causing many vessels to wait at anchorage. This port handles 92% of Bangladesh’s global maritime trade, with the remaining 8% distributed between the smaller ports of Mongla, Payra and Sonadia Ports.9 Seventy percent of the cargo from Chattogram port is transported to Dhaka, Bangladesh’s capital and industrial hub (approximately 250 km away). The remaining 30% is for the Chattogram region. Furthermore, poor road and rail connectivity between Dhaka and the country’s other major seaport, Mongla, creates an overreliance on Chattogram.10
The 50,000 Twenty-foot Equivalent Unit (TEU — the standard size of a container) storage capacity often causes yard overcrowding, with many containers waiting for space.11 This leads to container backlog at the port. With an aim to handle 14 million TEUs by 2043, Chattogram Port’s masterplan for upgradation will need external support to meet this goal.12
Sri Lanka’s Colombo Port, a major regional transshipment hub, faces significant limitations with constrained berth capacity, inefficient logistics, and a 12-meter draft that restricts larger vessels. Limited rail connectivity forces most cargo evacuation to rely on road transport, creating severe congestion at the port. These challenges have led shipping lines to divert from Colombo, raising port logistics costs by 50%.13 Congestion at Colombo Port has regional consequences in terms of delaying transhipment of goods to India and Bangladesh.
At Kolkata and Yangon ports, the maximum draft is 9m. This means that larger ships requiring deep water — at least 15 meters — must offload cargo to smaller vessels, often at other transhipment ports such as Colombo or Singapore. Therefore, the ports require regular dredging, which is cost-intensive. Presently, no port in the region outside of Hambantota is equipped with terminals capable of accommodating deep-water vessels exceeding 18,000 TEUs, a capability predominantly found in Chinese ports.14
In essence, addressing these infrastructure limitations and enhancing port capacity is crucial for the Bay of Bengal region to reduce congestion, lower trade costs, and meet the growing demands of global trade effectively.
Outdated efficiency parameters and lack of digitisation
Ports in the Bay of Bengal region lag in several key performance and efficiency metrics, including turnaround time (TAT), as outlined in Table 1. TAT is a crucial indicator of a port’s efficiency, denoting the duration required to unload and load cargo from ships. Lowering the time ships spend at port not only reduces trade costs by accelerating trade processes but also has benefits the environment through reducing CO2 emissions from idling vessels at harbours.15 Notably, major ports in Bangladesh and Myanmar exhibit an average TAT of two to three days, whereas premier ports like Shanghai and Busan achieve this in less than a day, despite handling the highest volume of containers globally. India’s Kolkata port is an outlier, with TAT of 3.4 days, mainly due to its location within city limits, which causes heavy congestion. This discrepancy underscores an urgent need to upgrade infrastructure at Bay of Bengal ports.
Table 1. Average turnaround time (TAT) of key ports in the Bay of Bengal region vs global average
For instance, the inefficiency cost of Bangladesh’s Chattogram port is estimated to be US$92 million annually.16 During 2001-02, an improvement of 1.05 days in vessel turn-around time saved ship owners a cost of US$15 million in the year.17 This cost, borne by shipping lines, is eventually passed on the port users.
Chattogram Port has made gradual progress in digitisation through automation systems, including of cranes, container yard management, and port processes, which have enhanced its port handling capabilities. However, it still lags behind regional competitors in terms of digital transformation. For instance, Port of Hamburg uses an Internet-of-things (IOT)-based Smart Port Logistics system to guide trucks to avoid congested roads near the ports and inform them about loading and unloading of goods from a vessel in order to optimise their arrival and departure and save time.18 Ports in the Bay of Bengal require similar technology to improve port processes and increase efficiency.
In the region, Sri Lanka holds about one-quarter of the container market share of the region, primarily as a transshipment hub.19 Colombo Port launched a smart port initiative in 2019, aiming to digitise within 18 months, but progress has stalled.20 An interview with a stakeholder from Colombo Port revealed gaps in adoption of a single window system to bring all stakeholders on a common platform. The delays stem from limited financial resources, concerns over data sharing, and a lack of digital skills and inter-agency collaboration.
Trade facilitation remains another challenge. Except for India, no other country in the region has met its World Trade Organization (WTO) Trade Facilitation Agreement (TFA) commitments to reduce the time and cost of doing trade by improving port processes, hovering between 40-60% among countries in the region.21 This results in complex customs procedures, longer clearance times, and limited digitisation, which increase both costs and delays for port users.
Challenges with government-owned versus private ports
For most states in the region, up until the 1980s and 90s ports were primarily run by the government. Table 2 provides an overview of the different port governance models in the Bay of Bengal.
