Regional Transport Infrastructure: Mapping Projects to Bridge South Asia and Southeast Asia

NO. 43

SEPTEMBER 2015 ADB BRIEFS

KEY POINTS Regional Transport • The economies of South Asia and Southeast Asia are a bright spot in a fragile world economy. These economies Infrastructure: Mapping are growing steadily and forging closer economic ties than ever before. However, regional integration between South and Projects to Bridge South Southeast Asia is still relatively limited, hindered by various problems particularly bottlenecks in transport infrastructure. Asia and Southeast Asia • Road and rail links between Bangladesh, India, Myanmar, and Thailand—the key land connections between the two regions—are patchy, with below- Peter Morgan Michael Plummer standard sections and missing links. In Senior Consultant for Research Director, SAIS Europe and the case of rail transport, these problems ADB Institute Eni Professor of International Economics are compounded by differences in gauges and rolling stock. Furthermore, seaports in the Bay of Bengal suffer from Ganeshan Wignaraja deficiencies in draft, capacity, operational Advisor, Economic Research and efficiency, and road and rail access. • Improving the quality of regional Regional Cooperation Department, transport infrastructure, and adding it Asian Development Bank where it does not exist, will lower unit transport costs, reduce shipment times, and increase throughput, all of which Introduction can lead to increased trade and greater benefits. The analysis of transport infrastructure in this brief focuses The economies of South Asia and Southeast Asia are growing and forging closer on two important areas: (i) road and economic ties than ever before. Growth and regional integration have been fuelled rail connections between Cambodia, by several factors including falling barriers in trade and investment, expanding Bangladesh, India, Myanmar, Thailand, production networks and supply chains, a commodity boom, and heighted demand and Viet Nam; and (ii) ports in the Bay of from a rising middle class. However, integration of trade, investment, and financial Bengal, which typically have high costs but the potential to contribute to the flows between these two subregions, while making progress, has been relatively development of supply chain networks limited, hindered by various bottlenecks and gaps associated with transport connecting the two regions. The brief infrastructure, among others. draws upon research undertaken for the ADB–ADBI flagship study entitled The link between improved transport infrastructure and greater potential for trade Connecting South Asia and Southeast Asia, and investment between South Asia and Southeast Asia is clear. In light of the which analyzed improvements in regional transport infrastructure, including slowdown in the advanced economies, and the moderation of growth in the People’s highways, railroads, and seaports that Republic of China (PRC), there is a greater need than ever to expand the size of can contribute to increased trade and regional markets through integration measures. investment between the two regions. • Total costs of new regional transport A flagship study of the Asian Development Bank (ADB) and the ADB Institute projects (roads, railways, and ports) are estimated by the ADB–ADBI (ADBI) entitled Connecting South Asia and Southeast Asia qualitatively and study at $62.6 billion, while the quantitatively analyzes how improvements in cross-border transport infrastructure— cost for priority transport projects is including highways, railroads, and seaports—can contribute to increased trade and estimated at $8.4 billion. Meanwhile, the investment between the two regions.1 It focuses on countries in the two regions that estimated potential benefits of reduced transportation costs (ranging from $89 billion to $358 billion) are larger 1 ADB and ADB Institute. 2015. Connecting South Asia and Southeast Asia. http://www.adb.org/ than these costs. sites/default/files/publication/159083/adbi-connecting-south-asia-southeast-asia.pdf

ISBN 978-92-9257-125-2 (Print) ISBN 978-92-9257-126-9 (e-ISBN) ISSN 2071-7202 (Print) ISSN 2218-2675 (e-ISSN) Publication Stock No. ABF157656 ADB BRIEFS NO. 43

