The sub-regional mechanism entered into a new paradigm with the signing of a motor vehicle agreement among four countries, famously called BBIN motor vehicle agreement, in January 2015.
The South Asian Sub-regional Economic Cooperation (SASEC) was established in 2001 as the offshoot of SAARC, aimed at enhancing economic cooperation among its four member countries- Nepal, Bhutan, Bangladesh and India. The objectives of cooperation mechanism were to promote regional prosperity, improve economic opportunities and build a better quality of life for the people in the sub-region. Project based cooperation has been the entry point of integration and the Asian Development Bank is providing technical and financial assistance to the investment projects, mainly on sectors of transport, energy, information and communication technology, economic corridor development and trade facilitation. Later, three other countries-Sri Lanka, the Maldives and Myanmar joined SASEC making a total of seven economies in the group.
The status of project implementation by June 2020 reveals that altogether 61 ADB financed investment projects were signed and implemented by the sub-regional countries. Of these, transport sector has got top priority and accounts for the most number of projects (41 projects worth a cumulative investment of USD 11.20 billion), followed by energy (12 projects worth 1.58 billion), economic corridor development (three projects worth USD 697 million), trade facilitation (three projects worth over USD 80.66 million) and ICT (two projects worth 20.80 million).
The sub-regional mechanism entered into a new paradigm with the signing of a motor vehicle agreement among four countries, famously called BBIN motor vehicle agreement, in January 2015. The agreement provided a regulatory framework for enabling cross-border movement of goods and passenger vehicles and outlined the procedures for such movement. But, the perplexing issue is the inordinate delays in finalising the protocols to operationalise the agreement down the line of six and half years after its conclusion.
This part of South Asia shares a common history, geography within diversity of natural and ecological setting sustained by various religious, social and ethnic groups. Communities in the sub-region were traditionally dependent in agriculture and realisation of trade potentials were largely stymied by the lack of proper physical connectivity. Recognising the importance of transport infrastructures and connectivity for integration of economies at regional level, two studies- SAARC Regional Multimodal Transport Study (SRMTS) and BIMSTEC Transport Infrastructure and Logistics Study (BTILS) were taken up in 2006 and 2007 respectively with the assistance of the Asian Development Bank. These studies identified various corridors and provided overall framework in promoting multimodal transport linkages for the region as well as for the BBIN sub-region.
The idea of sub-regional cooperation on transport linkages was mooted at a time when Nepal was developing its three ICDs in Birgunj, Biratnagar and Bhairahawa with the World Bank assistance. Of these, the ICD developed in Sirsiya, Birgunj is connected with the network of Indian Railways and at the time regarded as the largest ICD in South Asia ensnared under the green tract of trees and vegetation. However, delays in finalising the bilateral rail services agreement made this ICD idling for a period of three years before the rail started rolling into the facilities in mid-July 2004. With the opening of Visakhapatnam port in 2016 for Nepali transit trade, Birgunj ICD is now turning to be a transit hub that enables the movement of goods traffic between Nepal and major cities in India as well as ports of Kolkata, Haldia and Visakhapatnam.
Improvement of border facilities is an ongoing effort as two other ICDs were developed in Kakarbhitta and Tatopani during the early years of the last decade, two integrated customs check posts (ICPs) in Birgunj and Biratnagar are operational while few other ICDs and ICPs are in the process of development.
Nepal is also expanding railway linkages with India through various border points. Short links between Jayanagar-Kurtha and Jogbani-Biratnagar are now ready for operation after completion of the construction activities. The other rail links to connect Kakarbhitta, Bhairahawa and Nepalgunj are planned for development. Detailed project report of trans-Himalayan railway is being prepared with Chinese assistance to link Kathmandu with Tibet-China. This is supposed to open a new vista of connectivity between China and the South Asian sub-region.
Inland water transport has now surfaced as additional mode of transit transport for Nepal. Nepal and India, during the visit of Nepali Prime Minister to India in April 2018, reached an understanding on use of IWT for Nepali transit traffic. Accordingly, two river terminals of Ganges in Sahebgunj and Kalughat were designated as the intermodal transfer of cargo. However, protocols to give effect to this understanding is yet to be detailed and signed.
Nepal is also on the binge of extending air services to regional markets from the newly developed airports in Bhairahawa and Pokhara. Being located just 20 km away from Lumbini, Bhairahawa airport has the prospect of connecting with major cities in South and South-East Asia, thereby bringing Buddhist pilgrims to the birthplace of Lord Buddha. Pokhara with its scenic beauty and mountains can allure the pleasure and holiday trips and ready to be connected with the capital city and other major cities in the sub-region. Besides, Nepal is making a good progress in strengthening and widening national highways, strategic roads and other roads connecting the industrial corridors and border customs. Bridges are being built over Mechi River in the eastern border and at Mahakali River in the western flank of the country.