Table 2. Port governance models in the Bay of Bengal region
These different models have brought their own unique set of challenges. While the government-owned ports often benefit from a long-term perspective and focus on public interest — leading to more consistent policies and a greater commitment to infrastructure development, they also face limitations. As they are often subject to budgetary constraints, they lack sufficient funding and investment. Furthermore, they may also be prone to bureaucratic inefficacies, which can slow down decision making. For instance, at Chattogram port, authorities have prepared projects over the last 15 years to build a total of four terminals: none have been completed.27 While there have been some efforts to improve efficiency and attract private investment in port-related services, such as container handling and terminal operations, the efficiency parameters including turn-around time remain very high. Compared to this, private ports in the region are slowly overtaking the government-owned ports both in terms of cargo handling and efficiency parameters, particularly in India.
Geopolitical and strategic challenges
To overcome the challenges faced in port development, regional governments leverage their strategic location to attract investment from multiple global powers. This has led to increased geopolitical and geoeconomic competition to develop ports in the region (Table 3). China leads the group in terms of most port projects.
Table 3. Port investments by country in the Bay of Bengal Region until 2024
Note: *On 11 December 2024, India's Adani Ports, which holds a 51% stake in the WCT, opted out of this funding.
It must be noted that all countries in the Bay of Bengal, except India and Bhutan, are a part of China’s BRI. However, they are also navigating this competition with a careful balancing act. For instance, in Bangladesh, while China is engaged in the Chattogram port and is building the Payra port as part of US$24-billion BRI-related deals, Dhaka also denied China the opportunity to develop the strategically significant Sonadia Port, citing environmental concerns.28
India has built and is operating the Sittwe Terminal in Myanmar through the government-owned India Ports Global Limited (IPGL). The terminal was inaugurated in 2022. In Sri Lanka, India is building the West Container Terminal (WCT) at Colombo port and, in Bangladesh, a terminal at Mongla Port. Compared with India, Japan has one singular but large-scale project in the region. Tokyo is invested in building Bangladesh’s first deep-sea port at Matarbari, which is expected to connect with India’s northeast region. The United States had recently supported India on the WCT, however, India's Adani Ports recently opted out of the financing (Table 3). Australia has been engaged in the development of the Bay Terminal at Chattogram port through the South Asia Regional Infrastructure Connectivity (SARIC) program.
Table 3 shows that China’s total port investments (approximately US$4 billion) in the region surpass those of India, Japan, the United States and Australia combined (approximately US$3 billion). This has intensified geoeconomic and geopolitical competition in regional port development, resulting in varied infrastructure standards. In this competitive environment, donor partner countries often prioritise geopolitical interests over economic efficiency. Moreover, these geoeconomic investments rarely extend to improving port efficiency or advancing decarbonisation efforts.
Focusing solely on infrastructure as a tool for geoeconomic leverage—such as China’s investments in the region—without enhancing operational efficiency to attract businesses and customers risks undermining potential economic gains and increasing debt burdens for these countries. This poses a significant challenge to port development and operations in the Bay of Bengal region.
2. India and Australia’s interests in the Bay of Bengal
The Bay of Bengal has become a pivotal centre for global trade, security and diplomacy, shaping the geopolitical landscape of the broader Indian Ocean region. India and Australia’s interest in deepening their engagement in this region is driven by a combination of political, economic and strategic interests. This section highlights the key drivers of their engagement.
Key political and economic factors shaping India and Australia’s engagements in the Bay of Bengal
For India, the Bay of Bengal is part of its immediate neighbourhood and serves as a linchpin for its strategic, economic and security objectives. The region is not only key for New Delhi’s regional aspirations but also important for safeguarding its interests in an interconnected world. This has guided India’s proactive engagement in maritime initiatives in the region.
