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76 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA the main reason for informal trade (for lower value goods) is to avoid high transactions costs. The inadequate transportation systems between the two countries have led to high transportation costs with respect to port congestion, excessive documentation, slow movement of goods, etc. The Potential It is estimated that the removal of all tariffs would enhance intra-regional trade by a factor of 1.6, or 5% increase in trade for every 1% reduction in tariff (Mehta and Bhattacharya 2000). India has persistently had an export surplus with Bangladesh and this surplus has been increasing over time. However, we can expect an increase in Bangladesh imports with the opening of the Indian market due to the lifting of quantitative restrictions on tradable in SAARC. Since SAFTA has been adopted, SAARC countries are expected to further reduce tariffs on a sectoral basis. With an increasing pressure on an already weak infrastructure, the entire system may collapse if appropriate remedial measures are not taken with regard to the movement of goods between the two countries. Padeco (2005) computes that goods worth about US$1,650 million are presently moved across the six SASEC corridors and that transport cost savings of about US$25 million may be annually realisable. Reductions in transport costs have similar benefits to reductions in tariffs as there is a general stimulus trade, estimated at 5% for every 1% reduction in cost. The reduction in the costs to end-users of goods moved along the corridor is estimated at an average of 1.5% average which will stimulate trade and lead to an estimated 1% addition to regional GDP. The total first year direct benefits for the proposed measures are calculated as about US$25 million, with over 75% of this sum being accrued from the Kolkata-Petrapole- Benapole-Dhaka corridor. On this corridor, large volumes of traffic are combined with large potential benefits. The distribution of benefits will be between international shipping companies which may gain about 6% of the total benefits; truck operators who may gain about 41% of the initial total benefits from a combination of savings in vehicle time through reduced delays; reduced speed/facilitation payments; and reductions cargo loadings; Bangladesh Railways and the Indian IWTC, who may gain 5% of total benefits from reductions in operating costs; and importers, consumers of imports and producers of exports who may gain 48% of total benefits, largely from reduced cargo detention times. These latter benefits are most likely to filter to the poorest sections of the community. It is estimated that Bangladesh, will gain about 63% of total benefits, this mainly due to savings at the Bangladesh/Indian borders, which will mainly benefit Bangladeshi consumers, producers and Bangladeshi truck operators. India will gain about 21% of total benefits and the proportion of these savings that are likely to be absorbed by the Indian trucking industry. Accordingly, GDP in Bangladesh may grow by 1.6%. Subregional parts of India, mainly Bihar and West Bengal, may grow by 0.4% growth which is lower than that for the region as a whole, because of the very large population in the subregion and the country’s share of benefits is incommensurate with the population affected. The socio-economic impact on the rural population living along a transport corridor needs to be considered and quantified. This includes impacts on agricultural activities, non-agricultural activities, distance to markets, and access to education, health facilities, and to political participation. These translate into measurable benefits (time savings, improved connectivity and access to markets), reflected as: • National benefits manifested as increased trade between countries, reduced vehicular operating costs, and times savings • Local benefits such as increased local employment due to better job opportunities, improved health due to smoother traffic flows and less congestion, better access to education due to improved connectivity. 9 The Project For this analysis, we consider a specific section of the corridor which will help in immensely easing the heavy current as well as future traffic flows. NH34 and SH1 have already been considered under ADB’s West Bengal Corridor Development Project (ADB 2001a and b). We 9 AITD (2003) estimates that for a national highway: mobility for work increases 32%; use of the road for various purposes increases 79%; probability of incidence of poverty reduces 17%; rural proportion of non-agricultural workers increases as much as 50%; over all school enrolment increases 40%, and for girls alone 17%; and access to amenities such as electricity, drinking water, and sanitation increases 22%
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 77 consider improvements along NH35, which the government is considering and, additionally, improvements at the border points. The remedies suggested are: • Upgradation of the Barasat-Bangaon national highway (NH35) with two-lane facilities and provision of illumination. It is currently a very poor motorable single lane road of 60 km length. Civil works includes widening and improving road geometry and drainage, environmental and road safety considerations, and provision of graded railway crossings. • Upgrading the Naobhanga Bridge, 3 km short of Petrapole. The bridge is currently in extremely bad shape. Improvement work will include reconstruction of the bridge along realigned sections • Building of 5 railway overbridges on the railway crossings en route the export road to Petrapole • Construction of two gates at the Petrapole border; one each for import and export cargo and making the area two-lane by demolishing trees and small sheds which are creating obstacles • Creation of truck terminal and warehousing facilities on 16 acres of land at Petrapole procured by CWC and provision of rest-stop facilities • Building cross-border trade and customs facilities including building, lighting, sheds, parking bays, and other infrastructure need to be constructed. The facility will also require communication and customs systems and administrative systems Projections have been carried out for the project area and are presented in Table 9.5. Table 9.5 Project Cost Estimates Kolkata–Bangaon $ million Civil works, equipment, and bridges 90 Land acquisition and resettlement activities 10 Consulting services 2 Design and construction 3 Work at Petrapole 11 Upgradation of warehousing facilities 9 Total 125 The traditional view holds that highways facilitate intercity travel and transport of goods. However, largescale investment in road infrastructure is an effective and viable policy measure for poverty alleviation. In this section, we quantify two types of benefits emerging from the project: increased trade and local employment benefits. Increased Trade: India’s share in the total imports of Bangladesh grew from 3.6% in 1980, to 9.37% in 1995, and in 11.1% in 2000. However, India’s share of imports from Bangladesh remained less than 1% between 1990 and 2000. The rate of growth of India’s exports per annum over the years has been increasing at a very high rate since 2000; the rate of growth of exports per annum has been over 20% and the rate of growth of imports has been 20–40%. More efficient movement of trucks and shipments will result in increased trade. Assuming a 6% growth in GDP over time (pessimistic scenario), we forecast trends in imports and exports for the period 2008–30 (Table 9.6). 10 Table 9.6 Indo-Bangladesh Projected Trade Balance (US $ million) Year Exports Imports Trade balance 2008 2,596.06 199.70 2,396.36 2010 3,482.70 269.29 3,213.41 2015 7,259.69 199.32 7,202.92 2020 13,661.85 568.60 6,691.09 2025 15,132.84 1,200.60 13,932.23 2030 65,754.41 5,352.83 60,401.57 We make a conservative estimate regarding the with-project scenario for our analysis. We assume that benefits from growth in trade due to the project will accrue after the project is completed, i.e. only after five years. We assume a conservative scenario whereby with the project there is only further 2% increase in exports and 4% increase in imports, i.e. imports will grow at a higher rate since we expect with SAFTA, it will be easier for Bangladesh to export to India. Thus, there is an Fig 9.3 Trade Balance with and without Project Scenarios 10 For the function log GDP = a + b log X, we obtain b = 2.76 with R = 0.96; SE = 1.33; t-stat = 16.76 for log GDP = a + b log M, we obtain b = 1.74 with R = 0.76; SE = 2.55; t-stat = 5.52 which we use to make forecasts over a 25 year period.
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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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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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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10 QUANTIFICATION OF BENEFITS FROM
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2 Literature Review and Rationale f
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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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