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South Asia Subregional Economic Cooperation Operational Plan 2016 SOUTH ASIA SUBREGIONAL ECONOMIC COOPERATION OPERATIONAL PLAN 2016–2025 SOUTH ASIA SUBREGIONAL ECONOMIC COOPERATION OPERATIONAL PLAN 2016–2025 Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2016 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org Some rights reserved. Published in 2016. Printed in the Philippines. ISBN 978-92-9257-563-2 (Print), 978-92-9257-564-9 (PDF) Publication Stock No. RPT168338-2 Cataloging-In-Publication Data Asian Development Bank. South Asia Subregional Economic Cooperation operational plan 2016–2025. Mandaluyong City, Philippines: Asian Development Bank, 2016. 1. South Asia Subregional Economic Cooperation. 2. Regional cooperation and integration. 3. Trade facilitation. 4. Transport. I. Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Attribution—You should always acknowledge ADB as the source using the following format: [Author]. [Year of publication]. [Title of the work in italics]. [City of publication]: [Publisher]. © ADB. [URL or DOI] [license]. Translations—Any translations you create should carry the following disclaimer: Originally published by ADB in English under the title [title in italics]. © ADB. [URL or DOI] [license]. The quality of the translation and its coherence with the original text is the sole responsibility of the translator. The English original of this work is the only official version. Adaptations—Any adaptations you create should carry the following disclaimer: This is an adaptation of an original work titled [title in italics]. © ADB. [URL or DOI][license]. The views expressed here are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ADB does not endorse this work or guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. Please contact [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Notes: In this publication, “$” refers to US dollars. ADB recognizes “Korea” as the Republic of Korea. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda Printed on recycled paper CONTENTS FOREWORD iv IINTRODUCTION 1 A. The Development Context 1 B. The SASEC Program 1 II STRATEGIC OBJECTIVES AND OPERATIONAL PRIORITIES 3 A. Strategic Objectives 3 1. Transport 4 Road Transport 5 Rail Transport 5 Maritime Transport 6 Inland Waterways 7 Air Transport 7 2. Trade Facilitation 8 3. Energy 15 4. Economic Corridor Development 19 III IMPLEMENTING THE SASEC OPERATIONAL PLAN 22 APPENDIXES 1. Potential SASEC Transport Projects 24 2. Transport Projects Included in the ADB Pipeline, 2016–2018 29 3. Potential Projects in Trade Facilitation 32 4. High-Priority SASEC Trade Facilitation Projects to Begin in 2016–2018 33 5. Potential Energy Projects 35 6. SASEC–ADB Energy Projects Programmed or Discussed, 2016–2020 38 7. Potential Industry Links Between In-Country Economic Corridors in SASEC 39 iii FOREWORD outh Asia is one of the fastest growing regions in the world. Although it experienced setbacks after the global economic crisis, the region has regained momentum in recent years. Growth is forecast to Scontinue, with reforms underway to improve productivity and increase investment. The region’s growing young population is also expected to provide a demographic dividend in the coming decade. The challenge for South Asia is not only to sustain economic growth but also to ensure that the benefits of growth are shared by everyone in society. Bangladesh, Bhutan, India, the Maldives, Nepal, and Sri Lanka have an estimated 800 million people living below $3.10 a day. To elevate those people out of poverty, the region must create more jobs, raise industrial productivity, boost growth in poorer regions, and address economic vulnerabilities. With wide diversity in terms of geography, market size, and resources, regional cooperation can help achieve these goals. Since 2001, the South Asia Subregional Economic Cooperation Program (SASEC) has been promoting cooperation through projects that drive economic growth and benefit the poor. The current focus of the program is on transport, trade facilitation, and energy. Roads and rail systems are being upgraded and expanded. Cross-border travel is getting easier. Policy, regulatory, and institutional reforms are making trade more efficient. Power grids are being connected acrossborders and energy is being traded between countries. SASEC is also pursuing transport and energy links outside the region, in cooperation with the South Asian Association for Regional Cooperation and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation. This work is being guided by the SASEC Operational Plan 2016–2025, which is the program’s first comprehensive long-term plan. It builds on the program’s achievements since 2001 and expands the scope of regionally-oriented investments that are closely aligned with the efforts of SASEC member nations. It defines strategic objectives in the areas of transport, trade facilitation, and energy, and adds a new focus on economic corridor development. Each strategic objective has a well-defined set of operational priorities supported by a long list of projects identified by the SASEC countries. This project list, which will evolve to meet changing needs and circumstances, includes many initiatives, which ADB plans to support. The preparation of the operational plan involved intensive consultations with the SASEC countries— Bangladesh, Bhutan, India, the Maldives, Nepal, and Sri Lanka. With Myanmar indicating an intention to join SASEC, the plan may be expanded to include projects that help link South Asia with East and Southeast Asia. The strong commitment by SASEC countries to regional cooperation over the past 15 years, and ADB’s continuing support for the program, bode well for the region. It is well on its way to realizing a shared vision of sustainable and inclusive growth. Hun Kim Director General, South Asia Department Asian Development Bank iv IINTRODUCTION A.THE DEVELOPMENT CONTEXT Significant reforms in South Asia have resulted in an impressive average growth rate of more than 8% per annum during 2003–2007.1,2 This impressive growth, however, tapered off during the financial crisis period of 2008–2009, and despite a rebound in 2010, economic growth in the region has been sluggish until 2014, when it regained momentum. The Asian Development Bank (ADB) has forecasted that it could become the fastest growing subregion in Asia, and that its strong economic performance is likely to continue at least until 2017.3 High growth rates during the precrisis period have helped South Asia reduce poverty rates and raise living standards. But the incidence of poverty is still very high. It was estimated that as of 2012, about 807 million, or 56% of the combined population of Bangladesh, Bhutan, India, the Maldives, Nepal, and Sri Lanka, live on less than $3.10 a day. The next 10 years will be particularly challenging for South Asia as it strives to regain and sustain its growth momentum and, more importantly, ensure that this growth is inclusive. The key challenges include (i) increasing productivity and investment; (ii) creating jobs; (iii) mitigating macroeconomic and structural vulnerabilities; (iv) addressing the problem of lagging regions and improving social services delivery to these areas; (v) addressing vulnerabilities to global trends in energy and food, and confronting climate change effects; and (vi) addressing constraints to faster ntegration,i such as the high cost to trade, and low quality of infrastructure and institutions. These challenges are compounded by the diverse market size, geography, and resource endowments among countries in the region, making for highly uneven growth patterns. A huge infrastructure deficit is impacting growth, and more importantly, the quality of life. Connectivity among SASEC countries and with those outside the subregion is poor. Many areas within SASEC countries do not have access to reliable electricity connection, safe water supply, and adequate road and transportation facilities. Regional cooperation and integration (RCI) will play an important role in addressing these challenges amid the significant economic developments happening in Asia and the rest of the world. B.THE SASEC PROGRAM In 1996, four of the South Asian Association for Regional Cooperation (SAARC) members— Bangladesh, Bhutan, India, and Nepal—formed the South Asian Growth Quadrangle (SAGQ) to accelerate economic development in the four countries.
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