As a result, India has made regional connectivity and infrastructure development a priority. In 2014, India announced the Neighbourhood First and Act East policies, to signal its commitment towards better connectivity with its neighbourhood and Southeast Asia, respectively. The following year New Delhi launched the Security and Growth for All in the Region (SAGAR) approach. The SAGAR approach focused on a vision of a free, open and inclusive Indo-Pacific — similar to Japan’s Free and Open Indo-Pacific concept.29 These policies aim to improve regional connectivity, develop infrastructure, and de-risk and diversify supply chains to enhance regional resilience and stability. These policies also bridge India’s domestic policies such as ‘Sagarmala’, aimed at enhancing the performance of the country’s logistics sector by leveraging its coastline and waterways for both domestic and regional growth by also connectivity with the maritime neighbourhood.30
Infrastructure development and port connectivity is also important to support India’s growing trade with neighbouring countries. From 2008–2018, India’s trade with its neighbourhood nearly tripled, from US$13 billion to US$36 billion.31 New Delhi increasingly realises that its economic growth is also tied to that of its neighbouring countries. This explains why India extended the largest bilateral support of any other country — US$4 billion — during the 2022 Sri Lankan Economic Crisis.32 Over the last decade, New Delhi has also extended concessional loans (known as Lines of Credit) worth approximately US$14 billion to Nepal, Bangladesh, Sri Lanka and the Maldives.33 The neighbourhood is the largest recipient of India’s grant projects, with a significant majority — 86% — focused on infrastructure and connectivity development.34
These developments have positioned India strategically to collaborate with neighbouring nations through bilateral and trilateral efforts focused on safeguarding oceans, enhancing maritime connectivity, fostering capacity building, and promoting fair, mutually beneficial and sustainable maritime trade and transport. This was also highlighted recently by India’s External Affairs Minister, Dr. S Jaishankar, at the 2024 Indian Ocean Conference held in Perth, Australia:35
“Since 2014, India has joined or initiated 36 plurilateral groups in different domains. Many of them have a direct relevance to the future of the Indian Ocean. Others have a domain relevance that contribute to the well-being and security of the maritime spaces and its littoral territories.”
India led the formation of the Indo-Pacific Oceans Initiative, which focuses on boosting maritime connectivity in the Indian Ocean Region.36 It has also focused on expanding port connectivity with Southeast Asia, including through a Memorandum of Understanding between Thailand’s Ranong port and India’s major ports, Chennai, Vishakhapatnam, and Kolkata. India and Indonesia have also agreed to develop maritime connectivity between Andaman and Nicobar and the latter’s Sabang port, though progress has been slow.37
For Australia, the Bay of Bengal within the broader NEIO, is integral to its Indo-Pacific engagements. The NEIO is Australia’s immediate neighbourhood, with Perth in Western Australia often referred to as ‘Australia’s Indian Ocean capital’.38 Senior Australian Government Ministers have described Australia as “a diverse, engaged Indian Ocean Country.”39 The importance of enhanced connectivity in this region for Australia cannot be understated, as it directly impacts the country’s ability to protect its maritime borders, engage in international trade, ensure energy security, and foster regional cooperation.
Australia has taken several policy steps that demonstrate the importance of the NEIO to its government. In the 2020 Defence Strategic Update, Australia identified the NEIO, Southeast Asia and the Pacific as three priority areas within its ‘immediate neighbourhood.’40 Earlier in 2019, Australia launched the US$21 million (A$32 million) South Asia Regional Infrastructure Connectivity initiative (SARIC).41 In 2022, Australia also invested US$24 million (A$36.5 million) in the Bay of Bengal, specifically targeting the maritime sector.42 Australia’s 2024 National Defence Strategy (NDS) also highlights Australian concerns over China’s increasing competition for access and influence in order to secure dominance over critical sea lanes and strategic ports in the Indian Ocean region.
Table 4. Australia’s recent assistance to Sri Lanka
Australia has been re-investing in its bilateral relationships with countries in the Bay of Bengal. For instance, Australia has been cooperating with Sri Lanka on border management, countering transnational crime and improving Maritime Domain Awareness (MDA).
With Bangladesh, both countries have a Trade and Investment Framework Agreement (TIFA, 2021), which also aims to improve cooperation on critical infrastructure in the region.47 In May 2024, Australia’s Foreign Minister Penny Wong visited Bangladesh and highlighted the deepening of bilateral trade and economic ties, citing trade quadrupling from A$0.8 billion in 2012 to A$3.5 billion in 2022.48 Bangladesh is currently Australia’s 32nd largest bilateral trade partner and aims to be in the top 20 by the next decade.49
These political and economic drivers reflect Australia and India’s strategic interest in expanding their involvement in the Bay of Bengal, laying the groundwork for more comprehensive bilateral and regional agreements. Continuing these engagements is essential for Australia to demonstrate its regional expertise and collaborate with like-minded partners, strengthening its position within the Indo-Pacific’s dynamic geopolitical landscape.
Geostrategic factors are also driving Australia and India’s engagements in the Bay of Bengal
Australia and India’s geostrategic priorities converge in the Bay of Bengal and the larger Indian Ocean region, where both countries seek a free, rules-based and inclusive Indo-Pacific. Both countries have an interest in diversifying trade and security cooperation in the region, including through diversifying trade and investment, technology transfer, critical mineral cooperation, and strengthening people-to-people ties. The Bay of Bengal has seen an uptick in geostrategic interest, largely due to China’s expanding footprint through substantial infrastructure investments as part of its BRI. These engagements, which span from road and rail networks to port developments, have been viewed with suspicion by India.50 Large projects initiated by China, such as the Hambantota port in Sri Lanka, the Kyaukpyu port in Myanmar, and the proposed Kra Canal in Thailand, have sparked debates over their economic rationale and strategic intents, with some analysts labelling them economically unviable white elephants.51
Contrastingly, Australia and India’s infrastructure contributions in the region remain modest in scale compared to China’s expansive projects. India’s efforts including roads, railways, pipelines, and port terminals lack an overarching ‘regional plan’ for connectivity. They have often been ad hoc rather than cohesive. While India has made efforts in port development, including through the inauguration of Sittwe Port in Myanmar, construction of several other terminals in Bangladesh and Sri Lanka, and plans to build a port in Galathea Bay, Andaman and Nicobar Islands,52 the maritime potential of the Bay of Bengal has not been exploited fully.
