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

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 considered to be on the behaviour. Consumers are willing economic periphery of their to make the effort of purchasing respective countries. Clark these items from the jurisdiction (1994) calls this the ‘Circuity with lower taxes and do not Effect’1 of border location. mind the effort of a little travel to save money on such The solutions and priorities that purchases. emerge from such a focus would look to improve the Generally speaking, a border, efficiency of border-crossings or especially an international the development of Special border imposes barriers to the Economic Zones (SEZs) that free movement of factors of allow a more efficient production and the ability to combination of factors of freely exchange goods and production across borders. services. This inhibits the local economy of the borderland. Of But this focus on the corridors course, the borderland near an and gateways concentrates the international trading corridor has infrastructure and institutional an obvious advantage, being solutions around these integral to the transport and gateways and ignores the needs trading infrastructure and of areas not near the gateways proximate to international or the corridors. It is also An international gateways (that is, land border pertinent to understand that the border imposes crossings) that bridge the commercial and economic barriers to the free borders. needs of the population in the movement of factors of borderland might not benefit production and the This would enable the from the facilitation of ability to freely concentration of economic infrastructure developed to activity on such borderlands. But serve the bilateral trade needs exchange goods and borderlands that tend to be between the two countries.2 services further away from such corridors 10 Reimagining Border Haats as International Retail Trade Zones

Clark (1994) distinguishes this Calexico) led to the growth of differential impact of the border retail markets catering to for hinterland and borderland customers across both sides regions into primary and of the border. Such paired secondary level impacts. The city syndrome exists in the primary effects relate to the South Asian context as well, overall impact of international with population borders on a national economy concentrations underlined by (that is, the overall hinterland) historical, economic and and are related to issues of social affinities, for example, trade policy and cross-border Comilla-Agartala. connectivity-related infrastructure. • The extent of permeability: Permeability refers to the At the secondary level, national extent, to which goods, boundaries have localised services and people can effects (in the border zone) travel across a border, both defined by the course of the formally or informally. actual border and the locations, Borders that are officially The commercial and at which there are border hard (that is, significant economic needs of the points. Clark underlines that restrictions and barriers on population in the these secondary effects define formal trading) increase borderland might not many of the microeconomic ‘informal’ trade. This is benefit from the decision-making impacting the especially true if such day-to-day lives of border zone borders are difficult to facilitation of residents. Whereas everyone in administer and do not have infrastructure a nation is subject to primary natural physical barriers. In developed to serve the boundary effects, only those in such conditions, developing bilateral trade needs border zones are influenced by more formal, better regulated between the two secondary effects. The key and efficient markets require countries secondary effects are: a transformation of the eco- system supported by both Secondary Effect Factors:3 regulatory change and change in the business • Cross-border market size: models. The density of population in the borderland and the As Stern (2015) points out, overall purchasing power is a investments in market critical factor in the infrastructure (that is, mall- development of borderland like structures, or organised retail markets. As Ford (1988) and well-built retail spaces) points out, the phenomenon that provide a solid of ‘paired cities’ representing impression of formality, large concentrations of regulatory institutions and population and buying development of protocols power along the US-Mexican that inculcate trust among border (such as San Diego/ buyers and sellers (for Tijuana, and Mexicali/ Reimagining Border Haats as International Retail Trade Zones 11

example, payment systems, • Transfer Costs: Transfer proper receipts) are all part costs reflect the price of this mix. imposed on these flows on crossing the boundaries. This • The differential pressure in turn might be a function across national boundaries: not only of costs of Per capita income levels and addressing formal barriers to policies that have an impact cross-border flows such as on retail prices also have a documentation for significant impact on what compliance with regulations, consumers buy and which taxes and duties, and side of the border they transport but also of costs of would like to source their search, marketing and effort purchases from. Campbell required to either sell to or and Lapham (2004) for buy from across the border. example demonstrate the impact of real exchange rate These concepts of market size, fluctuations on the dynamics differential pressure, of retail trade in the US- permeability, transfer costs and The India-Bangladesh Canada border. We have circuitry effect have a direct already discussed Merriman’s bearing on the nature of border border is characterised (2010) analysis of cigarette zone trade, that is, whether such by significant purchasing behaviour in light trade would be conducted population of tax differentials across formally or informally, or the concentrations, borders. extent to which formal channels cultural affinities and would be subject to abuse. long-standing Leal et al. (2010) have These factors would also define commercial and trade demonstrated that the demand and scope of differences in the taxation of border-zone retail. relations the same good or service between neighbouring Table 3 uses these five broad countries, neighbouring factors to analyse the prospects regions, or municipalities in and potential models for the same country encourage successful and sustainable consumers to travel to the border zone retail trade in the jurisdiction where taxation is India-Bangladesh border, more lower to acquire that good specifically the sections of the or service, as long as the tax- border that are relatively far (or saving compensates for the in economic and supply chain costs of travelling from one terms not connected with) from jurisdiction to another. A the main trading corridors. similar idea of consumer decision optimisation has The India-Bangladesh border, been put forward by Kanbur especially the sections and Keen (1993). bordering West Bengal and Tripura are characterised by 12 Reimagining Border Haats as International Retail Trade Zones

Figure 1: The relation between Cross-border market size and Differential Pressure, Permeability, and Transfer Costs

Significant demand in Significant demand and combination with high differential pressures means transfer costs of formal trade there is a case for border and low permeability zone retail. Presence of high (borders are effectively hard) transfer costs with the border creates incentives for being permeable would Large/High informal trade. Low mean that significant amount High permeability in the border of informal trade would Cross zone also results in circuity already exist in the border Border effect for formal trade. There zone. Investment in Market is strong case for developing infrastructure and regulatory Size and formal border zone retail solution for border zone Differential solutions retail can help shift informal Transfer Pressure trade to formal channels Costs

While lower levels of Low levels of demand and permeability (relatively open differential pressure would borders) might result in mean a modest market for some circuity effect, this is border zone retail. Low counterbalanced by low transfer costs and high level transfer costs. Given modest permeability would mean Small/Law market size and low that this modest demand can Low differential pressure, there be easily met by existing would be relatively low retail formal cross-border trade demand inthe border zone. solutions. Infrastructure and Infrastructure and regulatory regulatory solutions for investments would not be border zone retail would not justified be justified.

