Indo-Asia connectivity and trade facilitation: Progress and challenges

Dhaka,  Mon,  01 May 2017
Published : 15 Jan 2017, 19:50:55 | Updated : 15 Jan 2017, 19:51:14
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Indo-Asia connectivity and trade facilitation: Progress and challenges

Luna Shamsuddoha
Nisha Desai Biswal, US Assistant Secretary of State for South and Central Asian Affairs in the outgoing Obama Administration, once famously  said that South Asia is one of the least economically integrated regions with about 6.0 per cent of its total trade and less than 1.0 per cent of its investment flows among the regional countries. But last September India and Bangladesh wrote history with a cargo truck from Bangladesh with a Delhi-bound consignment driving seamlessly through customs-free borders. This makes non-tariff barriers (NTB) disappear. New outlook and new solutions made the execution smooth. The latest digital technology was applied to mitigate risks of evasion or security risks. This is a milestone and brings a new era in Bangladesh, India and the BBIN (Bangladesh, Bhutan, India, Napal) regional trade. 

Innovation and creativity of citizens and private sector will amaze us.  e-permit was issued and Global Positioning System (GPS) device was placed on the truck. Technology also phased out NTBs.  No border transshipment. The savings in cost and time for both importers and exporters will be much less.   Trade facilitation adds to competitiveness.

US 'PROTECTIONISM', BREXIT AND INTERNATIONAL TRADE: Britain has voted in favour of exiting from the European Union (EU) and the US inclination is towards protectionism.  The situation is aggravated by the emergence of millions of refugees of non-European origin.

Nobel Laureate Thomas Piketty wrote in 2013 in his book Capital in the Twenty-first Century that many EU member countries did not want further European integration and foreign-held assets had led to a "sense of dispossession". He pointed out "domestic companies and government debts are largely owned by the rest of the world." Piketty put the matter to rest by observing that the phenomenon was being observed and understood. Brexit is not end of history.

On merit of international trade, venerated Benjamin Franklin said "No nation was ever ruined by trade." Van der Berg and Lewer calculated "the net welfare loss from protectionism in the United States in 1996 was nearly 1.45 per cent of US GDP."

These two current disruptive scenarios give us the possible outside limits to regional economic integration on one hand, and globalization, on the other.

Regional economic cooperation brings about more domestic and aggregate regional demand.  Connectivity is the key to finding new drivers of growth regionally. To best release the latent capacity of interconnected production networks and value chains, it is necessary that connectivity in every relevant aspect progresses in tandem. 

PRESENT ENVIRONMENT: The observations here relate to what are the regional initiatives and what is occurring.  As against inertia of the past, one now sees motion. There is certain acceleration.

BBIN: The sub-region Bangladesh, Bhutan, India, Nepal (BBIN) came into operation in 2014. It will implement projects and accelerate economic development and set off the latent export potential.  BBIN Motor Vehicle Agreement, signed in 2015, allowed a truck from Agartala to Kolkata through Dhaka. The route shortened the distance from 1550 km to 640 km. 

The President of India wants deepening of "regional connectivity and cooperation". He suggests "Connectivity by roads, railways, rivers, sea, transmission lines, petroleum pipelines and digital links must increase". He wants Bangladesh and India to come together to develop and purchase cheap and clean energy. 

India has started a $1.04-billion project to construct 558 km of roads to link with Bangladesh, Bhutan and Nepal. The movement of passengers and cargo with improved ground connectivity may increase inter-regional trade by 60 per cent.  ADB will provide half the funds. 

Bangladesh, China, India, Myanmar Economic Corridor (BCIM-EC):  All countries have different programmes and projects for BCIM-EC as mentioned below.

The land-locked Eastern States of India will use Bangladeshi ports. South China will also do the same. China is attracting Bangladesh to share its outbound investments and imports, once  the BCIM-EC corridor is implemented as a business hub. By 2020 China's import may reach US$ 10 trillion and outbound investments may reach US$ 500 billion. Myanmar has rich mineral resources and if utilized, economic development will be rapid.

Bangladesh is linking Chittagong to BCIM-EC for Kolkata to Kunming road connectivity. For the Chinese, BCIM countries were connected by the ancient Southern Silk Road and the Maritime Silk Road 2000 years ago. 

Bangladesh Minister for Commerce Tofail Ahmed thinks "Bangladesh would benefit most from this regional connectivity initiative." Bangladesh-Myanmar Friendship Road is under construction. Bangladesh Minister for Communications Obaidul Quader  calls it  "the biggest multi-nation transport corridor in the sub-continent." 

