Infrastructure and Logistics Gaps to Regional Trade and Cooperation in South Asia Region 12 June, 2013 World Bank, Washington DC 1 SAR also lags behind other regions in terms of logistics performance… 2 especially among the landlocked states/regions 3 In 1909, freight could move by rail and road seamlessly from Karachi to Lahore to Delhi to Dhaka 4 In 2013, lack of regional transit agreement leads to significant inefficiencies in transport routes used for trade Current Potential A container takes 35 days to get from New Delhi to Dhaka 5 days transit time via direct rail connectivity from New Delhi to Kolkata over Jamuna Bridge to Dhaka Rail: New Delhi-Bombay Maritime: Bombay-Colombo/SingaporeChittagong Rail: Chittagong-Dhaka A container travels 7162km to get from Dhaka to Lahore using Maritime Route 2300km overland through India Assam tea travels 1400km to get to Kolkata Port Goods from Agartala (NE India) travel 1645km to reach Kolkata Port The southern border of Tripura State of NE India is only 75km from Chittagong Port if travel through Bangladesh is permitted A container traded between Afghanistan to India must travel through ports in Iran Overland transit through Pakistan would shorten distances significantly 5 The rail network in SAR Major trade corridors in India, Pakistan and Bangladesh are connected to rail networks But the landlocked states have no rail network Gauge differences, missing links, insufficient equipment and incompatibility but most of all lack of transit agreement prevent seamless cross-border movement Country Bangladesh India Pakistan Rail Network (Total Route Km) 2,835 63,974 7791 Sri Lanka 1463 Source: World Development Indicators 6 Challenges along SAARC Rail Priority Corridor 1: Lahore-Delhi-Kolkata-Dhaka-Mahishasan-Imphal PR financial and ops problems, trains return empty to Amritsar Shortage of airbraked locos and wagons. Only BCX covered wagons permitted. Train interchange daylight only. No thru transit – transloading required Ranaghat-Gede: duplicative inspection, rake marshalling/ deconsolidation, shortage of locos Kolkata: Long dwell time Insufficient capacity at Jamuna Bridge Rolling stock and gauge differences. Shortage of locos and wagons. Only BCX wagons allowed. Train interchange daylight only 7 Challenges along SAARC Rail Priority Corridor 4: Birgunj/Raxaul-Katihar-Rohanpur-Chittagong with links to Jogbani and Agartala Missing rail link at JogbaniBiratnagar, gauge incompatibility Rohanpur-Singhabad: gauge differences, insufficient BR rail lines cause deconsolidation, shortage of BR locos Missing rail link at AkhauraAgartala, gauge incompatibility 8 The road network in SAR Country Total Roads (Km) Paved roads as % of total roads Road Density (km of road per 100 sq km of land area) Afghanistan 42,150 29.30 6.0 Bangladesh 239.226 9.50 14.8 Bhutan 8.050 62.0 18.0 India 49.5 125.0 Maldives 4,109,59 2 88 100 29.0 Nepal 19,875 53.9 14.0 Pakistan 258,350 65.4 32.9 Sri Lanka 97,286 81.0 173.9 Source: Latest World Development Indicators, 2008-10 Bangladesh, India, Pakistan and Sri Lanka have extensive road networks; road density highest in India and Sri Lanka Landlocked States: Afghanistan, Bhutan and Nepal, have limited networks and lower levels of access. Most countries need to increase proportion of paved roads Main roads on major trade corridors narrow and of low quality: < 10,000km are multi-lane. All ports were served by two lane roads with high traffic flows competing with pedestrians, bicycles, non-motorized vehicles, especially around urban areas. 9 Priority SAARC Road Corridors Wagah-Attari: transloading, no customs at border, insufficient border post infrastructure, positive list of 137 products, duplicative and manual procedures, no EDI, no thru transit of AfghanIndia bilateral trade No transit through Bangladesh for Indian goods from Kolkata to reach NE through PetrapoleBenapole-AkhauraAgartala Raxaul-Birgunj: transloading, duplicative and manual procedures, no EDI CORRIDORS COUNTRIES Lahore–New Delhi–Kolkata– Petrapole– Benapole–Dhaka (2,322 kms) Agartala Pakistan, India, Banladesh 2 Kathmandu– Birgunj/Raxaul– Kolkata/ Haldia Nepal, India 3 Thimphu– Phuentsholing– Jaigon– Kolkata/Haldia Bhutan, India 4 Kathmandu– Kakarvitta– Phulbari– BanglabandhaMongla (1,362kms) or ii) Dhaka– Chittagong (1,442kms) Nepal, India, Bangladesh 5 Sandrop Jongkhar– Guwahati– Shillong– Sylhet– Dhaka–Kolkata Bhutan, India, Bangladesh 6 Agartala– Akhaura– Chittagong Bhutan, India, Bangladesh 10 1 PhulbariBanglabandha: Nepali and Bangla goods must move by convoy thru Indian territory Petrapole-Benapole: transloading, 600 trucks/day, 80% of bilateral trade, duplicative/manual procedures, no EDI Barasat-Petrapole narrow congested road section Mongla and Chittagong Ports insufficient capacity, rail missing link at Khulna-Mongla Indo-Bangladesh IWT Protocol Route Short term of Bilateral Protocol prevents private sector investment; no night-time