Low High

Permeability

Source: Author’s summary based on literature

significant population demand for goods (and concentrations, cultural affinities services), which can often be and long-standing commercial serviced more effectively by and trade relations, and a distribution networks across border zone, without natural borders. With high transfer physical barriers, which is costs and a relatively permeable difficult to completely seal off. border, there is understandably There are significantly high a high volume of informal trade. transfer costs (due to trade- No doubt, there is a visible related and logistical costs) for presence of goods from across formal trade. Not surprisingly the border in border zone this results in significant markets on both sides. Reimagining Border Haats as International Retail Trade Zones 13

As Ford (1988) underlines, the urban concentrations are some presence of ‘paired’ urban distance away from their concentrations in the vicinity of national hinterland. This would the border zone adds mean that the effective prices of significantly to the demand for retail for various products at border zone retail solutions. these border regions would be There are also large urban at variance with the cross- concentrations at short border traded prices of these distances across this border. products between the Indian and Bangladeshi hinterland, Some examples include creating opportunities for price Bongaon (India)-Jessore arbitrage for retailers. (Bangladesh), Behrampore/ Murshidabad (India)-Rajshahi Also, differences in tax and There is a strong case (Bangladesh), Balurghat/ imposition of customs duties for developing border Malda(India)-Dinajpur create differential pressure, at zone retail solutions in (Bangladesh), Siliguri (India)- least if these goods are formally the India-Bangladesh Thakurgaon (Bangladesh), traded and sold, due to price border Coochbehar (India)-Lalmonirhat differences. (Bangladesh), Silchar (India)- Sylhet (Bangladesh), Agartala The India-Bangladesh border (India)-Comilla (Bangladesh). zone, therefore, represents a situation characterised by the These urban/suburban upper right-hand quadrant in concentrations act as both Figure 1. When there are demand multipliers as well as sudden crackdowns on informal distribution hubs that connect border trade making the local markets with surrounding borderless permeable, the areas and this can potentially border zone can also resemble help service a border zone retail the situation outlined in the market more effectively if such a upper left-hand quadrant. In market is allowed to develop. either scenario, there is a strong case for developing border zone Differential pressure is also high retail solutions in the India- given that many of these border Bangladesh border. regions and the associated 14 Reimagining Border Haats as International Retail Trade Zones

Some Existing Cross-Border Retail Models

ovacs (2011) defines apart from shopping tourism border zone retail trade and other generic types of K(or as per his cross-border retail. Market nomenclature-cross-border development in the vicinity of retail) as a frequent shopping borders (that is, in the border activity of people living in zones) has typically used a mix borderlands towards the other of border zone retail and side of the border to make a shopping tourism characteristics profit. ‘Profit’ in this context can (which are outlined in Table 1). be either in the form of lowering consumption The key differentiating factor expenditure or through gains between the two relates to the from petty trading. fact that while border zone retail requires a specific physical In this type of shopping, mostly market location, preferably Border zone retail trade fast-moving consumer goods located close to or at the is a frequent shopping (FMCG) products are purchased border, shopping tourism can activity of people living primarily for household take place at any location. But a in borderlands towards consumption. fundamental fact in both these the other side of the models is that access is border to make a profit However, since the time of controlled by customs and Kovacs writing his paper in other authorities, thus providing 2013, the nomenclature of the ability to regulate the flow cross-border retail has been of goods and people to and increasingly used in the context from these markets. of online purchases (that is, cross border e-commerce), and It is important to focus on a few therefore to avoid confusion key examples of border zone this paper uses the more retail activity that allow specific term of border zone consumers to cross borders (or retail. move to a dedicated facility) to understand the specific nuances Using a modified version of of how such cross-border Kovacs differentiation between movements are managed and retail models, Table 1 specifies the administrative practices and the characteristics that define institutional solutions that have borderland retail and sets it emerged from them. Reimagining Border Haats as International Retail Trade Zones 15

Table 1: Differences between Retail connecting Buyers and Sellers across Borders

Borderzone Retail Shopping Tourism Cross-Border Retail

Participants Typically involves people Anyone, no spatial Anyone, purchase and payment living in borderlands determination are online (or based on catalog)

Catchment Region Mostly concentrated From anywhere From anywhere of buyers around border regions

Purchasing Food, clothing, items of Typically, high end All types of products, but tends Behaviour and daily use including FMCGs branded luxury to be biased towards higher Preferred and electronic appliances goods, electronics, value items/brands not easily Products alcohol, and tobacco available in local markets, or products esoteric niche products

Need for Presence Physical presence close to Longer-duration travel No need for physical presence and Duration the border, or in a transit across the border into across the border Across Border zone between borders of another country two countries

Customs and Application of physical Inbound customs at Either simplified customs Regulatory Model checkpoints with simplified entry gateway, with regulations governing lower- customs clearance simplified rules value small parcels or general declaration and inspection, applicable to customs regulations depending similar to models applied international on value and other details of the to international passengers passengers products at airports

Source: Author’s modification of classification table developed in Kovacs (2011)

The US-Mexico Border buy items ranging from a day to Zone day groceries and FMCG to high-end fashion items. More The US-Mexican border zone than 650,000 people cross the represents a vibrant cross- US-Mexican border every day. border commercial eco-system for residents living in this Given the importance of such region. As Canas et al (2006) cross-border commercial activity point out, US consumers cross for the border zones on both the border in large numbers to sides, and its impact on local go to restaurants or avail economies, local community personalised services such as a leaders and business haircut, massage, or dental associations have a strong stake services. in its growth and continuity and have formed institutions that Mexican consumers travel to play an important role of large urban agglomerations intermediaries with regulators. such as Chula Vista, San Jose, One such institution is the Laredo, El Paso and Nogales to 16 Reimagining Border Haats as International Retail Trade Zones

Smart Border Coalition, which residents who cross land will be elaborated later in this borders for a short duration discussion. (typically less than 24 hours) shopping trip to a nearby The fundamental regulatory location across the border. The aspects for border zone personal exemption limit is consumers relate to their ability US$800 per US citizens re- to physically cross borders and entering the US and US$300- bring back their purchases with US$500 for Mexican citizens re- the minimal hassle (customs entering the US. duties and other taxes, and procedures related to them). A Both US and Mexican The fundamental brief discussion on these authorities provide local tax regulatory aspects for aspects in the context of the US- exemptions. Specifically, US border zone consumers Mexico border follows: Federal law prohibits the relate to their ability to imposition of local taxes on physically cross borders Movement of Goods exports and, therefore, all and bring back their In both the US and Mexico, border states maintain a system purchases with the purchases made by individual of refund of such taxes to consumers across the border foreign shoppers. The Texas minimal hassle are subject to personal system of refund of such taxes is exemption limits. These considered to be the most user- exemption limits apply to any friendly. A large percentage of US or Mexican citizen re- Mexican shoppers find this to entering his or her own country be an important driver of their after having travelled abroad, decision to make purchases that is, there is no special across the border in Texas. provision for border zone Reimagining Border Haats as International Retail Trade Zones 17