Bangladesh Prime Minister Sheikh Hasina  took up several initiatives in the past three years. She offered China a special economic and industrial zone in Chittagong. She suggested diversion of gas from Myanmar by the Chinese for this.

Bangladesh is providing a 'Power Corridor' to India to transmit around 6,000 megawatts (MW) of hydro-electricity from Arunachal to Bihar. It will have a tapping point for Bangladesh.  

BIMSTEC: The Secretariat of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) started formal functioning in Dhaka recently. BIMSTEC countries comprise 20 per cent of the world's population with combined gross domestic product (GDP) of US$2.7 trillion. 

BIMSTEC has huge potential area for hydropower in the Himalaya basin and hydrocarbon in the Bay of Bengal. The nations will tap the potential and build up energy security in the region.

CHINESE INITIATIVE: There are many levels of interaction on the issues of the region. 

Chinese President Xi Jinping called for joint development of an "Economic Belt along the Silk Road" and a "Maritime Silk Road of the 21st Century" in 2014.  China believes "One Belt, One Road" initiative will contribute to greater connectivity and complementarities across the sub-regions, and help the establishment and improvement of Asia's supply chain, industrial chain and value chain. Proper implementation would make economies more dynamic and more resilient.

According to Dr. Sadiq Ahmed of the Dhaka-based Policy Research Institute (PRI), China may contribute to this development challenge through at least four channels: knowledge transfer; exports; FDI inflows; and infrastructure investments. China is Bangladesh's largest source of imports - some $8.2 billion in FY2015, which is 20.2 per cent of total imports.  As compared to this, Bangladeshi exports to China were a meagre $808 million in FY2016, which is only 2.0 per cent of total exports. 

He holds "strong implementation capacity is the key. … The land and river ports remain outdated and congested; the road, rail and river networks are underdeveloped; energy trade growth is very slow". 

Dr. Mustafizur Rahman of the Dhaka-based Center for Policy Dialogue (CPD) recently pointed out "The resultant seamless connectivity will enable Bangladesh to translate her comparative advantages into competitive advantages through cost-effective movement of goods and development of efficient value and supply chains. This could help emergence of Bangladesh as a regional transport hub, creating opportunities for significant export of services."  

FACTS AND CHALLENGES: There is a need for effective industrialization and job creation. Infrastructure need gap is $2.4 trillion. Infrastructure growth lags behind urban population and 200 million of them are in slums (World Bank). 

Developing the areas alongside and between transport corridors extends the benefits, and encourages economic transformation and growth.  

TELECOM INFRASTRUCTURE AND FACILITATION: Information and communications technology (ICT) infrastructure on per capita basis is low in South Asian region. The capability to add capacity in terms of planning, engineering and implementing is there. Bandwidth, content and e-commerce are prevalent but have to be scaled up and delivered to vast numbers of people.

ICT facilitation has been going on a big scale. Now considerable resources have been made available in the web for entrepreneurs of the region. At the Asian and Pacific Training Centre for Information and Communication Technology for Development (APCICT) we even developed tools to enable women businesses to use proper business planning and management tools based on ICT. These are being translated into local languages which will give tremendous impetus to entrepreneurs. It is also intended to reduce inequalities.

SOUTH ASIA CHALLENGES: There are three challenges that are considered key i.e. South Asia is unconnected to regional and global value chains; FDI remains low; poor connectivity infrastructure leads to high cost of trading across the region. 

FUTURE GROWTH ACCELERATORS: The region has to plan urban and industrial growth to help boost productivity and standard of living; strengthen existing value chains - supply chain infrastructure: trade and logistics.

Appropriate regulatory framework has to be developed for creating suitable investment climate to attract FDI. Regional multimodal connectivity between economic corridors has to be established.

Institutional frameworks have to be set up for planning and implementation of the regional connectivity agenda. 

In conclusion, every aspect of regional connectivity has been researched, studied and debated but there is little to show in terms of implementation. The catch is political will. Have the politicians willed it?  They have.  We must now engage with people and take off.

The writer is Chairman of the Dhaka-based software firm Dohatec New Media. The article is adapted from a paper she presented at a conference titled "Indo-Asia Connectivity for Shared Prosperity" which was organized by the US Government, in partnership with CUTS International and the East West Center, Washington D.C., in Kolkata on December 15, 2016. She was on the Panel on "Trade and Investment". US ambassador to Bangladesh Marcia Bernicat, US Ambassador to India Richard Verma, and US Ambassador to Nepal Alaina Teplitz  attended the conference.

dohagm@gmail.com


 
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