Author: Ram Upendra Das and Nitya Batra, RIS
One of the easiest ways to boost economic activity is by promoting regional economic integration that facilitates freer movement of goods, services and investment, helping to achieve regional developmental objectives by creating jobs. But in eastern South Asia, this process is being held up by misguided decisions, strategies and outdated ideas.
Many studies suggest that transport costs and lack of connectivity can impede trade, including across Northeastern India, Nepal, Bhutan and Bangladesh. Back in 1999, the World Bank found that the median landlocked country experiences transport costs 42 per cent higher than the median coastal economy. Halving transport costs increases trade volume by a factor of five.
As landlocked countries, Bhutan and Nepal are dependent on India for external trade. Both use the Indian ports of Kolkata and Haldia for trade purposes. For these countries and landlocked Northeastern India, the World Bank’s findings of 1999 are still highly relevant.
A container usually takes 20–25 days and occasionally even up to 60 days to move from New Delhi to Dhaka, as the maritime route is via Mumbai, then to Singapore or Colombo before reaching Chittagong and then by rail to Dhaka. The same container could have been moved to Dhaka within three to four days with direct rail connectivity between New Delhi and Dhaka, as highlighted in SAARC-ADB studies.
The southern border of the northeastern Indian state of Tripura is only 75 kilometres from Chittagong port in Bangladesh, but goods from Tripura’s capital Agartala are required to travel 1645 kilometres to reach Kolkata port through the ‘chicken neck’, India’s Siliguri Corridor.
The Mongla port is not adequately linked with railway services, discouraging third-country containerised movement through the port. Given that a major portion of Nepal’s imports is in containerised form, this acts as a major constraint on Nepal’s trade linkages with other countries. It is a no brainer that facilitating connectivity for the landlocked areas of Bhutan, Nepal and northeastern India — enabling them to access ports and hence regional and global markets — will contribute to an increase in trade and yield developmental outcomes.
Diverting trade from the ‘chicken neck’ by using Chittagong and Mongla ports instead of the Kolkata port could reduce the costs of time and distance in transporting goods, lowering import costs while simultaneously increasing export competitiveness. Moreover, this could become the building block to overall South Asian integration, given that intra-SAARC economic linkages have enormous potential.
The solutions to these problems are already well-known. These include expanding port capacity at Chittagong and Haldia; the provision by Bangladesh of transit and trans-shipment facilities to India, Nepal and Bhutan, including access for Nepal and Bhutan to its sea port of Mongla for their external trade; implementing India’s offer of unilateral entry to vehicles from Bangladesh; and the signing of the SAARC Motor Vehicles agreement to facilitate freer movement of vehicles on a pan-South Asian basis.
So why is the situation not improving, particularly when other studies repeatedly suggest how inefficient the current system is? The answer lies in the flawed perspectives that exist in the region that have proved to be stronger than any empirical studies on the subject and the policy measures which they have suggested.
Some countries, for example, see transit rights as a bargaining chip in negotiations — a means to obtaining something else in the realm of water-sharing. But negotiating like this is counterproductive for developing countries, since it impedes regional cooperation and stifles economic growth. Existing infrastructure is also underutilised. The problem is not infrastructure availability but the connectivity of the region’s transport links, since there are railway lines on both sides of the border in India and Bangladesh that remain unutilised and disconnected.
Harbouring political animosity against a particular country instead of focusing on developmental outcomes through regional economic integration is bad economics and bad politics.
While transport connectivity is crucial for the eastern South Asia, the achievement of significant developmental outcomes has been hampered because the facts have weighed less than the outdated attitudes of decision-makers in some segments of the region.
Ram Upendra Das is Professor and Nitya Batra is Research Assistant at Research and Information System for Developing Countries (RIS), New Delhi.