However, it seems despite this (Mexico) and San Jose (US) in relatively user-friendly system, the form of ‘Border Xpress’. The the refund process still requires Border Xpress is closed access, some effort, and only shoppers CCTV monitored pedestrian making large purchases use it crossing across the border that and day shoppers (the typical allows US citizens to enter into profile of a border zone the airport at Tijuana just across consumer) do not typically file the border to either take flights for a refund. or use retail services in and around the airport. Mexican Movement of People citizens with visas (or Border US citizens do not need a visa Crossing Cards can also walk to cross the border, which is one across into the US). reason why US consumers can make more frequent trips and Institutional Solution also avail personalised services As mentioned earlier, successful such as haircuts or border zone commercial appointments with dentists that development requires offer significant price arbitrage. businesses to develop trust with However, since visas are authorities that flexibilities and required for Mexicans entering facilitations provided would be The Border Crossing the United States, it is relatively used legitimately and that Card has enhanced more difficult for Mexican businesses would serve as a graphics and citizens to make the trip across partner in enforcement as well technology that allow the border. as in finding solutions to regulatory issues. easier processing However, the US offers Mexican during entry and exit citizens a solution, which is The Smart Border Coalition, an extremely useful in the border association of businesses in the zone context in the form of the San Jose-Tijuana border brings Border Crossing Card. It has together businesses, local enhanced graphics and governments and federal technology that allow easier agencies on both sides of the processing during entry and border to ensure that borders exit. The card itself is valid for do not act as barriers for 10 years and allows unlimited consumers to access retail and entry during these years. A services on either side. border zone resident can, therefore, easily enter the US for China-Kazakhstan Border day trips related to shopping Zone with relatively minimal hassles. The China-Kazakhstan border There is also an example of a zone at Khorgos is very different specific border zone related from the US-Mexico example in infrastructure solution for the sense that it is a sparsely facilitating the movement of populated area, with the nearest people in the US-Mexican major urban agglomerations on border between Tijuana both sides, that is, Almaty in 18 Reimagining Border Haats as International Retail Trade Zones

Kazakhstan and Urumqi in China electronic gadgets, and more than 300 km away. The appliances. rationale for the development of a transit shopping zone at Very few Chinese shoppers use the Khorgos International the Khorgos ICBC since the Centre of Cross-Border Kazakh manufacturing industry Cooperation (ICBC) was based has very little to offer that on the development of Khorgos would be interested in most as one of the key border points Chinese shoppers. Since China serving the Eurasian rail corridor bans the sale of agricultural connecting Europe to China via products that would have been Russia. of interest to Chinese consumers (especially ethnic The Khorgos ICBC invested in Tajiks and Uighurs citizens who developing specialised retail have similar food culture with experience (i.e. well-developed the Kazakhs), the opportunity malls with rest and recreation for two-way border zone trade facilities) that would attract is thus reduced.5 shoppers from the larger urban agglomerations, on both sides The Khorgos ICBC has invested of the border. It has primarily in a physical infrastructure at a attracted Kazakh citizens from transit zone with controlled Almaty (340 km for ICBC), entry and exit from both sides. Kapchagay (350 km from ICBC) This border retail zone is a well- and Taldykorgan (316 km from planned five-storey mall with ICBC) travelling to avail bargains over 2000 shops. The entry/exit for Chinese made FMCG, points at both sides of the Reimagining Border Haats as International Retail Trade Zones 19

border are manned by customs/ customs, but most shoppers immigration and security have access to agents or touts personnel to prevent that help deal with such unauthorised entry of goods or challenges.6 people. Given that the ICBC receives 5,000 plus shoppers on Movement of People a typical weekend day, it Free movement of people is represents a moderate allowed into the Khorgos ICBC commercial success. from both sides. However, a Kazakh citizen would need a It needs to be noted that the visa to exit from the Chinese typical menu of goods sourced side, having entered from the by Kazakhs shoppers from the Kazakh side and vice-versa. ICBC was already available in Shoppers are allowed to spend local markets in Almaty or a full day before they have to Kapchagay, but this trade was exit the zone. There are no largely illegally mediated and restrictions on the number of customers were not sure if they visits to the zone. were getting genuine goods or whether they were being Institutional Solution Since China bans the cheated in terms of price. The ICBC itself, that is sale of agricultural Replacing this informal trade development of physical products that would with the formal establishment of infrastructure with secure access have been of interest a large mall has led to increased manned by customs and to Chinese consumer confidence and immigration, with agreed-upon thereby its popularity with rules for the movement of consumers...the Kazakh shoppers. people and goods and the opportunity for two- incidence of taxes and duties on way border zone trade Movement of Goods such goods that are being is thus reduced Kazakhstan allows its citizens a purchased within the ICBC personal exemption on customs represents an institutional duties and taxes of US$1,640 solution. The mall, with its allied per month for items of personal maintenance and commercial consumption. If the shopper organisation represents the makes more than one trip per business side of the institutional month, then a flat applied rate solution for ICBC. of 30 per cent of the value of goods is imposed on such Also, an eco-system of services, purchases. for example. buses that ply shoppers overnight from China allows a personal Kazakh cities some distance exemption of about US$285 per away from the ICBC has also person, subject to an annual been created around this limit of US$2,850 per person. shopping facility. In that sense, Anecdotal evidence seems to the Khorgos ICBC represents a indicate that there is some specific border zone shopping degree of rent-seeking in solution. 20 Reimagining Border Haats as International Retail Trade Zones

Potential for Retail Development on India-Bangladesh Border

s discussed in section I, having significant population the India-Bangladesh density and proximity of urban Aborder has the potential agglomerations with cross- for developing retail-oriented border business networks and businesses that cater to relationships. consumers from both sides of the border. The discussion in To an extent, there are parts of section II on the different the border on the Indian side models of border zone retail that resemble some parts of the indicates that the India- Mexican border and the Kazakh Bangladesh border resembles side of the Khorgos ICMC in India-Bangladesh both the US-Mexico and China- that they remain at a relative border has the Kazakhstan scenarios for disadvantage (compared to potential for citizens (of at least one of the most other parts of their countries) requiring a visa or a country) in terms of retail choice developing retail- permit to enter the territory of and pricing and this oriented businesses the other. disadvantage is offset to an that cater to consumers extent through access to more from both sides of the The India-Bangladesh border developed commercial border also closely resembles the US- agglomerations across their Mexico scenario in terms of borders. Reimagining Border Haats as International Retail Trade Zones 21

