Connecting Bangladesh: Economic Corridor Network

Economic corridors are anchored on transport corridors, and international experience suggests that the higher the level of connectivity within and across countries, the higher the level of economic growth. In this paper, a new set of corridors is being proposed for Bangladesh—a nine-corridor comprehensive integrated multimodal economic corridor network resembling the London Tube map. This paper presents the initial results of the research undertaken as an early step of that development effort. It recommends an integrated approach to developing economic corridors in Bangladesh that would provide a strong economic foundation for the construction of world-class infrastructure that, in turn, could support the growth of local enterprises and attract foreign investment.

About the Asian Development Bank Connecting Bangladesh: 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 a large share of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Economic Corridor

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, Network and technical assistance. Mohuiddin Alamgir

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UpgradingConnecting in Bangladesh: the Indian Garment Industry: AEconomic Study of Corridor Three Clusters Network

SaonMohuiddin Ray Alamgir MohuiddinSaon Ray ([email protected]) Alamgir is a former is Director Senior Fello of thew, Indian United NationsCouncil foragency, Research International on International Fund for Economic Agricultural Prithvijit Mukherjee No. 49 | December 2016 Development.Relations (ICRIER). Mishita Mehra Prithvijit Mukherjee is PhD Candidate, Department of Economics, Andrew Young School of Policy Studies, No. 43  April 2016 Georgia State University. Mishita Mehra is Graduate Student, Department of Economics, University of Washington, Seattle.

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1. Bangladesh. 2. economic corridor. 3. transport corridor. I. Asian Development Bank.

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Printed on recycled paper CONTENTS

Abbreviations vi

ABSTRACT vii

Background 1

I. RECENT ECONOMIC DEVELOPMENTS IN BANGLADESH AND FUTURE PROSPECTS 1 A. Sustained Growth 1 B. A Brighter Future 3 C. Regional Disparities 4 D. Poverty 4 E. Climate Change 6

II. TRANSPORT INFRASTRUCTURE DEVELOPMENT IN BANGLADESH 7 A. Background 7 B. Road Transport 8 C. Railroads 8 D. Inland Waterways 9 E. Air Transport 9 F. Current Transport Policy and Planning 9 G. Regional Connectivity 10 H. Transport Planning for the Future 10

III. M ethodology FOR THE DEVELOPMENT, MANAGEMENT, AND MAINTENANCE OF INTEGRATED ECONOMIC CORRIDORS 11 A. Framework for Economic Corridor Development 11 B. Framework for Corridor Management and Operation and Maintenance 16 C. Identifying Corridors for a Comprehensive Integrated Multimodal Economic Corridor Network 21 D. Key Challenges 33 E. Impact Analysis 34

IV. PRIORITIZA TION OF INVESTMENTS: IDENTIFYING PRIORITY CORRIDORS AND SECTIONS 36 A. Economic Analyses of Projects 36 B. Priority Corridors 37

V. Report FINDINGS AND CONCLUSIONS 41

VI. RECOMMENDATIONS 47 A. Core Priority Actions 47 B. Complementary Priority Actions 47 C. Implementation Strategies 52

REFERENCES 54 Tables, FIGURES, BOX, AND MAPS

TABLES 1 Indicators of Regional Economic Disparity in Bangladesh, 2010 4 2 Average Investment and Maintenance Expenditures, Developing Countries, 2005–2015 8 3 Road and Railway Networks of Bangladesh, 2011 8 4 Elements of Corridor Development Planning 19 5 Profiles of Nine Economic Corridors 24 6 Functional Connections in the National Highway System of Bangladesh 32 7 Border Link Roads in Bangladesh 32 8 Forecasted Average Annual Vehicle Growth Rates, 2015–2025 33 9 Projected Motor-Traffic Growth, 2015–2030 34 10 The Cost of Bangladesh’s Economic Corridors as Transport Corridors 37 11 The Cost of Bangladesh’s Economic Corridors 38 12 Bangladesh’s Economic Corridors Ranked by Priority 39

Figures 1 Average Annual Gross Domestic Product Growth Rate of Bangladesh 2 2 Bangladesh’s Sustained Growth, 1997–2014 3 3 Headcount Poverty Rates, FY1974–FY2010 5 4 Projected Growth in Population, Per Capita Income, and Gross Domestic Product, 2010–2050 7 5 The Growth Dynamics of Economic Corridors 12 6 An Overview of the Integrated Economic Corridor Approach 13 7 The Components of the Integrated Economic Approach 15 8 Technology, Skills, and Human Development for an Integrated Economic Corridor Approach 17 9 Climate Change Mitigation and Proofing for an Integrated Economic Corridor Approach 18 10 Corridor Management and Decision-Making Framework 20 11 A Methodology for Estimating the Impact of an Integrated Economic Corridor Network in Bangladesh 35

Box 1 Selection Criteria for National and Regional Economic Corridors 23 Maps 1 The Network of 16 Transport Corridors in Bangladesh 22 2 The Network of Nine Economic Corridors in Bangladesh 28 3 CIMECON Depicted in a London Tube-Style Format 29 4 Selected Proposed Infrastructure Interventions on Economic Corridors 1 and 2 48 5 Space Planning for Economic Corridors 1 and 2 50 ABBREVIATIONS

ADB Asian Development Bank AH Asian Highway ASEAN Association of Southeast Asian Nations BCP border-crossing point BCMA Bangladesh Corridor Management Authority CIMECON comprehensive integrated multimodal economic corridor network EC economic corridor EIRR economic internal rate of return EPZ export processing zone GDP gross domestic product GMS Greater Mekong Subregion km kilometer NPV net present value O&M operation and maintenance PPP public–private partnership SASEC South Asia Subregional Economic Cooperation (Program) SEZ special economic zone SIC Special Implementation Cell SMEs small and medium-sized enterprises

In this report, “$” refers to US dollars. ABSTRACT

The development of a comprehensive integrated multimodal economic corridor network (CIMECON) is a precondition for sustaining robust economic growth over the long term, hence the continuous efforts to identify the optimal set of economic corridors. Economic corridors are anchored in transport corridors, and international experience suggests that the higher the level of connectivity within and across countries, the higher the level of economic growth.

Bangladesh has many options for developing transport-anchored economic corridors. The Government of Bangladesh, the South Asia Subregional Economic Cooperation Program, and the Asian Highway planners have produced a list of 16-corridor network, which might be useful, but is rather complex and could not be very functional without any sort of prioritization.

In this paper, a new set of corridors for Bangladesh is being proposed: a nine-corridor CIMECON resembling the London Tube map. The nine corridors of CIMECON would satisfy market-integration and linkage criteria, and their development is expected to improve regional connectivity, transit, and integration, as facilitation measures are designed and put in place. The CIMECON is about improving connectivity within Bangladesh and enhancing Bangladesh’s role as the land bridge between South Asia and Southeast Asia (via Myanmar) and between South Asia and northern Asia (via the People’s Republic of China). For this goal to be realized, the optimal timing of investments in the components of CIMECON will be critical.

BACKGROUND

1. Strategy 2020 identifies regional cooperation and integration as one of the core areas of Asian Development Bank (ADB) operations. The Midterm Review of Strategy 2020 noted that ADB operations would continue to focus on infrastructure, including investments to promote cross-border connectivity, in order to strengthen regional integration (as well as inclusive and environmentally sustainable economic growth).1 ADB assumed the role of facilitator of regional cooperation and integration initiatives in South Asia through its support for the South Asia Subregional Economic Cooperation (SASEC) Program, launched in 2003; the South Asian Association for Regional Cooperation; and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. Conceptually, regional cooperation, like technological progress, can shift the production possibility frontier outward (or the production function upward), thus making it possible to achieve a higher level of national social welfare. This implies a natural convergence of national and regional priorities, leading to optimal welfare gain.

2. National and regional connectivity in South Asia helps drive socioeconomic growth by creating economic opportunities for poorer areas. Improved connectivity within countries between lagging and prosperous regions could help promote the transformation of the lagging regions. This objective could be fulfilled by developing integrated economic corridors connecting regions with different natural endowments, human resources, and physical and social infrastructures.

3. In August 2013, ADB began working on the development of a comprehensive economic corridor network within Bangladesh in line with the country’s overall development objectives. This paper presents the initial results of the research undertaken as an early step of that development effort. It recommends an integrated approach to developing economic corridors in Bangladesh that would provide a strong economic foundation for the construction of world-class infrastructure that, in turn, could support the growth of local enterprises and attract foreign investment. National connectivity through quality infrastructure, along with the provision of quality services and the development of the requisite human capital, would generate employment, and ensure sustainable and inclusive growth. This proposal is based on the concept of the comprehensive integrated multimodal economic corridor network (CIMECON).

I. RECENT ECONOMIC DEVELOPMENTS IN BANGLADESH AND FUTURE PROSPECTS

A. Sustained Growth 4. Bangladesh seems to have escaped the low-growth below-poverty-level equilibrium trap in which it was mired during the 1970s and 1980s. It has since embarked on a high-growth trajectory (Figure 1) that, according to the Sixth Five-Year Plan FY2011–FY20152 and the Perspective Plan of Bangladesh 2010–2021, will lead the country to middle-income status by 2021 (Vision 2021).3 The annual growth figures would have shown a clear exponential trend had it not been for the dips induced by certain internal factors (natural calamities, political uncertainties, and tension) and external factors (Asian financial crisis, 9/11, the global oil and food price crisis, global financial crisis, and the oil price increase). According to the Government of Bangladesh’s Vision 2021, the country would reach the

1 ADB. 2014. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific.Manila. p. 29. 2 “FY” refers to “fiscal year,” which in Bangladesh runs from 1 July to 30 June of the following year. 3 Go vernment of Bangladesh, Ministry of Planning, Planning Commission, General Economics Division. 2011. Sixth Five- Year Plan FY2011–FY2015: Accelerating Growth and Reducing Poverty. Dhaka; 2010. Outline Perspective Plan of Bangladesh 2010–2021: Making Vision 2021 a Reality. Dhaka. 2 ADB South Asia Working Paper Series No. 49

Figure 1: Average Annual Gross Domestic Product Growth Rate of Bangladesh (Varying Periods) (%) . . . . . . . . .

() . . . .

– –––– – – FY (rev) FY (est)FY (proj) FY (prov) –– (proj) (proj)

est = estimated, FY = fiscal year, proj = projected, rev = revised. Source: Government of Bangladesh, Planning Commission, General Economics Division. 2011. Sixth Five-Year Plan FY2011–FY2015. Dhaka; 2010. Outline Perspective Plan of Bangladesh 2010–2021: Making Vision 2021 a Reality. Dhaka; Government of Bangladesh, Ministry of Finance. Budget Documents 2013–2014. http://www.mof.gov.bd/en/index.php?option =com _content&view =article&id=183&Itemid=1.

middle-income status by securing and sustaining an annual gross domestic product (GDP) growth rate of 8% by 2013, which would rise to 10% from 2017.4 However, some observers feel that Bangladesh has actually moved from the low-growth (4% and under) below-poverty level equilibrium trap to a 5%–6% growth above-poverty-level equilibrium trap.5

5. In 2013, the governor of Bangladesh Bank (the country’s central bank) asserted that Bangladesh was experiencing a trend of resilient growth despite the natural and human-made crises that had affected its economy, thus contesting the view that the country was trapped within a GDP growth range of 5%–6% (Figure 2).

6. The issues now are (i) how to sustain the momentum of growth beyond the period covered by Vision 2021, and (ii) how to then accelerate that growth so that Bangladesh could continue increasing its per capita income while avoiding the middle-income trap and jobless growth.6 The latter has been the fate of the Philippines, where the first quarter of 2013 saw economic growth at an annualized rate of 7.8%, but with a persistently high unemployment rate of 7.5%.7 Vision 2021 could be the launching pad for Bangladesh’s takeoff into self-sustained growth, and for its transformation into a developed country by the middle of this century.

4 Government of Bangladesh, Outline Perspective Plan of Bangladesh 2010–2021, p. 5 (Box 1). 5 R. Islam. 2014. Responding to development challenges. The Daily Star. 15 March. http://www.thedailystar.net /responding-to-development-challenges-15390. This article defines the “growth trap” in Bangladesh as the economy’s being stuck at an annual GDP growth rate of 6%, which is not enough to reduce poverty or to close the gap with other countries in terms of average income or level of development. 6 Noteworthy examples of countries which have experienced middle-income trap include Brazil, Indonesia, Malaysia, South Africa, and Thailand. 7 M.V. de Leon. 2013. “Jobless Growth” Puzzle Haunts PH. Business Mirror. 18 March. http://www.abs-cbnnews.com/business/03/17/13/jobless-growth-puzzle-haunts-ph; Manila Bulletin. 2013. Jobless Up Despite Record Growth. 12 June. http://ph.news.yahoo.com/jobless-despite-record-growth-000500070.html Connecting Bangladesh: Economic Corridor Network 3

Figure 2: Bangladesh’s Sustained Growth, 1997–2014 (%)

Oil Price Hike Asian Cyclonic Domestic Frequent nationwide Slower growth MFA Phase USD /b ﬁnancial crisis storm Political Crisis pre-election post / ( ) out () (November ) (–) ( ) ( -) shutdowns ()

. . . . . . . . . . . . . . . . . . .

Real GDP growth rate () Linear (Real GDP growth rate ())

Most severe flooding in Severe floods, aecting Cyclone Sidr and major floods, Global financial A few tropical modern history, aecting of the country () aecting of the country () crisis (–) cyclones () of the country ()

External shocks Natural disasters Political crises

GDP = gross domestic product, MFA = Multi Fiber Agreement, p = provisional. Note: The linear depiction of the real GDP growth is a trend extrapolated from the reported or projected growth rates from 1997 to 2014. Sources: International Monetary Fund (IMF). 2013. World Economic Outlook: Transitions and Tensions. Washington, DC: Bangladesh Bank 2013. Annual Report 2012–2013. Dhaka; A. Rahman. 2014. Financial Inclusion and Sustainable Development: The Bangladesh Case. A presentation at the Asian Development Bank (ADB). 26 November.

B. A Brighter Future 7. From a longer-term perspective, taking into account both the favorable factors and the constraints, there is a good case for optimism regarding Bangladesh’s economic prospects. Bangladesh could reach the status of a middle-income country with a per capita income of $3,000 by 2025 (in 2010 dollars), and then move on to a higher plateau, to the level of a present-day developed country, by 2050.8 However, both the annual investment and savings rates would have to increase substantially for this vision to be realized.9 And there would have to be infrastructure development and industrial-support services to improve connectivity within Bangladesh (especially between the developed and underdeveloped areas) and between Bangladesh and the neighboring countries. These improvements would reduce the costs of transport, a critical move if Bangladesh is to achieve its growth potential in the 2030s, 2040s, and thereafter, and if economic disparities and poverty are to be reduced throughout South Asia. This study examines this thesis that, unless Bangladesh embarks on a higher-growth trajectory, it will not be able to develop or sustain the proposed integrated economic corridors. However, there are major challenges, including population density, which necessitates large infrastructure investments.

8 The average annual GDP growth rates envisaged are 9.28% (2010–2015), 11.28% (2015–2020), 11.22% (2020–2030), 9.66% (2030–2040), and 7.90% (2040–2050). 9 The rate of investment will have to increase from 24% in 2010 to 35% by 2015, 34% by 2020, 34% by 2030, 32% by 2040, and 30% by 2050. Domestic savings will have to be raised from 18% in 2010 to 27% by 2015, 27% by 2020, 29% by 2030, 30% by 2040, and 27% by 2050. 4 ADB South Asia Working Paper Series No. 49

C. Regional Disparities 8. Bangladesh is characterized by significant regional disparities in levels of income and economic development.10 The southern “divisions” (i.e., regions) of Khulna, Rajshahi, and Barisal (especially the coastal areas) are lagging behind the divisions of Chittagong, Dhaka, and Sylhet in terms of several economic and human development indicators, though the gap has narrowed since 2005. Educational outcomes have been varied, with the economic laggards outperforming the more advanced regions (Table 1). The policies and strategies in the government’s Sixth Five-Year Plan concerning regional disparities focus on inclusive growth, poverty reduction, and human development.11 The creation of integrated economic corridors will target the lagging divisions, to promote investment and to link these divisions with the advanced regions and with local development partners. A special program has been designed for the coastal areas, e.g., Barisal, to help meet climate change-related challenges. The elimination of regional disparities makes good economic sense. Investments in the depressed regions would stimulate economic activity there, including trade. This greater economic activity would, in turn, generate greater demand for products from other areas of the country, thereby creating multiplier and linkage impacts that would boost district, divisional, and regional GDPs. This would translate into increased interregional trade and cooperation within Bangladesh.

Table 1: Indicators of Regional Disparities in Bangladesh, 2010 Infant Under-5 Maternal Mortality Mortality Mortality Head Count Rate, 2008 Rate, 2008 Ratio, 2008 Per Capita Per Capita Expatriate Poverty Rate Net Primary (number (number per (number per Deposit, Advance, 30 Workers as (2010) Enrollment, per 1000 live 1,000 live 100,000 live 30 June 2010 June 2010 % of Total Region (%) 2009 (%) births) births) births) (Taka) (Taka) Population National 31.50 66.80 ... 64 3.48 23,438 17,854 3.57 Barisal 39.40 76.00 35 60 3.77 5,807 2,831 2.06 Chittagong 26.20 63.20 34 57 3.57 23,036 18,240 7.70 Dhaka 30.50 68.20 44 67 3.30 48,286 3,817 4.04 Khulna 32.10 73.60 35 57 3.39 8,239 6,618 1.41 Rajshahi 29.70 66.30a 51a 67a 3.49a 6,863 4,985 0.91 Rangpur 42.30 ...... 3,803 3,614 4.28 Sylhet 28.10 55.90 39 74 3.81 17,187 4,461 3.57 ... = data not available. aThese figures include the statistics for Rangpur as well as for Rajshahi. Source: Government of Bangladesh, Planning Commission. 2011. 6th Five-Year Plan FY2011-FY2015, Accelerating Growth and Reducing Poverty. Part 1. Dhaka. Tables 7.1 through 7.6, 7.9, and 7.10.