This backdrop has led to increased interest from other international players aiming to complement or contradict India’s infrastructure development in the region. The United States and Japan, in particular, have recognised the strategic value of the region. Japan is actively involved in constructing Bangladesh’s first deep-sea port at Matarbari, while the United States, until recently, had deepened its regional engagement through investment in the Colombo port, focusing on non-traditional security and critical infrastructure to bolster economic connectivity. Similarly, Australia has been trying to increase its engagement over the years, albeit at a comparatively smaller scale. These engagements also stem from India’s openness to work with other countries in the region, especially to establish networks that connect India’s land-locked northeast region with sea routes.
Moreover, the intensifying India-Australia partnership underscores the strategic significance of cooperation in the Indian Ocean region. Through mechanisms such as the Foreign and Defence Ministers’ (2+2) Strategic Dialogue, military logistics agreements, and cooperation in maritime domain awareness, both nations have solidified their commitment to regional stability and development.53 The 2023 Australia-India Economic Cooperation and Trade Agreement further strengthens this partnership, with increased bilateral leadership exchanges underscoring the mutual strategic interests within the Indo-Pacific framework.54 Cooperation in the Bay of Bengal and the larger Indian Ocean region will allow both India and Australia to better monitor and secure their vast coastline, protect maritime routes, and respond to challenges such as piracy, illegal, unreported and unregulated fishing, and maritime terrorism.
3. Focus areas for port development to leverage Australia and India’s strengths
Australia and India can make a significant impact in port development in the Bay of Bengal through focused, low-risk collaborations that maximise strengths in sustainability, technology, and trade. This ‘light touch’ approach, aimed at working around India and Australia’s capabilities and capacities, targets high-impact areas such as port decarbonisation, smart ports, trade facilitation, and capacity building to strengthen the region’s economic resilience and connectivity.
Australia and India’s leadership in sustainable port development
Globally, the maritime sector is engaged in decarbonisation efforts through comprehensive measures. This effort is driven by the International Maritime Organization’s (IMO) resolution on the Initial IMO Strategy on reduction of greenhouse gas emissions from ships.55 From shipping lines to port operators, different countries are at varying stages of development for decarbonisation. Research indicates that shipping-related activities are responsible for 2.5% of global carbon emissions and this figure is expected to triple by 2050 — representing a sizable amount of global pollution.56 The main carbon emitters in the shipping sector include vessels docking at ports, the petrol or diesel required to operate cargo handling equipment, and the higher reliance on roads compared to rail in cargo transport from ports.
In the Bay of Bengal, countries such as Bangladesh and Sri Lanka are particularly vulnerable to climate change and are considering how to minimise emissions in the ports sector. For instance, the Colombo port in Sri Lanka aims to minimise its carbon footprint by 2030.57 Bangladesh also aims to reduce carbon emissions from its port-hinterland transportation system as part of its 2024 Climate Action Plan.
Both Australia and India have developed domestic policies for port decarbonisation, green fuel bunkering, and green shipping and partnerships. India’s Harit Sagar (Green Ports) Guidelines provide a comprehensive plan of action for major ports to adhere to, covering all the components of the port ecosystem that contribute to the carbon footprint.58 Through focused implementation of ‘Green Interventions’, ports can achieve quantifiable reductions in carbon emissions over defined timelines.59
For its part, Australia was one of the first countries to establish Sustainable Strategy Development guidelines in 2020, setting a benchmark for eco-friendly port practices.60 Australia’s Maritime Emissions Reduction National Action Plan also identifies opportunities and creates an action plan for reducing greenhouse gas emissions from the shipping sector, including ports.61 Ports in the country have also taken measures to reduce their carbon footprint. For example, Port Botany in New South Wales developed an environmental incentive for shipping in 2019. Vessels qualifying for the incentive62 will receive a rebate on their port charges for up to A$2,500.6364 Furthermore, Australia has also conducted a feasibility study for low-carbon fuel bunkering with Malaysia at the Tanjung Pelepas port.65
As environmental concerns become more prominent in the Bay of Bengal, Australia and India’s leadership in sustainable port development is increasingly important as they seek to reduce their maritime carbon footprints and support neighbouring countries in the same pursuit. Australia and India can jointly promote and coordinate on port decarbonisation projects in the region, piloting green technologies at key ports to demonstrate feasibility and efficacy from the policy level to port-level interventions. Furthermore, both countries could explore establishing green corridors along strategic maritime routes. This would not only contribute to environmental sustainability but also foster regional economic growth by enhancing trade efficiencies.