are physically closest to the other region; in particular, it reflects cross-regional integration plans, including the Master Plan for the new opportunities made available by the opening up of Myanmar Association of Southeast Asian Nations (ASEAN) Connectivity, in economic and political terms.2 The analysis of ports focuses on the Greater Mekong Subregion (GMS) corridor network, the South those in the Bay of Bengal, since they generally have high costs but Asian Association for Regional Cooperation multimodal transport the potential to contribute to the development of supply chain strategy, and the India–Myanmar–Thailand Trilateral Highway networks connecting the two regions. project sponsored by the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC); including both The ADB–ADBI study estimates total costs of new transport-related routes and design standards. Four primary Asian Highway routes regional connectivity projects at $62.6 billion, including $17.7 billion cross east to west connecting South Asia and Southeast Asia, and for highways, $33.7 billion for railroads, and $11.1 billion for ports. The hence are most relevant for this study: AH1 and AH2 linking India total cost for priority transport projects is estimated at $8.4 billion. and Bangladesh with Myanmar and the rest of Southeast Asia; These estimates were based on a painstaking bottom-up analysis and AH15 and AH16 linking the Lao People’s Democratic Republic of critical infrastructure bottlenecks and the formulation of possible (Lao PDR), Thailand, and Viet Nam.4 These routes pass through projects to alleviate them. The estimates cover projects directly Myanmar, the only land bridge between the two regions.5 related to creating new infrastructure between South Asia and Southeast Asia, or upgrading existing cross-border infrastructure Background work for the ADB–ADBI study carried out an extensive which this brief covers. They do not include the cost of infrastructure analysis of the relative merits of alternative through routes linking projects not directly related to cross-regional connectivity. the two regions.6 It used a two-stage approach to identify priority Modelling work for the study concludes that the potential benefits highway projects. First, it selected priority “port-to-port” corridors of reduced transportation costs resulting from such investments based on a set of scoring criteria. Second, the study identified are significantly larger than these investment costs. candidate projects on each priority corridor from existing project pipelines and scored them on the basis of their connectivity This ADB brief highlights the critical role of transport infrastructure rationale; traffic and trade intensity; project recognition, to bridge South Asia and Southeast Asia. It maps the details of acceptance, and preparedness; socioenvironmental problems; and economic corridors and highways, railroads, and seaports. It also extent of benefit sharing among participating countries. attempts to identify priority transport investment projects to link the two subregions. Finally, it summarizes the key findings and discusses The three highest scoring corridors were (in order): the Kolkata–Ho the potential benefits from investing in transport infrastructure to Chi Minh City corridor through the Chicken’s Neck of Northeast link the two subregions.3 India, the Chennai–Dawei–Ho Chi Minh City corridor, and the Chittagong–Ho Chi Minh City corridor. The Chennai–Dawei–Ho Chi Minh City corridor follows the Mekong–India economic corridor, which is also part of the Master Plan for the ASEAN Plan Highways Connectivity.7 Map 1 shows these routes, plus a secondary route connecting Myanmar and Da Nang in Viet Nam (AH16). The Asian Highway network, established by the United Nations Economic and Social Commission for Asia and the Pacific Table 1 shows priority highway projects (total cost of $986 million) (UNESCAP) in 1992, is foremost among the existing pan-Asian while Table 2 summarizes the costs for all connectivity-related highway initiatives. The Asian Highway network follows frameworks highway projects ($17.7 billion). These projects and the priority for internationally agreed routes and infrastructure standards, highway corridors identified in this brief are also shown in Map 1. and provides the basic template for subsequent land-based, All the priority projects (except those related to Thilawa port in

2 For South Asia, this means Bangladesh, Bhutan, India, Nepal, and Sri Lanka. For Southeast Asia, this includes the Greater Mekong Subregion (GMS) countries— Cambodia, the Lao PDR, Myanmar, Thailand, and Viet Nam. The People’s Republic of China (PRC) (specifically Yunnan Province and Guangxi Zhuang Autonomous Region) is also a member of the GMS, and is considered in this study to the extent that it contributes to connectivity between South Asia and Southeast Asia. 3 Trade and transport facilitation can also contribute substantially to interregional connectivity—indeed, without them, improvements in physical connectivity can have only limited effects. They are discussed at length in the main ADB–ADBI study. However, they are outside the scope of this brief, and will be treated separately. 4 Route numbers begin with “AH,” which stands for “Asian Highway,” followed by one or two or three digits. Economic and Social Commission for Asia and the Pacific. 2015. Intergovernmental Agreement on the Asian Highway Network. http://www.unescap.org/sites/default/files/Asian%20Highway%20Agreement- consolidated-10Feb2015-En.pdf 5 United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). 2010. Asian Highway Database 2010: AH Network in Member Countries. New York: United Nations. http://www.unescap.org/ttdw/common/tis/ah/Member%20countries.asp (accessed 23 December 2012). 6 J. F. Gautrin. 2014. Connecting South Asia to Southeast Asia: Cross-Border Infrastructure Investments. ADBI Working Paper. No. 483. Tokyo: Asian Development Bank Institute. 7 Association of Southeast Asian Nations (ASEAN). 2010. Master Plan on ASEAN Connectivity. Jakarta: ASEAN Secretariat.