Table 2: Potential Addressable Markets: Agartala Airport and Lakhimari Sonahat Border Zones

Agartala Airport Commercial Borderzone

Population Immediate Vicinity 1 15 million Market Size Immediate Vicinity US$31bn

Population Extended Region 2 32 million Market Size Extended Region US$62bn

LAKHIMARI -SONAHAT COMMERCIAL BORDERZONE

Population 3 18.5 million Market Size US$28bn

1 Includes Khowai, West Tripura, Shipahjala, Gomati (IND) and Brahmanbaria, Comilla, Noakhali, Feni (BAN) 2 In addition to immediate vicinity districts, includes Cachar division of Assam (IND) and Shylet division (BAN) 3 Includes Alipurduar, Cooch Behar, Dhubri, Bongaigaon, Kokrakjar, Goalpara, West Khasi (IND) and Kurigram, Lalmonirhat, Rangpur, Nilphamari (BAN)

Source: Author’s calculations. Population data from national government websites of both countries. Market size is based on State level GDP per capita (for India) and divisional level GDP per capita (Bangladesh)

The two specific border zones and the peripheral wall of the selected for discussion in this airport is just about 900 metres. paper are the Agartala Airport Bangladeshi citizens are major border zone (Tripura state of consumers of Indian health and India and Chittagong division of education services. Bangladesh) and the Lakhimari- Sonahat border zone (West Many of the services clusters Bengal state of India and are situated in metropolitan Rangpur division of centres in India such as Kolkata, The two specific border Bangladesh). Bengaluru, Chennai, Delhi NCR, zones selected for Mumbai, and Pune. Bangladeshi discussion in this paper Table 2 provides the basic data citizens are increasingly using are the Agartala concerning consumers and the North Bengal hills, Sikkim Airport border zone market size potentially and Bhutan as tourist addressable from either of these destinations. The network of and the Lakhimari- two border zones, followed by a private boarding schools in the Sonahat border zone discussion on the specifics of North Bengal hills serves a the potential commercial and sizeable number of Bangladeshi associated regulatory models students. In short, there is a required to develop and huge demand for connectivity sustainably operate these to different parts of India. border zone retail solutions. The extended region of the Proposal for Agartala Agartala Airport border zone Airport Border Zone (see Table 2) on the Bangladesh side of the border is located Development some distance away from the The Maharaja Bir Bikram Airport main airports in Bangladesh. at Agartala is situated right next Thus, their current route to to the border. The distance these locations in India is to between Ajampur Railway travel to either through Dhaka station in Bangladesh territory or Chittagong and find a flight 22 Reimagining Border Haats as International Retail Trade Zones

to a major metro such as Chittagong) and tourism can Kolkata, Delhi, or Mumbai and easily enter into Bangladesh then again find further onward through this corridor and then connections. Customs and avail relatively cheap local immigration are done at transport for onward journeys. airports of entry in India. They would complete their Agartala Airport, therefore, customs and immigration into offers an alternative point of Bangladesh at the exit point of entry.7 the walkway on the Bangladeshi side. A diagrammatic If an approximately 300-metre- representation of such a facility long covered access-controlled is provided in Figure 2. walkway (non-elevated) is developed across the border,8 As Figure 2 indicates, a fully- Bangladeshi citizens could enter fenced corridor with a Customs and into Indian territory through pedestrian walkway (for immigration are done this walkway, and undergo all passengers/shoppers) and a at airports of entry in customs and immigration two-lane road running parallel India. Agartala Airport, formalities before boarding a to the pedestrian walkway (to therefore, offers an flight. They can then use the be used for small commercial entire domestic flight network vehicles carrying goods to stock alternative point of from Agartala Airport to in the customs bonded entry connect to the rest of India. warehouse or directly used in- shelf inventory in stores inside Similarly, Indian citizens who the CBZ) would need to be might want to travel to Comilla, developed across the India- Chittagong, Sylhet, Noakhali Bangladesh border near the and other such urban airport. This corridor would be agglomerations for trade (and manned by security personnel with the development of the from Bangladesh and have full beach resorts in and near CCTV coverage. Reimagining Border Haats as International Retail Trade Zones 23

Figure 2: Diagrammatic Representation of the Proposed Agartala Airport Commercial and Entertainment Border zone

Source: Authors Conceptualisation

The corridor would have Past the Bangladeshi customs separate entries into the CBZ and immigration point, a facility for passengers/shoppers walkway would connect and goods being supplied to passengers/shoppers to the the retail and other commercial Airport entry, and various establishments in the CBZ. The facilities in the CBZ. As Past the Bangladeshi goods would be inspected illustrated in Figure 2, the customs and before they enter into the proposed facilities include retail immigration point, a common bonded warehouse and exhibition space, a (common in the sense that this multiplex cinema that can walkway would warehouse would be under the double up as a conferencing connect passengers/ joint supervision of Bangladeshi facility, personalised services shoppers to the Airport and Indian customs). outlets, and food court and entry, and various hotel. A brief description of facilities in the CBZ A separate customs and each of these follows shortly. immigration facility (manned by Bangladeshi officials) would also At the entry/exit point to the be developed at the entry/exit airport, Indian immigration and point of the corridor to process customs would be able to movement of passengers/ check passengers/shoppers shoppers into/out of the CBZ entering/exiting Indian territory facility from/to Bangladesh. from the CBZ. There would be a 24 Reimagining Border Haats as International Retail Trade Zones