Leveraging ‘Smart Port’ technologies for enhanced efficiency
Smart port technology is another area for collaboration between Australia and India. Smart ports leverage digital technologies such as the Internet of Things (IoT), artificial intelligence (AI), and blockchain to enhance operational efficiency. Australia has been a pioneer in port automation, with Brisbane port emerging in the 1990s as one of the earliest automated ports in the Indo-Pacific region.66 Australia’s proficiency in mining and logistics automation, combined with India's growing expertise in technology and innovation, presents an opportunity to revolutionise port operations in the Indian Ocean region.67
Australia’s proficiency in mining and logistics automation, combined with India’s growing expertise in technology and innovation, presents an opportunity to revolutionise port operations in the Indian Ocean region.
Australia’s expertise in port automation is exemplified by the world’s first fully automated container terminal at Victoria International Container Terminal (VICT). The digital twin technology at the port provides real-time data and simulations that optimise port operations while identifying and mitigating risks. India has also made headway in digitalisation of port processes through the port community system and a Customs Single Window System, to expedite the clearance of goods from the ports.
With the rise of cybersecurity threats, Bay of Bengal ports are increasingly vulnerable to disruptions due to their geostrategic importance and smart technologies can play a crucial role in bolstering security, reducing the cost of trade, and enhancing decarbonisation efforts. Increased port automation can reduce costs, improve turnaround times, and ensure resilience against cybersecurity threats. By sharing best practices and investing in smart port technologies, Australia and India can support ports in the Bay of Bengal to modernise their infrastructure, making them more competitive in a global market.
Streamlining trade facilitation for enhanced regional connectivity
Trade facilitation is crucial for reducing the costs associated with enhancing regional connectivity. In addition to physical infrastructure, trade facilitation encompasses customs procedures and regulatory frameworks that are necessary but, when poorly designed, can hinder efficient port operations. Australia and India can collaborate on initiatives that simplify customs procedures, promote digitalisation, and streamline port processes, particularly in emerging markets like Bangladesh, Sri Lanka, and the Maldives. By jointly advocating for regional trade agreements and harmonising standards, Australia and India can help remove barriers to trade and promote economic integration in the region.68
While Australia, India and Thailand have met their commitments under the WTO’s TFA (Figure 1), all other countries in the Bay of Bengal region are yet to do so. The WTO’s TFA contains provisions under different categories (A, B and C) for expediting the movement, release, and clearance of goods from ports for export and import trade.69 Given that India and Australia have fully implemented the WTO’s TFA, they are in a strong position to assist developing countries in the Bay of Bengal to meet their obligations under the same agreement.
Figure 1. Implementation of trade facilitation by select countries in the NEIO
Building capacity for skilled labour and port security
Australia and India’s expertise in capacity building can be instrumental in developing skilled labour and enhancing port security in the NEIO and throughout the whole Indian Ocean region. Capacity building ensures that port workers and security officials are equipped with the necessary skills to operate advanced technologies, manage complex trade processes, and uphold higher security. Australia’s extensive experience in training programs, particularly in customs and port security, provides a foundation for knowledge transfer for greater effect.
For instance, through the Australia-ASEAN Maritime Resources Initiative, the Australian Border Force (ABF) is strengthening people-to-people links and building enduring relationships with future leaders of civil maritime security agencies in Southeast Asia. The ABF College has delivered two civil maritime security programs to 25 coast guard officers from Vietnam, the Philippines, Indonesia and Malaysia.70 India also offers modules and courses on maritime and coastal security through its Indian Technical and Economic Cooperation (ITEC) programme.71 India has also assisted in integrating neighbouring countries into a coastal radar network.72
Australia and India could coordinate or cooperate to deliver similar training programs to countries in the Bay of Bengal to increase port resilience against various threats including smuggling, piracy, and cybersecurity breaches. Notwithstanding their differing approaches to maritime security, the Bay states remain eager to collaborate in three crucial areas: capacity building, burden sharing, and Maritime Domain Awareness (MDA). Capacity building remains a priority, particularly in coastal patrolling, surveillance, and disaster relief.73 Australia and India are well-placed to provide assistance and could seize this opportunity for regional leadership.
