Transport Connectivity in South and South-West Asia Dr. Arbind Prasad Director General

1. Transport Connectivity in South and South-West Asia Dr. Arbind Prasad Director General Federation of Indian Chambers of Commerce & Industry (FICCI) New Delhi, India 1

2. Transport Connectivity in SSWA • Transport infrastructure development has played a key role in the growth of world trade • Many Asian countries have substantially expanded their transport infrastructure; yet, in most Asian countries transport densities and effective network access levels are still much lower than in Europe or North America • Poorly developed land transport linkage constrains regional economic integration in the South and South-West Asia (SSWA) region • The SSWA region is better connected with Europe and North America than with itself. As a result, the trade costs are high and the benefits of geographical proximity and contiguity are not available to the region’s trade 2

3. Transport Connectivity in SSWA • The non-tariff costs for intra-region trade are higher than exporting to the United States of America and Europe, thus effectively denying to intra-regional trade the advantage of geographical proximity and contiguity • With its geographical contiguity, South and South-West Asia has great potential for cooperation in the area of connectivity • It emerges among the least integrated regions in the world and has the bulk of its potential for regional economic integration to be exploited \ • Enhancing transport connectivity is essential for economic and trade development, closing development gaps, and economic and social integration in the region 3

4. Regional Integration The benefits of regional integration are mutual for all participating countries, as the value of the networks of even the larger countries and coastal areas will increase as networks/markets in hinterlands and neighbouring smaller economies get connected. An increased network size will make the combined network more useful and competitive, even when a newly connected economy does not significantly participate in the Regional Production Networks Source: Toward an Asian Integrated Transport Network; UNESCAP & AITD 4

5. Benefits of Regional Integration • Reduced transportation costs and enhanced intra-regional trade from increased regional integration • Higher level of economic activity and social development • Boost to lagging regions from improved and low cost connectivity with regional & global markets • Facilitates industrial transport and thus crucial for larger production, cost effectiveness, and reliability of supply • Inclusive trade and economic growth • Advantages of network externalities with expansion of networks and integration of transport corridors • Greater synergies from connecting regional frameworks • Emerge as a hub of East-West trade 5

6. Growing Trade in the Region Intra-regional trade in South Asia has begun to grow and has doubled in absolute terms in recent years. The South Asian region has also remained attractive to individual South Asian countries as an export destination vis-à-vis the rest of the world. Intra-SAARC exports (as percentage of total exports) Source: IMF, Direction of Trade Statistics, 2012 6

7. Growing Trade in the Region Intra-SAARC imports (as percentage of total imports) Source: IMF, Direction of Trade Statistics, 2012 7

8. Cross Border Connectivity in South Asia Source: Connectivity, Trade Facilitation and Regional Cooperation in South Asia – Prabir De 8

9. Challenges to Regional Connectivity • Absence of integrated and improved cross-border transportation network and regional transit system • Poor quality and inefficient infrastructure services, both hardware and software • High transportation costs, poor institutions, inadequate cross-border infrastructure, and absence of a regional transit trade • Lack in regional transit due to poor intra-regional and inter-regional connectivity (Missing links in road and rail networks) 9

10. Challenges relating to Trade Barriers • High non-tariff trade costs resulting high cost of moving goods across the borders • High-tariffs exist for certain sensitive products, and strong presence of Non-Tariff Barriers (NTBs) • Cumbersome cross-border and transit transport facilitation • Procedural complexity, multiple handling and inefficient border corridors • Different standards on vehicles and drivers across countries 10

11. Challenges relating to Transport Infrastructure • Poor quality and missing links of road network • Difficult terrain, with mountain ranges and many rivers • Lack of connectivity between rail networks in the region • Differences of rail gauges and incompatible rolling stocks • Insufficient handling capacity of land ports at borders • Reliance on feeder rather than mainline services due to draught restrictions at ports 11

12. Challenges due to poor trade linkages… 12

13. Challenges relating trade barriers across the borders • India permits overland transit facility for Bangladeshi products to reach Nepal by rail via Rohanpur-Singabad section • Post partition, goods from Agartala travel 1,645 km to Kolkata, while direct distance would be around 350 km, if direct movement via Bangladesh was available • Assam’s tea travels to Kolkata over a 1,400 km distance; if access to Chittaogong port was available, it could save 60% of the distance • Despite Railways in the region inherently integrated (from British) between India, Pakistan and Bangladesh, the through connectivity is lacking 13

14. Challenges relating to connectivity in the region • Security checks at the border are unnecessarily long and delays the consignment • Delays at borders due to different operating hours across the border • Delays in transit from road as the trucks need to be changed at the borders. Also, there is narrow road for truck movements and waiting period for trucks at times is more than 20 days • Limited air connectivity with traders in Pakistan, Bhutan and Maldives • Logistics delays at the Benapole/ Petrapole border (Bangladesh-India land border) and the resultant demurrage charges reduces traders margins • Lack of trade infrastructure at borders like proper warehouse facilities, EDI, etc 14

15. Challenges relating to connectivity in the region • Train service at Wagah is underutilized (almost 60 to 70%), and could be enhanced by increasing efficiency and proper management. • Delays due to railway operational procedures, such as train inspection, brake testing, checking of wagons and their equipment, recording of wagon and consignment details, etc • Absence of open wagons to transport coal across the borders • Delay in consignment due to non availability of wagons at borders. Also, there are delays due to ‘wagon balancing’ • Quite often, due to unavailability of wagons, the transfer of goods takes place close to one month; as first the goods are sent to Wagah border where they are unloaded, then again loaded on Pakistani wagons 15

16. Future Roadmap • Developing and upgrading land-based transport infrastructure • Constructing “missing links” • Removing non-physical barriers to transport • Regional transit agreements to enable cross border movements • Constantly improving the performance of border corridors and Land Customs Stations (LCSs) • Eliminating the asymmetry between the Land Customs Stations • Removing multiple handling of goods at border 16

17. Summing-up • Economic integration depends heavily on the density and quality of • connectivity or so to say regional infrastructure • Lack of regional connectivity is one of the major constraints hindering the • potential of regional growth and economic integration • A stronger connectivity not only strengthens the intra and inter-regional • trade but also generates higher income and prosperity • Economic integration moves well when rising intra-regional trade is • supported by developed infrastructure, stronger connectivity networks and • improved trade facilitation measures • • An integrated action plan required for developing transport connectivity and • trade facilitation in the region 17

18. THANK YOU 18