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Table 1: Priority Road, Rail, and Port Projects

Length Cost Project (km) ($ million) Road Projects India Imphal–Moreh 95 160 India Chennai Port Elevated Expressway N/A N/A Myanmar Endu–Kawkareik 70 150 Myanmar Kawkareik–Myawaddy 46 37 Myanmar Yagyi–Kalewa 186 110 Myanmar Kalewa–Tamu 160 245 Myanmar Thilawa–East Dagon 33 41 Myanmar East Dagon–NR1 Road 31 58 Thailand Myawaddy–Mae Sot 17 55 Thailand Mae Sot–Tak 78 90 Cambodia Aranyaprathet–Poipet 10 40 Subtotal 726 986 Railway Projects India Jiribam–Imphal 125 520 India Imphal–Moreh 95 400 Myanmar Tamu–Kalay 127 98 Myanmar Kalay–Mandalay 539 162 Myanmar Three Pagodas Pass (Myanmar) 110 250 Myanmar Lashio–Ruili (Yunnan Province) 142 480 Myanmar Dawei–BCP Myanmar 130 325 Thailand Three Pagodas Pass (Thailand) 153 490 Thailand Bangkok–Aranyaprathet 260 15 Thailand BCP–Nam Tok 30 75 Cambodia Poipet–Phnom Penh 386 175 Cambodia Phnom Penh Loc Ninh 254 1,100 Viet Nam Loc Ninh–Ho Chi Minh City 129 900 Viet Nam Ha Noi–Lao Cai (BCP) 260 149 Subtotal 2,740 5,139 Port Projects Bangladesh New Sonadia Deepwater Port – 1,000 India Sagar Island Deepwater Port (Kolkata) – 1,300 Subtotal 2,300 Country Totals Bangladesh 1,000 Cambodia 1,315 India 2,380 Myanmar 1,956 Thailand 725 Viet Nam 1,049 Grand Total 8,425 – = not applicable. BCP = border crossing point, km = kilometer. Sources: ADB and ADB Institute. 2015. Connecting South Asia and Southeast Asia. http://www.adb.org/sites/default/files/publication/159083/adbi-connecting- south-asia-southeast-asia.pdf based on J. F. Gautrin. 2014. Connecting South Asia to Southeast Asia: Cross-Border Infrastructure Investments. ADBI Working Paper. No. 483. Tokyo: Asian Development Bank Institute.

4 Regional Transport Infrastructure: Mapping Projects to Bridge South Asia and Southeast Asia

Table 2: Summary of Road, Rail, and Port Projects

Road Projects Road Projects Rail Projects Rail Projectsa Port Projects Total Countries (km) ($ million) (km) ($ million) ($ million) ($ million) South Asia 2,271 12,634 772 3,700 5,318 21,652 Bangladesh 648 11,064 261 1,604 1,100 13,768 India 1,623 1,570 511 2,096 2,210 5,876 Sri Lanka 0 0 0 0 2,008 2,008 Southeast Asia 3,429 5,112 7,021 30,040 5,809 40,961 Cambodia 45 85 696 1,276 90 1,451 Lao PDR 1,042 780 1,125 11,465b 0 12,245 Myanmar 1,593 1,587 4,247 7,860 5,660 15,107 Thailand 569 2,250 824 1,539 59 3,848 Viet Nam 180 410 129 7,900 0 8,310 Grand Total 5,700 17,746 7,793 33,740 11,127 62,613 km = kilometer, Lao PDR = Lao People’s Democratic Republic. a Only new rail projects. b Rail costs in the Lao PDR include $4,200 million for the Savannakhet–Lao Bao build-own-operate-transfer project. Source: ADB and ADB Institute. 2015. Connecting South Asia and Southeast Asia. http://www.adb.org/sites/default/files/publication/159083/adbi-connecting-south- asia-southeast-asia.pdf

