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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 .
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 71 the extent of benefits that can accrue. The benefits if computed for the subregion will multiply manifold. Future analysis may be undertaken to examine options for implementation of cross-border projects. Of the four projects, two were identified by the South Asia Subregional Economic Cooperation (SASEC) transport and tourism working groups 4 : • Upgrading of the Kolkata-Petrapole/Benapole corridor and customs facilities • Development of Bagdogra airport as a gateway and hub • Railway improvement between Lahore and Wagah/ Attari • Colombo port expansion. The positive impact of all projects is intuitive and indisputable, and the BCA helps in demonstrating the extent of gains in one country alone. As compared to national projects, these projects have the added benefit of high trade and tourism potential. The discussion on BCA for the projects in different scenarios brings out that the projects are immensely beneficial and extension of infrastructure facilities could be considered by the South Asian countries jointly. OVERVIEW OF CURRENT BARRIERS TO TRADE IN SAARC Lowering of border tariffs was integral to South Asia’s trade policy liberalisation since the 1990s. However, despite high rates of GDP and export growth, the countries still confront hurdles in the form of infrastructure bottlenecks, poor governance, serious constraints in land and labour markets, and inadequate financial markets. Das (2007) summarises that ‘some of the most conspicuous economic constraints have been created by power shortage and inland road and rail transport constraints, archaic labour laws, and inefficient trade infrastructure, particularly customs procedures and regulations.’ Despite the lowering of tariffs, restrictive trade and transport facilitation have hampered intraregional trade. Non-tariff Barriers to Trade SAARC countries have several ad hoc trade restrictions and NTBs on imports and exports. It is seen that NTBs faced by SAARC countries accelerated in the 1990s as tariff measures went down. The NTBs most often imposed relate to sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT), quotas, antidumping measures, license requirements, and countervailing measures. Documentation procedures and SAPTA certification have been strong forms of NTBs amongst SAARC countries. The computerisation of trade transactions (cargo declaration, licensing, and duty payments) opens up need for standards (e.g. ASYCUDA) and compatibility across regional systems. Alburo (2004) highlights that though there is scope for regional cooperation in addressing NTBs, there is little scope for resolving the barriers which is a matter for negotiations amongst the governments. Table 9.1 Percentage Share of NTBs to all NTBs Faced by SAARC Countries Non-Tariff Barrier Share (%) SPS, TBT, and Other Related Measures 86.3 Tariff Quota 9.8 Anti-Dumping Measures 7.4 License Requirement 5.3 Countervailing Measures 1.2 Note: Percentage shares exceed 100% since number of cases varies. Source: Bhattacharya and Mukhopadhyay 2002 (Table A-10 Part B). Governance Issues The World Bank’s Doing Business portal provides ranks and objective measures of business regulations and their enforcement across 178 countries of the world. Efficient customs, good transport network, and fewer documentation requirements promote exports and imports and therefore growth and employment. The World Economic Forum’s Global Competitiveness <strong>Report</strong> 2007–08, provides detailed rankings for five of the SAARC countries – Bangladesh, India, Nepal, and Pakistan, and Sri Lanka. Lack of infrastructure and government bureaucracy are listed as India and Pakistan’s main problems for doing business, while in Nepal it is political instability and in Bangladesh, corruption. 4 The various SASEC working groups commissioned studies carried out by a group of sector experts, in consultation with the concerned governments. Each SASEC report makes an analysis of the situation at the ground level and narrows down on projects and programs that could be jointly adopted by the countries. They mainly list a menu of options which were later discussed at the working group meetings. Identified projects are in ADB (2005) and Padeco (2005). Discussions were held within INRM, after reviewing various SASEC sector reports.
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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Part I BENEFITS FROM TRADE, INVESTM
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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