4. Recommendations to maximise Australia and India’s impact on port development
Recognising that port development in the NEIO requires greater attention and investment from like-minded partners, there are several options for Australia and India to strengthen their role in port development in the Bay of Bengal region.
1. Bridging knowledge gaps between India and Australia about strengths and capabilities
While there has been significant momentum in Australia-India bilateral relations over the last decade, there is still a need to bridge knowledge gaps about each other’s capacities and capabilities. To advance this collaboration, both countries should engage in knowledge-sharing workshops, technical exchanges, and joint research initiatives across government and academic levels. In particular, cooperation between their maritime agencies could complement the efforts of Australia’s Department of Foreign Affairs and Trade (DFAT) and India’s Ministry of External Affairs (MEA). Additionally, a partnership such as an MoU between Australia’s Commonwealth Scientific and Industrial Research Organisation and India’s Ministry of Ports, Shipping, and Waterways could support advancing emission reduction efforts in the maritime sector. Such partnerships could further be extended to the countries in the Bay of Bengal region.
Australia has demonstrated considerable expertise in areas like port automation, green shipping, and trade facilitation yet India does not typically view Australia as a hub of innovation, mainly due to knowledge gaps. This perception needs to be addressed to foster deeper, sector-specific engagement. By engaging more closely, India could benefit from Australia’s technological capabilities, while Australia could gain a better understanding of India’s vast market potential as well as the opportunities in the other countries of the NEIO. For instance, India stands to gain from Australia’s advanced port automation technologies, and Australia could lean on India’s experience in building large-scale infrastructure projects, particularly in complex regional environments.
To advance this collaboration, both countries should engage in knowledge-sharing workshops, technical exchanges, and joint research initiatives across government and academic levels.
A notable example is the India-developed Sittwe Port Terminal in Myanmar, inaugurated in 2022 as part of the Kaladan Multimodal Transit Transport Project. India managed local security challenges and subcontractor coordination to deliver this project.74 While India focuses on constructing and operating such infrastructure, Australia’s private sector could provide expertise, networks and financing to port decarbonisation and automation across various development stages. This would enhance sustainability and operational efficiency. Bridging the existing knowledge gap through these initiatives would not only bolster their bilateral cooperation in the Indian Ocean but complement their strategic exchange through the Foreign and Defence 2+2 Strategic Dialogue.
Beyond the bilateral, both countries could also look at bridging knowledge gaps through the Quad. Announced during the 2024 Leaders’ Summit, the Quad Ports of the Future Partnership is a critical area for India and Australia to leverage their respective expertise in the sector.75 With the inaugural Regional Ports and Transportation Conference scheduled for 2025 in India, there is potential for New Delhi to also organise visits to key facilities, including its major ports and the Gati Shakti Vishwavidyalaya.
2. Expanding the Australia-India Infrastructure Forum (AIIF) to the Bay of Bengal region
The Australia-India Infrastructure Forum (AIFF) is a platform developed by Australia and India in 2022 to promote two-way infrastructure investment by both countries. Australia had also announced a A$5.8 million Bay of Bengal Connectivity Partnership to expand its work to other countries in the region.76 However, since 2022, there has been no obvious development on this front to external observers. Given port infrastructure development requirements, it is important for India and Australia to reassess their infrastructure development commitments to the region.77 Japan, for instance, is engaged in the region with a US$200 million infrastructure fund.78 For Australia to become a reliable player in the region, it will need to step up its presence in infrastructure development or devise plans to complement initiatives by other states engaged in the region.
By expanding the scope of the AIIF from bilateral cooperation to Bay of Bengal countries, both India and Australia can play a pivotal role in advancing critical infrastructure development in countries of this region. This can be achieved through joint research projects involving regional stakeholders in networking and business initiatives and exploring additional investment opportunities. Such initiatives would not only enhance regional infrastructure but also demonstrate both nations’ commitment to collaborate and support development efforts.
3. Increasing the resources available for the South Asia Regional Infrastructure Connectivity (SARIC) program
The SARIC program was announced by Australia in 2019 and can be seen as part of Canberra’s response to shifting regional dynamics.79 Primarily focused on bolstering regional connectivity through transport and energy projects, the SARIC program engages with the World Bank and the International Finance Corporation through a four-year, US$21 million (A$32 million) fund. To maximise its impact and further contribute to regional development, Australia should consider expanding the SARIC’s resources and mandate.
Although India is not directly involved in the SARIC program, this initiative nonetheless presents an opportunity for Australia to complement India’s regional port projects through consultation, particularly in the absence of a formal joint cooperative mechanism under the framework. As of October 2024, discussions to extend SARIC for another five years are in progress. Australia has a unique window to expand the SARIC program and its influence in the region. A targeted approach focusing on complementary projects could generate synergies between Australia and India’s strategic and regional objectives. For instance, the SARIC program could prioritise capacity building in areas such as port automation and decarbonisation of port-hinterland transportation—urgent needs in Bangladesh and Sri Lanka.