D. Poverty 9. Trends in poverty between 1974 and 2010 (Figure 3) suggest that Bangladesh will exceed its targets associated with the Millennium Development Goals by 2015. Rice self-sufficiency has been secured. Wheat imports will continue for structural reasons. Extreme food insecurity, famine, and monga12 are all now history. Institutional innovations have had a lot to do with this progress, as have the country’s

10 Sixth Five-Year Plan, Part 1, Chapter 7, pp. 170–186. 11 “Human development” refers to general well-being, including health, opportunities, access to education, a decent material standard of living, etc. 12 a isMong a yearly phenomenon, lasting at least a month, during which there is widespread death from hunger. Connecting Bangladesh: Economic Corridor Network 5

Figure 3: Headcount Poverty Rates, FY1974–FY2010 (%)

. .

. . . . . . . . . . . . . . . . . Poverty Rate () RatePoverty . . . . . . . .

. FY FY FY FY FY FY FY

Rural Urban National

FY = fiscal year. Source: Government of Bangladesh, Ministry of Planning, Planning Commission, General Economics Division. 2011. Sixth Five- Year Plan FY2011–FY2015: Accelerating Growth and Reducing Poverty. Dhaka. p. 13.

economic growth; investments in infrastructure and connectivity; provision of microfinance (Grameen Bank and others); nongovernment organization-led antipoverty programs (e.g., Bangladesh Relief Assistance Committee); the pro-poor stance of the Bangladesh Bank; gains in agricultural productivity; industrialization, especially in the garment industry; overseas employment; and the government’s social safety net programs. By around 2035, Bangladesh could be deemed close to achieving a “poverty-free” society, except for frictional poverty. Since the creation of economic opportunities seems to lead the way out of poverty, the development of comprehensive economic corridors will have an impact on poverty as well. This paper explores this cause-and-effect relationship.

10. The challenge is to sustain the progress achieved in poverty reduction, preventing any reversals when the economy undergoes internal or external shocks. Many attribute poverty reduction in Bangladesh since the 1970s partly to the expansion of the road network, especially in the rural areas, by the Local Government Engineering Department. Case studies of the People’s Republic China, India, and Thailand conducted by the ADB found that infrastructure investments served the poor as well as the nonpoor. 13 The poor benefit from increased productivity and time savings, although these positive impacts depended on the quality of the infrastructure services and the ability of the poor to take advantage of the opportunities created. An analysis of Indonesian data showed that the poverty rate was

13 C. Cook and T. Duncan. 2005. Joining the Mainstream: Impact of Transport Investment on Poverty Reduction; RETA 5947. A PowerPoint presentation at the Asian Development Bank Institute (ADBI) Transport Infrastructure and Pov- erty Reduction Workshop. Manila. 18–22 July. All workshop papers are available through this link: http:// www.adbi.org/ event/851.transport.infrastructure.poverty.reduction/events.resources.php?TypeID=21 6 ADB South Asia Working Paper Series No. 49 most sensitive to investments in roads.14 Bangladesh data from Tangail showed that the development of rural infrastructure contributed to poverty reduction.15

11. ADB’s support for three economic corridors in the Greater Mekong Subregion (GMS) has had a positive impact on economic development there. Cambodia, Thailand, and Viet Nam have all benefited from the three GMS economic corridors (i.e., North–South Economic Corridor, East–West Economic Corridor, and Southern Economic Corridor), given that the development of these corridors included a package of diverse investments aimed at the agriculture, manufacturing, tourism, and other sectors. Thailand has upgraded portions of the North–South Economic Corridor (Kunming–Bangkok Road), the East–West Economic Corridor, and the Southern Economic Corridor, promoting investments along the corridor within its territory and across borders that spurred economic growth. The North–South and East–West economic corridors are transforming the Lao People’s Democratic Republic from a landlocked into a land-linked country. And Viet Nam’s “fast growing economy has been a strong contributor to the development of GMS economic corridors that have benefited its own people as well as those of its neighbors,” based on a 2012 ADB report.16

E. Climate Change 12. Since Bangladesh is not a major source of greenhouse gases, mitigation measures, while relevant, are not critical. Instead, adaptation measures are key to addressing the impacts of climate change. This study makes allowance for the investments needed for adaptation, which would primarily involve climate proofing, comprising climate change risk identification and risk reduction. This study argues that Bangladesh has to mainstream climate change adaptation into its planning for integrated economic corridors. Bangladesh needs a comprehensive risk-based framework for assessing climate change impacts, determining adaptation measures, and carrying out economic analyses to establish investment-worthiness.

13. Bangladesh has good reasons to be concerned about the impact of climate change. The average temperature, which is projected to increase by 2.4˚C by 2100, will make the country susceptible to a variety of climate events, including sea-level rise. This will cause serious direct damage to assets, particularly transport assets, located along economic corridors. Some analysts have zeroed in on the impacts of climate change on agriculture and food security, given that crop yields may decline by 30%. The projected number of climate change refugees in Bangladesh’s neighbors and the surviving areas within the country is also overwhelming. It has been speculated that, by 2065, a 1-foot rise in the sea level could cause 15% of the total landmass of Bangladesh to be submerged into the Bay of Bengal, creating 30 million environmental refugees. The bottom-line concern here is how to make investments in economic corridors viable in the context of climate change. In fact, it would have to be determined whether investments in the corridors would be economically justified once the adaptation costs are factored in.

14 E. Kwon. 2005. Infrastructure, Growth, and Poverty Reduction in Indonesia: A Cross-Sectional Analysis. Paper presented at the ADBI Transport Infrastructure and Poverty Reduction Workshop. Manila. 18–22 July. 15 R. Kuhnle. 2005. Rural Infrastructure Development and Poverty Reduction: Example of Bangladesh. Paper presented at the ADBI Transport Infrastructure and Poverty Reduction Workshop. Manila. 18–22 July. 16 ADB. 2012. Greater Mekong Subregion: Twenty Years of Partnership. Manila. p. 121. Connecting Bangladesh: Economic Corridor Network 7

II. TRANSPORT INFRASTRUCTURE DEVELOPMENT IN BANGLADESH

A. Background 14. Once the challenges outlined have been overcome, presumably by the middle of this century, Bangladesh is projected to have a per capita income 20 times the present amount, as a result of accelerated economic growth fueled by a demographic dividend and by rising saving and investment rates (Figure 4).17 A much higher share of investment will be devoted to climate change adaptation, given the country’s increasing economic and environmental vulnerability in the coming years. By 2050, Bangladesh is predicted to have a population of 230 million with a large pool of skilled labor. The current high rate of urbanization will continue, turning Bangladesh into a mostly urbanized society. The economy will be highly industrialized, with increased openness that will result in a very high share of exports in the total GDP. Urbanization, industrialization, and increased openness will together result in reduced regional disparities. And core poverty will largely be eliminated, with only frictional poverty possibly remaining. For this economic scenario to occur, however, there would have to be significant infrastructure development, including a comprehensive integrated multimodal economic corridor network (CIMECON) as an important component. This study examines how much investment in transport infrastructure would be desirable for Bangladesh, and how it could be financed. The first question can be answered by establishing the relationship between infrastructure demand and income growth (Table 2).

Figure 4: Projected Growth in Population, Per Capita Income, and Gross Domestic Product, 2010–2050 (%) . . . . .

. . . . . .

. Annual growth rate () rategrowth Annual

. . . . . .

– – – – – –

GDP Population Per capita income

GDP = gross domestic product. Source: Author’s estimates.

17 A demographic dividend occurs when lower fertility rates lead to a population structure in which the labor force grows in comparison with the proportion of the population dependent on it. 8 ADB South Asia Working Paper Series No. 49

Table 2: Average Investment and Maintenance Expenditures, Developing Countries, 2005–2015 (% of GDP) Country group Investment Maintenance Total Low income 4.2 3.3 7.5 Lower-middle income 3.8 2.5 6.3 Upper-middle income 1.7 1.4 3.1 Total developing 3.2 2.3 5.5 GDP = gross domestic product. Source: M. Fay and T. Yepes. 2003 Investing in Infratructure: What is Needed from 2000 to 2010? Policy Research Working Paper No. 3102. Washington, DC: World Bank. Quoted in A. Estache and M. Fay. 2009. Current Debates on Infrastructure Policy. Policy Research Working Paper No. 4410. Washington, DC: World Bank.

B. Road Transport 15. The current transportation network of national highways, regional (i.e., divisional) highways, zila (district) roads, and rural roads is impressive (Table 3), though there are issues related to quality and operational efficiency, maintenance, and the lack of intermodal interface and connectivity. The road network accounts for the bulk of passenger and cargo traffic, while the lower-cost rail and inland water alternatives lag far behind. Road transport accounts for over 70% of passenger and freight transport.18 The length of the paved non-rural road network increased from 600 kilometers (km) in 1947 to 18,209 km in 2009.19 In terms of total road density (km of road per thousand square km of land area), Bangladesh compares favorably with selected Asian countries, but not when it comes to the density of paved roads.20

Table 3: Road and Railway Networks of Bangladesh, 2011 (kilometers) Roads and Highways Total Paved Paved as % of total National highways 3,492 3,445 99 Regional highways 4,268 4,105 96 Zila (District) roads 13,280 10,659 80 Rural roads 289,334 71,501 25 Railways Broad Gauge Meter Gauge Total The entire network 659 1,757 2,416 Sources: Government of Bangladesh, Planning Commission, 2011 Sixth Five-Year Plan FY2011–FY2015 Accelerating Growth and Reducing Poverty Part 2: Sectoral Strategies. Programmes and Policies. Dhaka. pp. 164 (Table 4.3) and 180 (Table 4.6). Government of Bangladesh, Ministry of Planning, Statistics and Informatics Division, Bangladesh Bureau of Statistics. 2012 Statistical Yearbook for Bangladesh-2011. Dhaka.

C. Railroads 16. The 2,416 km rail network includes broad gauge, meter gauge, and dual gauge tracks, and encompasses international, intercity, and suburban rail routes. In 2010−2011, 64 million passengers traveled through the Bangladesh rail network.21 There are existing and proposed rail links between

18 Government of Bangladesh, Sixth Five-Year Plan, Part 2, p. 161 (Table 4.1). 19 Government of Bangladesh, Sixth Five-Year Plan, Part 2, p. 160 (Table 4.2). 20 Asian Development Bank. 2012. Key Indicators for Asia and the Pacific. Manila. 21 Statistical Yearbook of Bangladesh-2011. Table 7.22, p. 220. Connecting Bangladesh: Economic Corridor Network 9

Bangladesh and India. There are no rail links to Myanmar, but one from India to Myanmar via Bangladesh has been proposed. It should be noted that the government’s 20-year, $15 billion railway master plan, introduced in 2013, includes 235 ambitious projects designed to fundamentally transform railway travel in Bangladesh.

D. Inland Waterways 17. Bangladesh has 24,000 km of inland waterways, 5,968 km of which are navigable, carrying 87.9 million passengers and 0.58 million tons of cargo annually.22 A large portion of the waterways (40%) has a minimum depth of less than 1.52 meters, and only 11% exceeds 3 meters. Goods can be transported through the waters of Bangladesh from one port to another in India under a protocol between the two countries designating three routes and eight ports of call. The amount of cargo carried is far below the potential: less than a million tons in fiscal year (FY) 2010. Bangladesh has a total of 22 river ports and 24 pilot stations.

E. Air Transport 18. Air transport in Bangladesh is limited, with Dhaka and Chittagong as the two main hubs. Important airports to be developed are those in Barisal, Chittagong, Comilla, Dhaka, Ishwardi, Jessore, Khulna, Rajshahi, Rangpur, Saidpur, Sirajganj, Sylhet, and Thakurgaon. Air transport will expand, but its share of total transport in Bangladesh will remain small.

19. Road, railway, inland-water, and sea routes are linked to neighboring countries, though commercial use has been far below potential due to policy, institutional, and physical barriers to trade, transit, and transport. Lack of planning, inadequate investment, and poor private sector participation, combined with the slow pace of policy and institutional reform, have held back progress toward connectivity within Bangladesh and internationally. The current state of the transport network suggests that much could be gained by streamlining the domestic network of intermodal links and implementing measures to facilitate international connections. The latter would mean a lot to Bangladesh, as the country is an important bridge linking South Asia, Southeast Asia, and northern Asia. Well-developed interregional connections through Bangladesh would provide valuable opportunities, but unless Bangladesh acts fast, it will run the risk of being bypassed by other regional cooperation and development initiatives that would exclude it.

F. Current Transport Policy and Planning 20. Long-term planning has been missing from road development. Strategy and policy guidance comes from the National Land Transport Policy 2004, Integrated Multi-Modal Transport Study 2004, the 20-year Road Master Plan, National Integrated Multimodal Transport Policy, 2013, the government’s Rural Road Master Plan, and the 20-year Railway Master Plan (2010–2030). The targets of the Bangladesh Roads and Highways Department under the Sixth Five-Year Plan include the construction of 4,672 km of new roads and the rehabilitation of 8,433 km of existing roads. The key issues are lack of periodic and routine maintenance leading to the deterioration of roads; vehicle overloading which caused damage to roads; lack of road safety; poor traffic management; and inadequate high-capacity bridges in many rivers.

22 Government of Bangladesh, Ministry of Shipping, Bangladesh Inland Water Transport Authority. About Us. http://www .biwta.gov.bd/website/?page_id=2 10 ADB South Asia Working Paper Series No. 49

G. Regional Connectivity 21. Regional connectivity is high on the agenda, and Bangladesh acceded to the United Nations Economic and Social Commission for Asia and the Pacific-sponsored Intergovernmental Agreement on the Asian Highway network in 2009 where three Asian Highway routes traversing Bangladesh were identified.

22. The South Asia Subregional Economic Cooperation (SASEC) Program proposed six transport corridors connecting Bangladesh, India, Nepal, and Bhutan. Four of these corridors go through Bangladesh territory. When completed, these corridors will increase trade and transport among SASEC members and with nonmember countries. Mongla and Chittagong were designated as important regional gateways into Bhutan, India, and Nepal. These corridors will lift the economic status of depressed regions, especially those along the corridor sections passing through Bangladesh. This study looks into the Bangladesh sections of the SASEC corridors to assess their relevance to socioeconomic development, poverty reduction, and to the CIMECON.

H. Transport Planning for the Future 23. This study examines the implications of integrated economic corridor development for investment and for necessary policy and institutional reforms, to help optimize the gains from the dynamic impacts of infrastructure investments for the rural and urban economies, and for poverty reduction and regional development. Important considerations for the 2030s and beyond are the emerging role of the private sector and public–private partnerships, and the appropriate responses to climate change. Bangladesh also needs to carefully assess climate change mitigation options and adaptation measures, including climate proofing for transport and economic corridors.

24. The study highlights the need in Bangladesh for a single nationwide integrated framework for multimodal transport corridor and economic corridor network development. The Sixth Five-Year Plan should be reviewed to better align it with the current state of the country’s transport infrastructure. SASEC corridors are works in progress, within Bangladesh and beyond its borders. Cross-border infrastructure and trade facilitation measures are long overdue. Trade, transit, and transport facilitation policies; a regulatory framework; and associated institutions should evolve around this integrated concept of transport–economic corridor network.

25. This study recommends that Bangladesh move beyond transport corridors to pursue the development of economic corridors. Transport corridor development addresses the hardware (infrastructure) and the software (organization, technology, human resources, management, and policies and institutions) as a means of facilitating the domestic and cross-border movement of people and freight.23 Economic corridors link strategic nodes within a country or in two or more countries, covering a defined geographical space along a central transport artery such as road, rail line, or river. Their development would be accompanied by transport corridor investments in the same geographical spaces, as this complementarity would generate the greatest benefits for local communities through such impacts as a growth in production, economic activity, urban and rural settlements, and in border towns, thereby contributing to real economic and social development and to regional economic integration.

23 Douma, F., and K. A. Kriz. 2003. Transportation Corridor Planning: A Model and Case Studies. Minneapolis, MN: State and Local Policy Program, Humphrey School of Public Affairs, University of Minnesota. p. 2. The authors wrote, “We define a transportation corridor as a geographic area between two points, linking multiple centres, and moving people and freight. This definition includes both the transportation infrastructure (e.g., the roadbed, rails and stations) and the new and existing development that surrounds that infrastructure.” Connecting Bangladesh: Economic Corridor Network 11

26. There would be a hierarchy of corridors that would include, in an ascending order of complexity: (i) unimodal transport corridors (with a road, railway, sea, river, or air link between geographic areas); (ii) multimodal transport corridors (linking geographic areas through the integration of various modes of transport); (iii) logistics corridors (with a harmonized corridor institutional framework coordinating transport links to facilitate a more efficient movement of people, freight, and related information); and (iv) economic corridors (to attract investment and generate economic activity in the surrounding areas, including the less-developed regions, based on the transport and logistics corridors already in place). There would be an eventual transformation of transport and logistics corridors into economic corridors.

III. Methodology FOR the development, management, and Maintenance of INTEGRATED ECONOMIC CORRIDORs

A. Framework for Economic Corridor Development 27. The thesis of this study states that Bangladesh has to go beyond unimodal transport corridors to construct multimodal corridors and logistics corridors, and then to graduate to economic corridors. It is the economic corridors that will make the maximum contribution to economic growth and poverty reduction, and that will lay the foundation for close cooperation between neighboring countries. To reach this stage, an integrated approach needs to be adopted to achieve better synergy and cohesion. The process should eventually lead to higher levels of cooperation in achieving greater growth (Figure 5).

28. Long-term robust economic growth will be required for the development and maintenance of multimodal economic corridors. In fact, economic growth is the primary source of demand for economic corridors. On the other hand, the uninterrupted supplies of goods and services from economic corridors are themselves important inputs into economic growth. A CIMECON is a precondition for sustained robust economic growth over the longer run. International connectivity runs at various levels: from bilateral links to broader networks in the region and beyond, all supporting economic integration. Cross- country experiences suggest that, the higher the level of connectivity, the higher the level of growth (Figure 5). And connectivity is the foundation for integration and cooperation.

