THE ASIAN JOURNAL Volume 19 January 2016 Number 1 JOURNAL OF TRANSPORT AND INFRASTRUCTURE INTERNATIONAL TRADE IN TRANSPORT SERVICES Institutional Pathways to Promote Efficiency in Logistics: The Case of India Rajat Kathuria, Deboshree Ghosh and Parnil Urdhwareshe Logistics Services in the WTO and Bilateral Agreements: The Case of India Arpita Mukherjee and Ramneet Goswami Supporting Rail Projects Worldwide Dr-ING Denis Loskant Opportunities and constraints for investment in the Indian logistics sector Smita Miglani Connecting India to Global Value-Chains: The Role of Logistics Services Pritam Banerjee The Promise of Dry Ports for Regional Development and Integration Raghu Dayal CONTENTS Introductory Note i Institutional Pathways to Promote Efficiency in Logistics: The Case of India 1 Rajat Kathuria, Deboshree Ghosh and Parnil Urdhwareshe Logistics Services in the WTO and Bilateral Agreements: The Case of India 20 Arpita Mukherjee and Ramneet Goswami Supporting Rail Projects Worldwide 39 Dr-ING Denis Loskant Opportunities and constraints for investment in the Indian logistics sector 46 Smita Miglani Connecting India to Global Value-Chains: The Role of Logistics Services 61 Pritam Banerjee The Promise of Dry Ports for Regional Development and Integration 95 Raghu Dayal THE ASIAN JOURNAL Editorial Board K. L. Thapar (Chairman) Prof. S. R. Hashim Dr. Y. K. Alagh Prof. Dinesh Mohan T.C.A. Srinivasa-Raghavan Editor Raghu Dayal Sub-Editor M. Absar Alam © January 2016, Asian Institute of Transport Development, New Delhi. All rights reserved ISSN 0971-8710 The views expressed in the publication are those of the authors and do not necessarily reflect the views of the organizations to which they belong or that of the Board of Governors of the Institute or its member countries. Published by Asian Institute of Transport Development Asia Bhawan, Road – 205, Sector-9 Dwarka, New Delhi - 110 077, INDIA Phone: +91-11-28080177 Telefax: +91-11-28080178 Email: [email protected] Introductory Note International trade in services is an increasingly important part of global commerce. Services are defined as anything that is not a “good” and is characterised by high degree of intangibility and generally requires that production and consumption happen simultaneously. They cover a wide range of economic activities extending from tourism, health-care, education, insurance, banking, software development, transport and communications, etc. Transport services, in turn, include consultancy, construction, management, inter-country movement of vehicles, inter-country movement of human capital, warehousing, distribution, supply chain management, etc. The international trade in services is regulated by the World Trade Organisation’s General Agreement on Trade in Services (GATS) which categorises group of services under Four Modes–cross border, consumption abroad, commercial presence and presence of natural persons. So far as trade in transport services is concerned, there has not been much progress in terms of liberalisation under these Modes both with regard to supply of services and investment in related infrastructure. Several barriers exist which impede free trade in this area. For example, while financial capital is free to move, movement of human capital as service providers is highly restricted. The share of developing countries in international trade in transport services has been comparatively far less than that of the developed countries. This is despite the fact that the former have a huge potential for providing such cross border services. In this context, there is a strong case for regional cooperation which to begin with may be more feasible and desirable particularly with the proximate countries of the region. The potential gains from reciprocal liberalisation are likely to be substantial. It is axiomatic that for promoting export of services in transport, the domestic economic structure should adopt policies of liberalisation and competitiveness, enhance skill development and promote technological innovation. It is equally necessary to set up regulatory regimes and institutions that would facilitate this framework. An efficient and economic domestic base would provide the necessary stimuli for export of transport services. This issue of the Asian Journal exclusively addresses such aspects of trade in transport services that are relevant to India, with a particular emphasis on the rapidly evolving logistics industry in the country. The journal carries six papers by eminent authors and practitioners in the area of intermodal trade, transport and logistics. The article authored by Dr Rajat Kathuria in conjunction with Messrs Deboshree Ghosh and Parnil Urdhwareshe provides a close link between reforms to expedite infrastructure