International borders are considered to be major bottlenecks in the conduct of international trade. It is obvious that cross border trade is essentially a contributing factor to enhance competition, production and achieve higher economic growth. However, the bureaucratic delays, excessive border controls under the pretext of restricting the flow of unwarranted goods including narcotics, legitimate need for food safety, quarantines for the protection of plant and animal health and lack of adequate physical infrastructures at the border have been detrimental factors in relation to the flow of goods across international borders. Consequently, the low-income countries, particularly the landlocked ones, are facing difficulties in connecting with the neighbouring as well as overseas markets.
Containerisation of trade is a unique and innovative system, developed by an American trucking entrepreneur in 1956 that has brought a sea change in the mode of carrying out international trade. Malcom Mclean designed such a metal box that could be stuffed with traded goods and transferred to various modes of transport without the need for handling individual packages or breaking stuff up into pieces. This added numerous advantages to the supply and delivery of goods.
First, the task of dock workers in transferring the individual packages from ship to dockyard and vice versa was eliminated, secondly, theft, pilferage and losses during transportation and storage were greatly reduced, third, this triggered the development of physical infrastructure and use of mechanical equipment for handling the containers, fourth, opportunities were created for value added services like labelling, packaging and unitisation of cargo in the newly created facilities. Most importantly, it helped to reduce the cost of transportation as the container, could be interchanged between various modes of transport without breaking the journey. This also gave rise to the emergence of the multi-modal transport system in the movement of international trade.
Multi-modal transport in general terms is defined as the carriage of goods at least by two different modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country. According to this definition, the multimodal transport involves a single liability document to cover the whole journey to move the goods from consignor to consignee, involves at least two mode of transportation and entails to cross-country movement of goods. The main actor in this case would be the registered multimodal transport operator (MTO).
The flow of international trade basically involves three steps; entering into sales-purchase contracts, arranging physical movement of goods and making payment for the transaction. In order to complete this cycle, the stakeholders should pass through the maze of synchronizing different modes of transportation, preparation and submission of relevant documents for completion of administrative processes, complying with quarantine and SPS standards, and customs formalities during border clearances. Thus, physical movement of traded goods needs to be supplemented with the flow of information and documents and the last part of the transaction will end up with the settlement of payment from buyer to seller. In this process, the movement of goods to and from landlocked countries seems more arduous, as a substantial part of the transport operation is governed by the transit arrangement made with their coastal neighbours.
The primary task in creating a viable and efficient supply chain network is the development of transport infrastructures including roads, railroads, inland waterways and pipelines. Besides, the other important infrastructures are the facilities to connect those different modes of transport to establish interfaced linkages between them. Those infrastructures are developed in the form of inland clearance depots, container freight stations or the integrated check posts. Such facilities may be located in the border areas or in the hinterland, but mostly near the industrial or special economic zones, or in the vicinity of highways or rail roads which can serve a large number of the population through the distribution network. The concept of ICDs or dry ports is gaining traction as these facilities are considered as an extension of sea ports and used to lessen the burden of the latter by transferring their partial operations in the hinterland.
Dry ports in BBIN countries
In South Asia, the development of dry ports gained momentum in the 1990s. The Indian Railway subsidiary, Container Corporation of India opened its first dry port in Tughlakabad, Delhi in 1993. There were 129 ICDs/dry ports, and 168 CFS in India by March 2017. Besides, the government of India has planned 20 integrated customs check posts to be developed in the borders with its neighbouring countries. Bangladesh has 18 ICDs and has planned for 10 ICPs at its border with India. Most of these ICDs are located surrounding the Chittagong port. Bhutan is in the process of developing ICP in Phuentsoling. Nepal developed three ICDs at Birgunj, Biratnagar and Bhairahawa during the end of the 1990s. By 2021, five ICDs are operational, two under construction and one planned for construction in the near future. Similarly, two integrated customs check posts are in operation and two others are awaiting construction at the Nepal-India border. These facilities are supposed to facilitate trade with neighbouring countries and beyond, leveraged by the road and rail linkages with seaports, all the way to Kolkata, Haldia and Visakhapatnam.
Among the Indian states, Uttar Pradesh hosts the second largest number of ICDs (11) after Maharashtra (13). Haryana (9), and Gujarat (8) are other states having a good number of ICDs. Tughlakabad and Dadri in Haryana, Agra, and Kanpur in Uttar Pradesh lie within 400-600 Km away from the Nepal border. The newly developed inland water terminal in Sahebgunj, in Jharkhanda is 232 Km away from Biratnagar while the Kalughat terminal in Patna lies at a distance of around 200 Km from Birgunj. The governments of Nepal and India have agreed in principle to use those two terminals for the movement of transit traffic to and from Nepal. Three border posts of Bangladesh, namely Banglabandha (52 Km from Kakarbhitta), Biral (222 Km from Biratnagar) and Rohanpur (285 Km from Biratnagar) are now operational for Nepal-Bangladesh bilateral trade and transit. Banglabandha land port is linked with the national highway while the latter two are connected by the railways on both sides of the border. Meanwhile, the level of physical infrastructure and trade related services on all the border posts need to be improved in order to make operations more efficient.