29. The growth dynamics of economic corridors (Figure 5) suggests a sequence in which primary factors supported by technology, policies, institutions, and climate change adaptation trigger a growth in production and trade, resulting in higher consumption, investment, and income (from exports and remittances). The size and quality of this growth would depend on the level of integration. The synchronization and connectivity of national and regional corridors would create value, with a multiplier effect driven by market forces that would ensure high rates of return on investments in national and regional corridors. The introduction of multimodal national economic corridors would reduce the cost of doing business and of transporting people and goods, and would increase the value added from rational land use. The integration of national economic corridors into regional economic corridors would widen market opportunities and increase trade and income. And this impact would be reflected in an inclusive and poverty-reducing economic growth. As integration and cooperation are deepened due to improved connectivity, the disparities among Bangladesh’s regions would be reduced, with welfare gains for all.

30. The integrated economic corridor approach (Figure 6) is central to unleashing the growth potential of economic and market integration. Economic integration refers to production processes, while market integration refers to transit and trade. The driving forces behind comprehensive integrated economic corridors are population, resources, and technology. Population growth drives skills development through educational, vocational, and informal systems (such as on-the-job training)—a 12 ADB South Asia Working Paper Series No. 49

Figure 5. The Growth Dynamics of Economic Corridor

The higher the levels of connectivity and integration, the higher the level of growth.

Socioeconomic Growth levels (inclusive growth Connectivity for integration growth process with poverty reduction) and cooperation

International economic corridor (EU)

Consumption growth International International modal corridor Investment growth integration connectivity

Export growth

Remittances and Intraregional economic service-industry corridor (NAFTA) income growth International International modal corridor integration connectivity

Regional economic corridor (GMS)

Trade Regional Regional modal corridor integration connectivity

Domestic economic corridor (Bangladesh)

National Production National corridor modal connectivity integration

Connectivity, integration, and cooperation

Primary factors, technology, institutions and climate change adaptation

EU = European Union, GMS = Greater Mekong Subregion, NAFTA = North American Free Trade Agreement. Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 13

Figure 6: An Overview of the Integrated Economic Corridor Approach

Economic growth and poverty reduction

Regional Intraregional cooperation balance and equity

Integrated economic corridor approach

Logistics corridors

Multimodal transport corridors

Unimodal transport corridors

Skill Use of development appropriate technologies Climate change mitigation and adaptation

Resource Technology Population mobilization development

Source: Asian Development Bank. 14 ADB South Asia Working Paper Series No. 49 necessity for economic corridor development. Resources are needed to finance investment in corridors, technology, and climate change mitigation and adaptation. They are also necessary for facilitating the transformation of selected transport corridors into economic corridors, as well as the development of new corridors with multimodal options and logistics. The availability of appropriate technologies will be critical for corridor development and climate change mitigation and adaptation. Climate change-related technologies will be crucial because Bangladesh is especially vulnerable to climatic phenomena, and all economic corridor infrastructures will be exposed to various levels of climate-related risks. Growth, poverty reduction, regional cooperation, and intraregional balance and equity will likely follow from the development of a totally integrated economic corridor network.

31. The identification of, and planning for, integrated economic corridors will require a rigorous examination of the elements highlighted in Figure 6: population, resource mobilization, technology development, skills development, climate change mitigation and adaptation, the use of appropriate technologies, transport, multimodal and logistics corridors, and regional cooperation and disparities, as well as recent growth and poverty reduction. Each element has to be optimized in order to establish the ideal hierarchy of corridors that need to be supported and managed by appropriate policies and institutions.

32. The framework for operationalizing the integrated economic corridor approach is presented in Figure 6. The drivers of the framework are investments and resource mobilization. Investments would have to be made in corridors, skills building, and climate proofing. During the initial stage, corridor investments would include unimodal transport corridors, multimodal transport corridors, and logistics corridors. The choices of corridors would have to be based on the locations of urban-industrial nodes, population growth, existing links to ports, vehicle and passenger movements, trade volumes (domestic and cross- border), natural resources, the locations of border-crossing points, transport costs, center–periphery links, and transport facilitation needs. These aspects should be evaluated and new possibilities explored. Bangladesh is only at the early stage of defining an approach to economic corridor development. Indeed, the Bangladesh economy has already benefited from growing transport connectivity. Still, there are bottlenecks: lost opportunities; poor management; and lost productivity and income due to congestion, delays, disruptions, and gaps. It is difficult to provide a precise estimate of the positive impacts if these problems were to be solved, but one can safely assume that national output would increase significantly. Transport planning in Bangladesh should therefore take them into account. This study will highlight the “positives” and “negatives” of the development of unimodal transport, multimodal transport, and logistics corridors.

33. The inadequacies in education, skills, technology, and human development in Bangladesh are even more serious than those in transport corridor development. No progress in transport infrastructure development can be made without addressing these other areas. Economic corridor development is a progression from unimodal transport, multimodal transport, and logistics corridors that involves further investment in corridor structures and the development of economic spaces, facilities, and activities. The choice of economic corridors and the strategies for their operationalization will be based on such factors as physical planning; population distribution; regional disparities; trade volumes (domestic and cross- border); vehicle and passenger movements; economic activities; and the locations of urban areas, rural settlements, and border towns (Figure 7).

34. In terms of the development of CIMECON, this study emphasizes the need for a risk-based analysis of climate change damage, including the impacts on infrastructure, to determine what must be done to achieve climate change mitigation and climate proofing. This study assesses the investment needs of gateways, transport corridors, and related facilities, and the investments required for climate change adaptation measures. The methodology proposed here is actually designed to estimate all costs related to the development of economic corridors, and to assess impacts of economic corridors Connecting Bangladesh: Economic Corridor Network 15

Figure 7: The Components of the Integrated Economic Approach

Policy making, establishment Progress of institutions and agreements monitoring and Economic growth and impact evaluation poverty reduction

Regional cooperation Intraregional balance and trade and equity

External gateway Economic (land ports and sea Internal gateway corridor (multimodal ports) a development interchanges, land ports and river ports)

Construction of corridor Climate structures and development of change economic spaces, facilities, and impact activities

Investments in climate mitigation Development of unimodal and climate transport, multimodal transport, proofing and logistics corridorsb

Education, skills, technology, and human development

Investments in corridors, skills development, and climate proofing

Domestic and external resource mobilization (domestic savings, ODA, Public–private, and foreign direct investment)c

ODA = official development assistance. a The development of economic corridors would be based on such factors as physical planning; population distribution; regional disparities; trade volumes (domestic and cross-border); vehicle and passenger movements; economic actvities; and the locations of urban areas, rural settlements, and border towns. b The development of unimodal transport, mutimodal transport, and logistics corridors would be based on the locations of urban-industrial nodes, population growth, existing links to ports, vehicle and passenger movements, trade volumes (domestic and cross-border), available natural resources, the locations of border-crossing points, transport costs, center- periphery links, and transport facilitation needs. c ‘Foreign direct investment’ refers to the net inflows of investment from abroad to acquire lasting management interests (at least 10% of voting stock) in enterprises operating in a country of which the investors are not citizens. Source: Asian Development Bank. 16 ADB South Asia Working Paper Series No. 49 on GDP, poverty reduction, regional cooperation and trade, and on intraregional balance and equity. Infrastructure investments in economic corridors will receive financing from domestic and foreign sources. Since large funds will be required, domestic resource mobilization must be stepped up to substantially increase public, private, and corporate savings, and to channel these toward infrastructure investments, as required. Competing demands will have to be considered. Public–private partnerships could play an important role in infrastructure development, but the remaining gap will have to be filled from external sources such as official development assistance, loans, and foreign direct investment.24

35. This study will outline key policy and institutional reforms for economic corridor development, and will suggest that quantitative and qualitative indicators be developed and that participatory techniques be designed for monitoring progress (Figure 7).

36. This study will take into account the financial implications of skills development in support of CIMECON; it will also review the skills development process and make recommendations for creating a robust talent pool for economic corridor development. Local and imported talent pools could be drawn to meet the technological needs of economic corridors. Resources will have to be provided for technology development, importation, adaptation, and upgrading, and for the application of new or improved technologies to the development of economic corridors (Figure 8). Skills development and the application of technologies both contribute to human development, together with other social investments such as those in health and nutrition. Skills development, the application of technologies, and human development comprise the foundation for the optimal utilization of the labor force—a prerequisite for the development of unimodal transport, multimodal transport, logistics, and economic corridors. This foundation is also essential for meeting climate change challenges, as it will enable the implementation of measures for climate change mitigation and proofing (Figure 8).

37. Figure 9 shows the implications of climate change mitigation and proofing for economic growth and poverty reduction. A “business-as-usual” scenario, in which there are no measures to address climate change, is shown on the left-hand side of the diagram. A scenario in which climate change is fully taken into account is on the right-hand side. Risk-based analysis of climate change impacts on economic corridors suggests that resources will be required for implementing climate change mitigation and proofing measures, including an appropriate mix of personnel, skills, and technology. As a result of these measures, the economic corridors would be climate-proofed and would contribute to positive outcomes (regional cooperation and trade, intraregional balance and equity) and impacts (intraregional balance and equity). Figure 8 shows the extent to which the outcomes regarding economic growth and poverty reduction would be better with climate change mitigation and proofing than without. This study will test this hypothesis in its discussion of the selection of economic corridors.

B. Framework for Corridor Management and Operation and Maintenance 38. Once an integrated corridor network is developed, its management and operation and maintenance (O&M) would require a systematic approach, with a well-defined decision-making structure built on a strong foundation provided a “Bangladesh Corridor Management Authority” (BCMA), and supported by an act of Parliament and by a set of operational procedures (Figure 10). This would be comparable to the approach taken by the government with Bangladesh’s export processing zones (EPZs).

39. The primary business of the BCMA would be to plan the hierarchy of corridors: the unimodal transport corridor, multimodal transport corridor, logistics corridor, and economic corridor. The elements of corridor planning are presented in Table 4.

24 Foreign direct investment refers to the net inflows of investment from abroad to acquire lasting management interests (at least 10% of voting stock) in enterprises operating in a country of which the investors are not citizens. Connecting Bangladesh: Economic Corridor Network 17

Figure 8: Technology, Skills, and Human Development for an Integrated Economic Corridor Approach

Source: Asian Development Bank.

40. The primacy of logistics facilities needs to be highlighted, as the availability of such facilities will be vital for the smooth operation of the economic corridors, especially for attracting domestic and foreign investment. The provision of logistics facilities would qualify as good cost management, enhancing Bangladesh’s comparative advantage through improved productivity, distribution effi ciency, interest rates, energy availability, and energy costs. 18 ADB South Asia Working Paper Series No. 49

Figure 9: Climate Change Mitigation and Proofi ng for an Integrated Economic Corridor Approach

Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 19

Table 4: Elements of Corridor Development Planning

Road Transport Multimodal Transport Logistics Corridor Economic Corridor Development Corridor Development Corridor Development Development • Economic growth • Economic growth • Economic growth • Economic growth projection (GDP and per projection (GDP and projections (GDP and projections (GDP and capita income) per capita income) per capita income) per capita income) • Population growth projections • Population growth • Population growth • Population growth • Projected growth in the number of vehicles projections projections projections • Projected demand for multimodal transport • Changes in the • Projected growth in the • Projected growth in the • Changes in the economic structure, economic structure number of vehicles number of vehicles including regional disparities • Projected growth in the • Projected demand for • Changes in economic • Projected urbanization growth and patterns number of vehicles multimodal transport structure and regional • External trade projection (cross-border and • Vehicle operating costs • Changes in the disparities beyond: growth and patterns) • • Accident and related economic structure, Projected urbanization • Domestic trade projections (growth and costs including regional growth and patterns patterns) disparities • • Projected urbanization External trade • Projections regarding tourism development • Projected urbanization projections (cross- growth and patterns • growth and patterns border and beyond: Projected transit demand for road transport • External trade corridors • External trade growth and patterns) projections (cross- • Climate change projections border and beyond: projections (cross- • Domestic trade • growth and patterns) border and beyond: projections (growth Coordination, synchronization, and cost minimization • Domestic trade growth and patterns) and patterns) • projections (growth • Domestic trade • Projections regarding Projected patterns of passenger and cargo and patterns) projections (growth tourism development transport, including cross-border passenger travel and cargo movement • Projections regarding and patterns) • Projected transit • tourism development • Projections regarding demand for road Planning of physical links and facilities (e.g., warehousing) combined with a harmonized • tourism development transport corridors Projected transit corridor institutional framework to facilitate demand for roads • Projected transit • Climate change demand for road projections the efficient movement of people, freight, transport corridors and related information • transport corridors • Governance of logistics Regional disparities • Planning for receiving inputs and materials • Climate change • Climate change corridor development projections (same considerations and distributing output projections • • Governance of as for road transport Coordination, synchronization, and cost • Governance of road minimization, especially in the development transport corridor multimodal transport corridors) corridor development • Coordination, and application of ICT development • Attracting investment to, and generating (strategic planning (same considerations synchronization, and as for road transport cost minimization economic activities in, the geographic areas regarding efficiency, surrounding the corridors (including the effectiveness, corridors) • Projected patterns • Coordination, of passenger and less-developed areas or regions) by means transparency, of logistics facilitation, and of physical accountability, and synchronization, and cargo transport, cost minimization including cross-border linkages with ports, border-crossing points, corruption; project tourism sites, mineral deposits, markets, • passenger travel and development; Planning and towns, and administrative headquarters financing, including development cargo movement • PPPs; and contract of multimodal • Planning of physical Projections regarding skill requirements and awards for interchanges links and facilities development • implementation, • Projected patterns (e.g., warehousing), Governance of road transport corridor supervision, and of passenger and combined with a development (strategic planning regarding monitoring and cargo transport, harmonized corridor efficiency, effectiveness, transparency, evaluation) including cross-border institutional framework accountability, and corruption; project passenger travel and to facilitate the development; financing, including PPPs; cargo movement efficient movement and contract awards for implementation, of people, freight, and supervision, and monitoring and related information evaluation), with particular reference to the • Planning for receiving management of EPZs, SEZs, EZs, HiTPs, inputs and materials land ports, and urban areas by the BEPZA, and distributing output BEZA, BHTPA, the Bangladesh Land Port Development Authority, and local • Development and government bodies. application of ICT BEPZA = Bangladesh Export Processing Zones Authority, BEZA = Bangladesh Economic Zones Authority, BHTPA = Bangladesh Hi- Tech Park Authority, EPZ = export processing zone, EZ = economic zone, GDP = gross domestic product, HiTP = Hi-Tech Park, ICT = information and communication technology, PPP = public–private partnership, SEZ = special economic zone. Source: Asian Development Bank. 20 ADB South Asia Working Paper Series No. 49

Figure 10: Corridor Management and Decision-Making Framework

Source: Asian Development Bank.

41. Poor logistics has been a hindrance to attracting foreign investment to Bangladesh. The improvement of logistics is thus a high priority, all the more so as Bangladesh is increasingly integrated into the world economy. A study in 1997 found fi ve challenges constraining the development of logistics in Bangladesh: infrastructure-related problems; issues arising from the economic system, including the eff ects of frequent changes in government policy; management system problems; managerial problems; Connecting Bangladesh: Economic Corridor Network 21 and general problems such as political instability.25 These challenges call for action on the part of the government, the private sector, and academics and researchers; they also require regional cooperation.

42. Discussions with stakeholders and personal observations revealed that the situation has improved since the late 1990s, but gaps remain between intention and action. For example, the government is formulating policies and cultivating private sector participation in infrastructure development, but both efforts have fallen short of expectations.

43. The next set of decisions with regard to corridor management would entail strategies for skills development, climate change adaptation and mitigation, the adoption or development of technologies, and human development. There would also have to be a thorough economic analysis (described in detail later in this report). The resource requirements for corridor development would then have to be estimated, and a resource mobilization strategy would have to be formulated to finance investments according to a well- articulated, sector-wide investment road map for corridor development that would be phased according to a time scale covering the short, medium, and longer term. The BCMA would be responsible for implementing corridor development and for monitoring its progress. Feedback from the monitoring would be the basis for adjustments in the implementation and postimplementation O&M. The BCMA would have the overall responsibility for corridor development policies and strategies. Feedback from external and internal impact evaluation would be reflected in reviews and revisions of corridor development policies and strategies. The BCMA would work closely with the Bangladesh Export Processing Zone Authority; the Bangladesh Economic Zone Authority; relevant government ministries and agencies; and other stakeholders.

44. It is recommended that the BCMA establish a Special Implementation Cell (SIC) to fast- track important corridor projects since delay at any of the various stages of implementation has been a major problem with corridor development (causing further delays in the successive stages).The SIC would be responsible for project implementation and for monitoring its progress. While the government made earlier initiative to prioritize six mega projects totaling $16 billion under the Fast Track Project Monitoring Committee, the results have so far been reportedly mixed.26 Obviously, ad hoc arrangements for program implementation have their limitations, so there should be a more structured approach of the kind recommended here (i.e., BCMA and SIC).

C. Identifying Corridors for a Comprehensive Integrated Multimodal Economic Corridor Network

1. The 16-Corridor Option for an Economic Corridor Network 45. A 16-corridor network can be compiled drawing on the Asian Highway network, SASEC-proposed corridors, and the corridors proposed by the Sixth Five-Year Plan of Bangladesh (Map 1). According to the Sixth Five-Year Plan, transport corridors are to be selected on the basis of regional connectivity, market integration, and poles-of-development criteria. Physical connectivity and trade promotion were the critical considerations in the designation of the Asian Highway and SASEC corridors.

46. Map 1 shows the network of the 16 recommended economic corridors, all of which are anchored in existing or proposed transport corridors. The complexity of this network, with its multiple corridor overlaps, makes the identification of the corridors very difficult; hence the need for a simpler network, one whose economic impact would be easier to analyze. But these transport corridors will not fill the bill. Each of the 16 transport corridors has individual merit, but the network encompassing all of them does not comprise a comprehensive framework for investment, as these corridors are supply-driven rather

25 M. A. Razzaque. 1997. Challenges to Logistics Development: The Case of a Third World Country—Bangladesh. International Journal of Physical Distribution & Logistics Management. 27 (1). pp.18–38. 26 The Daily Star. 2015. Fast Tract Projects See Mixed Progress. 8 January. 22 ADB South Asia Working Paper Series No. 49

Map 1: The Network of 16 Transport Corridors in Bangladesh

Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 23 than demand-driven. Besides, as unimodal transport corridors, these are not based on optimal use of surrounding geographic spaces.