Myanmar) are either roads connecting to the border crossing make improvements necessary. In Thailand, road projects along the points (BCPs) or improvements at the BCP itself, and all are on the corridor are intended to ensure a seamless four-lane road network.8 Kolkata–Ho Chi Minh City corridor. The rationale for implementing such projects is simple. Roads leading to BCPs have been neglected and are not maintained properly. In India, the Imphal–Moreh road Railroads is below standard and in poor condition. The same applies to The situation for rail corridors is different from that for roads. Whereas the roads in Myanmar. For example, on the Tamu–Kalewa road, road links mostly exist and mainly need upgrading, many rail links are financed and built by India in 2006, bridges were not included in missing altogether. Moreover, as noted above, this is compounded the contract. The road has deteriorated and full rehabilitation is by differences in gauges and rolling stock, among others. There is now needed but security concerns could delay implementation. currently no rail connectivity between South Asia and Southeast Another set of projects relate to improving the link between Asia and there is no adequate connectivity within the GMS or within Myanmar and Thailand, which will be done by ADB and Thailand’s South Asia for that matter. There are, however, plans to construct the Neighboring Countries Economic Development Cooperation missing links within the GMS and South Asia (South Asia Subregional Agency. In Myanmar, poor maintenance and bridge reconstruction

8 The priority projects in Table 1 may be compared with the priority projects identified in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Transport Infrastructure and Logistics Study Update (see Table 1 in ADB. 2014. Updating and Enhancement of the BIMSTEC Transport Infrastructure and Logistics Study: Draft Final Report. Manila: ADB). All of the road projects in Table 1 for India, Myanmar, and Thailand are included in the BIMSTEC list. The BIMSTEC list contains a number of additional road projects for India, including four-laning of the route from Siliguri to Shillong in northeastern India, but these were judged to be far from the border to be relevant for the ADB–ADBI study, which focused on cross-border connectivity. Cambodia is not a member of BIMSTEC, so the BIMSTEC list does not include the Aranyaprathet–Poipet segment. Road projects for Bangladesh were not included in Table 1 because of the lack of transit agreements with India and Myanmar.

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Economic Cooperation) and also to connect the two regions. The rail Seaports corridors described below are based on these plans. Improving ports and port access has the greatest potential to The Trans-Asian Railway (TAR) is UNESCAP’s counterpart to the improve connectivity between South Asia and Southeast Asia. Asian Highway in the rail transport subsector. The main routes of First, sea trade makes up the bulk of international trade in the two significance for connectivity between South Asia and Southeast regions in value terms, and the share in volume terms is even higher, Asia are TAR-S1 and TAR-S2. Similar to the Asian Highway network, since items with lower value-added tend to move by sea.12 Second, it provides the template for subsequent regional integration transport corridors are normally anchored by ports at each end, efforts for railroad networks, including the ASEAN flagship railway and it is likely that the greatest benefits of increased connectivity transport infrastructure project—the Singapore–Kunming Rail will accrue to the catchment areas of those ports. To be sure, such Link—and the South Asian Association for Regional Cooperation improvements will benefit all trade in and out of a given port, and multimodal framework. cannot easily be associated with growth of trade between South Asia and Southeast Asia specifically. In general one can only assume Similar to that for roads, the approach adopted in the study was to that port improvements will result in a proportionate increase in identify through “port-to-port” railroad corridors that connect the trade with all regions. Still, reducing transport costs and increasing two regions. Based on an analysis similar to that for highways, the regional welfare should be the key economic objective. Third, two most attractive corridors are Kolkata–Ho Chi Minh City through sea trade, especially container trade, is closely associated with the Chicken’s Neck and Dawei–Ho Chi Minh City with branching to manufacturing supply chain networks, a key driver of growth in the Laem Chabang.9 However, the total cost of projects for the Kolkata– region. In comparison, the benefits from increased land connectivity Ho Chi Minh City route is $4.1 billion, much higher than the amount via remote border crossings are likely to be much smaller. required for roads. There are too many missing links to make the Kolkata–Hai Phong through the Lao PDR economically justifiable. ADB argues that, in relation to the concept of corridor development The best way to reach Hai Phong from South Asia is through and international trade, it is desirable to focus on ports as gateways Yunnan Province since rail connections are under construction in to such corridors.13 For example, many GMS corridors have a port at the PRC (Map 2). Total connectivity-related rail project costs are one end and, more importantly, the amount of trade moving along estimated at $33.7 billion (Table 2), and costs of priority projects are those corridors invariably increases on those sections closest to estimated at $5.1 billion (Table 1).10 The Kolkata–Ho Chi Minh City such gateway ports. The study focuses mainly on ports in the Bay and Kolkata–Hai Phong corridors meet the wish of the Government of Bengal, including Colombo, Chennai–Ennore, Kolkata–Haldi, of India to connect Delhi to Viet Nam by rail. By the same token Chittagong, Sittwe, Kyaukpyu, Yangon–Thilawa, and Dawei (see they would also complete the western branch of the Kunming to Map 3). This is because these ports are most directly connected with Singapore route (Singapore–Kunming Rail Line), a key element of South Asian–Southeast Asian trade, but many of them suffer from the ASEAN Master Plan on connectivity.11 numerous bottlenecks, including shallow depth, antiquated facilities, inadequate road and/or rail access, and low operational efficiency. Doubts have been expressed on the viability of building a rail line through the Three Pagodas Pass, but an alternative exists. A rail line In view of the strategic importance of container trade for economic from Nam Tok in Thailand to Dawei in Myanmar may be technically development, the research on ports focuses on issues related and economically more feasible. Nevertheless, if feasibility studies to container trade. Background work for the ADB–ADBI study were carried out now, all projects would likely fail to be economically examined container trade port call data for Bay of Bengal ports and justifiable because of the poor performance of the different identified several issues, many of which reflect the problems cited national railways, among other reasons. It is only when the national above in those ports.14 railways become profitable and have increased their share of freight transport that constructing missing links for regional purposes could be seriously envisaged.