Australia has a unique window to expand the SARIC program and its influence in the region.
To realise these ambitions, Australia should consider increasing the scope of SARIC to broaden its engagement in training and networking services from a focus on transport and energy sector professionals to engagement with local communities and civil society organisations.80 This will ensure that infrastructure projects are inclusive and benefit a large section of the population, and also align with India’s connectivity interests in the region. Australia’s initiatives will therefore become more impactful and aligned with broader regional priorities.
4. Mobilising Australian and Indian private sectors for infrastructure financing
Financing remains one of the biggest hurdles to port development in the Bay of Bengal as well as broadly in the Indian Ocean region. While public sector engagement is best practice, mobilising private sector resources is essential and can significantly accelerate project implementation. Both Australia and India have vibrant private sectors that could be engaged as partners for infrastructure financing.
Coordination on infrastructure financing can be done at different levels.
Firstly, DFAT could provide technical support for India’s port development projects in the region. For instance, technical support could be provided by conducting project feasibility studies or environmental and social impact assessments. Additionally, given Australia’s advanced port modernisation, it could also offer advisory services for port or terminal privatisation in the region. For instance, Australian companies, such as King & Wood Mallesons (KWM), have provided advisory services for infrastructure projects in the region. KWM played a pivotal role in advising Chattogram port in Bangladesh on the privatisation of its Patenga container terminal, which became the first private sector-run port terminal in the country.81 Australia has further cultivated this expertise as a part its Partnerships for Infrastructure Initiatives in Southeast Asia.82 By leveraging such expertise, Australia can bring private sector-driven efficiency to infrastructure projects in the region.
Secondly, at the policy level, the private sector needs to be incentivised to engage in the region’s ports. A positive development on this front is the Southeast Asia Investment Financing Facility (SAIFF) is a A$2 billion fund. Within SAIFF, Australia’s export credit agency, Export Finance Australia, plays a key role in the facilitation of private sector engagement.83 However, it must be noted that the A$2 billion commitment is a safety corpus in the National Interest Account for the private sector under the SAIFF.84 Such safeguards in foreign engagements for the private sector facilitate strategic investments but this does not provide enough incentive to meet development needs. Australia could develop a similar fund for the private sector to operate in the Bay of Bengal region, whether in consultation or jointly with India.
Finally, Australian companies such as Macquarie Group, which already has a presence in the region, could provide mechanisms for scalable infrastructure financing in the region. This could also include public-private partnerships and blended finance models that combine public funds with private capital to reduce risk and enhance returns.
5. Coordinating Australia-India cooperation through regional and global institutions: BIMSTEC, IORA, and CDRI
Regional organisations such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Coalition for Disaster Resilient Infrastructure (CDRI), and the Indian Ocean Rim Association (IORA), offer valuable platforms for Australia and India to coordinate their efforts.85 By working through these regional bodies both countries can engage with a broader range of stakeholders and promote shared goals in the Bay of Bengal region. Countries in this region are more inclined to engage through regional institutions rather than bilateral mechanisms, so Australia and India stand to gain more by leveraging these multilateral bodies to their fullest.86
In the context of BIMSTEC, Australia can support the implementation of the BIMSTEC Master Plan for Transport Connectivity. This is a comprehensive 10-year strategy (2018-2028) and action plan currently supported by the Asian Development Bank for improving the Bay of Bengal’s transport linkages including ports and maritime transport.87 Australia could work directly with BIMSTEC to finance or engage in capacity building on port development and connectivity projects in the region. Through this, Australia can complement India’s efforts and strengthen delivery through BIMSTEC.
Countries in this region are more inclined to engage through regional institutions rather than bilateral mechanisms, so Australia and India stand to gain more by leveraging these multilateral bodies to their fullest.
The CDRI provides another avenue for collaboration, particularly in disaster-resilient infrastructure. Given the vulnerability of Indian Ocean ports to natural disasters, Australia and India could contribute their expertise in resilient design and engineering to help build ports that are better equipped to withstand extreme weather events. They could use this platform to focus on sustainable port development in the Indian Ocean, especially as Australia has made progress on its own Maritime Emissions Reduction National Action Plan and India on drafting the Green Ports guidelines. This would complement the existing activities of India and Australia in CDRI.