separate entry from the Indian and Bangladeshi e-commerce side into the common bonded players. Consumers can order warehouse for goods and other online and collect their commercial material to supply merchandise in these stalls using retail and other commercial point-of-sale cash or card outlets in the CBZ, manned by payment at the stalls. This would Indian customs. especially help Bangladeshi customers who have limitations Thus, the two ends of the CBZ on being able to make online (at the entry/exit point of the payments in foreign currency. cross-border corridor and the entry/exit point of the airport) Given the popularity of Indian would be securely manned by films in Bangladesh, having customs and immigration of the good quality cinema halls in the two countries. The customs and CBZ would further attract immigration authorities would footfalls from across the borders, have Standard Operating and increased footfalls would Procedures (SOPs) similar to help the retail business, as well managing airport or land as the food-court. A passenger terminals, with a high competitively priced hotel degree of facilitation. having both three- and two-star quality rooms would also The services outlets The CBZ itself would have a support shoppers, travellers, could serve a crucial retail space for rent for traders/ traders. aspect of the Indian retailers from both India and services that are Bangladesh. Besides a few The stalls could be turned into exported to sensitive items, all types of exhibition centres for bilateral Bangladesh merchandise should be allowed trade fairs and provide a for sale on these premises, platform, especially for including goods not Bangladeshi traders seeking to manufactured in India or reach out to the Indian market. Bangladesh. In a sense, this Since both sides will have visa- would be similar to a duty-free free entry into the CBZ, it would shop, but with several different be an ideal meeting point. retailers leasing space and not just one (or a few). Similarly, the cinema halls could be utilised for business The customs treatment on both conferences, cultural and sides should also typically be academic meets. Since food- akin to duty-free merchandise, related and hotel services would that is, personal purchase also be present in the CBZ, exemptions. The governments having conferences or of both countries could enhance exhibitions for trade promotion the personal import exemptions conceived for a few days would for purchases made in the CBZ. also not be a challenge.

Dedicated stalls could also be The cinema halls space could made available to large Indian also be used for live shows. Reimagining Border Haats as International Retail Trade Zones 25

Bangla rock-bands (from India flights to Jaipur (due to demand and Bangladesh) have fans for religious tourists from across the border. Bengali and Bangladesh to Ajmer) and Pune The cinema halls space Hindi film industry-related live (Bangladeshi education and could also be used for shows, reality shows, and even some healthcare-related live shows. Bangla jatra (a traditional form of tourists) would be made rock-bands have fans theatre) could be hosted, possible. serving clientele from both across the border sides of the border due to the Bangladeshi travellers would visa-free access. gain from cheaper fares and faster transit times than their The services outlets (see Figure current routes from eastern 2) could serve a crucial aspect parts of Bangladesh. Similarly, of the Indian services that are the tourism sector around the exported to Bangladesh. Space Chittagong hill-tracts and some could be rented to provide out- really good beaches in the patient-services (OPD) and Chittagong division could be diagnostic services to developed through this corridor, Bangladeshi customers. Since a attracting Indian tourists who visa would not be needed to are emerging as one the most enter the CBZ this would important drivers of the global facilitate much greater ease of tourism industry. physical access for Bangladeshi consumers seeking such Perhaps the most important services. advantage of the design outlined here is from a Contact centres of education regulatory perspective. institutions and tutorials and Customs, immigration and exam preparatory service security-related agencies from providers interested in India and Bangladesh would not Bangladeshi customers could be required to re-invent the also avail space. Associated wheel or develop new rules or services such as high-end salons procedures. or spas could also be developed to attract middle and upper- The existing SOPs for duty-free middle-class clientele. shops with their associated bonded warehouse for The CBZ and Raja Bir Bikram inventory, with minor tweaks for Contact centres of Airport would then potentially having multiple retailers instead education institutions act as force-multipliers for each of one or a few, would suffice and tutorials and exam other. Over some time, the for managing the flow of goods. preparatory service increased demand from providers interested in Bangladesh would lead to an Similarly, the existing SOPs for increased number of flights processing immigration controls Bangladeshi customers from this airport to the rest of and customs (for accompanied could also avail space India, and allow for direct flights baggage including duty-free to many more locations. Just to shopping purchases) currently use a few examples, direct extant would suffice. Minor 26 Reimagining Border Haats as International Retail Trade Zones

tweaks would be required to management of these cards adjust to the visa-free access would be best administered by from both sides to the CBZ this bilateral association, which entry/exit points (airport and would also look into the overall cross-border corridor being the maintenance and in-house two gateways), and the larger security of the premises of the numbers of people expected to CBZ. This bilateral association use this. The use of technology would also be able to ensure and smart risk management fair access to retail and other systems would eliminate commercial spaces to local whatever minor risks that stakeholders. agencies can perceive. Over time, the association could Critical to the commercial develop a regime of special development and sustainable digital cards in partnership with management of this facility, and the authorities of both countries its ability to make local that would also accommodate businesses from both sides of short-term temporary entry to the border (retailers, exhibitors, local business associates from services providers, entertainers) the two countries into each gain from this initiative would other’s territories. be a dynamic business association dedicated to Figure 4 includes a space for the A special regime of supporting this facility office premises of such an digital cards with comprising of key local players association, which would be biometrics could also from both sides of the border. collectively responsible for the be developed administration of this CBZ Such an institution would also (either as a cooperative or a be a partner in ensuring special purpose entity). This regulatory compliance with space would also be used by concerned agencies and ensure banks that provide FOREX that facilitation in process services (for shoppers and management is not abused. It businesses using the CBZ). could look to examples such as the Smart Border Coalition that The overall commercial, serves the Tijuana corridor in business development, and the US-Mexico border discussed connectivity growth (from the earlier. perspective of increased connectivity with Raja Bir Bikram A special regime of digital cards Airport) for the Agartala region with biometrics could also be should potentially serve as developed. These cards would credible reasons for the State be given to the staff and Government of Tripura to management of the retail and arrange for the land needed for other commercial facilities. the corridor (in the Indian side) These cards would allow the and the CBZ in the proximity of holders to facilitate access to the airport. Given the ability of the CBZ. The issuance and such a corridor linked CBZ to Reimagining Border Haats as International Retail Trade Zones 27

foster overall growth of bilateral border trade centre has been The Government of economic, cultural and people set up in Lakhimari and has to people connect between been operational since 2015. India should work to India and Bangladesh, the Most developmental efforts so develop the corridor Government of India should far have been piecemeal and on the Bangladeshi also be keen on such a project, the infrastructure has been side with the and work to develop the essentially geared to manage cooperation of the corridor on the Bangladeshi the movement of goods via Bangladeshi side with the cooperation of the trucks across borders.9 government Bangladeshi government. The major item of trade being Proposal for Lakhimari stone-chips and coal, the Sonahat Border Zone warehousing and storage Development infrastructure remains rudimentary. However, local The Lakhimari-Sonahat border media reports over the last zone is located in the Dhubri several years indicate that there district of Assam. (Sonahat lies is a strong demand for in Kurigram district of Rangpur expanding the list of items division in Bangladesh. A land allowed for trade. Indian ginger, customs station (LCS) exists in garlic, onion, pulses and rice Lakhimari with its counterpart have a large market on the Bangladeshi customs in Bangladeshi side, as do FMCG Sonahat). A land-port has been and electronic goods. Similarly, operational in Sonahat since there is strong demand for 2014, while a so-called Bangladeshi fresh vegetables, ‘International Market’ and fish and garments.10 28 Reimagining Border Haats as International Retail Trade Zones