9 Footnote 6. 10 The rail projects in Table 1 generally do not correspond with those in the BIMSTEC list (see footnote 8), since the latter are not directly related to interregional connectivity, and are mostly in Bangladesh, which was excluded because of the above-mentioned lack of transit agreements. Railroad projects are only a “priority” in a relative sense since, for reasons described in the text, interregional rail connectivity at this stage looks less attractive than road or port connectivity. 11 Footnote 7. 12 Globally, maritime trade accounts for about 70% of total trade in value terms and 80% in volume terms. United Nations. 2012. World Economic Situation and Prospects. New York. 13 ADB. 2012. Initial Assessments of Road Transport Infrastructure and Transport and Logistic Services for Trade Facilitation in the GMS Countries. Draft final report of the 18th GMS Ministerial Conference, Nanning, People’s Republic of China. http://www.adb.org/sites/default/files/progress-report-GMS-RIF-transport.pdf 14 D. Wignall and M. Wignall. 2014. Seaborne Trade between South Asia and Southeast Asia. ADBI Working Paper. No. 508. Tokyo: Asian Development Bank Institute.

7 ADB BRIEFS NO. 43 Bay of Bengal Ports of Map 3: Bay Source: Compiled by the Asian Development Bank. the Asian Development Compiled by Source: 8 Regional Transport Infrastructure: Mapping Projects to Bridge South Asia and Southeast Asia

