Lack of connectivity is a major reason behind low inter-regional trade in South Asia, according to Nagesh Kumar, Head South and South-West Asia of the United Nations Economic and Social Commissions for Asia and the Pacific or UNESCAP.
According to him, South Asia has a trade opportunity of $80 billion as against the actual trade of $28 billion. An UNESCAP estimate says remedial measures may push the regional trade to as high as $170 billion by 2020.
“Cost of doing trade in South Asia is higher vis-à-vis the trade with Europe and North America. The advantage of geographical proximity is lost,” Kumar told BusinessLine in an interview. He was speaking in his personal capacity. The UN organisation is the architect of the Asian highways and transnational rail links some of which are now being implemented between India and its Eastern neighbours.
India, Russia link “South Asia is strategically located between Central Asia, Europe and Eastern Asia. If there is opportunity for smooth movement, the region may emerge as trading hub and this what we are trying to push,” Kumar said.
The upcoming International North South Transport Corridor (INSTC) and the recent India-Iran-Afghanistan agreement to connect central Asia through Chabahar port should prove major connectivity boosts.
The multi-modal INSTC aims sea movement of containerised cargo from Indian ports to Bandar Abbas in Iran followed by rail movement to St. Petersburg. Part-ready, the project may be opened for commercial use this year.
UNESCAP also proposed Istanbul-Tehran-Islamabad-Delhi-Kolkata-Dhaka (ITIDKD) rail container corridor. ITI part is operational. India and Bangladesh are implementing a wide array of transit and connectivity agreements.
Kumar disagrees that SAARC has outlived its purpose due to overplay of politics. But he admits that the sub-group BBIN (Bhutan, Bangladesh, India, Nepal) is taking lead in implementing the cooperation agendas like motor-vehicles agreement discussed in the SAARC.
“These countries (Eastern neighbourhood) are beginning to see opportunity in the rise of Indian economy as a major market. India also sees the potential of working with these countries,” he said.
But he reminded that such consensus hasn’t reached overnight. Indian-Myanmar-Thailand trilateral highway is in discussion for over a decade. South Asia Growth Quadrangle proposed in 1997 had the same constellation as BBIN.
Capacity building The UNESCAP official thinks India is showing increasing maturity in promoting regional cooperation issues as is evident in unilateral removal of sensitive list for least developed countries including Bangladesh, Nepal, Bhutan, Afghanistan and bi-lateral assistance for infrastructure building.
But smaller neighbours, like Bangladesh, should focus on capacity building to take advantage of Indian import needs.
Bangladesh imports fabrics, buttons, zip-fasteners from India at competitive price to feed its huge (second to China) ready-made garments industry. But it suffers from limited offerings (other than garments) to meet India’s huge needs.
The issue can be addressed by Indian corporate investments in the neighbouring countries. “Due to trade pattern, Indian corporates know the Western markets much better, now they are beginning to learn what is there next door,” he said.