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Developing Economic Corridors in South Asia

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Developing Economic Corridors in South Asia Developing Economic Corridors in South Asia As tariff-based barriers decline in South Asia, countries in the region are recognizing the importance of transport and trade facilitation measures to reap the benefits of trade liberalization. The next stage in regional cooperation is the development of economic corridors. This book discusses the shaping of economic corridors along regional transport arteries and DEVELOPING shows how opportunities for industrial agglomeration and expansion can bring dynamic gains to the region. It identifies viable subcomponents to link ECONOMIC CORRIDORS with principal transport networks and economic clusters while suggesting IN SOUTH ASIA policy measures to ensure that benefits are fully realized. Policy makers and development economists will find this volume a valuable resource. About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to approximately two-thirds of the world’s poor: 1.6 billion people who live on less than $2 a day, with 733 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Edited by Prabir De and Kavita Iyengar ISBN 978-92-9254-510-9 ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org 9 789292 545109 > Publication Stock No.: BKK146474-2 Printed in India DEVELOPING ECONOMIC CORRIDORS IN SOUTH ASIA Edited by Prabir De and Kavita Iyengar Edited by Prabir De and Kavita Iyengar © 2014 Asian Development Bank All rights reserved. Published in 2014. Printed in India. ISBN 978-92-9254-510-9 (Print), 978-92-9254-511-6 (PDF) Publication Stock No. BKK146474-2 Cataloging-In-Publication Data De, P. and Iyengar, K. Developing economic corridors in South Asia. Mandaluyong City, Philippines: Asian Development Bank, 2014. 1. Regional economy. 2. Transport infrastructure. 3. Trade facilitation. I. Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. Note: In this publication, “$” refers to US dollars. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, please contact: Fax +63 2 636 2648 [email protected] Contents Foreword v Acknowledgments vii Contributors viii Tables, Figures, Box, and Appendixes ix Abbreviations and Acronyms xiii Overview: Making the Case for Economic Corridors in South Asia 1 Prabir De and Kavita Iyengar Part I: Rationale, Challenges, and Opportunities Chapter 1: Economic Corridors and Regional Economic Integration 15 Prabir De Chapter 2: Infrastructure Development, Industrial Agglomeration 45 and Regional Trade in South Asia Chiranjib Neogi Chapter 3: Economic Corridors, Trade Costs, and Regional Production 63 Networks in South Asia Ajitava Raychaudhuri and Prabir De Chapter 4: Economic Corridors in South Asia: Exploring the 77 Benefits of MarketAccess and Trade Facilitation Selim Raihan Part II: Case Studies Chapter 5: Transit and Trade Facilitation across Economic 113 Corridors Connecting Bangladesh, India, and Nepal Pushpa Raj Rajkarnikar Chapter 6: Transit and Trade Facilitation across South Asian Corridors: 139 India–Pakistan Land Connectivity Paramjit S. Sahai and Vijay Laxmi Chapter 7: Trade Facilitation through Economic Corridors in South Asia: 157 The Pakistan Perspective Ghulam Samad and Vaqar Ahmed Chapter 8: Trade Potential and Economic Cooperation between 179 Bangladesh and Northeast India Mohammad Masudur Rahman Chapter 9: Economic Corridors and Pro-Poor Private Sector Development 195 in South Asia: A Case Study of Bangladesh and India Saikat Dutta and Suranjan Gupta Appendixes 221 Foreword South Asia needs to create more than 12 million jobs every year for sustained growth. A significant part of the jobs will have to be created in manufacturing and related logistics and services. Unlike in East and South East Asia, the manufacturing sector has underperformed in South Asia due to various constraints, which, if addressed effectively, can unlock untapped economic potential of the young demographics of South Asia. This is one of the key policy thrusts of the governments in the region. Facilitating industrial economic clusters around important transport corridors that link to global production networks—otherwise called ‘economic corridors’—is one of the important means to strengthening the manufacturing sector and creating jobs. Economic corridors capitalize on efficient multimodal transport network within a defined geography with the help of quality infrastructure, logistics, distribution networks that link production centers, urban clusters, and international gateways. Equally important for transforming transport corridors into economic corridors is an enabling policy framework that eases doing business and non-tariff measures to facilitate trade. Economic corridors promote growth by removing infrastructure bottlenecks, improving access to markets, stimulating trade and investment and boosting productivity and efficiency through associated network externalities and agglomeration effects. They attract private investments in productive assets, which generate employment. Economic corridors also promote inclusive growth by expanding economic opportunities in backward regions and linking cities and towns with urban centers and industrial clusters. This book describes through a series of papers, the key conditions for transforming transport corridors into economic corridors, and associated constraints. It establishes the rationale for developing economic corridors, and related benefits from production value chains along those corridors. It stresses the significant potential of economic corridors in South Asia, particularly those being developed under the South Asia Subregional Economic Cooperation program. Countries in the subregion would benefit by working closely to exploit the full economic potential of the economic corridors. The book is a result of painstaking stakeholder consultations with policy makers, academics, businesspersons, among others. I appreciate the contribution of the South Asia Network for Economic Modeling in Dhaka, the Institute for Policy Research and Development in Kathmandu, and Research and Information System for Developing Countries (RIS) in New Delhi. I recognize the invaluable contribution of Mr. Biswajit Dhar, the then Director General of RIS in bringing together institutional partnerships, and providing the stewardship for this initiative. Developing Economic Corridors in South Asia I hope that this book will be an important reference for policy makers, academics, and other stakeholders committed to rapid and sustainable economic growth through regional cooperation in South Asia. Hun Kim Director General South Asia Department Asian Development Bank vi Acknowledgments The editors acknowledge the inputs from experts, policy makers, research scholars, and government officials. Paper reviewers include Syed Saif Hossain, Centre for Policy Dialogue (CPD), Dhaka and Macquarie Law School, Sydney; Fukunari Kimura, Keio University, Tokyo and Economic Research Institute of ASEAN and East Asia (ERIA), Jakarta; Javaid Mansoor, National Trade and Transport Facilitation Committee (NTTFC), Islamabad; Partha Pratim Pal, Indian Institute of Management Calcutta (IIM Calcutta), Kolkata; Sanjib Pohit, National Institute of Science Technology and Development Studies (NISTADS), New Delhi; Mustafizur Rahman, Centre for Policy Dialogue (CPD), Dhaka; Nisha Taneja, Indian Council for Research on International Economic Relations (ICRIER), New Delhi; and C. Veeramani, Indira Gandhi Institute of Development Research (IGIDR), Mumbai. Valuable comments were provided during consultation seminars by Monika Dhami, Department of Economic Affairs (DEA), Ministry of Finance, Government of India; Yuba Raj Khatiwada, Governor, Nepal Rastra Bank (NRB), Kathmandu; Purusottam Ojha, Secretary, Prime Minister’s Office (PMO), Government of Nepal, Kathmandu; Madhu Sudhan Pokhrel, Department of Custom, Government of Nepal, Kathmandu; Mozibur Rahman, Bangladesh Tariff Commission (BTC), Dhaka; K L Krishna, Centre for Economic and Social Studies (CESS), Hyderabad; Arup Mitra, Institute of Economic Growth (IEG), New Delhi; Manoj Pant, Jawaharlal Nehru University
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