BBIN motor vehicle agreement could be considered as a milestone in expanding physical connectivity in the sub-region. If implemented properly, its spillover benefits go beyond the simply movement of transport vehicles. Several other opportunities could be explored on the back of motor vehicle agreement. Some of these are;
First, the agreement provides opportunity for development of transport infrastructures. These involves improvement of existing highways, roads and railway lines and opening up new stretches. Inland water transport is coming up as additional mode of transit for landlocked countries. Inland navigation arrangement between India and Bangladesh is operational under the protocol routes and the coastal shipping agreement. The discernible benefits of IWT is still to be accrued to Nepal and Bhutan. Nepal could experience competition among various modes of transportation with the operationalisation of river transport services through the NWT-1 in India.
Sub-regional transport network is getting a facelift as huge investment projects such as roads, railways and bridges are being implemented or planned. The multilateral banks including the Asian Development Bank and the World Bank, are taking a lead in providing financial and technical assistance to those projects. Some bilateral projects for development of railway lines, port facilities, improvement of roads and bridges are also in progress.
Second, reducing transit transportation cost and establishing better transit regimes is crucially important for the landlocked countries. The BBIN connectivity espoused by the motor vehicle agreement should aim at further facilitating the movement of transit traffic between ports in India and Bangladesh and two landlocked countries. This requires simplification of the procedures and documents, use and application of EDI and single window, one stop clearances of goods at borders and establishment of dedicated freight corridors and use of modern fleet of vehicles, among others.
Third, the agreement can be a vantage point for establishment of inter-industry linkages among countries. India and Bangladesh are emerging as the next manufacturing hub of Asia after China, Vietnam and Indonesia. With increased connectivity, there are possibilities of going into decentralised production pattern in selected manufacturing industries. Production units could be vertically and horizontally integrated in order to increase intra-regional trade. Such industries may be in garment, motor parts, electronic goods and agro-processing. More could be explored. This may also require making suitable arrangements in the bilateral treaty of trade.
Fourth, countries could focus on development of sub-regional electrical grids that allows the trading of electricity across the sub-region. With high potentials of producing hydroelectricity as well as solar energy, Nepal and Bhutan can export power to India and Bangladesh. This type of clean energy helps to reduce the use of fossil fuel and coal, replacing the dirty sources by the clean energy. Nepal, as a storehouse of hydropower, can focus on establishing energy intensive industry like manufacturing of fertiliser, foundries and smelting industries.
Fifth, with the development of transport infrastructures and better physical connectivity, BBIN countries could benefit from joint promotion and marketing of the tourist products. Based on diversity of geography, natural resources, culture and social practices, tour packages could be marketed elsewhere in other regions. High mountains to blue oceans; temples and monasteries scattered around the sub-continent could become the source of tour packages. This will also help to promote intra-regional tourism and promote people to people linkages.
What lies ahead?
The implementation of SAFTA has remained sluggish over the last decade due to strained political relations between India and Pakistan. BIMSTEC FTA seems even more lethargic in implementation as the trade in goods agreement remains in limbo over the last eighteen years. It seems that the two big economies of the group-Thailand and India are not much interested to go along the inter-regional arrangement; rather more interested in pursuing the bilateral track. In such a situation, BBIN countries may consider negotiating an early harvest program leading to free trade within the sub-region. This may stand as a building block for a nuanced and coherent trade and economic integration in the region.
Making transit transport reliable, predictable and efficient is the preferred option of the landlocked countries. Along with the development of transport infrastructures, participating countries should be able to bring qualitative changes in the processes through the adoption of modern technologies and available international instruments like the Revised Kyoto Convention, Custom Convention on International Transport of Goods (TIR), Vienna Programme of Action and the WTO trade facilitation agreement. With the use of advanced information technology and internet, countries are moving towards paperless trade, thereby resetting the traditional regulatory regimes. Hence, the bilateral treaty of transit should be renegotiated with a view to simplifying the existing procedures and allowing use of IT enabled services in port, transit movement and border customs following the contours of international conventions and instruments.
BBIN countries should focus on intensification of cooperation arrangement in selected sectors like trade, transport, investment, energy and tourism rather than going extensively over many sectors. Lessons learnt from SAARC tells us that wider dispersion of areas of cooperation makes implementation ineffective.
Governments should also encourage Track II process that brings all stakeholders and service providers such as business chambers, transporters, freight forwarders, customs agent, importers and exporters together to discuss the issues of connectivity trade, transport and investment in different fora. A greater collaboration among various stakeholders would help to sort out the implementation issues in a prompt and efficient manner.
Connectivity is multidimensional. It is not merely the development of road, rail, air and inland water transport. In a broader sense, it spans to digital connectivity, improvement of market access opportunities, investment and financial connectivity development of energy grid and promotion of people to people linkages. The overall goal is to bring prosperity, provide employment and income opportunities to all people in this sub-region. Countries in this part of South Asia need to work together with greater confidence and harmony in order to make this a reality. Gone are the days of making the regional forum a talk shop. Now, it is time to act and move forward.
(Ojha is former Secretary of the Government of Nepal. The views expressed are personal.)