2. The Criteria for the Selection of the Nine Economic Corridors 47. National economic corridors are to focus on rational land-use planning and on the integrated development of geographic space for optimal socioeconomic impact, whereas regional economic corridors are to focus on facilitating market development and integration to enhance the socioeconomic impact. Two sets of selection criteria are presented here—one for national economic corridors and the other for regional economic corridors. Both sets of criteria are used for selecting national economic corridors that also have a regional dimension (Box 1).

48. Regional economic corridors are selected on the basis of their potential contribution to trade,

Box 1: Selection Criteria for National and Regional Economic Corridors

National economic corridors are to focus on rational land-use planning and on the integrated development of geographic areas, whereas regional economic corridors are to focus on facilitating market development and integration.

Selection Criteria for National Economic Corridor Selection Criteria for Regional Economic Corridor • Socioeconomic impact • Regional connectivity • Rate of return on investment • Regional economic integration • Transport cost saving • Regional complementary investment • Optimal land space planning • Optimizing competitive and comparative advantage • Traffic capacity to meet vehicular growth • Establishing production value chain • Reducing regional disparity • Promoting environmental sustainability and resilience • Creating employment to climate change • Conforming to Asian Highway standard • Promoting logistic, multimodal, technological, and • Facilitating market development and integration by financial connectivity strengthening links with seaport, land port, airports, • Promoting peace and harmony railway stations, bridges, tourist spots, industrial belts, • Reducing regional disparity mineral belts, growth poles, export processing zones, • Enhancing intraregional trade and reducing trade gap administrative headquarters, and border link roads • Promoting tourism, transport, and transit • Enhancing regional food and energy security Source: Asian Development Bank.

transport, transit, and, as a result, to increases in the GDP, household income, and in employment, among other indicators. These impacts would be optimized by regional connectivity and economic integration. The selection of regional economic corridors would also depend on investment linkages as measured by the growth of complementary investments and improvements in comparative and competitive advantage.

49. The selection of regional economic corridors would also be based on their potential damage to the environment and to the resource base, and their potential for improved resilience to climate change. Regional economic corridors that show a greater potential for facilitating cross-border cooperation and integrated activities on environmental and climate change issues would be given preference. Similarly, corridors that might diminish regional disparities (as measured by income gaps) and contribute more to peace and harmony in the region would also be given preference. Corridor attractiveness would be determined as well by the potential to increase tourism; cross-border vehicular movements; and 24 ADB South Asia Working Paper Series No. 49 hulna K continued on next page on next continued Interchanges tia, Chuadanga, Major Road–Rail Major Road–Rail ush Saidpur, Parbatipur, Parbatipur, Saidpur, Bogra, Rangpur, Dhaka, Tongi, Joydebpur, Chittagong Comilla, Feni, Dhaka, Benapole, Jessore, Bazar/ Bhairab Narsingdi, Sylhet Ashuganj, Parbatipur, Saidpur, Ishwardi, Bogra, Rangpur, Jessore, K Joydebpur, Mymensingh, Dhaka Tongi, tia, ush K angpur, angpur, tchpur, tchpur, tchpur, a a K K essore, essore, Major Road Major Road Interchanges ymensingh, Joydebpur, ymensingh, Joydebpur, hulna, Mongla Comilla, Feni, Chittagong, Chittagong, Comilla, Feni, Myanmar Bazar, Cox’s Border Bhairab Narsingdi, Bhulta, Sarail, Bazar/Ashuganj, Sylhet, Shaistaganj, Tamabil Hatikamrul, Bogra, Dasuria, Bonpara, Bogra, Hatikamrul, Tangail, Tangail, Hatikamrul, Bogra, North, Dhaka Joydebpur, South, Dhaka Bhanga, Bhatiapara, South, Dhaka Jessore, Jhenaidah, K North–Dhaka Dhaka South–Bhanga–Barisal ery high Banglabandha, R ery high Benapole, J ery high M Medium Banglabandha, Rangpur, V V V tchpur– a K erryghat), erryghat), erryghat erryghat alna F alna F K K National and National IdentificationProspect Economic Regional Highway Highway Regional tchpur–Teknaf) tchpur–Teknaf) N2 ( tchpur), a a N5 (Banglabandha– Hatikamrul), N405 (Hatikamrul–Elenga), N4 (Elenga–Joydebpur), N3 (Joydebpur–Dhaka urban road North), North–Dhaka (Dhaka South– South), N1 (Dhaka (Benapole– N706 R750 Jessore), Z7503 (Jessore–Narail), (Narail– N805 Bhatiapara), to N8 (Bhatiapara–Bhanga), (Bhanga–Mawa–Dhaka South– South), N1 (Dhaka N5 (Banglabandha– Hatikamrul), N507 (Hatikamrul–Bonpara), N6 (Bonpara–Dasuria), (Dasuria– N704 N7 Jhenaidah), Port) (Jhenaidah–Mongla N3 (Mymensingh–Dhaka Road Urban North), North–Dhaka (Dhaka South), N8 (Dhaka South–Mawa–Bhanga– Barisal–Patuakhali) K N806 ( K Tamabil) Table 5: Profiles of Nine Economic Corridors Economic Nine of 5: Profiles Table 661 338 982 504 Length (km)Length tchpur– tchpur– a a K K hulna–Mongla Route K tia–Jhenaidah– ush Banglabandha– Panchagarh– Rangpur–Bogra– Hatikamrul–Jamuna Bridge–Elenga–Tangail– North– Joydebpur–Dhaka South– Dhaka Madanpur –Comilla– Bazar– Chittagong–Cox’s Border Teknaf–Myanmar Benapole–Jessore–Narail– Bhatiapara–Bhanga– Mawa–Dhaka– Banglabandha– Panchagarh–Thakurgaon– Rangpur–Bogra– Hatikamrul–Bonpara– Port Mymensingh–Joydebpur– North–Dhaka Dhaka South–Mawa–Bhanga– Patuakhali Barisal and to Sarail–Sylhet–Tamabil K Jessore– Corridor Northwest– Southeast (NW–SE) Southwest– Northeast (SW–NE) North–South (West) (NS–W) North–South North–South (Central) (NS–C) No EC1 EC2 EC3 EC4 Connecting Bangladesh: Economic Corridor Network 25 continued on next page on next continued Interchanges Major Road–Rail Major Road–Rail hulna Sylhet, Brahmanbaria, Brahmanbaria, Sylhet, Chittagong Comilla, Feni, Saidpur, Parbatipur, Parbatipur, Saidpur, Bogra, Rangpur, Dhaka, Tongi, Joydebpur, Bazar/ Bhairab Narsingdi, Sylhet Ashuganj, Ishwardi,Joydebpur, Ishwardi,Joydebpur, Bhairab Narsingdi, Dhaka, Comilla, Bazar/Ashuganj, Chittagong, Feni, Benapole, Jessore, Benapole, Jessore, Dhaka, Goalanda Ghat, Chittagong Comilla, Feni, K angpur, angpur, tchpur, tchpur, a K tchpur, Comilla, tchpur, a K Major Road Major Road Interchanges hulna, Barisal Tamabil, Sylhet, Sylhet, Tamabil, Sarail, Shaistaganj, Brahmanbaria–Comilla– Feni–Chittagong– Border Myanmar Bogra, Hatikamrul, Tangail, Tangail, Hatikamrul, Bogra, North, Dhaka Joydebpur, South, Dhaka Bhairab Narsingdi, Bhulta, Sarail, Bazar/Ashuganj, Sylhet, Shaistaganj, Tamabil Dhaka, Narsingdi, Narsingdi, Dhaka, Bazar/Ashuganj, Bhairab Chittagong, Comilla, Feni, Border Myanmar Jhenaidah, Magura, Magura, Jhenaidah, Dhaka, Chittagong K High ery high Banglabandha, R Medium Ishwardi,Joydebpur, Medium Benapole, Jessore, Medium V tchpur– a K National and National IdentificationProspect Economic Regional Highway Highway Regional tchpur), N2 ( tchpur), a N2 (Tamabil–Sarail), N102 N102 N2 (Tamabil–Sarail), (Sarail–Brahmanbaria– N1 Mainamati), (Mainamuti–Myanmar Border) Tamabil) N5 (Banglabandha– Hatikamrul), N405 (Hatikamrul–Elenga), N4 (Elenga–Joydebpur), N3 (Joydebpur–Dhaka Road Urban North), North–Dhaka (Dhaka South– South), N1(Dhaka K Chittagong), N1 (Chittagong–Myanmar Border) N706 (Benapole– N706 N7 (Jessore– Jessore), Jhenaidah–Magura– N5 (Paturia Daulatdia), Ghat–Manikganj–Dhaka Road Urban North), North–Dhaka (Dhaka South– South), N1 (Dhaka Border) Myanmar Route Water Inland 746 805 668 670 not available (Darsana– Rail Length (km)Length hulna– K tchpur–Sarail– Route a K tchpur–Madanpur – a Banglabandha– Panchagarh– Rangpur–Bogra– Hatikamrul–Jamuna Bridge–Elenga–Tangail– Dhaka– Sylhet–Tamabil Darsana–Poradaha– Ishwardi–Jamtoil–Jamuna Bridge–Joydevpur– Dhaka–Narsingdi–Bhairab Bazar–Ashuganj– Brahmanbaria–Akhaura– Comilla–Mainamati– Laksham–Feni– Chittagong–Myanmar Border Tamabilr–Sylhet–Sarail– Brahmanbaria–Comilla– Feni–Chittagong–Cox’s Bazar–Teknaf–Myanmar Border Benapole–Jessore– Jhenaidaha– Magura–Goalanda Ghat– Paturia Ghat– Manikganj–Dhaka– K Mainamati–Comilla– Chittagong–Myanmar Border Angtihara– Angtihara– Barisal–Up Meghna– Barisal–Up Assam Corridor Northwest– Northeast (NW–NE) Southwest– Southeast (SW–SE) North–South North–South (East) (NS–E) East–West East–West (EW) Inland Water Water Inland (IWR) Route No EC6 EC7 EC5 EC8 EC9 Table 6: continued Table 26 ADB South Asia Working Paper Series No. 49 Link ighway 2 ighway ighway 2 ighway Asian Highway/ Highway/ Asian SASEC Corridor SASEC continued on next page on next continued Asian H - 2) and Asian (AH - 41) 41 (AH Highway (AH - 2) and SASEC - 2) and SASEC (AH Corridor 5 (AH - 1) (AH (AH - 2) and Asian (AH - 41) 41 (AH Highway Asian H arnafuli K arnafuli K Zones (EPZ) Zones Export Processing Export Processing Chittagong, Comilla, Chittagong, and Dhaka, Uttara and Uttara Dhaka, Adamjee Ishwardi and MonglaIshwardi 2 Asian Highway Dhaka and UttaraDhaka 1 Asian Highway Chittagong, Comilla, Chittagong, Adamjee, Dhaka, and Uttara Points Major Border Major Border Tamabil, Myanmar Myanmar Tamabil, and Akhaura, Border, Bazar Bibir Haluaghat Banglabandha, and Darsana, Hili, Benapole Benapole, Tamabil Benapole, Tamabil and Akhaura Banglabandha, Bibir Banglabandha, Bibir and Myanmar Bazar, Border ta uaka hulna, K K Sites Major Tourism Major Tourism hulna, Mongla, Chittagong, Cox’s Cox’s Chittagong, Jaflong, Bazar, Ruins, Mainamati Sri Mangal, Ramu, Teknaf Dhaka, Greater Greater Dhaka, and Mymensingh Hills. Garo Bagerhat, Bagerhat, Dinajpur, Mahastangarh, Mongla, Puthia, Rahshahi Dhaka, Jaflong, Jaflong, Dhaka, K National Sundarban Teknaf Park, Chittagong, Cox’s Cox’s Chittagong, Dhaka, Bazar, Mahastan Dinajpur, Gorh, Mainamati Ramu, Ruins, and Teknaf, Rangpur, Tentulia tila, tila, halaspur alash ailash K K K Coal) ta, Maulvi Bazar, Bazar, Maulvi ta, ta, Salda, ta, mta Major Mineral Major Mineral Sites (Gas and Sites (Gas halaspur a am am Chatak, Bakhrabad, Bakhrabad, Chatak, Beanibazar, Bibiyana, Begamganj, Feni, Fenchuganj, Haripur, Habiganj, Jalalabad, Maulvibazar, Salda, Rashidpur, Titas K Barapukuria, Barapukuria, Jamalganj, Chatak, Beanibazar, Beanibazar, Chatak, Fenchugan, Bibiyana, Haripur, Habiganj, Jalalabad, K Salda Rashidpur, K Barapukuria, Titas, and Jamalganj, K Bakhrabad, Bakhrabad, Feni, Begamganj, tia, hulna, ush K K Major Industry/ hulna, Business Centers Business Ashuganj, Ashuganj, Chittagong, Comilla, Ghorasal, Meghnaghat, Sylhet, Narsingdi, Thakurgaon Tangail, Barisal, Dhaka, Barisal, Dhaka, Habiganj, Gazipur, Mymensingh, Tongi Narayanganj, Jessore, Jhenaidah, Jhenaidah, Jessore, K Rajshahi, Pabna, Sirajganj, Rangpur, Thakurgaon Meghnaghat, Meghnaghat, Narayanganj, Sylhet, Narsingdi, Tongi Tangail Ashuganj, Bagerhat, Bagerhat, Ashuganj, Gazipur, Dhaka, Habiganj, Ghorasal, Jessore, Bogra, Chittagong, Chittagong, Bogra, Comilla, Dhaka, Gazipur, Narayanganj, Sirajganj, Rangpur, and Tongi hulna Bogra, Dinajpur, K Interchanges River/Sea Port Port River/Sea hulna, Tongi, hulna, Tongi, Major Road/Rail– Ashuganj-Bhairab Ashuganj-Bhairab Chatak, Bazar, Chittagong Naryanganj, Dhaka, Dhaka, Naryanganj, Tongi Ishwardi, Ishwardi, K Dhaka, Narayanganj, Narayanganj, Dhaka, Ashuganj- Narsingdi, Bazar, Bhairab Chatak Sirajgonj, Tongi, Tongi, Sirajgonj, Narayanganj, Dhaka, Chittagong , , Cox’s , Cox’s azipur K hulna, K azipur K Major Road– Interchanges River/Sea Port Port River/Sea hulna Meghnaghat, Meghnaghat, Ashuganj-Bhairab Chatak, Bazar, Cox’s Chittagong, Lipsa, Bazar, Patuakhali, Barisal, Patuakhali, Charjanjat, Munshiganj, Dhaka, Naryanganj, Mawa, Tongi, Nawyapara Ishwardi, Sirajganj, Sirajganj, Ishwardi, Baghabari, K Mongla, Charjanjat, Dhaka, Dhaka, Charjanjat, Narayanganj, Tongi, Meghnaghat, Mawya, Munshiganj, Narsingdi, Nawyapara, Ashuganj–Bhairab Lipsa, Bazar, Maowa, Madaripur, Chatak Sirajgonj, Baghabari, Baghabari, Sirajgonj, Narayanganj, Dhaka, Tongi, Chittagong Bazar, EC5 No EC4 EC3 EC2 EC1 Table 6: continued Table Connecting Bangladesh: Economic Corridor Network 27 Link C Corridor 3 C Corridor 4 Asian Highway/ Highway/ Asian SASEC Corridor SASEC SASEC Corridor 4 SASEC SASE 41 and Asian Highway - 41) (AH SASE (AH - 2) (AH arnafuli K Zones (EPZ) Zones arnafuli Export Processing Export Processing Dhaka, Uttara, Uttara, Dhaka, and Chitagong K Mongla, Dhaka, Mongla, Dhaka, Chittagong, Uttara, and Dhaka and UttaraDhaka 2 Asian Highway

