Establishing the connection

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: Lack of connectivity between South Asian countries is a key impediment to the region’s economic growth. Creating connectivity so that people can engage in economic exchange is in itself a development strategy; unfortunately, such a strategy has not got the importance it deserves from the policy-makers in South Asia. Border crossings in many parts of the region involve some of the highest transaction costs in the world. There is not a single star performer in the region. South Asia can equal East Asia in terms of growth and global integration if this problem is given the attention it deserves.

In each of the South Asian countries, transaction costs across the border and behind the border rank much lower than the average in emerging countries. Each country fares poorly in trade procedures, transport formalities, domestic transport and logistics infrastructure, and regulatory policies that impact the flow of goods and services within the countries own boundaries.

The connectivity between South Asian countries to a large extent explains why inter-regional trade in South Asia, especially through formal channels, remains the lowest in the world at 2% of the total trade. A World Bank 2007 study estimated that improvements in regulatory and logistical issues can lead to a substantive gain of $2.6 billion in inter-regional trade, an increase of more than half of the current levels of trade.

Unilateral reform in trade facilitation calls for:

* Reducing extensive documentation requirements

* Ensuring full use of information technology

* Bringing about transparency and accountability

* Introducing audit-based controls

* Introducing cooperation among all the Government agencies involved in clearance of cargo.

* Introducing self-assessment.

* Reducing examination of goods to a minimum

* Introducing modern risk assessment techniques

* Introducing Single Window in each port and airport

* Reducing the cargo dwell time

The most important step towards meeting these objectives is to create an Inter-Ministerial Trade Facilitation Committee chaired by a cabinet minister with strong representation from the private sector. The Committee must meet quarterly to review the progress towards the above objectives, examine the causes of delays at every step in the process of cargo clearance and put the guilty parties at task and ask them to show improvement. A smaller level Trade Facilitation Committee must work at every customs point also to resolve simple issues at the source.

Connectivity between South Asian countries still remains pathetic. For example, at the Benapole border, on an average, there are lines of 1,500 trucks that often have to wait for up to five days to get clearance. A part of the reason is some nations don’t allow foreign trucks to operate in their territories. The conditions of overland routes are also poor, and there is no rail connectivity, partly due to the lack of uniformity in track gauges mong countries.

The South Asia Free Trade Agreement (SAFTA) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) have just paid lip service to trade facilitation. This is in sharp contrast to the Greater Mekong Sub-region (GMS) initiative in South-East Asia.

SAFTA has no chance to succeed given the lack of trust between India and Pakistan. South Asian integration is too important to be made hostage to a dispute only among two of its eight members. One unique opportunity is to put some teeth to BIMSTEC to transform it as a trade facilitation center for its members. The BIMSTEC can easily be extended to include Maldives, and simultaneously a joint protocol between Afghanistan, Iran, India and Sri Lanka can create an integrated transport agreement linking Afghanistan and the rest of Central and South Asia via the Persian Gulf port of Chahbahar. BIMSTEC can then be further extended to link with South-East Asia through Thailand, Laos, Cambodia, Vietnam, Malaysia, and Singapore, and reorient the focus of this grouping as a nodal agreement on trade facilitation. In order to succeed, it should have specific time-bound targets, which have to be mandatory for all member states.

A regional integration can succeed only with connectivity. It is high time to leverage this new interest in trade and transport facilitation to push for an aggressive reform agenda connecting South Asia with South-East Asia through a reoriented BIMSTEC with its main focus on connectivity. This should be the focus of the forthcoming summit in Delhi in November.