(i) All of the containers from Yangon, Chittagong, and In a nutshell, it is not economical for efficient large-scale container Kolkata are transshipped. From Chennai, at least 70% ships to call on most Bay of Bengal ports. Instead, cargo from those of the containers handled are carried on feeder ships to ports must be loaded onto smaller and less efficient container ships, transshipment terminals, mainly to Colombo. All transshipped and then transshipped at hub ports, adding another round of costs. containers from these ports are subject to additional costs relative to direct calls by large container ships. The strategy for selecting port-related projects was based primarily (ii) With the exception of Chennai, there are no direct ship on the desirability of increasing the efficiency of container trade in calls from any of the top 20 international shipping lines to the region. Ports and container terminals around the Bay of Bengal ports in the Bay of Bengal. Rather, for cost and efficiency need to attract direct calls from major container shipping lines reasons, these lines have slot charters with common feeder that offer the potential to either avoid transshipment or promote operators. This represents a major reduction in competition a switch to in-line transshipment, and thus achieve a significant for one element of container transit that pushes up costs. To reduction in costs. In-line transshipment is where containers are understand the scale of Regional Container Lines and Sea moved from one very large container ship to another at some port Consortium with respect to these routes, it is noteworthy of call along their mutual routes. This form of transshipment is that these two companies control 90% of container shipping different from hub-and-spoke feeder transshipment, and in effect capacity into Chittagong. provides the benefit of a much broader range of direct port-to-port (iii) Although the ports in the ASEAN member states have a container shipments to shippers with the cost being absorbed by greater range of container services and trade route options, the shipping line to improve their competitive position over other this cannot be fully explained by higher volumes. Penang is shipping lines. Direct calls can, over time, achieve cost savings from smaller than Chittagong and Chennai but has a far greater $100 to $500 per TEU, which equate to between 20% and 50% of range of services that call at the port. Location is also a factor. total container shipping costs into ports around the Bay of Bengal.15 (iv) The size of container ships calling at ports around the Bay of In line with this, many ports around the Bay of Bengal need to Bengal is small, with ship sizes rarely exceeding 3,000 twenty- develop or expand deepwater container terminals. At a minimum, foot equivalent unit (TEU) compared to 6,500–12,000 6,500 TEU ships should be accommodated. Deeper and more TEU in comparable ASEAN ports; this increases costs for capable terminals should be considered.16 containers handled at ports in the Bay of Bengal compared with direct port calls by large container ships. Specific project suggestions come in three primary types: (i) major (v) The distance between significant container terminals around port developments with substantial supporting infrastructure the Bay of Bengal is far greater than, for example, along the requirements, (ii) container terminal development, and (iii) coast of the PRC. This observation takes into account the supporting infrastructure development. With respect to the last “gaps” in relative population density along the northern coast category of projects, only illustrative projects are identified, not of Myanmar. Also, the distance from the major container a comprehensive list of potential projects. Total project costs are trade lanes may be a factor. The average distance from the estimated at $11.2 billion (see Table 2). Of these, priority projects major trade lanes for ports on the Bay of Bengal is about 1,250 are the new Sonadia deepwater port in Bangladesh, the Sagar Island kilometers, compared with about 500 kilometers for the deepwater port in India, and Thilawa port road connections in major ports of ASEAN. Myanmar (see Table 1).17

15 Footnote 12. 16 This should be based on detailed cost–benefit analysis. Such analysis was beyond the scope of the ADB–ADBI study. 17 The port projects in Table 1 are also different than those in the BIMSTEC list (see footnote 8), since they focus on developing “deepwater” ports on the Bay of Bengal to accommodate large-size container ships, while the BIMSTEC study argues that demand for such ships was unlikely to be met in the foreseeable future, and hence focused on “deeper water” ports to accommodate larger feeder vessels (see ADB 2014, 9). However, container traffic in the Bay of Bengal area appears to be growing significantly faster than assumed in the BIMSTEC study.

9 ADB BRIEFS NO. 43

Benefits from Transport Highway 1 and 2 connecting India and Bangladesh with Myanmar Investment and the rest of Southeast Asia. Three other significant gaps have been identified in crossings to Myanmar.

What are the potential benefits? Using a computable general Some of the major ports closest to connecting the two subregions— equilibrium model, the ADB–ADBI study found that the increase Kolkata, Chittagong, and Yangon—suffer from capacity limitations, in real income from a 5% reduction in transport costs (a very including shallow channels, operational inefficiencies, and conservative estimate) between the two regions through 2030 restrictions on road and rail access. In contrast, Chennai and Ennore could be 1.4% of gross domestic product (GDP) for South Asia ports are in good condition. However, the Bay of Bengal ports (roughly $59 billion) and 1.0% of GDP for Southeast Asia (roughly collectively face a systemic problem in that they are largely shackled $30 billion), or a total of $89 billion, higher than the estimated to the hub-and-spoke feeder system that significantly raises costs in Table 2. If transport costs were reduced by 15%, which still transport costs. If major port investments can substantially increase seems feasible, net benefits would increase dramatically to 5.7% direct calls or in-line transshipment of large-scale container ships, of GDP for South Asia (roughly $240 billion) and 3.9% of GDP for this could dramatically lower costs, which could significantly Southeast Asia (roughly $118 billion), or a total of $358 billion, much increase the attractiveness of manufacturing activity in the region, higher than the estimated costs. especially that related to supply chains.