Points Major Border Major Border Angtihara, Chilmari Angtihara, and Mtanmar Border and Mtanmar Benapole, Bibir, Bazar, Bazar, Benapole, Bibir, Darsana, Myanmar Myanmar Darsana, and Akhaura, Border, Bazar Bibir Banglabandha, and Akhaura Tamabil, Sites Major Tourism Major Tourism hulna K Dhaka, Mainamuti Dhaka, Ruins Chittagong, Dhaka Dhaka Chittagong, and Mainamoti Ruins Dhaka, Dinajpur, Dinajpur, Dhaka, Jaflong, Sri Mahastangorh, Mangal, Tentulia tila, ta, ta, am halaspur K alash K K Coal) ta, Salda, Titas, Salda, Titas, ta, Major Mineral Major Mineral Sites (Gas and Sites (Gas hulna, Barisal, am K Narayanganj Bakhrabad, Bakhrabad, Begamganj, Salda, Titas K Bakhrabad, Bakhrabad, Feni, Begamganj, Maulvibazar, Maulvibazar, Rashidpur, Barapukuria, Jamalganj, Chatak, Beanibazar, Beanibazar, Chatak, Fenchuganj, Bibiyana, Haripur, Habiganj, Jalalabad, Major Industry/ hulna, Barisal, Business Centers Business K Narayanganj Comilla, Dhaka, Comilla, Dhaka, Gazipur, Faridpur, Narayanganj, Jessore, Tongi Chittagong, Comilla, Chittagong, Darsana, Dhaka, Meherpur, Gazipur, Pabna, Narayanganj, Sylhet, Sirajganj, Thakurgaon, Tangail, Tongi Ashuganj, Bogra, Bogra, Ashuganj, Dinajpur, Dhaka, Gopalganj, Gazipur, Habiganj, Meghnaghat, Narayanganj, Rangpur, Narsingdi, Sylhet, Sirajganj, Thakurgaon, Tangail, Tongi Interchanges River/Sea Port Port River/Sea haka, Narayanganj, haka, Narayanganj, hulna Major Road/Rail– K Dhaka, Narayanganj, Narayanganj, Dhaka, Chittagong Tongi, D Chittagong Tongi, Sirajganj, Tongi, Tongi, Sirajganj, Narayanganj, Dhaka, Ashuganj–Bhairab Bazar azipur K , Sirajganj, , Sirajganj, Major Road– Interchanges River/Sea Port Port River/Sea hulna, Barisal azipur K Aricha, Daulatdia, Aricha, Daulatdia, Dhaka, Tongi, Nagarbari, Narayanganj, Chittagong Baghabari, Dhaka, Dhaka, Baghabari, Tongi, Narayanganj, Chittagong, K Baghabari, Dhaka, Dhaka, Baghabari, Narayanganj, Tongi, Ghat, Meghna Ashuganj–Bhairab Bazar No EC9 EC8 EC7 EC6 Table 6: continued Table (Program). Cooperation Economic = South Asia Subregional SASEC km = kilometer, corridor, = economic EC http://www.railway.gov.bd/site/ Map. Route Railway Bangladesh Railway. http://www.daftlogic.com/projects-google-maps-distance-calculator-htm; Calculator. Distance Logic. Draft Sources: Manila; report. final of Draft Subregion. in the South Asia Study Efficiency Corridor Operational Subregional Bank. 2007. page/ff534cd8-a522-4c7d-a48c-6d41dc63aa82;Development Asian http://www.bba.gov.bd/category/ongoing-projects; Projects. Ongoing Bridges Division. Bangladesh Bridge Authority, and Bridges, Transport Road Bangladesh, Ministry of of Government /common/TIS/AH/files/ http://www.unescap.org/ttdw Bangladesh. Dhaka. on Asian Highway: Paper 2011. Status Division. Roads Communications, Bangladesh, Ministry of of Government Bangladesh in Bangladesh. Routes Priority Asian Highway of Upgrading Asian Highway: 2007. Communications. Bangladesh, Ministry of of Government wgm4/Countries/Status/Bangladesh.pdf; and Economic Nations United Bangladesh. http://mapofbangladesh.blogspot.com/2011/12/major-industries-bangladesh.html; Bangladesh. Major Industries: Maps of Dhaka; Paper. Country in Road AH1: Bhatiapara–Benapole of Study Prefeasibility Routes. Priority of Upgrading the Asian Highway: of and Development Promotion 2007. Asia and the Pacific. for Social Commission http:// Integration. Regional Greater Towards Connectivity: Road Subregional /ContentPages/6431421.pdf; http://s3.amazonaws.com/zanran_storage/www.unescap.org Bangladesh. Dhaka. of Information & Travel Directory—Tours Bangladesh Tourism Directory. Information and Travel Bangladesh Tours www.lcgbangladesh.org/Transport/Presentations/ppt%20annex-D.pdf; Official Bangladesh.com in Bangladesh. http://www.bangladeshtourismdirectory.com/tourist-attractions-in-bangladesh.html; Places Attraction Tourist & Popular Top Bangladesh, List of & Travel Directory—Tours Bangladesh Tourism Directory. Information and Travel Bangladesh Tours Bangladesh. http://www.bangladesh.com/sights; of Sights the Must-See Explore website. bangladesh- http://www.bangladeshtourismdirectory.com/ Dhaka. Sites Archaeological Sites, in Bangladesh, Bangladesh Archaeological Sites Archaeological Bangladesh, List of of Information Bangladesh. Sea port to Tour Plan. Dhaka; Master Road 2009. Department. and Highways Roads Communications, Bangladesh, Ministry of of Government archaeological-sites-list.html; http://www.iifc.net/ (IIFC). Center Banglabandh Land Port. of Development Facilitation Investment Infrastructure in Bangladesh. http://www.tourtobangladesh.com/moreo-sea-port.php; http://www.biwta About Us. Authority. Transport Water Shipping, Bangladesh Inland Bangladesh, Ministry of of Government publication/miscellaneous/Banglabandha%20Land%20Port.pdf; http://www.iifc.net/publication/miscellaneous/Bibirbazar%20Land%20Port.pdf Land Port. Bibirbazar of Development IIFC. .gov.bd/website/?page_id=2; 28 ADB South Asia Working Paper Series No. 49

Map 2: The Network of Nine Economic Corridors in Bangladesh

Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 29 passenger, cargo, and vehicular transit through the country. Finally, regional economic corridors could be assessed by their contribution to regional food and energy security, measured by the degree of integration of food and energy flow while avoiding supply stress. A consideration of the criteria set out earlier would point to the nine-corridor network comprising CIMECON (Table 5 and Map 2) as the preferable choice.

50. An overview of the proposed comprehensive integrated multimodal economic corridor network (CIMECON) shows the nine selected corridors as part of or connected with the Asian Highway and/ or SASEC corridor networks, and are located on or near multimodal exchanges, thus enabling further multimodal connectivity, as well as links to export processing zones (EPZs) and to major border-crossing points, industrial and commercial centers, mineral resource sites (gas fields and coal fields), and tourist attractions. The corridors vary in terms of the economic prospects of their surrounding regions, from very high (EC1, EC2, EC4, and EC6), to high (EC5), to medium (EC3, EC7, EC8, and EC9). A preliminary assessment suggests that there would be significant socioeconomic impact from any configuration of economic corridors, although some corridors could be deemphasized because their contributions would be less important. Feasibility studies of ADB-financed roads in Bangladesh have indicated high economic internal rates of return (EIRRs), and the EIRRs for the nine economic corridors would be even higher, with both the roads and corridors well above the minimum acceptable level of 12%.

51. The proposed economic corridors could be designed so as to minimize transport costs. For instance, goods shipped from EPZs should reach a port through shorter and less costly routes (by road, rail, or inland waterways). The same is true of cargo movement between the production or extraction points and the consumption or utilization points.

3. The London Tube Map 52. The nine proposed economic corridors that would Map 3: CIMECON Depicted in a London Tube-Style Format make up CIMECON could be represented in a manner resembling the London Tube map (Map 3). This representation of CIMECON is possible for two reasons: (i) CIMECON is essentially a grid composed of north–south, east–west, northwest–southeast, and southwest–northeast corridors; and (ii) by 2050, Bangladesh is projected to be a compact, integrated economic space dominated by a single urban conglomeration, and with a transport network similar in structure to the London Tube, carrying people and goods at high speeds through multimodal CIMECON = comprehensive integrated multimodal economic corridor network. transport corridors. Source: Asian Development Bank.

53. One should be able to reduce the time, distance, and cost of travel or transport by using the right corridors and the appropriate intramodal and intermodal interchanges and links (Table 5). The development of CIMECON would not hinder the upgrading of existing networks of roads, railways, and inland waterways to Asian Highway or 30 ADB South Asia Working Paper Series No. 49 other international standards. This is demonstrated by the fact that there are overlaps between the nine economic corridors and the major national highway, regional highway, railway, and inland waterway routes (Table 5 and Map 2). Moreover, the surrounding areas (including important locations such as industrial, mineral, and tourist sites) would undergo enhanced economic development and activity (Table 5). Economic corridors, skills development, technology, and infrastructure upgrading are all highlighted as pillars of growth in the Perspective Plan of Bangladesh 2010–2021. Bangladesh is projected to become a middle-income country by the end of the plan’s duration.

54. The proposed economic corridors were chosen based on their optimal structural and accessibility characteristics, both of which should facilitate the planning for an ideal industrial structure, with a desired trade and export composition. These characteristics will also help deal with the complexity of exports, taking into account relative unit labor costs, regional income distribution, the extent of network and geographic cohesion, population density and dynamics, prospects for trade diversification along value chains, and intraregional vs. interregional trade, Bangladesh’s share of components trade, vertical network integration, information network integration along value chains, transport network completeness, and interconnectivity (local to global).

4. Economic Corridors to Accommodate Projected Traffic Growth 55. The central transport arteries that anchor the proposed economic corridors would be designed to accommodate increased road traffic, which is projected to grow 8%–10% annually, in line with GDP growth. This would be done in part by increasing the number of lanes from two (which two-thirds of the national highways currently have) to four, six, or eight, depending on the planners’ preferences and on the analysis carried out as part of this study.

5. Economic Corridors to Improve Connections to Land Ports 56. The CIMECON corridors would include both new connections and upgraded ones to land ports. Bangladesh has 13 land ports, including 12 on the border with India (Akhaura, Banglabandh, Benapole, Bibir Bazar, Birol, Bhomra, Burimari, Darsana, Haluaghat, Hili, Sonamasjid, and Tamabil ) and 1 on the border with Myanmar (Teknaf). The Ministry of Shipping and the Bangladesh Bank are developing 12 of the land ports (excluding Benapole) in partnership with the private sector, on a build–operate–transfer basis, to enable more efficient cargo storage and handling.27 The foundations have recently been laid for the construction of facilities at Banglabandh land port and in nearby Phulbari (India), which will also facilitate links with Nepal and Bhutan. ADB is providing support for the upgrading of facilities at Burimari land port, with a view to operationalizing a corridor connecting Bhutan with Bangladesh that will give Bhutan access to the seaports of Mongla and Chittagong (Thimphu–Phuentsholing–Jaigaon– Changrabandha–Burimari–Chittagong Port or Mongla Port). Bangladesh and India are conducting talks on the possibility of building a 20-km rail link between Akhaura (in Bangladesh) and Agartala (in the Indian state of Tripura), to reduce the distance and cost of transport between the seven provinces of northeast India and the rest of the country (Kolkata–Petrapole–Benapole–Dhaka–Akhaura–Agartala).28 The Kolkata link will one day take cargo and passengers all the way to Lahore, via Delhi, Atari, and Wagah. Similarly, Bangladesh and Myanmar are discussing trade facilitation measures to raise exports in both

27 Infrastructure Investment Facilitation Center (IIFC). Development of Banglabandha Land Port. http://www.iifc.net/ publication/miscellaneous/Banglabandha%20Land%20Port.pdf; IIFC. Development of Bibirbazar Land Port. http://www.iifc.net/publication/miscellaneous/Bibirbazar%20Land%20Port.pdf 28 K. R. Chowdhury. 2013. Akhaura–Agartala Rail Link: Indo-Bangla Officials Meet to Devise Plan Today. Dhaka Tribune. 21 May. http://www.dhakatribune.com/development/2013/may/21/akhaura-agartala-rail-link-indobangla-officials-meet -devise-plan-today Connecting Bangladesh: Economic Corridor Network 31 directions through Teknaf.29 Benapole is the most important land port of Bangladesh. It is located across from Petrapole, in India, and accounts for 90% of imports from India and 60% of total overland trade with India by both road and rail. Even with some recent upgrading, however, the facilties remain below par, unable to cope with the rising volume of overland trade between India and Bangladesh. Trade through Hili, also on the Indian border, is by road and railway. Benapole, Hili, and Sonamasjid account for almost 90% of total overland border trade. Hili is second in terms of cargo handled. Tamabil is used primarily for importing coal from India, and the facilities there are minimal. Darsana, an old railway station at the Indian border, carries mostly passengers. The facilities at Bibir Bazar will be expanded under a build– operate–transfer arrangement to increase the volume of trade with the Indian state of Tripura; and the facilities in Haluaghat will be expanded to increase trade with the Indian state of Meghalaya. Against this backdrop, the proposed economic corridors are expected to facilitate connections with all the land ports of Bangladesh.

6. Economic Corridors to Promote Market Development and Integration 57. Bridges. The establishment of economic corridors is not an end in itself. Market development and integration are the main objectives, as they will set the stage for higher GDP growth in Bangladesh that would also be inclusive, for individuals and the poorer regions. Market development and integration mean expanding the supply base as well as the demand base. CIMECON will facilitate market development and promote market integration, in particular through the rehabilitation of major bridges and the construction of new ones, including high-priority mega bridges along the proposed transport corridors.

58. Connecting poles of development. Market integration will require that selected economic corridors cover major roads and ferry crossings to ensure smooth operations, maintenance, rehabilitation, and reconstruction, as these will help contain rising transport costs, thereby preserving a competitive edge. In the same way, the proposed corridors will improve links with major seaports and river ports in Bangladesh, thereby providing a gateway for both Bangladeshi and foreign shipments. The proposed economic corridors are designed to connect to poles of development, as well as administrative headquarters, tourist destinations, and EPZs, to improve connectivity at reduced transport cost. CIMECON will be strong on connectivity throughout the South Asia region, both directly and through border link roads.

59. The development of the most appropriate economic corridors for CIMECON would ensure the construction and maintenance of strategic bridges, the efficient working of ferries (if any left), a greater number of visitors to tourist attractions in Bangladesh, an accelerated growth in production, and increased exports from the EPZs through expanded transport corridors and upgraded seaports and river ports. Following a similar strategy, the planning for CIMECON should be aimed at strengthening links with poles of growth, including towns and cities with administrative headquarters (Table 6), as well as major industrial locations such as Bogra, Chittagong, Dhaka, Gazipur, Khulna, and Rajshahi; and mineral resource sites (including gas fields and coalfields) in the eastern and western parts of the country.

60. Market integration has to encompass domestic and foreign markets. Bangladesh’s economic corridor network must align the country’s roads, railways, inland waterways, seaports, and river ports with the requirements of connectivity, integration, and transit with the rest of South Asia and with countries outside the South Asia region. Reference has already been made to the Asian Highway and SASEC corridor links throughout Bangladesh. In addition to the economic corridor links, CIMECON planning should also pay attention to border link roads (Table 7).

29 Narinjara. 2013. Burma and Bangladesh Discusses Improvement of Border Trades (sic). 24 June. http://narinjara.com/ index.php/burma-and-bangladesh-discusses-improvement-of-border-trades 32 ADB South Asia Working Paper Series No. 49

Table 6: Functional Connections in the National Highway System of Bangladesh Location Function Connections Dhaka Capital N1, N2, N3, N4, N5, N8 Barisal Divisional headquarters N8 Chittagong Divisional headquarters N1 Khulna Divisional headquarters N7 Rajshahi Divisional headquarters N6 Sylhet Divisional headquarters N2 Chittagong Seaport N1 Mongla Seaport N7 Akhaura Land port Z1216 Banglabandh Land port N5 Benapole Land port N706 Bhomra (near Satkhira)a Land port (LGED road onlyb) Bibir Bazar (near Comilla)a Land port (LGED road onlyb) Birol Land port Z5803 Burimari Land port N509 Haluaghat (near Mymensingh) Land port Z3711 Hili Land port Z5503, Z5856 Sonamasjid (near Chapai Nawabganj) Land port Z6801 Tamabil Land port N212 Teknaf Land port N1 LGED = Local Government Engineering Department, N = national highway, R = regional highway, Z = zila (district) road. a Bhomra and Bibir Bazar are not connected to roads used by the public for passenger or cargo traffic. They are connected to roads meant for government use only. b The Local Government Engineering Department is the national government agency responsible for rural roads. Source: Government of Bangladesh, Ministry of Communications, Roads and Highways Department. 2009. Road Master Plan. Dhaka.

Table 7: Border Link Roads in Bangladesh Starting point End point Route Distance Rangpur Lalmonorhat N5-N506 18 Lalmonorhat Burimari N509 52 Beldanga Dinajpur N5 16 Dinajpur Birol Z5803 12 N5-R550 Junction Joypurhat N550 22 Joypurhat Hili Z5503 13 Banpara Rajshahi N6 35 Rajshahi Nawabganj R680 45 Nawabganj Sonamasjid Z6801 16 (Baliadighi) Mymensingh Phulpur R371 15 Phulpur Haluaghat Z3711 11 Khulna Satkhira R760 59 Satkhira 3km point R7602 3 3km point at R7602 Bhomra LGED Road 6 km = kilomter, LGED = Local Government Engineering Department, N = national highway, R = regional highway, Z = zila (district) road. Notes: 1. The bold names indicate the original points and end points on the routes features in this table. 2. The routes are grouped according to the networks of linked roads. 3. The Local Government Engineering Department is the national government agency responsible for rural roads. Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 33

61. CIMECON is aimed at fostering connectivity in South Asia through 12 regional connectivity roads, promoting regional integration and facilitating regional transit and access to ports. One benefit of economic growth through economic corridors is the gain in employment opportunities. Investments in economic corridors should therefore emphasize labor-intensive technologies to maximize the number of jobs created. This is particularly true of the operation and maintenance (O&M) of central transport corridors, which can be outsourced to contractors specializing in labor-intensive methods. Moreover, economic corridors will connect depressed regions with affluent ones to spur economic growth, thereby helping to reduce regional disparities. With better planning of the use of economic spaces, corridors should help prevent the problems caused by the 139 hats (weekly local markets) and bazaars that congest Bangladesh’s transport network.30 The development of economic corridors will have to include the construction of bypasses and service roads, and the improvement of intersections, to create better traffic conditions.

D. Key Challenges 62. The development of CIMECON has not been without its challenges. Hindrances to the realization of CIMECON have included the pressures resulting from GDP growth, urbanization, environmental stresses, climate change, traffic growth and congestion, and, last but not the least, investment demand. For instance, the Northwest–Southeast, Southwest–Northeast, and North–South (Central) corridors are encroached upon at more than 30 locations each by hats and bazaars. This encroachment means significantly increased transport costs and longer travel times, which will become even worse with the forecasted growth in traffic over the period 2015−2025 (Table 8).

Table 8: Forecasted Average Annual Vehicle Growth Rates, 2015–2025 Truck Bus Car Othersa All Vehicles Low 2015–2020 7.10 3.00 6.90 5.25 5.15 2020–2025 1.40 3.00 5.50 2.00 2.45 2005–2025 5.10 3.00 7.57 5.69 4.64 Medium 2015–2020 6.40 4.00 7.00 5.30 5.00 2020–2025 2.80 4.00 5.70 2.90 3.18 2005–2025 5.82 4.00 8.40 6.45 5.24 High 2015–2020 6.00 5.00 6.80 5.20 5.50 2020–2025 5.22 5.00 5.45 4.20 4.90 2005–2025 6.87 5.00 9.90 7.32 6.50 a “Others” refers to such vehicles as jeep, taxi, auto-rickshaw, tractor, motorcycle, and trawler. Source: Government of Bangladesh, Ministry of Communications, Roads and Highways Department. 2009. Road Master Plan. Dhaka.

