Connectivity is a larger concept that encompasses not only the physical and soft infrastructures but also the larger aspects like livelihoods of the people, gender issues, and development of the borderlands.
--BY PURUSHOTTAM OJHA
Trade and economic integration at the bilateral and regional levels is gaining ground in the wake of the faltering global trading system. The looming dissension against the rules of international trade by the US administration not only debilitated the functioning of the World Trade Organization (WTO) but also reckoned to the re-emergence of old mercantilist theory, a turnaround from the principle of free trade. Hence, countries which have embraced the path of liberal and open trading regimes are enticed more than ever, towards bilateral and regional approaches forming a cocoon of free trade regimes within their region or vicinity. The emergence of new free trade agreements (FTAs) in Asia, Pacific and Africa and the start of negotiations on formation of new FTAs are considered as the fallouts of the new discontent within the multilateral trading system.
Connectivity remains in the heart of trade and economic integration as the seamless flow of goods, services, finance and people only ensures the complementarities of economy and participation of countries in the regional or global value chains. It is a means to achieve the goal of deeper economic integration but not a panacea to all evils. Hence, the larger goal of integration means increasing employment and income opportunities and enhancing welfare of the common people and helping them achieve a decent livelihood. This is attainable only with a composite approach of liberalization of trade in goods and services, including facilitation of trade and reduction in trade costs. Moreover, measures for the promotion and protection of investment and enabling intra-industry trade for a cross-border value chain are other key instruments in achieving the larger goals of economic integration. Well-designed domestic economic policies can only support the initiatives of bringing countries together through the process of sub-regional and regional integration.
Connectivity as a phased approach
Efforts are going on to establish an efficient transport network and connectivity within and across the region of South Asia. Studies at the regional level were carried out in 2006-07 in the name of Saarc regional multi-modal transport study (SRMTS) and the Bimstec transport infrastructures and logistics study (BTILS). But the implementation of the projects identified by the studies is lagging far behind due to various obvious reasons including the ineffective implementation mechanisms within the regional body. Establishing a sustainable transport network across the border requires a phased approach from the bilateral level to sub-regional, regional and extra-regional levels. As a member of two regional and one sub-regional economic cooperation programme, Nepal may opt for 4-B approach; Bilateral, BBIN, Bimstec and BCIM as contour of strategic interventions in establishing regional linkages and attain larger connectivity.
At the bilateral level, Nepal concluded an agreement with the Government of India in 2014 for the movement of passenger traffic. Accordingly, regular bus services are being operated between the capital cities of Kathmandu and New Delhi and some other major towns like Pokhara-New Delhi, Dang-New Delhi and Kathmandu-Varanasi. An agreement for facilitation of movement of the passenger and freight traffic was negotiated with Bangladesh in 2010 and the text is more or less finalized and ready for signature at the appropriate levels of the two governments.
BBIN motor vehicle agreement was signed in June 2015, and the protocol is being negotiated for its operation at the sub-regional level. Still there are some issues on the MVA from the perspectives of land-locked countries; the agreement envisages the application of transit fee and charges for all transport vehicles which is inconsistent with the provision of international conventions like the United Nations Convention on Law of the Sea (UNCLOS), Article V of the General Agreement on Tariff and Trade (GATT) and Trade Facilitation Agreement of the WTO. Despite those shortcomings, BBIN MVA has been the initiator of greater connectivity in the sub-region. Bringing Myanmar in the process is another milestone and a stepping stone for another MVA at the level of Bay of Bengal community.
The BIMSTEC transport infrastructures and logistics study (BTILS) has identified several projects at the regional level which require large investment and long timeframes for implementation. Thus, there is a need of prioritization of the projects to harvest the benefits of physical connectivity earlier - the so-called low hanging fruit, which provides a demonstration effect on ensuing projects. It is worthwhile for the Bay of Bengal community to negotiate a similar motor vehicle agreement with ASEAN in order to link the eastern part of South Asia with South-East Asia and beyond. The transport corridor linking Kunming of China to Kolkata (India) via Yangon and Dhaka, also known as Bangladesh-China-India-Myanmar (BCIM) corridor, provides an excellent example for extra-regional connectivity. A car rally was successfully organized in 2014 in this corridor, which, if fully developed, connects the region of South Asia and South-East Asia with China. However, the landlocked country Nepal is not in the loop of this transport chain. If Nepal could be linked to this corridor, it would make a complete circle of the road and railway network within three regions of Asia and Pacific. The implementation of the projects for connecting the missing links under Asian Highway and Trans-Asian Railway would be another important step in achieving a higher level of physical connectivity.
The economic integration process also depends upon three important parameters of Connectivity, Commerce and Creativity, also called the three Cs of economic integration. First, Connectivity requires both development of hard and soft infrastructures and development of multi-modal transport system; second, Commerce should incorporate trade and transit agreements, customs facilitation, (simplification of procedures and harmonization of documents) and developing modalities for linking production network at the bilateral or regional level. Third, Creativity entails adoption of modern technology and practices like an electronic single window, use of IT enabled services, adoption of the best practices and research and development to adapt to the dynamism of trade and transport.
Perspectives of land-locked countries
Nepal as an LLDC is participating in three fronts of connectivity at bilateral, sub-regional and regional levels and aspiring for a fourth process of extra-regional connectivity being a part of the BCIM corridor.
Besides concluding the agreement on passenger movement between some larger cities in Nepal and India in 2014, two important events occurred during the visit of PM Oli to New Delhi in April 2018. First, an understanding was reached to link Kathmandu by railways through developing railway link from Raxaul in India and second, inclusion of Inland Waterways Transport (IWT) as the mode of transport links between Nepal and India for transiting the traded goods to and from Nepal.
As a land-locked country, the strategic interest of Nepal lies in facilitation of transit services with a view to reducing the cost of transit transportation and establishing physical linkages through development of railways, highways and inland waterways. Another area of interest would be in connecting the land-locked countries with the maritime transport and port systems. From this perspective, there should be serious consideration about linking the land-locked countries with the coastal shipping agreements, multi-modal transport system and use of a trilateral highway linking India with Thailand via Myanmar.
Connectivity is a larger concept that encompasses not only the physical and soft infrastructures but also the larger aspects like livelihoods of the people, gender issues, and development of the borderlands. The issues of cross-border investment and services like tourism, health and education have also a direct bearing on the physical and non-physical linkages among the countries. Dealing those from a holistic perspective would only help to improve and sustain the connectivity agenda. Hence, efforts should be made to simplify the border crossing procedures including the harmonization of customs and border processes. Transit procedures need to be revisited in line with the provisions made in the international conventions. Recent understandings reached between Nepal and India (through IGC meeting) to review the treaty of transit is a welcome step.
The political economy impact of connectivity is heavy and burdensome as has been evidenced from the failure of South Asian Motor Vehicle Agreement to be signed during the 18th Saarc Summit in 2014. There are border issues, particularly related with the influx of refugees (Rohingya crisis), cross-border movement of criminals, drug and human trafficking, smuggling of contraband goods etc. It is important for the countries to increase cooperation on such divergent issues that not only inflict upon trade and investment but also the overall gamut of bilateral relations.
There should be a balance between the interests of securing borders and also facilitating the flow of goods, services, vehicles, and people across the borders for ensuring a greater integration of the economies.
The author is the former secretary at the Ministry of Commerce and Supplies.