related services particularly logistics services and growth in manufacturing ii Introductory Note trade. Ms Arpita Mukherjee and Ramneet Goswami, in their article, argue that how India has unilaterally liberalised its logistics services sector as reflected in its bilateral as well as multilateral engagements such as GATS. The paper also presents a comparative status of commitments of countries, till date, in transport sector under WTO’s GATS. Dr Denis Loskant, in his article, reproduced through courtesy Railway Gazette International, explains how DB International, while working in about 100 countries since 1966, offers a range of consulting and engineering services, from feasibility studies and planning to project supervision and commissioning. In addition to its presence in the Middle East, DB International has been specially active in China and Brazil; and having been appointed to act as quality and safety consultant for the 25 km elevated metro project in Kochi, it plans to make a further thrust in India with its own office at Bengaluru. Discussing the criticality of logistics services within a global value chains production network and the emergent new geography of production and consumption, Dr Pritam Banerjee in his article enumerates the policy related challenges in the Indian context which impede, or prevent, the efficient roll-out of service functions related to three different types of connect - physical, transactional, and regulatory, also suggesting policy interventions necessary for the purpose. Examining the role of private sector investment, with its opportunities and constraints, in logistics infrastructure in the country, the penultimate paper in the issue by Ms Smita Miglani also provides a bird's eye-view of the trends and patterns of investment in India's logistics sector in the last two decades. The essay by Mr Raghu Dayal, at the end, traces the rationale and promise of dry ports as an instrument of development and integration of the South Asia and Southeast Asia region, with empirical instances of their growth in India relevant to mutual advantages of the countries across the region. K.L. Thapar Chairman Institutional Pathways to Promote Efficiency in Logistics: The Case of India ∗∗∗ Rajat Kathuria, Deboshree Ghosh & Parnil Urdhwareshe INTRODUCTION With the fast globalising world, the success of an economy critically depends on evolving the efficiency of its trading and business activities. In order to maintain competitiveness, it is crucial for a country to understand the factors that affect this efficiency both in domestic and international market. A positive relationship between logistics and economic growth has been well established in the literature. 1 In addition, it is not possible to develop the infrastructure without access to resources that growth produces. This symbiotic relationship is an integral part of modern economies. With growing complexities in the trade patterns including the rise of Global Value Chains (GVC) and regional production networks, the importance of an efficient logistics network cannot be over-emphasised. Accordingly, any growth strategy for India should regard development of logistics infrastructure as an integral part of that effort. The global logistics industry is worth approximately $4 trillion and accounts for roughly 10 per cent of global GDP with Europe as the hub of most major logistics service providers and the United States (US) as the largest consumer. It is not surprising to observe that countries that have invested in an efficient logistics infrastructure have been able to capture the benefits of trade extensively (Jacobs, 2012). ∗ Dr. Kathuria is currently Chief Executive and Director of the Indian Council for Research on International Economic Relations, New Delhi. This paper borrows from work he has previously done with the National Transport Development Policy Committee for the “India Transport Report: Moving India to 2032”. Deboshree Ghosh and Parnil Urdhwareshe are Research Assistants at the Indian Council for Research on International Economic Relations. 1 Miglani, S., Le, H., Hsu, Y. “Logistics Services Sector: Possibilities for India-Taiwan Trade and Collaboration” in Enhancing Trade and Cooperation between India and Taiwan, Pal. P, Mukherjee, A., Hsu K. (eds.), ICRIER, 2013, Academic Foundati on 2 Institutional Pathways to Promote Efficiency in Logistics What constitutes logistics has changed over time, reflecting the dynamic nature of production and distribution systems. With expansion of both domestic and international trade, there has been a transformation in logistics networks, which today encompass and integrate several functions along the supply chain. For example, distribution services that were delivered internally tend