Australia and India can also leverage their advanced port infrastructure and regulatory frameworks through IORA. Australia and India lead the Maritime Safety and Security working group in IORA, giving them a platform to facilitate initiatives in this area.88 Furthermore, Australia can also build on its previous leadership of IORA’s Trade and Investment Facilitation (TIF) working group. Currently, Mozambique, another IORA member country, is the Chair of the TIF Working Group. Australia can impart its own experience in process improvement and automation to Mozambique to support the TIF agenda, while also potentially supporting some initiatives such as the development of a regional guideline for port operations.89
6. Promoting Australia’s role in standards and quality infrastructure
Australia’s involvement in developing and supporting infrastructure standards in the Pacific and Southeast Asian regions reflects its commitment to high standards in infrastructure development. The Bay of Bengal region could also benefit from higher infrastructure standards, promoted by Australia. For instance, as part of the Pacific Islands Forum, not-for-profit organisation Standards Australia is an implementing partner of the Pacific Quality Infrastructure (PQI) initiative.90 Through PQI, Australia is leveraging its domestic progress in maritime decarbonisation to support the countries of Southeast Asia including in areas such as bunkering operations; importing, storing and handling low-carbon fuels; permits and licensing; safety requirements; inspection, monitoring and compliance; and emissions standards.91 By sharing its experience with India and other Indian Ocean nations, whether through SARIC, regional institutions, or bilaterally, Australia can play a key role in promoting high-quality infrastructure standards across the region.
At a practical level, this could involve joint efforts between Australia and India to establish quality benchmarks for port infrastructure as well as training programs that build local capacity in areas like construction management and safety protocols. Standardisation is crucial for ensuring that ports in the Bay of Bengal meet global standards, which is essential for attracting international trade and investment. By aligning their efforts, Australia and India can help the region adopt best practices in infrastructure development, contributing to economic growth and enhancing the region’s attractiveness as a destination for global trade.
5. Leveraging Australia and India’s complementary strengths for a better result
Port development in the Bay of Bengal has emerged as a low-hanging fruit for Australia-India strategic and economic cooperation. The region has emerged as a significant and increasingly contested geopolitical space. This region faces numerous challenges, ranging from infrastructure deficits and maritime security threats to the impacts of climate change, all of which contribute to a complex landscape of geopolitical and geoeconomic rivalry.
Despite the region's strategic significance, Australia's engagement in the Bay of Bengal and the larger Indian Ocean Region has been limited. However, expanding opportunities in the region, particularly within infrastructure development, present Australia with a timely occasion to redefine its role in partnership with India. By harnessing its comparative strengths and collaborating with India, Australia has the potential to make a more substantial impact.
This report evaluated the current state of NEIO port development, identifying key gaps and highlighting potential areas for intervention. It proposed collaborative policy options that leverage the strengths of both Australia and India, thereby fostering regional economic development and enhancing economic security linkages. Specifically, four primary areas for collaboration on port development are clear going forward: port decarbonisation, smart port technology, trade facilitation, and capacity building. Australia and India both bring individual strengths to these areas and would benefit from combining efforts.
Australia’s infrastructure expertise combined with India’s regional experience places them in a strong position to contribute meaningfully to the region’s development needs.
However, for effective cooperation to materialise, Australia and India must first address existing knowledge gaps regarding their respective strengths and capabilities within this sector. This can be achieved through multi-tiered collaboration, encompassing government-to-government engagement and partnerships between research institutions. Both nations could also consider expanding the scope and funding of initiatives such as the AIIF.
Regional institutions present an additional channel for cooperation in areas like trade facilitation, digitalisation, and automation. By engaging through platforms such as BIMSTEC, IORA, and CDRI Australia and India can benefit from enhanced engagement opportunities that bilateral relations alone may not afford, particularly with smaller developing countries in the region. Moreover, both countries should focus on mobilising private sector investments in various areas of port development and on promoting high standards of infrastructure quality. This approach has the potential to significantly elevate port development in regional countries, serving as a catalyst for broader economic benefit.
To position themselves as preferred development partners in the Indian Ocean region, Australia and India must prioritise tangible outcomes in port infrastructure projects. Although their strategic and geoeconomic interests may vary in emphasis and scope in the NEIO, both nations have ample opportunity to combine their distinct strengths to improve regional connectivity.
Australia's infrastructure expertise combined with India’s regional experience places them in a strong position to contribute meaningfully to the region’s development needs. Focusing on port infrastructure development offers a relatively low-risk, high-reward opportunity for Australia and India to generate substantial impact without overextending their resources. By building on their respective strengths, they can forge a collaborative framework that supports sustainable growth and stability in the Bay of Bengal and the broader NEIO.
The production of this report was supported by the Centre for Australia-India Relations.
Acknowledgements
The author would like to thank the United States Studies Centre, the Centre for Australia-India Relations, Sydney, and the Centre for Social and Economic Progress, New Delhi, for their support in completion of this report. The author would also like to thank all the experts and reviewers for their insights and feedback.