The local populations on both The Lakhimari-Sonahat border sides have also long demanded zone is ideal for a mature The Lakhimari-Sonahat a proper immigration facility. commercial border zone. As border zone is ideal for The land-port/border trade pointed out in Table 2, this zone a mature commercial centre has become somewhat of caters to a catchment area of border zone a tourist spot, with people close to 20 million consumers gathering near the zero points and a market size close to to meet and greet each other US$30bn. As Table 3 indicates, and even organise local live several major towns that are entertainment. relatively under-served by retail networks of their respective All this led to a local media countries, exist in the periphery outlet to describe such events of 150 km. as ‘Dui Banglar Milon Mela’, loosely translated as a fair for The proposed Dhubri-Phulbari coming together of the people bridge (West Khasi Hill District, from both sides of Bengal; Meghalaya), once built, will though strictly speaking Dhubri bring several other regions on the Indian side lies in the nearby. The development of the state of Assam.11 Dhubri-Phulbari bridge, the longest in Asia, spanning about In light of this, India’s Border 20 km, would act as a game- Security Force (BSF) declared changer for this entire region.12 their plans for developing a ‘Wagah like’ border at this Both Sonahat and Lakhimari location, with flag-lowering (Golokganj) are connected by ceremonies and cultural railways, which would also programmes to draw tourists. facilitate entry of potential

Table 3: Some Major Urban Agglomerations at Lakhimari-Sonahat Border Zone

India Bangladesh

Town Distance to Town Distance to Proposed CBZ Proposed CBZ

Cooch Behar 60 Kurigram 47

Alipurduar 65 Lalmonirhat 52

Bongaigaon 150 Rangpur 86

Kokrajhar 88 Nilphamari 142

Dhubri 37 Phulbari (Dinajpur District) 43

Goalpara* 130 Saidpur 134

Phulbari* (West Khasi District) 45

Source: Author calculations. *Distances from Goalpara and Phulbari assuming the development of Dhubri- Phulbari Bridge Reimagining Border Haats as International Retail Trade Zones 29

customers to the proposed wholesale trade, with facilities commercial border zone and and procedures allowing for help sustain footfalls. visa-free entry to a transit zone, which integrates facilities for The currently unused road entertainment, business bridge connecting Golokganj meetings, food courts and station with the border could be immigration (for those who creatively re-developed (bridge have visas). upgraded with handle-rail and proposed rail connectivity, This is a failure of imagination which is also being considered). and planning and a classic That there is demand for retail, example where a good initiative, The development of the as well as cultural and that is, the Border Haat, has not Dhubri-Phulbari bridge entertainment facilities been built upon to mature into would act as a game- connecting the populations of something bigger and more changer for this entire the border zone has already ambitious despite conditions for region been established. such development.

But the plans for this border Besides the commercial, zone (most of them on paper) locational and logistical have been haphazard, to say the advantages already discussed, least. There is little coordination this border zone also has land between Bangladesh and the available along the border Indian sides. Development perimeter that would allow such initiatives such as the proposed a border-zone development. ‘Wagah like’ border ceremony Thus, there is an opportunity to post replete with galleries do develop an advanced integrated not cater to a holistic attempt to commercial zone. integrate shopping traffic and 30 Reimagining Border Haats as International Retail Trade Zones

Figure 3: Diagrammatic Representation of the Proposed Lakhimari-Sonahat Commercial Border Zone

Source: Authors Conceptualisation

But this has to be done before shop or avail cultural and some of the more haphazard, entertainment services and for piece-meal ideas take shape and traders to meet and undertake construction starts. Figure 3 business. Additionally, the provides a diagrammatic development of customs representation of a commercial protocols akin to ‘duty-free border zone (CBZ), which shops’ creates an eco-system, requires about 3.5 to 4 hectares conducive to the development of land, which is available. of the viable retail-led commercial zone. The crux of a CBZ (to re-iterate discussions elaborated upon for If such a facility also integrates a the Agartala Airport CBZ whole-sale trade zone, it previously) is that it eliminates enables optimal use of the the need for visas for people to regulatory resources and Reimagining Border Haats as International Retail Trade Zones 31

infrastructure being developed, facilitated by the issuance of while at the same time digital cards that are biometric- facilitating trading opportunities enabled (discussed earlier in the for small traders with relatively context of Agartala Airport modest means. Such a facility CBZ). would essentially allow small traders and retailers to purchase Once inside the CBZ, shoppers relatively small parcels of goods would also have access to a for further sale or distribution in food-court and toilets. A movie- their home markets. Such a theatre could also be located wholesale market would, inside the CBZ allowing therefore, lead to much greater shoppers to catch an Indian or a product diversification. Bangladeshi movie. The theatre could be also used for live- The proposed design in Figure 3 shows or trade and business embodies this idea of integral conferences. development. None of the independent piecemeal If local demands so indicate, initiatives for this location services related stalls such as conceives of this opportunity doctors OPD chambers, for integration and most diagnostics, or contact centres importantly misses the point on for tutorial and other the vitality of visa-free access to educational services could also a transit zone and facilitated be located with space allocated customs movement. either in the core retail zone or in the food-court/services The proposed facility design for facilities zone (see Figure 3). All this CBZ envisages secure of this would add to the access-controlled entry/exit commercial viability and overall points to the CBZ from both the attractiveness of this CBZ. Indian and Bangladeshi sides (see Figure 3). These entry/exit Based on the current interest in points would be manned by live entertainment for local officials who will check identity performers that often take place to ensure that Indians do not at Lakhimari-Sonahat border cross-over to Bangladesh or zero-point, the core retail zone vice-versa through the CBZ. could also develop an open-air theatre for such performances, They would also implement the adding further to footfalls. This ‘light touch’ risk management- open-air theatre could also based check and inspections of double up as space for business goods being carried out of the association meetings and small CBZ by shoppers after their trade fairs and exhibitions, purchases. The access to the targeting the wholesale aspect CBZ for the staff and of trade proposed for this management of stalls and other facility. The inventory for the commercial facilities, as well as retail (and services related) stalls maintenance staff, would be would be stored in a common 32 Reimagining Border Haats as International Retail Trade Zones

