Report

9 Quantification of Benefits from Transport
and Trade Facilitation in South Asia 1
INTRODUCTION
The increase in trade across the world since the past
several decades was driven by several very diverse
factors which countries consciously pursued, including
the reduction in legal trade barriers and defining of
international standards for products, manufacturing
and services, among others. Countries pursued trade
liberalisation measures since they were convinced that
the positive benefits from opening up trade and tariff
reduction for the country as a whole outweighed the
negative effects on the protected domestic producers
and loss of revenue for the government. Trade was
further facilitated but falling transportation costs over
time which allowed firms to base manufacturing
facilities in countries which were able to offer them the
optimum low-cost mix of technology, labour, and
capital at basic minimum standards.
In the context of regional trading blocs, these
benefits from trade sometimes need to be quantified
and demonstrated to all trading partners in order to
induce them to participate in the liberalisation process.
However, benefits from improved transport and trade
facilitation measures bring obvious win-win outcomes
for all trading partners, subject to certain conditions.
High trade costs such as transportation charges,
documentation requirements, and clearance delays at
the borders have a discouraging impact on trade and
production similar to trade restrictions such as tariffs
and quotas. A country’s ability to deliver goods and
services in a timely manner at low cost is the key to its
export competitiveness. It also promotes imports and
foreign direct investment which encourages innovations
in technology. Trade and transport facilitation measures
targeted at improved trade logistics through simplification
of customs procedures and enhanced connectivity
bring direct benefits to business, which includes
the faster clearance and release of goods, costs cutting
and reduced delays, increased transparency and integrity,
and enhanced competitiveness. 2 The benefits in
the form of savings of time and reduced costs to the
trading partners help the economy to grow fast. Further,
since inefficient trading procedures act as NTBs to
trade, improved trade and transport facilitation reduces
the scope for illegal trade and corruption. Trade facilitation
measures also provide participating countries
safeguards against sometimes conflicting national
measures imposed by individual countries.
Given the various issues of trade and transport
facilitation in South Asia, this chapter quantifies gains
from cooperation identified regional projects using
BCA. 3 Although regional in nature, the benefits are
computed for one country which is undertaking the
project on its territory in order to provide a flavour of
1
Useful comments and inputs have been provided by Prabir De at the Research and Information System for Developing
Countries (RIS), New Delhi, T. Keshawrani and K.L. Thukral at the Asian Institute of Transport Development, New
Delhi, and Saikat Sinha Roy at Jadavpur University. Bhishma Rout’s assistance in procuring data and documents is much
appreciated.
2
http://www.dti.gov.uk/europeandtrade/key-trade-issues/trade-facilitation/page22745.html
3
BCA involves the aggregation of the present value of the time-streams of all benefits and costs expected generated by the
proposed project (James, 2005). The three steps involved for the BCA are as follows: compile costs of the project; calculate
all possible monetary benefits of the project; and calculate present value of net benefits from the project. The time-stream of
total costs is depicted as C 1
, C 2
, . . . C n
, and total benefits as B 1
, B 2
, . . ., B n
over an ‘n’ year time period. The stream of net
benefits (B 1
– C 1
), (B 2
– C 2
), . . ., (Bn – C n
), where all values of C t
are 0 after costs are incurred. The present value (NPV) of is
the sum of discounted net benefits, where the discounted net benefit for any year t is obtained by dividing each net benefit
value (e.g. B 2
– C 2
) by (1 + r) t where r is the social ‘discount’ rate. NPV = Σ t
(Bt – Ct)/(1+r) t .