63. Traffic volumes along the Roads and Highways Department network are moderate to high on the national highways and low on the regional highways and zila roads, but the average volumes of vehicle

30 Government of Bangladesh, Ministry of Communications, Roads and Highways Department. 2009. Road Master Plan. Vol I. Dhaka. p. 23. http://www.rthd.gov.bd/assets/docs/road_master_plan.pdf 34 ADB South Asia Working Paper Series No. 49 traffic overall have been growing at 5.0%–6.3% per year (Table 8). Traffic growth has proven consistent with the projections set out in the government’s 2009 Road Master Plan (Table 9). Projections, in general, are higher for busier routes, such as the Dhaka–Chittagong Highway, which may eventually have to carry more than 30,000 vehicles a day. The current projections are modest, however, if one considers the full implications of the development of CIMECON; specifically, it could create a feedback cycle in which increased transport and economic capacity generates increased demand for vehicles, which, in turn, leads to increased traffic flow. Moreover, increased economic and regional trade and transit activity would create a demand for the services of transport, logistics, and economic corridors; and this would spur capacity expansion. The London Tube model for CIMECON in particular would create demand for its services; and the increased demand—domestically and cross-border—would then create further pressure for capacity expansion. The projections in the Road Master Plan go up to 2025 only. Beyond that, traffic volumes will likely explode in response to modernization, increased mobility, and a projected GDP growth of 10% per year. CIMECON may therefore have to deal with even higher traffic growth, of the order shown in Table 9.

Table 9: Projected Motor-Traffic Growth, 2015–2030 Average Annual Growth Rate Road Type (%) National highway 8–10 Regional highway 10–15 Zila (district) road 10 Source: Government of Bangladesh Ministry of Communications, Roads and Highways Department. 2009. Road Master Plan. Dhaka.

64. The projected traffic growth will require an upgrading of the road network in the form of improved quality and greater number of lanes. Major national arteries will have to comply with international benchmarks such as those of the Asian Highway network. Given the current condition of roads in Bangladesh, quality improvement is an immediate concern. Bangladesh will also have to apply appropriate measures to improve the resilience of its road infrastructure in the face of climate change. The real challenge of CIMECON will be the large investment required (both from domestic and external sources) for corridor-related infrastructure and software, including climate change adaptation measures.

E. Impact Analysis 65. Economic corridor development, along with the necessary policy and institutional reforms, would have a substantial impact. The selections of the economic corridors that will comprise the network were linked to their potential contributions to GDP growth (Figure 11). Any combination of corridors should have a positive incremental impact on GDP, compared with the scenario of no economic corridor network at all. Conceptually, an application of the production function approach will show that GDP would be higher with economic integration through transport corridor and economic corridor connectivity than it would be without. The absence of such connectivity, referred to as the “business-as-usual” scenario, shows normal GDP growth derived from the primary factors of production and from technology, driven by policies, institutions, programs, and projects. Growth would be reflected in further investment and in gradual increases in employment, trade, revenues, and private sector activity. But there would be a lack of dynamism in the growth process because there would be no trigger, no regional infrastructure or connectivity, and no development of economic corridors within or between regions.

66. Once economic integration is factored in, a number of processes are set in motion that spur an upward shift in the production function, resulting in a higher level of output for the same level of Connecting Bangladesh: Economic Corridor Network 35

Figure 11: A Methodology for Estimating the Impact of an Integrated Economic Corridor Network in Bangladesh

Permanent and temporary Employment coefficients for Planning model for an integrated employment in economic economic corridors economic corridor network (transport, corridors logistics, and economic corridors)a

Distance of Unit cost per km for roads (by roads (by road type), and other transport- type) and other Travel time saving, efficiency and construction-related costs Harmonization, transport routes, improvement, and increase in facilitation, and (including skill, technology, also volume of production and services and human development; institutional-reform other measures climate mitigation and construction proofing

Transport operating Increase in units of products Travel cost savings = costs and opportunity or services, and in vehicle savings in transport costs of travel time flow (trucks, buses, rail, river Total cost of investment in costs + reductions in transport, etc.) economic corridors (skill, travel time technology, and human development; climate mitigation and proofing) Annual increases in Distance by road or by freight and other transport mode passenger traffic Average load per truck (or (road, rail, river, other transport mode), Value added coefficient etc.), and in the incremental production, and Estimated share of economic for manufacturing and average value of service-delivery rate per corridors in total investment service sectors freight and of economic unit production and services

Total investment (including Increase in value investments in skill, added for Interregional trade, technology, and human manufacturing export trade, and transit development; and in climate and service mitigation and proofing) sectors Economic model for Sector and Increase in total and projections of total regional growth and poverty- Capital-output ratio sector GDPs, reduction and regional GDPs in poverty by region, and of poverty reduction (including investments in elasticity skill, technology, and human and reductions in reduction development; and in climate interregional disparities mitigation and proofing) in development Exports: total and Export elasticity intraregional

Increase in Employment Import–GDP ratio Imports: total and full-time employment coefficient interregional

Increase in revenue Tariff and transit fees

GDP = gross domestic product, km = kilometer. Notes: 1. The black boxes signify the major drivers or model for impact estimation; the light gray boxes, parameters (unit costs, elasticity, employment coefficient, and others used to estimate impact); and the dark gray boxes, impact. 2. The regions within Bangladesh are referred to as “divisions.” a This is based on physical plans, population growth, population distribution, the proportion of urban versus rural settlements, urban industrial nodes, links to ports, links (or lack thereof) to the hinterland, economic activity, trade volume (domestic and external), natural resources, border-crossing points, border towns, the cost of center–periphery transport facilitation, and other factors. Source: Asian Development Bank. 36 ADB South Asia Working Paper Series No. 49 primary inputs. Economic integration between countries, or among regions within the same country, generates confidence, introduces harmonization, and promotes coordinated development. More infrastructure is built or expanded. Policies, institutions, programs, and projects take on new meaning as they are driven by a more dynamic environment. Higher gains are recorded, the result of infrastructure investment, including a greater share of investment for roads and other means of connectivity. And the benefits become more diversified. Travel time, travel-related costs, and production costs are all reduced, enhancing the competitive edge of the country (and its regions) in trade. The private sector emerges as the driver of the process, supported by necessary policy and institutional reforms and by structural changes.

67. These outcomes can be quantified for use in determining the desirability of a corridor network like CIMECON, as proposed in this study.

IV. PRIORITIZATION OF INVESTMENTS: IDENTIFYING PRIORITY CORRIDORS AND SECTIONS

68. Many options are available to Bangladesh for developing economic corridors, but they all come with a price tag. CIMECON’s nine corridors are only candidate corridors. The planning and development of the corridors, sections of the corridors, multimodal transport, and adjacent economic spaces would have to be prioritized on the basis of economic impact analysis. Two approaches to prioritization are suggested: (i) partial equilibrium project economic analysis, based on net present value (NPV), economic internal rate of return (EIRR), etc.; and (ii) a comprehensive macroeconomic optimization model to identify the combination of integrated economic corridors that would maximize incremental GDP, reduce poverty, diminish economic disparities among Bangladesh’s regions, include skills development and land improvement, promote trade cooperation, and make the structures within the corridors climate-resilient (through adaptation measures that include climate proofing). This report applies the first method. The macroeconomic model has been deferred to a possible future study.

A. Economic Analyses of Projects 69. Due to budget considerations, there will be a need for optimal investment sequencing. Economic corridors will have to be prioritized on the basis of sound technical, financial, economic, social, and environmental criteria. Using the framework presented in this paper, potential economic corridors can be ranked according to their impact on critical variables during the target year. An alternative would be to treat each economic corridor as a single project or divide it into subprojects, in order to calculate cost– benefit ratios, NPVs, and EIRRs, which would then inform the prioritization of the corridors. Whichever way it is done, the decisions would be made on the basis of sound technical and economic analysis at the project level.

70. Economic analyses of projects can be carried out with or without factoring in climate proofing. GDP growth would be safeguarded by climate proofing, although some of that growth may be lost due to the cost of climate proofing itself. This frictional loss would, however, be lower than the loss due to damage in the absence of climate proofing. One can calculate the NPV, EIRR, and cost–benefit ratio regarding the stream of benefits of climate proofing (based on the percentage of expected losses due to climate change) and the costs of climate proofing (capital, O&M). One can do the same calculation based on the stream of total benefits (original base estimates) and total costs (the increase in the original cost stream due to the added cost of climate proofing) to see if the economic viability criteria Connecting Bangladesh: Economic Corridor Network 37 are satisfied or not. It should be noted though that the period covered by a climate change analysis should be longer than the usual 25–30 year project period; and a lower discount rate should be used when calculating the future net benefit stream, taking into account the pure rate of time preference, intergenerational equity, and the marginal productivity of capital.

71. Partial equilibrium project economic analysis could be used by planners and policy makers in Bangladesh to identify, evaluate, and prioritize economic corridors from among the many options under consideration. A macroeconomic optimization model could provide a comprehensive framework within which investments across time and space are determined. Policy makers could thereby decide when, where, and how much to invest.

B. Priority Corridors 72. The nine proposed economic corridors have been assessed, as have 54 nonoverlapping sections. The NPVs and EIRRs have been calculated for all of them based on the transport corridor framework, and they have all been ranked according to their EIRRs. The evaluation of each corridor based on its projected performance as a transport corridor took into account its capital and operating costs, along with the benefits accrued from savings in vehicle operating costs and travel time. The evaluation of each corridor, based on its performance as an economic corridor, took into account the capital and operating costs relating to transport (tollbooths, border- and road-related facilities, truck fleet modernization), geographic space (economic facility creation), capacity building (skills and management training), and climate change adaptation (climate proofing). The benefits of additional time savings at borders, land ports, and river crossings, as well as the incremental value added attributable to transport assets, were also considered. The definitions of costs and benefits for economic corridors are thus broader than those for transport corridors.

Table 10: The Cost of Bangladesh’s Economic Corridors as Transport Corridors ($)

Annual O & Mb Routine+ operation Periodic (every sixth Corridor Name - Transport Mode Capital cost of constructiona + special works or seventh year) Northwest–Southeast (NW–SE)–road 1,308,924,056 4,048,557 75,441,857 Southwest–Northeast (SW–NE)–road 2,517,581,292 1,471,730 30,857,362 North−South (West) (NS−W)−road 632,466,444 2,527,330 40,469,675 North–South (Central) (NS–C)–road 2,292,123,450 1,434,310 25,399,513 North–South (East) (NS–E)–road 880,473,318 2,676,838 48,793,014 Northwest–Northeast (NW–NE)–road 1,140,723,969 2,570,825 52,945,889 Southwest–Southeast (SW–SE)–(road/rail) 1,211,727,537 4,604,970 41,808,279 East–West (EW)–road 3,132,908,147 3,163,961 56,961,925 Inland Water Route (IWR) 670,000,000 5,360,000 1,340,000 Total cost (non-overlapping sections)c 8,598,550,119 22,947,802 184,210,751 O&M = operation and maintenance. a The figures for the projected capital costs of construction are for 2015–2019. b The figures for the projected costs of O&M (both columns) are for 2015–2035. c The total costs do not count more than once those sections of road along which two or more corridors overlap. Source: ADB estimates. 38 ADB South Asia Working Paper Series No. 49

73. For the purpose of analysis, it is assumed that all investments in all the corridors and corridor sections occur in parallel; this assumption refers to the projected capital costs during 2015–2019 and to the projected O&M costs during 2015–2035. The capital costs of tollbooths, border-crossing points (BCPs) and land ports, truck fleet modernization, and road-related facilities are assumed to be incurred in the third, fourth, and fifth years of project implementation. Routine operating costs are assumed to be incurred annually, beginning in the sixth year of project implementation; periodic maintenance, every sixth or seventh year after project completion; and annual special works, from the sixth year after project completion. A 12% rate is used to discount all costs and benefits.

74. The projected costs of the CIMECON corridors are shown in Table 10 (relating to their construction and operation as transport corridors) and in Table 11 (relating to their construction and operation as economic corridors). The priority ranking of the economic corridors is given in Table 12. The total transport corridor capital cost of CIMECON construction is estimated at $8.6 billion, spread over a 5-year period (2015–2019). To fully explore the implications of CIMECON decision making with regard to investments (how much, when, and where), one has to implement the multiperiod macro- optimization model proposed in this study: partial equilibrium project economic analysis. Proper routine O&M and special works would impose a significant fiscal burden, except for what could be recovered from toll roads. The substantial proposed upgrading of corridor sections from two to four lanes would elevate the cost of construction and maintenance. And the construction of access-controlled expressways would add to the base cost. Finally, the cost of periodic maintenance is also likely to be rather high, but without it, corridor efficacy could not be sustained, and many of the projected benefits in terms of vehicle operating costs and travel-time savings would not materialize.

Table 11: The Cost of Bangladesh’s Economic Corridors ($)

b Capital cost of Annual O & M construction and other Routine and Corridor Name – Transport Mode capital costsa periodic Other Northwest–Southeast (NW–SE) – road 5,039,893,425 79,490,415 369,241,409 Southwest–Northeast (SW–NE) – road 4,887,098,435 32,329,093 233,978,970 North–South (West) (NS–W) – road 2,572,551,411 42,997,006 192,182,342 North–South (Central) (NS–C) – road 3,989,045,877 26,833,824 167,365,872 North–South (East) (NS–E) – road 3,502,361,874 51,469,854 259,547,435 Northwest–Northeast (NW–NE) – road 4,467,006,505 55,516,714 329,277,326 Southwest–Southeast (SW–SE) – (road/ 5,039,902,175 46,413,250 380,706,281 rail) East–West (EW) – road 6,569,400,723 60,125,888 339,193,721 Inland Water Route (IWR) 2,700,435,000 6,700,000 202,541,000 Total cost (non-overlapping sections)c 23,188,819,861 207,158,555 1,434,688,991 O&M = operation and maintenance. a The figures for the projected capital costs of construction are for 2015–2019. Other capital costs of toll booths, border-crossing points (BCPs) and land ports, truck fleet modernization, and road-related facilities are for 2017–2019. b The figures for the projected costs of O&M (both columns) are for 2015–2035. c The total costs do not count more than once those sections of road along which two or more corridors overlap. Source: ADB estimates.

75. The projected capital cost requirement goes up almost threefold, to $23.2 billion, for the construction of economic corridors. This is due to the inclusion of other capital expenditures, a large Connecting Bangladesh: Economic Corridor Network 39 part of which would comprise investments in economic-space planning and development concerned with upgrading transport corridors to logistics corridors and then to economic corridors. Adaptation to climate change would also require substantial anticipatory investments. Estimates for investments in economic corridors are somewhat speculative and may be on the low side. All or many of these investments would be market-driven and sponsored by the private sector. The real outlay would be higher once all considerations are factored in. There is also the fact that some sections of the proposed corridors are more attractive than others because of their existing and/or committed infrastructure investments in factories, export processing zones (EPZs), tourist destinations, multimodal exchanges, seaports, river ports, mineral resource sites development, and administrative headquarters.

Table 12: Bangladesh’s Economic Corridors Ranked by Priority Base Casea Economic b c Transport Corridor Economic Corridor Corridor NPV EIRR NPV EIRR Ranks by Corridor Corridor Name–Transport Mode ($) (%) ($) (%) EIRRd EC1 Northwest–Southeast (NW–SE) – road 3,529,993,172 31.50 6,897,631,688 29.30 1 EC2 Southwest–Northeast (SW–NE) – road 2,851,466,337 22.90 6,472,140,303 27.80 2 EC4 North–South (Central) (NS–C) – road 2,410,352,239 22.30 5,255,141,930 27.50 3 EC6 Northwest–Northeast (NW–NE) – road 1,977,973,050 26.50 5,070,348,054 27.50 4 EC5 North–South (East) (NS–E) – road 1,670,303,391 27.20 4,011,735,917 27.40 5 EC3 North–South (West) (NS–W) – road 721,203,399 22.70 2,493,814,886 26.00 6 EC9 Inland Water Route (IWR) 357,773,517 18.40 2,284,690,952 25.10 7 EC7 Southwest–Southeast (SW–SE) – road, rail 521,027,785 17.60 4,073,505,518 24.80 8 EC8 East–West (EW) – road 2,225,259,408 19.20 6,310,907,388 24.30 9 All Corridors 14,040,092,890 24.20 36,559,009,248 27.20 EC = economic corridor, EIRR = economic internal rate of return, NPV = net present value. Note: Narrow definition of costs and benefits is used to evaluate transport corridor comparing capital and operation and maintenance (O&M) cost of roads/rail with benefit from operating cost and travel time savings. Broad definition is used for economic corridor which includes other capital costs and benefits. Other capital refers to toll booths, border facilities, land ports, truck fleet modernization, capacity building and climate change adaptation. Other benefits include time savings at border, dry ports and river crossings and incremental value added attributable to improvements. a The “base case” in this context refers to the most probable NPVs and the EIRRs. b This refers to the proposed economic corridors in their capacity as transport corridors (the functions of which they would still perform). With regard to defining the costs and benefits in the cross-corridor comparisons, the costs include the capital costs and the costs of the O&M of roads, railways and inland waterways, and the benefits include the reductions in operating costs and travel time. c This refers to the proposed economic corridors in their full capacity as economic corridors. The costs and benefits are defined more broadly in this case, as they also include the capital and O&M costs for toll booths, border facilities, land ports, truck fleet modernization, capacity building, and climate change adaptation; and the benefits also include time savings at border-crossing points, dry ports, and river crossings, and the incremental value added attributable to capital improvements. d This also refers to the proposed economic corridors in their capacity as economic corridors. Source: ADB estimates.

76. Fostering domestic and cross-border transport, as well as economic corridor connectivity, will help Bangladesh: (i) improve productivity in accordance with its natural comparative advantages; and (ii) benefit from complementarity, thereby increasing output, trade, and consumer welfare. Concrete gains will accrue to Bangladesh from the development of CIMECON through investments in road construction and/or rehabilitation; the construction and/or modernization of road-related facilities such as BCPs, land ports, tollbooths, and truck fleets; mega projects like the Padma Bridge; skills development and management-capacity building; and climate change adaptation. These gains will include (i) savings 40 ADB South Asia Working Paper Series No. 49 in travel time; (ii) savings in travel costs; (iii) increased road freight traffic; (iv) higher employment rates; (v) GDP growth; (vi) increases in trade, including total exports, imports, and interregional trade; (vii) higher revenues; (viii) greater subregional development, and (ix) private sector growth. In this study, the benefits derived from transport corridors will come mainly in the form of vehicle operating cost and travel-time savings. Benefits from the economic corridors will include vehicle operating cost and travel- time savings; additional time savings at BCPs, river crossings, and land ports; and incremental value added attributable to transport assets. The benefits, together with the costs, are the basis for estimating NPVs and EIRRs.

