1 Edited by Mustafizur Rahman 2 Towards Regional Integration in South Asia Published in November 2015 Centre for Policy Dialogue (CPD) House 40C, Road 32, Dhanmondi R/A Dhaka 1209, Bangladesh Telephone: (+88 02) 9141703, 9141734, 9143326, 9126402 Fax: (+88 02) 8130951 E-mail: [email protected] Website: www.cpd.org.bd Copyright © Centre for Policy Dialogue 2015 All rights are reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission in writing from the publisher. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The views expressed in this publication are those of the authors alone and do not necessarily coincide with the views of CPD. Cover by Avra Bhattacharjee Graphic and page lay-out Md. Shaiful Hassan ISBN 978-984-33-9903-8 Price: Tk. 550 USD 50 Printed at Enrich Printers 41/5 Purana Paltan, Dhaka 1000 C12015_3TOW_TRC 3 Preface The three chapters in the present compendium address a number of issues that are critical to deepening cooperation and integration among the countries of South Asia. These relate to promoting trade facilitation, eliminating non-tariff barriers to trade and strengthening transport linkages. Indeed, together, these are central to addressing the key challenge of strengthening connectivity in South Asia in all its dimensions: Trade Connectivity, Investment Connectivity, Transport Connectivity and People to People Connectivity. A common thread stitches all the papers in this volume – they address the challenges of strengthening economic cooperation and integration in South Asia from the particular vantage point of Bangladesh. Whilst in recent years SAARC policymakers have taken a number of important decisions to enhance market access, facilitate trade and promote movement of goods in the region, formidable bottlenecks continue to undermine the possibilities of realising the full potentials of such initiatives. In this backdrop, the volume has put forward a number of concrete proposals to overcome the challenges of broadening and deepening regional integration in South Asia. These proposals are based on evidence and knowledge generated through analyses of data, field-level investigations (conducted in Bangladesh and India) and wide-ranging consultations and perception surveys involving all key stakeholders. The proposals include a framework SPS Agreement to deal with non-tariff barriers to trade with India, border measures and infrastructure that need to be put in place to reduce trade transaction costs, and modalities of operationalising the recently signed sub-regional Motor Vehicle Agreement (MVA) by drawing on insights and experiences of global best practices iv Towards Regional Integration in South Asia The articles in this compendium are based on studies undertaken by CPD over the recent past, which focus on concrete steps to deepen economic integration in South Asia at bilateral, sub-regional and regional levels. The first chapter titled Trade and Transport Facilitation in Bangladesh: An Audit of the State of Play was part of a regional study titled “Trade and Transport Facilitation in South Asia: Bangladesh Country Report,” undertaken in partnership with South Asia Watch on Trade, Economics and Environment (SAWTEE), Kathmandu, Nepal, with support from the Department of Foreign Affairs and Trade (DFAT), Australia. The Bangladesh country report was prepared by CPD; other countries included in this regional study were India, Nepal, Pakistan and Sri Lanka. This study was initially published as a CPD Working Paper (No. 110) in April 2015. The other two studies included in the volume Addressing Sanitary and Phytosanitary Concerns in Bangladesh-India Trade: Framework for an Agreement and Trade Facilitation in South Asia through Transport Connectivity: Operationalising the Motor Vehicle Agreements were conducted by CPD with generous support extended by the US Embassy in Bangladesh. One may recall that, in its report to the SAARC leadership, the Group of Eminent Persons set up at the 9th SAARC Summit in 1997, had put forward the vision of a South Asia moving towards a South Asian Economic Union by the year 2020. Regrettably, South Asian history has not lived up to the expectations of these visionaries. However, this is not to say that there has not been any notable progress in terms of deepening cooperation in the region. A large number of initiatives have indeed been put in place towards this at bilateral, sub-regional and regional levels, through SAARC and other avenues: preferential market access has been further enhanced through establishment of a free trade area in the region (SAFTA); sensitive lists are being gradually reduced; preferential market access for services is being discussed in SATIS (SAARC Agreement on Trade in Services) negotiations; India has offered unilateral duty-free access for virtually all goods exported by the SAARC LDCs; a sub-regional MVA (with the participation of Bangladesh, Bhutan, India and Nepal – the BBIN MVA) has been signed and a regional MVA (SAARC MVA) is expected to be inked in the near-term future; initiatives