navigation permitted; dredging needed esp Nov-May; more and better navigational aids, cargo handling equipment and terminals needed, esp in Bangladesh Akhaura could soon become one of the main doorways to a $1billion/year trade corridor, but need wider approach roads on both sides, India building ICP Ashuganj Port needs better terminals, equipment, operations, Need rail connectivity from Tripura 11 Infrastructure Gaps exist but the real challenge is no freedom of transit, protectionist policies and NTBs In addition to investments in infrastructure, High Impact Solutions include: Rail Road IWT Gauge/Equipment TIR Carnet Longer-term IWT Standards Motor Vehicle Agreement Protocol/ Agreement Harmonization Road Design Harmonization Regional Bond Through Bill of Lading Customs Simplification, Harmonization, and Cross-border Cooperation Simplification, Harmonization and Mutual Recognition of Quality and Technical Standards Removal of NTBs (rules of origin, standards, etc..) Restrictive Trade Agreements (positive list, etc..) 12 Political Economy Considerations Level Global Issues - - China vs. India competition for spheres of influence Smaller countries benefit from cheap capital/investments Regional Countries using transit rights as political or negotiation bargaining chip National Ethnic tensions and political disputes within national boundaries, lobbying power and resistance to change by vested interests Subnational-Local - Corruption by officials and informal groups weak regulation/monopolies (e.g. trucking services) 13 A corridor approach focuses implementation efforts on one particular geographical area while addressing multiple sources of congestion – a supply chain is only as good as its weakest link Corridor management Institutions Infrastructure Seaport/ Economic cluster Mode interface Border Economic cluster International transit Services • Seaport and shipping • Access to port • Transit • Customs and border management • Road and Rail Transport services Dry port ICD Gateway / Economic cluster National transit • Customs and border management • Vehicle change • Customs and border management • Storage • Consolidation • Clearing and forwarding • Air freight • Customs and border management • Transit • Clearing and Forwarding Challenges along a typical SAARC Priority Corridor: Kolkata/Haldia-Raxaul-Birgunj-Kathmandu: Road and Rail Challenges: Long dwell time at Kolkata/Haldia ports Bilateral transit agreement limits Nepali transit to only one corridor, and only containerized cargo for rail Poor and narrow roads in Nepal and India No rail link in Nepal No through bill of lading and inland clearance Duplicative domestic licensing/documentation Duplicative and manual customs procedures Corruption/informal payments at border and along road corridor No cross-border electronic data interchange No mutual recognition of collaboration on SPS and standards Insufficient parking/warehousing facilities 15 WB Approach and Lessons A Corridor Approach to tackle multiple sources of congestion along a supply chain Strengthening Bilateral Coordination Mechanisms Strengthening National Multi-Sector Coordination Mechanisms: Role of National Trade and Transport Facilitation Committee (NTTFC) Tacking Complex Multi-sector Project in a Weak Capacity Environment: trust fund support essential, significant resources devoted to capacity support during project preparation Relationship and Confidence building ◦ Big vs. Small country: letting smaller country take the lead and provide capacity/knowledge support ◦ Showing early signs of success: the project design focused on showing early results (low hanging fruits) as well as long-term success ◦ A regional study tour was key: to forming amicable relationships 16 away from the negotiating table Nepal-India Regional Trade and Transport Project Joint IDA-IFC Project: $101 million: financing $99m IDA, $2m IFC parallel cofinancing First regional trade and transport facilitation project in South Asia Region Negotiations: May 17, 2013, Board: June 28, 2013 PDO: decrease transport time and logistics costs for bilateral trade between Nepal and India and transit trade along the Kathmandu-Kolkata corridor for the benefit of traders by reducing key infrastructure bottlenecks in Nepal and by supporting the adoption of modern approaches to border management. Component 1 Modernize transport and transit arrangements between Nepal and India TA for modernization of bilateral trade and transit framework Automating of Customs Transit Document Transport management regulations - Axle load control - Road safety Component 2 ICT systems to automate processes for documents related to imports, exports and transit Single Window Trade Portal PCO/NTTFC Institutional Strengthening Component 3 Trade-Related Infrastructure Expand and upgrade the NarayanghatMugling road Kathmandu Inland Clearance Depot (ICD) Development Birgunj and Bhairahawa ICD Improvement Multi-agency Labs 17