77. Economic analysis has shown that all nine of the proposed economic corridors would be viable, as they have positive estimated NPVs and EIRRs well in excess of the minimum acceptable 12% (Table 12). The nine corridors are ranked according to their EIRRs, using a broad definition based on the potential direct and indirect economic contributions of each corridor. This ranking is comparable with the ranking based on the corridors’ NPVs, which reflect the total potential economic contribution of each corridor. Economic Corridor 1 (EC1) is a clear winner in terms of both NPV and EIRR. Economic Corridor 2 (EC2), which coincides with part of the Bangladesh section of Asian Highway 1 (AH1), would have a clear advantage over the other corridors in terms of NPV (as both a transport and economic corridor). It would provide access to important border links with India and other SASEC countries via Benapole, in the southwest, and Tamabil, in the northeast. EC2 would also connect with road links to Myanmar and other Association of Southeast Asian Nations (ASEAN) countries, and to Kunming in the People’s Republic of China via Myanmar.

78. Given their NPV and EIRR values, the proposed economic corridors are very promising. Economic Corridor 6 (EC6) would be an important transit route, as it overlaps with part of AH2 and with sections of EC1 and EC2, and would thus be able to provide border connections with India via Banglabandh, Tamabil, and Zakiganj. EC2 and EC6 would reduce the travel distance to India and other SASEC countries, and the distance between India’s northeastern states and the rest of that country. Equally significant is the potential contribution to greater economic integration between Bangladesh and northeastern India, to the benefit of both. Economic Corridor 8 (EC8) would improve the connectivity of the middle belt of Bangladesh, after the construction of the second bridge over the Padma River, at Goalanda Ghat and Paturia Ghat, which are now connected by ferry. Along this corridor, there would be connectivity to India and other SASEC countries via Benapole, and connectivity to Myanmar and other member countries of the ASEAN via Teknaf. The proposed Economic Corridor 4 (EC4) has the potential to evolve into an important central artery through Bangladesh, with a border link with India via Haluaghat, in the north.

79. Economic Corridors 3 (EC3), 5 (EC5), 7 (EC7), and 9 (EC9) are economically viable but lower in rank based on their potential contributions to Bangladesh’s economy. Still, each has a significance of its own. EC3 would provide neighboring India, Bhutan, and Nepal with direct access to Bangladesh’s seaport of Mongla through the land port in Banglabandh, and through other points along border link roads. Similarly, EC5 would serve as the gateway for northeast India to Chittagong Port, serving as an alternative to the lengthier route to Kolkata and Haldia. The rest of India, as well as Bhutan and Nepal, would be able to access the Chittagong Port via EC1 and EC8. EC7 and EC9 are lower-cost rail-and- road and inland-waterway routes with transit potential, as well as regional linkages with India (and other SASEC countries) and Myanmar (and other member countries of ASEAN).

80. This study recommends that priority be given to developing EC1 and EC2. Much of the economic development of Bangladesh, and many of the critical points of interest, have been along these two routes, making them the natural priority economic corridors, with clearly defined regional connectivity, including the Bangladesh–China–India–Myanmar (BCIM) economic corridor, as well as rail links to Agartala, Kolkata, Delhi, and Lahore. EC1 would be the route for all of Bangladesh’s major exports, especially the all-important exports of ready-made garments. Connecting Bangladesh: Economic Corridor Network 41

V. Report FINDINGS AND CONCLUSIONS

81. Unimodal transport corridors vs. multimodal economic corridors. Policy makers in Bangladesh are more focused on transport corridors than on economic corridors, resulting in a limited development impact. A vast array of roads (national, regional, zila (district), and rural), railways (broad and meter gauge), and inland waterways crisscross Bangladesh. Yet transport development, dominated by semiautonomous authorities, is still conducted on a unimodal basis. Bangladesh would benefit more from multimodal economic corridors, and that is why they should be at the core of development planning. Moreover, economic corridors could accommodate current and proposed special economic zones (SEZs), which are likely to add dynamism to Bangladesh’s economic growth.

82. Land-use planning. Rational land-use planning is a high priority in Bangladesh, as it is essential for stopping the loss of agricultural land, land grabbing, and unplanned urban expansion; and for managing the development of SEZs. Per capita agricultural land diminished from 0.170 hectares in 1961 to 0.056 hectares in 2011. The signs of land grabbing are visible all over the face of Bangladesh’s rural and peri-urban landscapes, mostly in the form of real estate developments and industrial sites.

83. Management of corridor development. Growth in industry, complemented by growth in the agriculture and service sectors, would be promoted by the Bangladesh Corridor Management Authority (BCMA), in collaboration with the already existing Bangladesh Export Processing Zones Authority, Bangladesh Hi-Tech Park Authority, and Bangladesh Economic Zones Authority, creating an incentive framework and providing support services that would appeal to private investors. The SEZs would all be located near the national highway network. The economic corridors would sustain economic growth, and accelerated economic growth would create a demand for the services offered in the economic corridors. With Bangladesh’s economy growing at a rapid pace, there is a persistent clamor from industrialists and developers for the establishment of economic zones. The linking of economic zones to economic corridors would harmonize production for domestic and foreign markets and facilitate the development and operation of high-tech industries and high-tech services. With progress in the development of economic corridors, the EPZs, which have been lagging, would be revitalized, as would the construction of high-tech parks (e.g., those in Kaliakoir and Jessore). The interest shown by a company in India in developing part of the Kaliakoir Hi-Tech Park is welcome news.

84. National and regional economic corridors. A synchronization and connectivity among national and regional corridors will generate a multiplier effect. Economic integration will create the market conditions for high returns on investment in national and regional economic corridors. Investment in domestic road corridors can be better justified if they are considered a component of regional connectivity, which is essential for expanded trade, transit, and transport, and thus calls for facilitation measures.

85. Logistics corridor development. Very little attention has been paid to the development of logistics corridors, and this oversight has resulted in insufficient investment in the creation of a harmonized institutional framework for facilitating the movement of people and freight and the collection of relevant data. In the future, logistics corridors must be given greater priority in Bangladesh. The importance of good logistics to exports is self-evident. Field visits have confirmed that road transport must be freed of hurdles to ease the movement of exports from Bangladesh and of imports from neighboring countries. But an inadequate and inefficient transport infrastructure is currently raising costs, thereby hampering exports and undermining Bangladesh’s competitive strength. Despite these problems, exports from Bangladesh are on the rise, with total exports increasing by 11.65%, from $0.82 billion to $30.17 billion, between 1983–1984 and 2013–2014. Garment exports reached a record high of $24.50 billion in FY2014, 13.86% higher than the previous fiscal year. According to the Export Promotion Bureau and the Bangladesh Garment Manufacturers and Exporters Association, the continued prosperity of the garment 42 ADB South Asia Working Paper Series No. 49 sector will hinge on political stability, the smooth transport of goods, and the efficient management of Chittagong Port—all aspects of the logistics system.

86. Planning of the spaces around the economic corridors. Bangladeshi planners and policy makers have not given enough focus on the development of economic corridors, which would contribute significantly to economic growth and poverty reduction, while laying the foundation for and promoting regional cooperation, in the process contributing to intraregional balance and equity. Economic corridor development should include planning for the economic and geographical spaces anchored in specific multimodal transport and/or logistics corridors. The corridors offer physical linkages and logistics facilitation that would help attract investment and generate economic activities in the surrounding areas, including the less-developed areas or regions.

87. A gap in planning. One important gap in planning is the lack of an integrated economic corridor network, which would serve as the cornerstone for optimal returns on investments in transport, logistic, and economic activities. Transport corridor development has been guided primarily by an adherence to Say’s Law, which holds that “supply creates its own demand.” According to this law, once road, railway, and energy corridors are in place, investments in other economic activities will automatically follow, and the full utilization of capacity will only be a matter of time. This is not always the case, however. The increased utilization of newly created transport corridors will require facilitation measures, including those to improve access to finance for complementary investments. Besides, the viability of economic corridors depends on the size and dynamism of local and regional markets. The evolution of markets is the key. This is why there should be a systematic evolutionary approach to developing comprehensive integrated economic corridors in Bangladesh.

88. Climate change. As Bangladesh is extremely vulnerable to the effects of climate change, it has been at the forefront of efforts to conceptualize, design, and implement mitigation and adaptation measures. This commendable effort has to be integrated into economic corridor planning. The integrated economic corridor approach calls for a risk-based analysis of climate change damage and impact on infrastructure to determine climate mitigation and climate-proofing needs.

89. Skills development. Bangladesh has achieved many educational milestones (e.g., in girls’ education and literacy), but the country has lagged behind in skills development overall. Investments have to be made in skills development facilities to provide vocational and skills training to a larger number of people, and thus be able to meet the demands of various sectors, especially those linked to the development of integrated economic corridors.

90. Options for corridor development. There are many options available to Bangladesh for developing economic corridors—based on existing or proposed transport corridors—that are supported by the government, the South Asia Subregional Economic Cooperation (SASEC) Program, and the Asian Highway planners. The implementation of these options would, however, result in a complicated network of 16 corridors that would be visually unclear and conceptually weak, with the functional content lost in multiple overlaps and directional confusion. And there would be no clear, rational hierarchy of the types of corridors: unimodal, multimodal, logistics, and economic. Besides, neither the individual corridors nor the integrated whole has ever been evaluated according to the relevant criteria for economic corridor selection: economic impact, connectivity, and market integration. This study proposes a restructuring of the 16-corridor network into a new nine-corridor comprehensive integrated multimodal economic corridor network (CIMECON) for Bangladesh. CIMECON can be elegantly represented in a format resembling the London Tube map. The nine corridors of CIMECON are candidate corridors, conceived to satisfy criteria relating to market integration and linkage. The development of integrated economic corridors within the country would be accompanied by facilitation measures to improve regional connectivity, transit, and integration. The map of CIMECON presents a clear visual image, as opposed Connecting Bangladesh: Economic Corridor Network 43 to one that is cluttered to the point of unreadability, because the concept underpinning CIMECON is clearly reflected in the London Tube-style layout. This layout, together with the economic mapping and planning of multimodal interchanges, brings out the functional content of each corridor and the interrelationship among the corridors, while clearly showing the hierarchy of corridor categories as the nine corridors evolve into economic corridors.

91. Economic impact of corridors. The final selection of the CIMECON corridors would be determined by economic impact analysis, with a two-pronged approach used for evaluating the economic impact of each corridor. A partial equilibrium project analysis based on the calculated EIRRs would determine the acceptability of each corridor at one level, supplemented by a more comprehensive macroeconomic optimization model that would assume the objective of integrated economic corridor development to be the maximization of incremental GDP, subject to certain stipulations (constraints). The macroeconomic optimization model would help identify the integrated economic corridors in Bangladesh that would (i) maximize incremental GDP; (ii) reduce poverty and regional disparities; (iii) enable skills development and land improvement; (iv) promote trade cooperation; and (v) make the structures within economic corridors climate resilient through adaptation measures, including climate proofing. The EIRR ranking established EC1 and EC2 as the two top corridors in terms of economic impact.

92. Priority corridors. The case for the proposed economic corridors, especially EC1 and EC2, is well established. CIMECON would provide a strong economic foundation for the development of a world-class infrastructure to facilitate the growth of local enterprises and attract foreign investment. Major cities, administrative centers, and market towns such as Bogra, Dhaka, Dinajpur, Elenga, Gazipur, Gobindaganj, Joypurhat, Panchagarh, Rangpur, Saidpur, Tangail, and Thakurgaon are booming along EC1 up to Banglabandh. When completed, the transport corridors would consist of modern two-, four-, and eight-lane highways that would have to be operated and maintained according to a comprehensive plan, with adequate funding for routine operation and maintenance (O&M), periodic maintenance, and special works. A flexible approach to toll-setting would ensure adequate foreign direct investment.

93. Corridor capacity. Many sections of the road, highway, and expressway network would adhere to the Asian Highway design standards and therefore would have sufficient capacity to carry domestic and regional traffic (passenger and cargo). Domestic and regional trade, transport, and transit would be facilitated by the construction of mega bridges and by the formulation and implementation of trade, transport, and transit policies fulfilling the requirements of domestic and cross-border traffic. During this process, the question of transit fees for foreign shipments would also be addressed. In the future, some sections of the economic corridors may fall short of capacity requirements because of increases in trade throughout the South Asia region.

94. The role of the private sector. The private sector would emerge as a dominant player in the construction of economic corridors, whether under exclusive or public–private partnership arrangements. In particular, the additional investments required to transform transport corridors into economic corridors would be undertaken largely by the private sector simply because the government cannot and should not do more than facilitation measures. The growth of vibrant local economies around transport corridors would be a boost for development entrepreneurs, who would champion small and medium-sized industries and new linkages between sectors. Business and household incomes would rise, government revenues would increase, and poverty and regional disparities would be reduced.

95. Transit trade. The economic corridors in Bangladesh would increase the country’s transit trade involving cargo originating in and/or traveling to other regions, including those where current movements are minimal. The economic corridors would enable neighboring countries to make greater use of port facilities in Bangladesh and also enable northeast India to transport cargo to the rest of India 44 ADB South Asia Working Paper Series No. 49 cost-effectively. Bangladesh would have to foster enabling conditions that would allow northeast India to increase its trade with Bangladesh and other countries, and reduce the costs of shipping to other parts of India. In addition to improving connectivity within Bangladesh, CIMECON is about enhancing Bangladesh’s role as the land bridge between South Asia and Southeast Asia, via Myanmar, and between South Asia and northern Asia, via the People’s Republic of China. To reach that point, the economic and political obstacles to regional economic cooperation would have to be dealt with.

96. Trade and transport facilitation. The effects of trade and transport facilitation measures are clearly manifested in increased investments in roads, road-related facilities such as tollbooths and weighing stations, port facilities, and border and land-port infrastructure. Benefits accruing to CIMECON would also depend on truck fleet modernization, improved technology for baggage handling and transshipment, increased container traffic, and better-quality roads. The establishment of CIMECON would result in significant increase in vehicle operating cost savings. Travel, waiting, and processing times would be reduced, with commensurate cost savings. Truck traffic, and the quantity of freight transported, would increase; and cargo would move more smoothly from origin to destination. Consumer goods, capital goods, and construction materials would reach their destination markets sooner than before. Cross-border trade between Bangladesh and its neighbors and transit trade would increase, as would trade between these countries and the rest of the world, as warm-water ports in Pakistan and Iran become more accessible. The macroeconomic effects would be in the form of incremental GDP growth; permanent employment creation; incremental revenue generation; and improved balance of payments, as exports grow faster than imports.

97. As mentioned above, there would be a direct impact on business and household incomes and on government revenues. Household income would increase and poverty would be reduced through temporary and permanent employment in road construction projects, related construction works, and in the service industries. With the reductions in transport and transaction costs, consumers would benefit from the lower prices of essentials. These benefits would be distributed evenly across the affected regions in Bangladesh, especially along the identified road corridors. Business income would rise with increases in production, trade, commerce, and service activities. As the business environment improves—with a reduction in procedural bottlenecks and illegal extortion, simplification of taxes and tariffs, and greater security—the private sector would have more incentive to invest and participate in cross-border trade, transport, and transit activities. The increases in government revenues (and reductions in budget deficits) would be attributable to the road corridors and related developments, and to cost-recovery measures such as road tolls, transit fees, and fuel taxes.

98. The maturity of CIMECON would come with policy and institutional reforms, and with the construction of appropriate border facilities and the streamlining of border procedures. CIMECON would then reach its full potential as a network of busy multimodal transit corridors. Foreign trucks would travel through Bangladesh, and Bangladeshi trucks would travel deeper into India and on to countries beyond. Trucks from other neighboring countries would be able to use India’s corridors to reach markets and ports in Bangladesh.

99. Smooth and friction-free vehicle movement is important for cargo transport. Many impediments constrain the movement of vehicles and cargo, including formal and informal checkpoints; poor road quality; lack of service support along link roads; lack of service roads, making it harder for drivers to deal with vehicle breakdowns; and long queues at river and rail crossings, ports, and BCPs. Heavy traffic becomes worse when markets and small towns spill over onto highways, a common occurrence all over Bangladesh. Rickshaw vans are no help, as they block or slow down highway traffic. Additional constraints to the development of trade, transport, and transit include (i) distances to major markets; (ii) truck fleets that are aging or in poor condition; (iii) tariff and nontariff barriers; (iv) barriers to market entry; (v) a weak and disorganized private sector; (vi) domination by the central government of economic activity Connecting Bangladesh: Economic Corridor Network 45 and decision making; (vii) weak investment laws and an inadequate legal and regulatory framework; (viii) poor information and communication technology; (ix) inadequate information, along with barriers to information exchange; (x) weak institutions in terms of operational efficiency, capacity, and human resources; and (xi) the inadequate development or absence of key services such as banking and finance, insurance, bonded warehousing, marketing, standards certification, and telecommunications.

100. Customs procedures. This report does not focus on border and customs procedures, but they are relevant to CIMECON, as greater cross-border movement would account for some of the increased traffic in Bangladesh. In short, nontariff barriers are a problem. There is always scope for simplifying and streamlining customs procedures and documentation requirements. Other barriers include delays due to the lack of capacity, an overly bureaucratic approach, excessive checking arising from the control mind- set of officials, and the unnecessary checking of vehicles already cleared elsewhere. Add to that the “illegal taxes” (i.e., extortion) at customs points and informal road tolls charged by police, in connivance with thugs operating on the highways and at vehicle stops. Moreover, customs cooperation between countries is minimal. All these factors hold back the growth of both domestic and cross-border trade, and raise cost of exports.