Linking trade and transport is one of the main elements behind This brief evaluated road corridor options to connect South Asia the design of transport corridors. However, the social benefits to Southeast Asia; the best option being the Kolkata–Ho Chi associated with greater connectivity are often overlooked. One of Minh City Port corridor through the Chicken’s Neck. The brief also the first impacts of improved corridors is the increase in passenger evaluated rail connectivity between South Asia and Southeast and tourist movements across borders. Evaluation of the GMS Asia, with the Kolkata–Ho Chi Minh City corridor and connections transport corridors has revealed that one of the immediate benefits through Yunnan Province being the preferred options. However, of cross-border road improvements was the significant increase in the attractiveness of connecting national rail systems at this stage passenger and/or tourist movements, some by car but mostly by is less than for highways in view of gaps and incompatibilities bus. Increased cross-border passenger movements have positive between systems, among other factors. Therefore, implementation effects on economic growth but they also contribute to developing should come after the national railways have realized substantial social bonding among populations. However, significant potential modernization reforms. Regarding ports, the brief identified negative externalities such as human trafficking, smuggling, and investments that could contribute most to reducing transport costs disease transmission must also be considered. at major ports on the Bay of Bengal, including Chennai–Ennore, Kolkata–Haldia, Chittagong, and Yangon–Thilawa.

Summary This brief finds that the priority projects will incur total costs of $8.4 billion, of which $986 million are for roads, $5.14 billion for railroads, and $2.40 billion for ports. The contrast between the costs Critical gaps in land transportation connectivity between South for road and rail projects is stark, and suggests that road projects Asia and Southeast Asia exist mainly in Myanmar. Some additional should be given priority in the early phase, given their much lower gaps have been identified in Bangladesh, Cambodia, India, the Lao costs and locations near borders. Port costs are high, but should PDR, and Thailand. In some cases, there are no links of any sort, receive priority attention, particularly in light of the fact that the particularly in the rail sector. For the road sector, gaps are usually bulk of trade still goes by sea. The largest investment figures are for poor quality roads that cannot accommodate reliable all-weather Bangladesh, India, and Myanmar. travel. The main cross-subregional highway links are the Asian

18 B. Bhattacharyay. 2012. Estimating Demand for Infrastructure. In B. Bhattacharyay, M. Kawai, and R. Nag, eds. Infrastructure for Asian Connectivity. Cheltenham: Edward Elgar Publishing Limited. pp. 19–79. The reason for the discrepancy is that Bhattacharyay includes all projects related to cross-border connectivity, either within regions or across regions, while this brief focuses only on projects relevant for cross-regional connectivity. Also, some of the projects included in Bhattacharyay extend outside the region, including the Asian Highway and Trans-Asian Railway. The figures herein are total, and should not be regarded as representing all priority projects.

10 Regional Transport Infrastructure: Mapping Projects to Bridge South Asia and Southeast Asia

Table 2 gives cost estimates of all road, rail, and port-related billion), or a total of $358 billion, much higher than the estimated projects relevant to connecting South Asia and Southeast Asia. The costs. total is $62.6 billion, including $17.7 billion for roads, $33.7 billion for railways, and $11.1 billion for ports. The total represents about one- There is a historic opportunity to link South Asia and Southeast quarter of the estimated total costs of $214 billion for cross-border Asia through transport infrastructure. Moderating growth in the infrastructure costs related to programs covering the two regions PRC has shifted attention to the rest of Asia. An ASEAN Economic given in Bhattacharyay (2012).18 Community—with an integrated market and production base among its 10 members—is expected by the end of 2015. A pro- The increase in real income from a 5% reduction in transport costs business Indian government provides an impetus for deepening (a very conservative estimate) between the two regions through domestic reforms and implementing a new Act East Policy with 2030 could be 1.4% of GDP for South Asia (roughly $59 billion) and cross-border infrastructure investments and trade agreements. 1.0% of GDP for Southeast Asia (roughly $30 billion), or a total of The opening up of Myanmar—the key land bridge between the two $89 billion, higher than the estimated costs in Table 2. If transport subregions—makes possible closer infrastructure-led connectivity. costs were reduced by 15%, which still seems feasible, net benefits With national and regional policy action, the integration of South would increase dramatically to 5.7% of GDP for South Asia (roughly Asia and Southeast Asia can become a reality. $240 billion) and 3.9% of GDP for Southeast Asia (roughly $118

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