The discussion on connectivity and multimodal transport is gaining traction in this part of South Asia.
Integration of various modes of transport, and the transport corridors is gaining pace in a bid to reduce the cost of delivery of goods and achieve efficiency in international trade. The process is reinforced by the adoption of a multimodal transport system that enables linkages between two or more modes of transport for physical transfer of goods from seller to buyer on the basis of multimodal transport document. The multimodal transport operator is responsible for issuing the multimodal transport document under a contract that covers a single liability for the whole journey. Thus, multimodal transport involves four aspects of logistics; the first is the movement of goods across the international borders, second, engagement of at least two modes of transport, third, undertaking by a single operator and fourth, use of single transport document under the contract of carriage.
The multimodal transport system, on account of its inherent advantage for reducing trade costs, is more relevant to the landlocked countries as the prohibitive transactional cost deters them to reach out to the international markets. It is obvious that competition among various modes of transportation and combined use of intermodal transport services bring efficiency and provide a least cost solution to transport and logistics.
Various landlocked countries have concluded transit transport agreements with their neighbours that enable access to and from the seas of neighbouring countries through various modes of transport, use of port and birthing facilities by the vessels carrying the flag of landlocked countries, rights granted to navigate the high sea and use of marine resources within exclusive economic zones. These provisions are explicitly outlined in the UN Law of the Sea (UNCLOS) which serves as the framework for negotiating the treaty of transit between a landlocked country and its neighbouring country. This also implies that conditions in use of transit rights and facilities are largely governed by the provisions made in the bilateral agreement.
Thus, the provisions mentioned in the law of the sea are subject to a negotiated arrangement which is largely influenced by the level of mutual trust, confidence, bilateral political relations as well as size of economies, level of infrastructure development and governance etc. Some agreements provide more flexibility in choice of mode of transport, use simplified documentary and bureaucratic procedures, apply IT enabled services while some others impose stringent rules and regulations that increase the cost of transportation for the countries and territories in the hinterland. For example, the transit agreements signed between Afghanistan-Pakistan, Bhutan-India, Nepal-India, Nepal-China, Mongolia-China and Laos-Thailand reflect the idiosyncrasies of bilateral relations.
Transit system entails a combination of activities related to physical handling and movement of goods, exchange of information and documentation, processes designed for receipt and dispatch of traffic in transit to and from the seaport. The whole process of transit operation revolves around the ecology of infrastructure, technological advancement, stakeholder's cooperation, legal arrangement and level of governance.
Adequate physical infrastructure has an enormous impact on the efficient use of transit transport operations. Road, rail and waterways (river, lake or sea) are the modes of transit transportation identified in the United Nations Convention on Law of the Sea (UNCLOS)-1982. However, the convention has mentioned that other modes of transport like gas and liquid pipeline could also be included as means of transport through the bilateral arrangement. Transit services through air transport is guided by the rules of International Civil Aviation Organization (ICAO).
Establishing proper connectivity between seaports and production centres in the hinterland requires interventions across four fronts. First, the infrastructure and facilities in the port require adequate space for handling all types of cargoes--containerised, bulk, break bulk and liquid. This should be supplemented by warehouses for general cargo and cold storage facilities for perishable goods; and container handling equipment like quay cranes, reach stackers, fork lift, silos and vertical tanks depending upon the nature of the goods.
Second, the transit movement of goods requires an efficient transport system with a modal competition among, road, rail and inland water transport. The standards of highways, railroad and navigability of the water bodies and the quality of transport equipment are important factors in bringing down the time and cost of delivery of goods. For example, transport infrastructure in China and Thailand are far better in comparison to South Asian countries. Hence the landlocked countries sharing borders with these countries enjoy better transport services in comparison to similar countries in South Asia.
Third, border infrastructure such as land customs stations, on both sides needs to be developed in a way to allow uninterrupted flow of export and import traffic. The land customs stations should also have sufficient parking space, warehouses, immigration, resting places, and other amenities for the flow of passenger as well as goods traffic. This would require infrastructure like the Inland Clearance Depots, Integrated Customs Check-posts, Container Freight Stations and test and certification facilities for clearances of traded goods.
Fourth, investment in domestic transport network is important in order to link production facilities with the external markets. The distribution and logistics network is not only crucial for international trade but also equally important for facilitating domestic movement of goods, maintaining resiliency in the supply chain as well as for improving social interaction and integration. Development of road transport is more important for Nepal as a country, comprising of 83 percent of land with difficult hills and mountainous terrain.
The discussion on connectivity and multimodal transport is gaining traction in this part of South Asia after the signing of a motor vehicle agreement among four countries namely, Bangladesh, Bhutan, India and Nepal in 2015. This has been followed by the expansion of inland waterways protocol routes and coastal shipping agreements between India and Bangladesh on one side while an announcement has been made by the governments of Nepal and India for use of two riverine terminals of India for Nepali transit traffic. This could be considered as another milestone in the bilateral treaty of transit in way of diversification of transit corridors through its southern borders.
Development of physical infrastructure is crucial for enhancing trade and investment linkages and facilitating cross-border flow of people for tourism, social and cultural exchanges. One of the problems faced by Nepal in connecting with the global market is the inadequacy of its infrastructure and facilities in the gateway port of India and Bangladesh. Surface transport in India, particularly highways, are being upgraded but the equipments used in the transportation of transit traffic are mostly outdated. Riverine terminals proposed for the use of Nepali cargo are yet to be fully developed and brought to operation.
The need to improve border infrastructure was realised during the late nineties with the development of inland clearance depots in three border posts in Biratnagar, Birgunj and Bhairahawa with the World Bank's assistance. This was followed by the border post improvement in Kakarbhitta during the end of the first decade of this millennium. Physical facilities were expanded in Birgunj-Raxaul and Biratnagar-Jogbani following the development of integrated customs check-posts under Indian assistance. Two border posts in the northern border, Tatopani and Rasuwagarhi, have been developed with Chinese assistance. However, the roads connecting the northern borders are in a dilapidated condition requiring major improvements and rehabilitation.
Nepal needs to strengthen its domestic transport system in order to complement the transit transport and operate under a multimodal fashion. Domestic road conditions are not up to standard in terms of quality of construction. Total road length in Nepal has reached 95,742 km by July 2020. Of these, only 19,204 km (20%) is black topped. A large stretch of road (53,741 km) is earthen and serviceable only during the dry season. Many production pockets in the Himalayan and mountain range are not connected to proper road networks. Rail lines are confined to small stretches in two places in the Terai. Air services are available in almost half of the hilly districts, but these mainly serve passenger traffic rather than commercial goods.
Development of transport infrastructure at the border and beyond leading to sea ports is a primary need in order to establish better connectivity with the global markets. Diversification of transport corridors and mode of transportation ultimately helps increase competition in the provision of services, thereby reducing the transportation cost and achieving efficiency in trade and economic activities. Hence, the government of Nepal should take a judicious approach in making adequate investment in transport infrastructure within the country and nudge for greater investment in the development of transport infrastructure at the sub-regional and regional level.
(Ojha is a former Secretary of Commerce.)