bonded facility managed by The reason for suggesting this customs administrations of both feature in the case of the countries and there would be a Lakhimari Sonahat CBZ, while special controlled entry for not in the case of Agartala goods, whether directly going Airport CBZ is that Agartala to the shops or being stored as Airport CBZ would be a more inventory (see Figure 3). conventional ‘duty-free’ zone with the permanent presence of A common ‘check-out’ facility certain retailers (having long- has also been included in the term lease arrangement for their proposed design for the CBZ. A stalls). common check-out, that is, a single point of payment is a A few stalls should be made regular feature of food-courts available to smaller-retailers with several different stalls and temporarily, but control the software and management arrangements in place with a practices required for this are few tweaks in the protocols commonplace. Many local fairs should be able to provide use a variation of this system ample assurance to regulators using pre-paid coupons or in the Agartala Airport eco- receipts. The reason for the system, especially with the help In the case of inclusion of this feature is to of a robust business coalition as Lakhimari-Sonahat allow a further layer of a partner, as has been CBZ, there would be a assurance to regulators. suggested. frequent change of entities renting the Since all transactions and In the case of Lakhimari- stalls on a short-term, payments go through a set of Sonahat CBZ, there would be a thereby reducing the common registers and all cash/ frequent change of entities credit card payments are renting the stalls on a short- ‘known entity-lower managed at this single-point, term, temporary basis, thereby risk’ factor in the transactional history of retail reducing the ‘known entity- regulatory would be transparently available lower risk’ factor in regulatory management regularly to the regulators, management. Thus, this especially customs and tax additional feature might authorities. In combination with become a critical level of bonded warehouse (with assurance to regulators on both associated control measures) sides for them to confidently and controlled and secure entry allow such a model of and exit of goods (with CCTV commerce to operate, and cameras and if needed, basic eliminate all existing restrictions scanning machines in place) this that have been in place for the provides substantial checks and ‘Border Haats’ so far. balances against abuse of duties and tax-related violations or The controlled entry of goods even smuggling of contraband (manned by customs on either items. side) would also serve as the Reimagining Border Haats as International Retail Trade Zones 33

point of entry for the trade- traders-market across the zone or wholesale market. This customs inspection zone (Figure zone could be on the lines seen 3). Having this facility where in Khorgos in the form of they can see/touch/feel the containers doubling up as goods, negotiate and then ‘stalls’, that is, ‘box market’. prepare a wholesale Goods could remain locked up consignment and take it back in individual ‘boxes’ when the into their own country would be market is not in operation or a major booster for trade, stored in the bonded facility. especially for the larger local Basic truck-bays would be eco-system consisting of the developed on either side of the hinterlands of Rangpur division goods entry, and allow goods in Bangladesh and North to be carted inside/carted Bengal, western Assam and outside (see Figure 3). western Meghalaya.

Like in the case of the retail Key to the success of this zone, goods can be taken to the proposed CBZ would be lifting As in the case of the shops directly once registered of all current restrictions on proposed Agartala with customs and inspected, or what can be sold and who can Airport CBZ, sent to the bonded facility for buy and sell. A large number of future use. Registered cycle-van restrictions like what applies to developing an operators could be allowed border-haats must not apply to institutional solution inside the CBZ to provide this CBZ. Indeed, as suggested for the administration, carting services. The wholesale in the case of the proposed management and trade zone or box-market would Agartala Airport CBZ, this CBZ promotion of the CBZ be physically segregated into must also be free to sell any is important Indian and Bangladeshi product (barring notable sections. exceptions such as liquor and other restricted items) and allow A common customs inspection any citizen of both countries to shed could also be developed in come and shop or trade. the centre of the whole-sale zone to segregate and control As in the case of the proposed the movement of exports and Agartala Airport CBZ, imports (that is, traders developing an institutional purchases) moving from the solution for the administration, Bangladeshi side to the Indian management and promotion of side and vice-versa (see Figure the CBZ is important. A ‘Haat’ or 3). market committee with equal representation from both sides Traders, once having entered of the border would serve as the zone through the access- this institutional solution. This controlled entries from their committee would also have a respective sides of the border, few ‘elders’ as members. Such would be able to move freely ‘elders’ could be local legislators between the Indian and or eminent citizens from both Bangladeshi portions of the countries such as retired 34 Reimagining Border Haats as International Retail Trade Zones

members of the judiciary, would also be made responsible bureaucracy, security forces, or for the operation and prominent local captains of management of the common industry. check-out point. The ‘Haat’ Committee would have to Representation from customs, dedicate the necessary space for immigration, local offices, which include rest and administration and border recreation area for the CBZ staff security agencies of both and regulatory agency staff countries would serve as (Figure 3). observer members. Such a composition would An additional infrastructure automatically ensure that this augmentation on the Indian committee also serves as an side could be the strengthening institutional platform for of the existing old road bridge cooperation and partnership as a link between the Golokganj Once cross-border rail between businesses and rail station (and the town of facilities are administrators/regulators. Golokganj) and the CBZ, with e- rickshaw services to and from established a special The allocation of retail and the CBZ. The bus-stop and taxi ‘halt’ proximal to the other commercial spaces in the stand in Golokganj to the CBZ CBA and with a secure CBZ should follow a typical could also be served by such e- access footbridge ‘Haat’ model, that is, space rickshaws to avoid congestion leading to it could also would be made available to and chaos that would emerge be developed retailers for temporary periods. from allowing large commercial Space allocation should be passenger vehicles, unregulated made through transparent numbers of auto and cycle auctions and there should be rickshaws right up to the CBZ, some pre-eligibility criteria for which would also require being able to participate in additional space for parking. these auctions. The criteria would need to be designed Once cross-border rail facilities most inclusively, especially are established a special ‘halt’ taking care not to exclude proximal to the CBA and with a smaller retailers and indeed secure access footbridge incorporating some positive leading to it could also be discrimination in their favour. developed, further improving its commercial viability. Similar The auctions would be interventions could also be managed by a ‘Haat’ considered on the Bangladeshi Committee. This committee side. Reimagining Border Haats as International Retail Trade Zones 35

Conclusion and Recommendations

his paper argues for a governments can agree with more integrated what such valid documents Tapproach to cross-border would be. commercial development, especially focused on retail and • Removal of any restrictions personalised services in select on the eligibility regarding points in the border keeping in who can set up retail/ mind the demand for such personalised service stalls at innovations and operational such CBZs, as long as they feasibility. are citizens of either country. An additional requirement Also, the operational feasibility for a proposed Agartala prioritises the needs of Airport CBZ would be the regulators putting models in need to be registered with place that address the key tax authorities and customs regulator concerns relating to (given the permanent/ long- revenue leakage, smuggling term nature of and other illegal acts. establishments).