have been taken to stimulate investment cooperation among SAARC members; a SAARC Development Fund has been set up; and a large number of centres and fora have been established to broaden cooperation among professionals and organisations of the eight SAARC member countries. Preface v In spite of the above, and despite some progress in selected areas, overall, cooperation and integration in SAARC continue to remain weak and subdued. A major reason for this is that, whilst at policy level many initiatives have been put in place, much remains to be done at the level of operationalisation and implementation. In view of this, the present volume addresses three key issues from the distinctive perspective of implementation: how trade facilitation can help ensure that borders are not control points but crossing points, how non-tariff barriers can be tackled through win-win measures and how best to operationalise t he M VA s. The first chapter identifies the bottlenecks and delays faced by traders on account of complex documentation, difficulties in moving goods across borders, absence of facilities to exchange data and information, lack of standardisation, weak harmonisation of customs practices and inadequate human resources. The study has put forward concrete suggestions for operationalising a ‘Single Window’ at the border customs stations and identified the hardware, software and human ware needs to set it up. The second chapter addresses the most oft-complained issues of non-tariff barriers in the form of SPS-TBT that significantly limit the potentialities of Bangladesh-India bilateral trade. Whilst the diagnostics of this problematic has been carried out in an extensive way, the prescriptive part has tended to remain rather inadequately addressed. In this backdrop, the study proposes the signing of a bilateral SPS Agreement with a Mutual Recognition Agreement (MRA) at its core. The framework SPS Agreement that has been put forward draws on global best practices and includes key elements that must inform such an Agreement. The third chapter deals with issues of operationalisation of the recently signed MVA among four countries: Bangladesh, Bhutan, India and Nepal. Here also, based on an extensive examination of global best practices, concrete suggestions have been put forward as regards standard operating procedures that will need to be put in place to implement the BBIN MVA as also the needed institutional architecture, charges and fees and financial arrangements, and the required investment for operationalising the MVA. It may be noted here that, the issues which are dealt with in this volume are very much linked with, and indeed are in continuation of, the research, policy influencing and outreach activities that CPD has carried out since its establishment in 1993. A major focus of CPD’s activities vi Towards Regional Integration in South Asia over all these years has been to advance the interests of South Asian cooperation and integration in areas ranging from trade, connectivity and investment to energy and water, climate change, tourism, security and other areas. CPD and the South Asia Centre for Policy Studies (SACEPS) which it hosted for several early years, have always been at the forefront of mobilising public opinion in support of mutually benefitting solutions to address the cause of South Asian integration. The present volume is, thus, also a testimony to CPD’s commitment to strengthen regional and sub-regional integration in SAARC and Southern Asia. The present volume has made a modest attempt at taking the South Asian regional integration discourse further and forward by getting into the relatively less addressed areas of implementation and operationalisation of policies and initiatives. It is hoped that the insights and suggestions presented in the volume will be found useful by both experts and policymakers. It is also hoped that the broader audience of readership who are keen to have an informed understanding about the challenges and opportunities of deeper integration in South Asia will find this volume useful and interesting. Dhaka Mustafizur Rahman November 2015 Executive Director Centre for Policy Dialogue (CPD) vii Acknowledgement The authors would like to take this opportunity to register their sincere gratitude to Professor Rehman Sobhan, Chairman, CPD, whose pioneering works, intellectual leadership and unwavering commitment to promoting South Asian identity and advancing regional cooperation in South Asia have always been an inspiration to all of us. This is also an opportunity to recall our debt of gratitude to late Dr M Rahmatullah who during his association with CPD had carried out important works to strengthen transport connectivity in South and Southern Asia. The team would like to register its deep gratitude to the senior management at CPD and colleagues at CPD’s Research, Dialogue and Communication, and Administration and Finance Divisions for their support and cooperation at all stages of the research works included in this volume.