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New economic corridors: India on road to redefine trade ties with South Asian neighbours

Currently, the connectivity through the sea route with Bangladesh is through Colombo and Singapore ports, which, being circuitous, adds to transportation costs.

Written by Sharmistha Mukherjee | Published: November 18, 2015 1:43:54 am

Improved connectivity in the South Asian region, both through road links and waterways, is being leveraged by the Centre as a means to enhance regional co-operation and foster intra-regional trade. The latest among these measures is the standard operating procedure (SOP) India and Bangladesh signed to operationalise an agreement on coastal shipping last Sunday.

The pact is aimed at promoting bilateral trade and bring down the transportation cost of export-import cargo. Apart from this, India has also signed a proposal to facilitate free vehicular movement with Bhutan, Bangladesh and Nepal (BBIN) and is also working on operationalising a 3,200-km road link from Moreh (India) to Mae Sot (Thailand). According to the India-Bangladesh SOP, both countries will have to treat each other’s vessels as per international sea transportation norms.

Besides, the two sides have also agreed on using river sea vessels (RSVs), which are smaller in size, for Indo-Bangladesh coastal shipping. A senior government official said, “The deep draft ports on the eastern coast of India can be ‘hub ports’ for the onward transportation of cargo to Bangladesh via the coastal mode through RSV category of vessels. The Indian ports will attract enhanced cargo and also the overall transportation cost to Bangladesh will get reduced. Besides, the opening of coastal shipping between India and Bangladesh would enable the movement of cargo to the North East through coastal shipping up to Chittagong and thereafter by road/inland waterways.”

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Rapid growth in bilateral trade between the two countries has led to congestion on roads connecting the Indo-Bangladesh border, hindering movement of cargo and also increasing transportation cost.

Currently, the connectivity through the sea route with Bangladesh is through Colombo and Singapore ports, which, being circuitous, adds to transportation costs.

There is no significant cargo movement between sea ports of Bangladesh and India as it is not profitable for the big vessels to operate between these ports. With the SOP providing for operation of RSVs on coastal shipping routes, there will be direct connectivity of eastern sea ports of India with Chittagong and other ports in Bangladesh. This, besides improving the connectivity will provide competitive freight rates, say government sources. “The progress and economic development of the countries in the region are interlinked and enhanced regional connectivity will give a boost to trade and commerce among the countries and with other regions through intra-regional and inter-regional trade,” added the official.

According to official estimates, transforming transport corridors into economic corridors could potentially increase intraregional trade within South Asia by almost 60 per cent and with the rest of the world by over 30 per cent.

Prime Minister Narendra Modi is learnt to be keen on establishing infrastructure links to enhance regional co-operation between South Asia and South-East Asia. Skirting Pakistan, India signed a road connectivity pact with Bangladesh, Bhutan and Nepal (BBIN) on June 15 to pave the way for greater trade and economic co-operation in the sub-region. The pact aims to open up vehicular traffic — passenger, personnel and cargo — among the signatory nations to enhance regional co-operation. “The BBIN agreement has been designed to facilitate efficient road transport in the sub-region and will help each country in creating an institutional mechanism for regional integration. Exports and imports will increase and translate into new opportunities for trade and business,” said a Ministry of Road, Transport & Highways (MoRTH) official.

The pact, according to officials, will give India greater access to the North-Eastern region of the country via road links in Bangladesh; connect the land-locked Bhutan and Nepal to open seas and global markets via Chittagong. The pact will be supplemented through building and upgrading roads, railways and waterways, energy grids, communications and air links to ensure smooth cross border flow of goods, services, capital, technology and people.

India had also planned a road connectivity pact — the Saarc Motor Vehicle Agreement — among South Asian Association for Regional Cooperation (Saarc) nations comprising Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka in November 2014. It was to be signed along with the Saarc Framework Agreement for Energy Cooperation and Saarc Regional Railways Agreement, but Pakistan objected citing the lack of internal approvals. The government consequently resolved to pursue a sub-regional motor vehicle pact among Bangladesh, Bhutan, India and Nepal.

Bus services have already been inaugurated between India, Nepal and Bangladesh. Services are now available between Delhi-Kathmandu, Varanasi-Kathmandu, Kolkata-Agartala via Dhaka, and Guwahati-Dhaka and will soon become operational between Delhi-Pokhara in Nepal.

India, Myanmar and Thailand too have agreed to develop a similar pact (IMT) on the lines of the Saarc Motor Vehicle Agreement. Secretary-level talks for this were concluded in Bengaluru in June. Consensus has been reached on the text of the pact.

The MoRTH official added, “The India-Myanmar-Thailand road link is of strategic importance. It has been designed to bridge economies in the Asean and Saarc zones. The pact is scheduled to become operational shortly and to mark the occasion a car rally would be held before March 2016.”

The highway project, which is to run from Moreh in Manipur to Mae Sot in Thailand via Mandalay in Myanmar, will ensure that India’s eastern border is opened to a new bus route from Imphal to Mandalay.

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