Having discussed at length Given that Lakhimari- both existing international Sonahat CBZ is being examples, as well as the proposed for smaller-scale proposed solutions for the retailers who will put up Indo-Bangladesh borders, it is stalls on an intermittent or important in the final temporary basis, requiring summation, to provide some of them to be registered with the key regulatory flexibilities indirect tax and customs and developmental support would not be appropriate. Lakhimari-Sonahat that such CBZ development would need from policymakers: Therefore, a local protocol CBZ would also need a for registration with customs much more facilitated • Removal of any restriction could be developed system of using the on eligibility regarding who requiring minimal bonded facility, can shop at such CBZs, as documentation and especially small long as they are citizens of verification. The proposed retailers/traders and either country and have CBZ bilateral business service providers documentary evidence to association could also play a support the same. The two role in the verification of 36 Reimagining Border Haats as International Retail Trade Zones

antecedents. A system improve to around just 2 per similar to house-rent cent over two-three years as verification could also be regulators get more considered, where comfortable with CBZ verification by the local operations and have better police station could be intelligence and information submitted as proof of to use for more targeted antecedents. profiling.

• A special pass, preferably • Lakhimari-Sonahat CBZ with bio-metric facilitation, would also need a much needs to be developed for more facilitated system of those persons who would using the bonded facility, access the CBZs daily. They especially small retailers/ include stall staff, traders and service maintenance personnel, providers. This would mean security personnel (private having low charges for using security engaged in Agartala the bonded facility and no Airport CBZ), entertainer and requirement of any bond or performers, warehouse bank guarantee. This would workers and other support require major tweaking of staff. current procedures and norms. Such a system of passes should preferably be It also means that the managed jointly by owner/operator of the government agencies and facility would need the CBZ business association. additional support if the It is important to note that usage fees are kept low. the cost of implementing Either both governments or and operating such bio- one of them could consider metrics has reduced running and operating this significantly in recent years. facility with a substantial subsidy to keep user costs • High-levels of trade low for a period of three to facilitation for shoppers in five years to promote border terms of customs processing trade, regional integration of purchases made at the and people-to-people CBZ being brought into their cultural exchange. territories. Highly targeted risk management, which After the initial period of does not interdict or support, the commercial physically check more than 5 viability of this CBZ should per cent of the total footfall become robust enough for flow into these CBZs should users of the warehouse to be the initial target and afford market rates. Reimagining Border Haats as International Retail Trade Zones 37

• While both these concepts competitive rates by the In the case of the could be commercially state. To the extent these Agartala Airport CBZ, interesting, they are both CBZs serve as important targeting eco-systems regional integration it also integrates air somewhat far away from the initiatives, multilateral connectivity between a economic/metropolitan agencies such as World relatively under-served cores of their respective Bank, Asian Development region of Bangladesh countries. Therefore, to Bank, or AIIB could also be with the rest of India expect the private roped in for support. developer(s) to jump in, that too at market rates for land • In that context, a PPP model and other infrastructure could evolve where development required, government brings in would be somewhat of a substantial funds and land as rosy assessment. These equity and the private projects are building blocks partner(s) bring in some of market development and funds (as commitment as force multipliers aimed at financing) and expertise to commercial growth for the build, operate, manage and larger hinterland of these market such a facility. Just as CBZs, as has been argued in in the case of some housing Section III. and retail real-estate developments, the developer In that context, these eventually hands over the projects could be taken up facility to the actual users, with substantial government that is, the operators of the funding and with land being stalls, theatres and facilities provided at rather in the CBZ. 38 Reimagining Border Haats as International Retail Trade Zones

The above list is indicative and Such CBZs also provide a place there are many more levels of for entertainment and a place regulatory and developmental to sell and promote other support that would be required services such as healthcare, at every stage of development education and even tourism. In of such CBZs. If there is a the case of the Agartala Airport commitment from governments CBZ, it also integrates air of both sides and support from connectivity between a the private sector including the relatively under-served region all-important local business of Bangladesh with the rest of communities, then the micro- India and allows the Agartala modalities of actualising these Airport to build on these ideas would be easy to develop. additional passengers to increase its connectivity with the In conclusion, it is important to Indian hinterland. reiterate that these CBZs are force multipliers for regional This enhanced connectivity also integration. The essence of helps India and Bangladesh to market-led development is to sell important services such as have a market, somewhere to healthcare, education and meet, touch and feel products, tourism much better. negotiate and enter into contracts (formal or informal). Last but not the least, it greatly improves the consumer welfare These CBZs meet that of the populations on both requirement without sides of the border by making encumbering interested people available a wider variety of from both sides to undertake goods, at more competitive the hassles of visas or rates and through formal complicated customs clearance channels that eliminate criminal procedures (up to some limits of elements that dominate such goods purchased). exchange of goods in the present eco-system. Reimagining Border Haats as International Retail Trade Zones 39

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Endnotes

1 Circuity refers to the reduction in the potential of economic activity since boundaries are permeable only at certain points and not at others. This inhibiting characteristic of the border results in fewer opportunities for economic development.

2 For example, border developments along the Vietnam-China border serve the needs of the industrial cluster in Chengdu (China) and Hanoi (Vietnam) that are being linked by a corridor and trade facilitation developments, but fail to address the commercial and cultural needs of the population in the borderland.

3 The list of factors here borrows from the conceptualization presented by Clark (1994)

4 Mogab et al. (2005)

5 Zhou, Y (2019) The buyers and sellers of Khorgos, a special trade zone on the Kazakhstan-China border, October 26th, Quartz, available at https://qz.com/1720196/who-visits-khorgos-the-trade-zone-on-china- kazakhstan-border/

6 Ibid

7 The author would like to acknowledge Bhuwan Bhaskar Agarwal, Consultant Asian Development Bank (ADB) for pointing the author to the potential of Raja Bir Bikram Airport to serve a large Bangladeshi market given its locational advantage right on the border

8 Similar to Border Xpress between Tijuana and San Jose in the US- Mexico border discussed earlier

9 Essentially weight bridges, very basic customs offices, uncovered dumping yards for products like stone-chips, and very covered godowns, which remain largely underutilised given product restrictions on trading using this point

10 Authors summary of several local print media reports, as well as electronic news reports available on youtube

11 Ibid

12 India’s longest bridge set to come up between Assam and Meghalaya, North East Today, March 8, 2020, https://www.northeasttoday.in/indias- longest-bridge-set-to-come-up-between-assam-meghalaya/ 42 Reimagining Border Haats as International Retail Trade Zones