Seamless transport connectivity between India and Bangladesh has the potential to boost national income by as much as 17 per cent in Bangladesh and 8 per cent in India, says a new World Bank report.
The report titled “Connecting to Thrive: Challenges and Opportunities of Transport Integration in Eastern South Asia,” analyzes the Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement (MVA), com-pares it with international best practices, and identifies its strength as well as gaps for seamless regional connectivity.
The report also discusses regional policy actions the countries can take to bolster the MVA and proposes priorities to infrastructure investments that will help the countries maximise its benefits.
At present, bilateral trade accounts for only about 10 per cent of Bangladesh’s trade and a mere one percent of India’s trade.
Whereas, in East Asian and Sub-Saharan African economies, intraregional trade accounts for 50 per cent and 22 per cent of total trade respectively.
In fact, it is about 15–20 per cent less expensive for a company in India to trade with a company in Brazil or Germany than with a company in Bangladesh, the report points out.
High tariffs, para-tariffs, and nontariff barriers also serve as major trade barriers. Simple average tariffs in Bangladesh and India are more than twice the world average.
Previous analysis indicates that Bangladesh’s exports to India could increase by 182 per cent and India’s exports to Bangladesh by 126 per cent if the countries sign a free trade agreement.
This analysis found that improving transport connectivity between the two countries could increase exports even further, yielding a 297 per cent increase in Bangladesh’s exports to India and a 172 per cent increase in India’s exports to Bangladesh.
Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan, said, “Geographically, Bangladesh’s location makes it a strategic gateway to India, Nepal, Bhutan, and other East Asian countries. Bangladesh can also become an economic powerhouse by improving regional trade, transit and logistics networks.”
While trade between India and Bangladesh has increased substantially over the last decade, it is estimated to be $10 billion below its current potential, she said adding that, the World Bank is supporting the Government of Bangladesh to strengthen regional and trade transit through various investments in regional road and waterways corridors, priority land ports, and digital and automated systems for trade.
Weak transport integration makes the border between Bangladesh and India thick. Crossing the India–Bangladesh border at Petrapole–Benapole, the most important border post between the two countries, takes several days.
In contrast, the time to cross borders handling similar volumes of traffic in other regions of the world, including East Africa, is less than six hours, the report highlights.
Junaid Ahmad, World Bank Country Director in India, said, “The eastern sub-region is poised to become an economic growth pole for South Asia. An important component of this development potential is for countries to invest in connectivity – rail, inland waterways, and roads.”
He said this is especially true as the region begins its economic recovery from the COVID-19 pandemic. Ultimately, connectivity offers the promise of long term sustainable and inclusive growth.
At present, Indian trucks are not allowed to transit through Bangladesh. As a result, the northeast of India is particularly isolated with the rest of the country and connected only through the 27-km-wide Siliguri corridor, also called the “chicken’s neck”.
This leads to long and costly routes. Goods from Agartala, for example, travel 1,600 kilometers through the Siliguri corridor to reach Kolkata Port instead of 450 kilometers through Bangladesh.
If the border were open to Indian trucks, goods from Agartala would have to travel just 200 kilometers to the Chattogram Port in Bangladesh, and the transport costs to the port would be 80 per cent lower, the report estimates.
According to the report, all districts in Bangladesh would benefit from integration, with the eastern districts enjoying larger gains in real income.
States bordering Bangladesh such as Assam, Meghalaya, Mizoram, and Tripura in the northeast, and West Bengal on the west, and states further away from Bangladesh such as Uttar Pradesh and Maharashtra would also reap huge economic benefits from seamless connectivity.
Matias Herrera Dappe, Senior Economist and Charles Kunaka, Lead Private Sector Specialist and authors of the report, said, “The transport integration agreements in eastern South Asia represent a significant step toward the creation of a cross-border integrated transport market in the subregion, with the Motor Vehicles Agreement (MVA) being the cornerstone of that integration.”
The agreement can achieve full potential by adopting good practices; addressing gaps and inconsistencies in infrastructure and market failures in transport services; and adopting complementary policies that remove binding constraints caused by market imperfections, he added.
