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Reimagining Border Haats As International Retail Trade Zones #2011 Discussion Paper Reimagining Border Haats as International Retail Trade Zones Published by Consumer Unity & Trust Society D-217, Bhaskar Marg, Bani Park, Jaipur 302016, India Tel: +91.141.2282821, Fax: +91.141.2282485 Email: [email protected], Web site: www.cuts-international.org © CUTS International, October 2020 Author Pritam Banerjee Independent Trade and Logistics Specialist Supported by In partnership with This Discussion Paper has been published as a part of CUTS project entitled, ‘Border Haats between India and Bangladesh as a tool to reduce informal cross- border trade’ undertaken with the support of the Foreign, Commonwealth & Development Office, UK and in partnership with Unnayan Shamannay, Bangladesh. #2011 Reimagining Border Haats as International Retail Trade Zones 3 Contents Abstract 5 Introduction 6 Border Zones and Cross-Border Retail: An Overview 8 Some Existing Cross-Border Retail Models 14 The US-Mexico Border Zone 15 China-Kazakhstan Border Zone 17 Potential for Retail Development on India-Bangladesh Border 20 Proposal for Agartala Airport Border Zone Development 21 Proposal for Lakhimari Sonahat Border Zone Development 27 Conclusion and Recommendations 35 References 39 Endnotes 34 4 Reimagining Border Haats as International Retail Trade Zones List of Figures and Tables Figure 1: The Relation between Cross-border Market Size and Differential Pressure, Permeability, and Transfer Costs 12 Figure 2: Diagrammatic Representation of the Proposed Agartala Airport Commercial and Entertainment Border Zone 23 Figure 3: Diagrammatic Representation of the Proposed Lakhimari-Sonahat Commercial Border Zone 30 Table 1: Differences between Retail Connecting Buyers and Sellers across Borders 15 Table 2: Potential Addressable Markets: Agartala Airport and Lakhimari Sonahat Border Zones 21 Table 3: Some Major Urban Agglomerations at Lakhimari-Sonahat Border Zone 28 Reimagining Border Haats as International Retail Trade Zones 5 Abstract raditional cross-border This Discussion Paper provides a retail trade has broadly brief synopsis of the literature Tdepended on two formats. related to the traditional cross- One is cross-border tourism border retail trade and where buyers across the border establishes the difference make purchases. A special form between cross-border tourism of such cross-border tourism is and cross-border retail zones. It duty-free shopping zones goes on to discuss the different created in transit spaces such as models of cross-border retail airports or large cruise trade based on existing terminals. examples extant internationally. The other format is to have a It then brings this analysis to dedicated retail zone accessible bear upon the possibility of to foreign buyers with special developing a cross-border retail rules and regulatory flexibilities zone in the India-Bangladesh on or close to an international border and juxtaposes the border. discussion on regulatory concerns to this specific case. Both these formats depend upon certain economic, political The paper provides some and geographic pre-requisites practical examples of addressing and are subject to concerns these concerns through related to non-compliance with administrative innovations and established trade and tax technology and proposes a regulations, consumer security, potentially workable model for and abuse of these channels for such retail zones in this region. contraband trade. 6 Reimagining Border Haats as International Retail Trade Zones Introduction orders are an either side of it are much less institutional innovation. studied. This bias is reflected in BThis seemingly obvious policy priorities as well. Much and innocuous statement more policy effort is put into accurately sums up the reforms and initiatives that challenges of border would connect these wider management and the economic hinterlands across designated impact they have on their gateways, that is, points in the hinterlands. Like all institutional border that allow the movement innovations, borders are of goods, capital, people and governed by a set of rules, data. procedures and laws administered by agencies that This often results in the interior This Discussion Paper ensure adherence to them. hinterlands being much better makes a case for the connected compared to the development of cross- And like all institutional borderlands on the two sides. In border retail zones innovations, there are some ways, this is accessible to significant differences in the understandable, given that in consumers from both design of these laws and many cases (with several notable procedures and their exceptions) economic clusters of sides in the context of enforcement in different places, countries tend to be in the wider India-Bangladesh that is, major variations in the hinterlands and not on the border quality of this institution (that is, borderland. But there are border) at different locations. definite opportunities for economic development through The literature related to the economic integration of transaction costs of borderlands that should not be international trade and trade overlooked. facilitation is primarily focused on the theoretical or applied More importantly, it can lead to analysis of such variations in significant improvement in the institutional quality and design. economic and quality of life of However, the discussion in this the people living in the literature typically focuses on borderlands. the wider hinterland enclosed by this border. The strategy for economic integration of borderlands can The borderlands, that is, the focus on the integration of regions near the border on production factors, or allowing Reimagining Border Haats as International Retail Trade Zones 7 for greater integration of associated with these concepts. consumption, or both. Section II discusses some of the Production focused integration existing cross-border retail has led to innovations such as models and associated learning cross-border development from their operational structure zones or Special Economic and management. Zones (SEZs). Good examples include the Maquiladoras in the Section III makes a case for US-Mexico border. developing commercial border zones (CBZs) that allow formal While consumer integration retailing and personalised strategies are less common, but services under controlled there are examples in the environments. It provides a China-Kazakhstan border. In design proposal detailing the this regard, the Discussion potential management of Paper makes a case for the people and goods in a manner development of cross-border that will ensure compliance with retail zones accessible to immigration, customs, and consumers from both sides in security-related regulations and the context of the India- processes using technology and Bangladesh border. managerial innovations to address any regulatory concerns Section I presents a brief arising from such a overview of the concept of development. Section IV borderlands and border zones concludes with a summary of and discusses some of the key the key messages and policy elements in the literature recommendations. 8 Reimagining Border Haats as International Retail Trade Zones Border Zones and Cross- Border Retail: An Overview he characterisation of a However, given that North border has been American and European borders Tprovided by Hoover are the ones that are most (1948). He describes a border as studied and analysed, the akin to a river and the border literature on borderland points that allow passage across development is biased towards them as bridges. Like bridges, studying the more urbanised these border crossings impose borders in these regions. The a cost of operation and literature review that follows maintenance, and more represents this bias. Despite this importantly, adjacent points shortcoming, this literature across a border are not provides insights generically accessible across a straight line applicable to a discussion on but by a circuitous route via the borderlands and their nearest border gate. It follows development. It is also important to that this concept of border point out that the development has economic, It is also important to point out economic impact of a geographic, social, political and that the economic impact of a border on economic environmental implications. border on economic decisions, especially those about decisions, is not limited More importantly, borderlands purchasing and consumption in to international represent very diverse eco- the borderlands, is not limited borders systems. For example, the to international borders. Sub- highly urbanised borderland national borders (or between Mexico and the state international borders within a of California in the US, or common market such as EU) can between Singapore and also create varying degrees of Malaysia are completely influence on such decisions due different from sparsely to differences in taxes, populated borderland between economies of scale, or presence Laos and Cambodia with of specific industries or the scattered villages on both sides, existence of trade networks. which in turn are different from the densely populated but One illustrative example from largely rural borderlands Merriman (2010) demonstrates between India’s state of West that differences in relatively Bengal and Bangladesh. minor tax rates on items of Reimagining Border Haats as International Retail Trade Zones 9 regular consumption such as have typically fewer economic cigarettes across a border can opportunities and are often substantially influence consumer
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