Where connectivity is the key

In a short-story 'Poth Jana Nai' (Path not Known), as we remember, novelist Shamsuddin Abul Kalam depicted how connection with cities through a road could help a village grow in wealth and happiness. Bibhuti Bhushan and Tarashankar in their literary works also epitomised the economies of infrastructure (especially of roads and electricity).  And economists have long been pleading for infrastructural development --roads and irrigation --as a recipe  for village development.

What is true within a country is also true across countries.  Of late, Mustafizur Rahman, KG Moazzem, Mehruna Islam Chowdhury and Farzana Sehrin of the Center for Policy Dialogue (CPD) have produced a working paper for the Asian Development Bank Institute (ADBI) pointing to linkage of connectivity with prosperity of a country like Bangladesh. We deem it worth reading as the observations have profound relevance to the present-day context i.e., harnessing regional markets for growth and development.

The paper titled 'Connecting South and Southeast Asia: A Bangladesh Country Study' seems to be a timely research output that warrants attention on more than one count. First, infrastructural development (a relatively poor proxy for connectivity) has long been described as a road to poverty reduction through its impacts on mobility and malleability. Second, since Bangladesh has opened up its economy to foreign investment and technology with a rising share of the external sector to the GDP, the connectivity remains a key parameter in the fulfilment of attaining the desired objectives such as growth rate. Third, lest we miss the 'Asian Century', an expansion of inter-and intra-regional trade calls for wider connectivity among the countries in South and Southeast Asia so that concerned countries can take full advantage of the regional markets.

"Bangladesh's geographical location between two major regions of Asia - South Asia and Southeast Asia - provides (a) unique opportunity for the country to benefit from greater cross-border movement of goods and services, investment flows, and enhanced human contact". Unfortunately Bangladesh is one of the most disconnected countries of the region although re-establishment of the Asian Highway and the Trans-Asian Railway network could crown her as a hub of trade and business.

The costs of non-connectivity are huge. For example, the contribution of foreign direct investment (FDI) to domestic investment is small at about $1.2 billion (about 1.0 per cent of the GDP) in FY 2013; the total FDI reached 6.3 billion accounting for roughly 2.0 per cent of the total stock of South Asia and only a miniscule of that in Southeast Asia. Arguably, the low level of FDI owes much to a host of factors including limited policy support for investors at the pre-establishment phase and the lack of conducive environment.

The good news is that Bangladesh's trade with South and Southeast Asia has been on the rise since the early 2000s with 40 per cent of total trade now taking place in these regions. Obviously SAFTA since 2006 and duty-free access for most products in the Indian market since 2011, have contributed to breaking of the ice. However, various tariff and non-tariff barriers still impede expansion of trade and keep the share to low level. Meanwhile, Southeast Asia has been growing as an important source of imports for Bangladesh.

The authors of the paper have succinctly summarised - and we paraphrase those - the status of bilateral strategy for connectivity pertaining to Bangladesh-India, Bangladesh- Bhutan, Bangladesh-Nepal, and Bangladesh-Myanmar with a disconcerting note of unsatisfactory progress. They have also identified five key areas of focus: (i) mobilising needed funds; (ii) identifying sequence of prioritising; (iii) cross-border coordination; (iv) building human resources to manage cross-border mega projects; and (v) building supply side capacities to benefit from regional market opportunities.

By and large, a number of projects are at work in increasing connectivity across these regions (mainly roads and highways). What is missing, however, is the implementation of these projects with earnest endeavour. The World Bank's Logistic Performance Index ranks countries in terms of logistical performance in international trade. In 2014, Bangladesh was ranked 108 out of 160 countries whereas the position was 79 out of 155 in 2010. This shows that the performance has been weakening over time. Marginal improvements have taken place in timeliness but still pales in areas of customs, infrastructure, and tracking and tracing.

The perilous state of the projects involving connectivity between Dhaka and Chittagong as well as between Dhaka and Mymensingh amply demonstrates that there is a serious flaw in the overall governance of connectivity within Bangladesh - not to speak of its connectivity with outside world. The number of documents required for the country's export and import with Nepal and Bhutan ranges from 22 to 36, and the number of required copies of these documents is also high: 44-115 copies. Cross-border trade in South Asia is still carried out through manual process with four-fifths of the documents handled manually.

If Bangladesh has to travel by train to the Asian Century, business-as-usual approach would do no good. A firm commitment to connectivity should be reflected by the disposal of undergoing projects at the quickest possible time. "The gaps that were identified in trade facilitation, connectivity, cross-border movement of goods and vehicles, and freer flow of goods, services, investments, and energy should command heightened interest of policy makers and ought to be addressed with a sense of urgency. Political will, financial resources, implementation capacity, and cross-border coordination will be a key to addressing these challenges". There are miles to go.

The writer is a Professor of Economics at Jahangirnagar University.  [email protected]