Seamless transport connectivity between India and Bangladesh has the potential to increase national income by as much as 16.6% in Bangladesh and 7.6% in India, says a report of the World Bank.
Bangladesh could increase its real income by 11.3% by allowing Indian trucks in the northeast-southwest and northwest-southeast corridors while the real income of India will increase by 5.6%, it says.
On Tuesday, Dhaka and Delhi offices of the World Bank jointly launched the report titled "Connecting to Thrive: Challenges and Opportunities of Transport Integration in Eastern South Asia" at an online media briefing.
The report analysed the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (MVA), compared it with the best international practices, and identified its strengths as well as gaps for seamless regional connectivity.
It also discussed regional policy actions the countries can take to strengthen the MVA and proposed priorities for infrastructure investments that would help the countries maximise the benefits of the agreement.
Matias Herrera Dappe, senior economist of the World Bank, and Charles Kunaka, lead private sector specialist of the development agency, presented the summary of the report.
They said Bangladesh could increase its export to India by 182% while India could increase it by 126% if the countries signed a free trade agreement.
Improving transport connectivity between the two countries could increase exports even further, yielding a 297% increase in Bangladesh's exports to India and a 172% increase in India's exports to Bangladesh, they added.
Two editors of the report described tariff, non-tariff, and para-tariff barriers and the lack of infrastructure as obstacles to boosting bilateral trade between the two neighbouring countries.
Mercy Miyang Tembon, country director at the Dhaka office of the World Bank, said at the event, "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. 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."
World Bank Country Director in India Junaid Ahmad 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.
"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."
According to the report, all districts in Bangladesh will benefit from integration, with the eastern districts enjoying larger gains in real income. Indian states bordering Bangladesh such as Assam, Meghalaya, Mizoram, and Tripura in the northeast, and West Bengal in the west, and states further away from Bangladesh, such as Uttar Pradesh and Maharashtra, would also gain huge economic benefits from seamless connectivity.
But unleashing the full potential of integration in the region requires strengthening the agreement signed in 2015. Countries need to address a number of challenges, such as infrastructure deficits, particularly in designated border posts, and harmonisation of regulations and customs procedures, the report said.
Non-tariff and para-tariff barriers
As any truck is not allowed to cross borders, cargo must be transloaded, adding to transport and trade costs. On average, crossing the India-Bangladesh border at Petrapole-Benapole takes 138 hours, including 28 hours spent transloading cargo.
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 said cargo transported by rail also has to be transloaded at the border because of restrictions on the use of freight wagons on foreign railways.
Cargo shipped between Bangladesh and India in seagoing vessels has to be transshipped in Colombo or ports in East Asia, such as Singapore and Port Klang.
Deficits also exist in transport and trade infrastructure, but the main drivers of the high costs are policy and regulatory barriers, said the report.
Week, ununiformed infrastructure
The report identified the fragile infrastructure, especially in Bangladesh territory, as the major obstacle to boosting trade in the region. The difference in standard and ununiformed infrastructure was also found to be another obstacle.
Other obstacles include the insufficient capacity of roads and bridges to handle current demand, the need to rely on inefficient ferries to cross rivers, the mismanaged system of weight checks at bridges, and policies, regulations, and procedures that create unnecessary trips.
Underutilised bilateral trade opportunities
The report said the bilateral trade between India and Bangladesh represents only 1% of the global trade of India while it is 10% of the external trade of Bangladesh.
East Asian and Sub-Saharan African economies and intra-regional trade account for 50% and 22% of total trade respectively. In fact, it is about 15-20% less expensive for a company in India to trade with a company in Brazil or Germany than with a company in Bangladesh, the report pointed out.
Citing an example, the report said the average trade cost between Bangladesh and India is about 121% of the value of the products. The cost of trade between Bangladesh and Germany is 117% while it is 104% between India and Germany.