101. Trade and transit agreements. There is little capacity for designing, implementing, and monitoring bilateral, trilateral, and regional trade and transit agreements. Bangladesh has entered into such agreements with neighboring countries, but some of them lack the details and commitment necessary for implementation. And impediments to third-country transit are sometimes an issue due to security concerns that need to be addressed. Transit problems are also compounded by the difficulty of obtaining visas, the lack of mutual recognition of drivers’ licenses, absence of TIR carnet arrangements,31 and the absence of bonding and guarantee insurance systems. Moreover, reciprocal traffic rights are not enforced; and the existing laws, rules, and procedures are not always consistent with international agreements or with the regulations of the World Trade Organization.

102. Border and land port facilities. The facilities at many border posts and land ports remain far short of the minimum requirements for supporting the movement of people and goods or for normal customs operations. The BCPs and land ports in Bangladesh are characterized by lack of space; uncertainty of property rights; inadequate buildings; lack of parking spaces for trucks; insufficient handling facilities for other vehicles and for passengers; and inadequate border policing, warehouses, cargo-handling equipment, detection equipment, telecommunications, information technology (i.e., computerization of operations, and local and wider-area networking and linkages), railway and river-port facilities, power supplies and other utilities, and, last but not the least, human resources. The government and the Bangladesh Land Port Authority have taken the initiative in modernizing facilities at 12–14 border locations on a build–operate–transfer basis. Customs operations are greatly hindered by the lack of external communication links, information technology setups, and reliable power supplies. In addition, different agencies control different operations at the BCPs, a situation that results in confusion. Before adding more long-term expenditures on existing or new facilities, it would be preferable to develop a master plan for border and inland facility development, taking into account prospective transport and economic corridor development. The Automated System for Customs Data (ASYCUDA) would help implement risk management in a consistent manner by providing automated selectivity based on preset system parameters.

103. Operation and maintenance. The levels and growth rates of traffic on some of the major road arteries suggest that the O&M of an improved road network could be self-financing by means of road tolls and fuel taxes. The capacity of the Ministry of Finance to make funds available for road maintenance has been constrained by weak revenue generation, a problem that road tolls, transit fees,

31 “TIR” stands for “Transports Internationaux Routiers” (International Road Transport). 46 ADB South Asia Working Paper Series No. 49 and fuel taxes could address. There is a general view that it may be more advisable to follow the strategy of zero or low transit fees at the initial stages, in order to encourage the use of Bangladesh transit routes by foreign vehicles. However, if the amount to be collected eventually came to $100 per incoming truck, the revenues could be substantial. Private financing and regulation of toll roads seem appropriate, as there are sections with projected traffic of at least 10,000–15,000 vehicles a day, the rates that would be viable for the operation of tollbooths by private companies (considering the construction, operating, and financing costs).

104. Road safety. The roads in Bangladesh are generally hazardous due to their design, as well as due to congestion, disregard for traffic rules, road encroachment by markets and towns, slowly moving vehicles, poorly maintained or nonexistent shoulders, reckless driving, lack of roadworthy vehicles, and the absence of road stops. Human and animal casualties and vehicle damage mount every year. Some road segments, such as the one from Jamuna Bridge to Hatikamrul, are known as death traps. The effects of drinking and drug abuse on road safety are no less an issue.

105. Urbanization and economic corridors. Urbanization is intrinsically linked to economic corridor development, and vice versa. Without exaggeration, Dhaka is the most unlivable city in the world. In Bangladesh, urbanization has to be a trigger for growth, which needs to be planned in a manner that is innovative, socially sensitive, and connectivity-oriented (with connections among major cities and between cities and peri-urban areas). Cities must be well regulated and should be made more livable (via better supporting infrastructure and services), made more viable for business (by preventing real estate price bubbles, traffic congestion, and other impediments), and economically diversified and dense (high economic density as opposed to population density, as measured by GDP or value-added per square km). The economic gap between small towns and large cities should be narrowing, rather than growing, as seems to be the case now. According to Zahid Hussain, a lead economist at the World Bank, “the Dhaka metro area needs to evolve into a diversified economy with skilled human resources and an innovation capacity fueled by the cross-fertilization of ideas typical of large metropolitan areas. Dhaka metro area also needs to be better connected internally and with its peri-urban areas, and both Dhaka and Chittagong have to strengthen their connection to the global economy. Improved connectivity within Bangladesh’s system of cities is also important for productivity and export competitiveness. The development of an economically dynamic urban space, in particular in the Dhaka metro region, has occurred at the expense of livability. The livability of the urban space will become an even more binding constraint to sustained growth as Bangladesh transitions to a new business model based on higher-value industries and services, which need a highly skilled and internationally mobile workforce.”32

106. The development of the proposed economic corridors would contribute to a rational pattern of urban growth, a far cry from the current chaotic state. The population has become more mobile, which means that some redistribution of the population among various levels of urban areas will occur, as indicated by prospective development of satellite townships away from Dhaka proper. Here is the dilemma: satellite towns eat up agricultural land and alienate the poor from their land. On the other hand, they help lure people away from the overcrowded center of metropolitan Dhaka.

32 Z. Hussain. 2013. In Bangladesh, the Alternative to Urbanization is Urbanization. World Bank Group website. 13 May. http:// blogs.worldbank.org/endpovertyinsouthasia/bangladesh-alternative-urbanization-urbanization Connecting Bangladesh: Economic Corridor Network 47

VI. RECOMMENDATIONS

107. The recommendations of this study are divided into two parts: core priority actions and complementary priority actions. The core priority actions are linked to the longer-term overall socioeconomic development of Bangladesh and to the government’s vision for transport sector development. The complementary priority actions will be required to ensure the longer-term sustainability of CIMECON.

A. Core Priority Actions 108. Core priority infrastructure-related actions. Invest in transport and trade infrastructure to create alternative competitive routes for trade between Bangladesh and its neighbors and with third countries.

109. Core priority institution-related actions. Strengthen the country’s institutions that are related to domestic and international trade (the latter including cross-border trade and trade with third countries). This would entail improving multimodal interchanges, transit formalities and monitoring, port capacity and efficiency, and the customs environment—to make all of them transport- and trade- friendly.

110. Core priority policy-related actions. Harmonize transport, transit, trade, and tariff policies, standards, and regulatory frameworks; conform to international regulations, conventions, and treaties; rationalize and strengthen Bangladesh’s participation in bilateral and multilateral trade and transit agreements; and foster private sector growth to increase investment in cross-border trade and transport facilities (Map 4).

B. Complementary Priority Actions 111. Complementary priority infrastructure-related actions. The recommended complementary infrastructure-related interventions include the following:

(i) These are the strategies that should underlie the interventions: (a) In the future, physical investments should factor in multimodality into the transport hierarchy to maximize the value-added impact and transport cost savings. (b) To maximize growth impact, transport corridors should be elevated to economic corridors, with additional investments in road-related facilities; border facilities, border link roads, and land ports; airports, airport link roads, and air services; multimodal interchanges; rail links; inland waterways; tollbooths; weighing stations; truck stops; cargo handling and transshipment facilities; truck fleet modernization; and investments in climate change adaptation and proofing (given that roads in Bangladesh are highly vulnerable to climate change). (c) Land is a key constraint and concern in Bangladesh, so early action on land acquisition and access to right-of-way is paramount. (d) The government should gradually make all the national highways access-controlled, thereby eliminating nonmotorized transport and auto rickshaws, which compete with and slow down motorized highway traffic. (e) Economic corridors must be based on rational land-use planning and on the integrated development of geographic space to create an enabling environment for national and regional corridors. There should be a careful assessment of the suitability of areas 48 ADB South Asia Working Paper Series No. 49

Map 4: Selected Proposed Infrastructure Interventions on Economic Corridors 1 and 2

Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 49

along the highways for urban settlement and expansion, housing developments, farm- ing, factories, trading and business centers, locales for services (e.g., education, health, entertainment, waste management), and transport and communication facilities. This means that urban planning and road network planning have to be an inherent part of integrated countrywide economic corridor network development. (f) Investments should be prioritized on the basis of the economic internal rate of return of each corridor and road segment.

(ii) There should be a strategic approach to urban industrial development alongside economic corridor development. The integrated planning would have to include the possibility of re- locating industries away from their current overcrowded locations. In any case, there would have to be a balance between the development of satellite towns and the growth of second- ary and tertiary cities and towns as a means of redistributing human settlements. (iii) The upgrading of border posts and land ports around the country: In addition to those mentioned earlier, investments would have to be made in priority border posts and land ports located in Akhaura, Bhomra, Bibir Bazar, Birol, Burimari, Darsana, Haluaghat, Hili, and Sonamasjid. Burimari will be upgraded under an ADB-financed project (South Asia Subre- gional Economic Cooperation Road Connectivity Project—Bangladesh). (iv) Border link roads: Parallel to border-post and land-port development, investments would have to be made to upgrade underdeveloped border link roads such as Mymensingh– Phulpur–Haluaghat, Khulna–Satkhira–Bhomra, Nawabganj–Sonamasjid (Baliadighi), Joypurhat–Hili, and Dinajpur–Birol. (v) Warehouses and assembly plants near border facilities: Following the example of the Tata warehouse and assembly plant under construction in Petrapole, which will be devoted to India’s exports to Bangladesh, the government should develop an incentive framework to encourage India’s private sector to invest in similar warehouses and plants in Bangladesh. (vi) Infrastructure to ease road encroachment: The development of economic corridors would have to include the construction of bypasses to prevent small towns and marketplaces from encroaching upon the highway, slowing down traffic. The construction or improvement of bypasses and other infrastructure, such as service roads, flyovers, and junctions, would create the conditions for better traffic management. Moreover, there should be regulations preventing the access of slow-moving vehicles to national highways, as the current situation adds another 20%–50% to travel time between any two points. (vii) Economic space planning and development: Economic corridor development has to go hand in hand with rational land-use planning and the development of economic zones. For example, the Dhaka (North)–Jamuna Bridge belt is likely to be highly urbanized, with the potential for economic zones, subject to land use and economic space planning. The same is true of the area between Dhaka and Bhairab Bazar. The Dhaka–Mawa space offers an opportunity for structured and rational development. In fact, industrial and commercial centers and special economic zones (SEZs) could be established or expanded all along EC1 and EC2. Selected proposed investments in the economic spaces along EC1 and EC2 are shown in Map 5. The targets for investment would be economic zones, cross-border economic zones, SEZs, EPZs, seaports, land ports, border link roads, industrial belts (e.g., in Dhaka, Chittagong, and Khulna), and tourist destinations. Other potential investments could be in river ports, multimodal connection facilities, city flyovers, ferry services, railway stations, and rail modernization (in accordance with the government’s 20-year master plan for railway development). 50 ADB South Asia Working Paper Series No. 49

Map 5: Space Planning for Economic Corridors 1 and 2

Source: Asian Development Bank. Connecting Bangladesh: Economic Corridor Network 51

(viii) River ports: In a riverine country like Bangladesh, river ports would be essential components of multimodal integrated economic corridors. High priority should be given to the construction and/or expansion of the river ports in Angtihara, Aricha, Ashuganj, Baghabari, Barisal, Bhairab Bazar, Chatak, Chittagong, Cox’s Bazar, Dhaka, Kazipur, Khulna, Nagarbari, Naray- anganj, Narsingdi, Patuakhali, Sirajganj, and Tongi. (ix) Ferry services: Until the proposed bridges are built and put into operation, it would be advisable to upgrade ferry service between Paturia and Daulatdia, Nagarbari and Aricha, Goal- anda Ghat and Paturia, and Keorakandi and Mawa. (x) Railways: Railway modernization is a necessity everywhere in Bangladesh, but, in the context of CIMECON, priority would have to be given to the Darsana–Chittagong connection. Along this route, an upgrading is recommended for the railway stations in Akhaura, Basail, Brahmanbaria, Chittagong, Comilla, Darsana, Dhaka, Feni, Ishwardi, Jamtoil, Joydebpur, Laksham, Mainamati, Narsingdi, and Poradaha. (xi) Multimodal interchanges: For CIMECON, the development of multimodal (road, rail, seaport, river port) connection facilities is of critical value. There are many options, but those directly related to EC1 and EC2 include Baghabari, Benapole, Bhairab Bazar–Ashuganj, Bogra, Charjanjat, Chittagong, Comilla, Cox’s Bazar, Dhaka, Feni, Jessore, Joydebpur, Ka- zipur, Khulna, Madaripur Mawa, Meghnaghat, Mongla, Narayanganj, Narsingdi, Parbatipur, Rangpur, Saidpur, Sirajganj, Sylhet, and Tongi.

(xii) Complementary priority institution-related actions. (a) Border management: Many agencies have a presence at the border-crossing points (BCPs). There should be a clarification of their respective roles and responsibilities and of their hi- erarchical relationships. The reform and modernization of the border and customs services should continue to receive high priority in the coming years. The introduction of common facilities and joint inspections at the BCPs should also be considered. (b) Information and communication technology: For information management, the Automated System for Customs Data (ASYCUDA) should be implemented, as it would help standard- ize customs clearance and eliminate repeat checks, while promoting transparency and accountability to reduce corruption, which is rampant in the customs services. (c) The private sector: The required investment for economic corridor development would be massive, far beyond the capacity of the public sector. Enabling conditions for private sector participation, including foreign direct investment, whether individually or in the form of public–private partnerships, would have to be established. Private sector participation in the development of economic corridors and related facilities (e.g., truck fleet modernization) would require giving the private sector easier access to bank credit.

(xiii) Complementary priority policy-related actions. (a) Border facilities: Visits to BCPs on the proposed economic corridors brought home the point that the economic returns from regional and national corridors could be maximized through trade; transit; and transport facilitation measures, including effective investments in appropriate cross-border and transport infrastructure, to be financed by the national budget and foreign assistance resources. (b) Transit: To redress transit problems, several steps may be considered by neighboring governments on a reciprocal basis. The introduction of the “bonded carrier” system should be expedited. Streamlining border-crossing formalities would facilitate road vehicle, cargo, 52 ADB South Asia Working Paper Series No. 49

and crew entry. Time- and resource-intensive transshipment and changes of vehicles at the borders must be avoided at all costs. Bangladesh and its neighbors should agree to the mutual recognition of registration forms, licenses, and inspections. They should also enter into bilateral or multilateral agreements to grant mutual freedom of transit and to exempt transit traffic from non-cost-related charges. Sanitary and phytosanitary, and quarantine regimes should be applied uniformly and seriously. Foreign transport operators should be allowed to operate in each country, and this would mean harmonizing infrastructure design and road traffic rules. A detailed procedure should be drawn up for a modified Transports Internation- aux Routiers carnet system in which the transit of containerized cargo would be approved on the basis of the shipping line’s or steamer agent’s seal. One could consider corridor- specific approaches and a flexible guarantee ceiling for the region. (c) Imports of stones for crushing: Stone importation and crushing in the Tamabil region pose a threat to forestry and tourism, both of which appear to be under environmental stress because of the unregulated and hazardous approach to stone crushing. The situation calls for a review of the relevant environmental and development policies. (d) Private sector policy: The policy framework for private sector development should focus on improving the investment environment and on promoting the smooth working of market forces. Policy reforms should aim to direct private investment to priority areas and to strengthen the private sector’s capacity to participate effectively and extensively in cross- border trade and transport-related activities. (e) Private participation: Both the public and private sectors, separately or jointly, could invest in technical and maintenance workshops, highway rest areas, and transport terminals at strategic locations. The private sector should be encouraged to help fund warehouse and transshipment facilities at the borders. (f) Regulation and deregulation: There should be a deregulation of transport services, international transport, and transit; but there should be regulations regarding safety and mandatory third-party liability insurance. The current regulations on drivers and vehicles need to be made more rigorous in order to improve road safety and protect the environment and road infrastructure. (g) Human resources: Skills development policies and strategies have to be synchronized with the government’s infrastructure development program. Skills upgrading is necessary for project implementation and for postproject management of assets and services. Appropri- ate investments would have to be made in skills development and management capacity building.

C. Implementation Strategies

(xiv) It is recommended that an Economic Corridor Development Authority be established to pursue the network development proposals presented in this study. (xv) It is also recommended that a Bangladesh Corridor Management Authority (BCMA) be established by an act of Parliament to coordinate the development, operations, and management of all economic corridors. It is also recommended that the BCMA establish a Special Implementation Cell to fast-track important transport corridor projects. The Special Imple- mentation Cell would be responsible for implementation and for monitoring implementation progress. (xvi) Ongoing road and bridge projects, together with other mega projects, would have to be expedited to avoid economic losses and human suffering, and to reap the economic benefits. Connecting Bangladesh: Economic Corridor Network 53

Mega projects are interlinked due to the budgetary allocation process and intersectoral linkages. Therefore, to facilitate the synchronized implementation of all mega projects, the existing Fast Track Project Monitoring Committee, headed by the Prime Minister, should be reorganized on a more structured basis and should focus directly on implementation, not only on monitoring implementation, with adequate capacity for performing this more de- manding task. In addition, the concerned government ministries and agencies must monitor the progress of work very closely and take corrective action at the first sign of trouble. (xvii) The implementation of the recommended priority actions should be phased in sequence or in parallel, as the case may be, to create the maximum synergy for optimal development impact. All the actions recommended in this study would have to be incorporated into the government’s Seventh Five-Year Plan and into its revised Perspective Plan. Implementation would be operationalized through the 3-year rolling Medium-Term Budget Framework, under which the annual budgetary allocations would be made. 54 ADB South Asia Working Paper Series No. 49

References*33

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Economic corridors are anchored on transport corridors, and international experience suggests that the higher the level of connectivity within and across countries, the higher the level of economic growth. In this paper, a new set of corridors is being proposed for Bangladesh—a nine-corridor comprehensive integrated multimodal economic corridor network. This paper presents the initial results of the research undertaken as an early step of that development effort. It recommends an integrated approach to developing economic corridors in Bangladesh that would provide a strong economic foundation for the construction of world-class infrastructure that, in turn, could support the growth of local enterprises and attract foreign investment.

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 Connecting Bangladesh: countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to a large share of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Economic Corridor 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. Network

Mohuiddin Alamgir

NO. 49 adb SOUTH ASia December 2016 working paper series

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