The idea of connectivity in eastern South Asia, gained pace with the signing of the BBIN Motor Vehicle Agreement (MVA) in 2015. Protocol on inland water transport-2015, and coastal shipping agreement-2015 between India and Bangladesh, agreement on bus services between Nepal and India in 2015 and the understanding reached to use Nepal's transit traffic through the inland water route of India in 2018 were the watershed arrangements reached in terms of creating a network of transport connectivity in this sub-region. India's accession to the International Road Convention (TIR) and ratification of WTO trade facilitation agreement has added a new dimension to the facilitation of transit trade and enlarged connectivity between the four partnering countries.
The use of information technology in the provision of trade and transport services has been accentuated more than ever due to the upsurge of Covid-19. Many private service providers and the government regulatory bodies are now pursuing online services which has a net effect on the reduction of paperwork and time for completing the transactions. Stylized facts reveal that physical connectivity combined with the application of IT enabled services in cross-border transaction creates synergy in achieving efficiency and meeting the objectives of trade facilitation.
There are a number of issues that need to be addressed in order to establish a smooth transit and transport network in the BBIN sub-region. First, infrastructures such as roads, railways and inland water transport need to be upgraded and standards should be harmonized. Second, missing links in the transport network should be restored, third, the customs and border clearance process should be simplified with the greater use of IT based services, and fourth, an intra-regional transport agreement should be negotiated in order to allow the cross-border movement of goods and passenger traffic. Most importantly, the existing transit treaties concluded between the land-locked countries and their coastal neighbours needs reviewing and revision with a view to simplifying the overall process related to the movement of goods across the transiting countries.
The proliferation of inland clearance depots, container freight stations and other border infrastructures in the BBIN sub-region has made it possible to move goods from one facility to another in a secure way with the use of containerized services. The ICDs or CFSs are connected with the port systems in India and Bangladesh. But those dots in the hinterland should connect with each other for the purpose of increasing competition and bringing efficiency in door to door services. A working arrangement on receiving containers and their dispatch from those nodal points should be developed so that it would make it possible to diversify the transit and transport corridors, making use of ports other than the existing ones officially designated by the governments. In such conditions, Nepal may be able to use the dry ports of Tughlakabad and Dadri in Haryana, thereby linking Birgunj, and Banbasa with Mumbai and Kandla port. Similarly, a working arrangement could be made in linking the dry port of Benapole and Dhaka, Bangladesh with Birgunj and Biratnagar. Similarly, the riverine terminals of Kalughat and Sahebgunj could also be linked with Birgunj and Biratnagar ICD respectively.
However, the arrangement for connecting the nodes of intermodal movement needs to be supported by an appropriate regulatory framework agreed upon by the BBIN members. Such a framework should include, among other things, the methods of receipt and dispatch of containers and goods, storage of containers, mode of transport, liability of the carriers and terminal operators, and payment of fees and charges etc. A sub-regional agreement for enabling the movement of goods between various dry ports should be negotiated for greater connectivity and complementarity of trade.
The eastern part of South Asia comprising of North-East India, Nepal, Bangladesh and Bhutan is facing more challenges when it comes to creating a transport connectivity network in comparison to the rest of South Asia. This has become one of the deterring factors in the economic growth of the sub-region and the integration of the different economies.
The border management infrastructure in these countries has been there since the 1990s, which helped to establish transport linkages with the seaports on one side and also helped to increase formal trade among the partnering countries caused by better managed border facilities.
Increased efficiency in transport operations is considered a prerequisite of regional integration. Efforts have been made in recent years to improve the transport network through the intervention in hard and soft infrastructures. The BBIN Motor Vehicle Agreement has been a precursor in this initiative. Improvement of transport and border infrastructures, development of special economic zones, recognising inland waterways as an important mode of transit transport and use of electronic means in cargo tracking are some important initiatives taken and needed to improve connectivity in the sub-region.
The related connected infrastructure to facilitate the intermodal transfer and movement of goods is needed in order to achieve greater efficiency in trade and investment. This needs to be duly supported by the appropriate regulatory framework and requires regional or sub-regional agreements. This should be earnestly pursued by the partnering countries if they wish to achieve an economically integrated sub-region in South Asia, also a building block for greater regional integration.
(Ojha is former Commerce Secretary.)