Removing hindrances to intra-regional trade

PORT INFRASTRUCTURE AND EFFICIENCY: Air and maritime ports in South Asia are generally considered less competitive than those in East Asia. Infrastructure and efficiency in ports of South Asia are lower than those of East Asia.
For example, it takes only a couple of hours at the ports of Singapore and Thailand to clear consignments from a vessel. In contrast, it takes 2 to 3 days in Bangladesh. It takes 30-35 days for goods shipped from the US West Coast to Pakistan by containers.  Port efficiency is highly correlated with shipping costs.
Clark, Dollar, and Micco in a study in 2004 found that improving port efficiency by 25 to 75 per cent lowers shipping costs by more than 12 per cent. Tariffs for port entry are part of this total and can be high in South Asia.
Air and maritime ports play a pivotal role in trade of South Asia. There are three types of maritime ports: (1) transshipment hubs, (2) regional hub ports, and (3) regional seaports.  Transshipment hubs are located in or close to major shipping routes and attract frequent calls by large shipping lines.
Colombo port in Sri Lanka is presently the only transshipment hub and is the most developed and successful port in the region. Colombo's ranking in the top 100 container ports in the world is declining, however, primarily due to intense competition from Chinese ports.
Nhava Sheva, India's largest port, is considered a regional hub. Regional seaports handle feeder services from major transshipment hubs e.g. Kolkata and Haldia in India, and Chittagong port in Bangladesh. South Asia's low port efficiency ranking today is due to a myriad of problems. Congestion and associated delays prevent exporters from guaranteeing timely deliveries causing delays and uncertainty in turn-around time at the ports adversely impacting overall trade.
LAND TRANSPORTATION: Lack of cross-border transit points and road connections across the region are significant hindrances to intra-regional trade. For example, barriers to trade and commerce in Afghanistan are centred, in part, on problems in infrastructure as well as cargo transshipment.
There is an inland water transport route between India and Bangladesh. Goods moving between India and Pakistan often must be transshipped through a third country. The lack of integrated transport networks in the region clearly raise cargo shipping costs.
This is a critical problem particularly for landlocked countries, including Afghanistan, Bhutan, and Nepal. A significant factor driving costs and barriers is that at every border in the region goods must be transshipped. In addition, labour strikes in the region can cause delays in transit and congestion in land transport networks. These constraints keep shippers from taking the routes that offer the most efficient shipping route in terms of time and cost.
The cost of road transport can be high. For example, the average transport cost on the Kolkata-Petrapole route between Bangladesh and India is Rs 2,543 which is about 40 per cent higher than other highways. Costs are also a function of vehicle maintenance.
A carpet manufacturer in Kathmandu reported that because of the poor quality of local roads, it must "repair one of its vehicles every week and spends NRs 100,000 a year on maintenance" (Biggs et al., 2000). Road transport is also affected by aging bridges and lack of capacity.
This in turn limits truck and cargo weight and therefore efficiency in freight movement. Other restrictions are based in licensing restrictions. For example, foreign trucks are not permitted to enter Bangladesh. All these conditions prevent shippers from taking the most efficient routes - extending time and cost which impede opportunities for international and intra-regional trade.
A number of projects have been undertaken in the countries of the region for upgradation of railway networks over the past decade. However, problems remain. For example, India has moved to electrify tracks and convert meter gauge to broad gauge to harmonise its system infrastructure (UNESCAP, 2001).
Freight accounts for 41 per cent of traffic units on India's railway system, and in contrast it accounts for 76 per cent of traffic on China's rail network.
Moreover, the types of rail gauge still vary among countries and regions. The railways in India and Bangladesh suffer from 'over-staffing, poor maintenance, and old rolling stock' (Subramanian and Arnold, 2001). Reportedly, the Bangladesh railways has a serious problem with maintenance, especially in parts of the country where flooding is a problem. Due to these and other factors, the railway sector has lost its share to the road sector and exporters consequently limit use of railways.
BORDER CROSSINGS AND CUSTOMS: Border crossings most often include inter-related infrastructure and facilities such as customs clearance checkpoints, truck waiting areas, storage depots, rail yards, and loading or unloading areas at ports.
The border crossing at Benapole is reportedly one of the most developed in the region with facilities for warehousing, well-developed services, and other facilities. In contrast, some border crossings do not even have customs facilities. Problems arise when customs clearance centres are located far away from other border-crossing facilities.
For instance, the sanitary and phyto-sanitary testing laboratory in Kolkata is located one thousand kilometres from the customs facility at Birgunj, Nepal. Exporters have to pay additional fees for vehicle detention charges for weeks while waiting for test results. This not only raises the costs but also clearly affects the quality of export products.
Poor management at customs is not a major constraint compared to the problems with ports and land transportation. However, there are costly delays in transactions in border crossings. Some of these delays are associated with the preparation of customs documents and inspections due to a lack of standard documents.
At the India-Bangladesh border, a consignment needs at least 22 documentations, more than 55 signatures, and minimum 116 copies for the final approval. Each country requires different documents, such as transit, export, and import declaration. Poor management in customs is not a major constraint compared to the problems with ports and land transportation; however, there are costly delays in transactions in border crossings.
Each country requires different documents, such as transit, export, and import declarations. Exporters must prepare separate documents at each side of the border. Furthermore, the region uses different product classification systems for commodities: the Standard International Trade Classification is used by Pakistan and the Harmonisation System (HS) by others.
These contribute to a general lack of transparency and problems in product classification in trade.
There are other administrative problems with customs that continue in the region. They include limitations on staff working hours and lack of uniformly-applied import duty rates, among others.
Non-transparent inspection procedure in any country reduces efficiency and slows customs clearance times. As a result of these and other factors, customs clearance in South Asia requires dedicated improvements in administrative rules applied at the border and associated reform. It takes more than 8 days on average to clear customs by sea in South Asia, while it takes less than six days in East Asia.
STANDARDS AND TECHNICAL REGULATIONS: Like other developing countries, those in South Asia confront challenges and can realise opportunities for market expansion in meeting standards and technical regulations. These measures are directly related to trade facilitation.
According to the World Bank's Technical Barriers to Trade (TBT) database, South Asian firms in India and Pakistan report standards and technical regulations as very important to export success - at a higher percentage as countries in other regions.
There are specific examples across the region in other countries which suggest standards as a means to facilitate trade are critical. For example, Nepal's woolen carpet industry was severely affected when Germany, an importer of 90 per cent of the products, required eco-labels on the products (Shrestha and Shakya, 2002). Nepalese exporters often fail to present 'quarantine and health standard certificate' at the border with India (Shrestha and Shakya, 2002). Similarly, the Indian coffee industry has had difficulties in meeting market standards.
On one hand, the industry must comply with sanitary and phyto-sanitary (SPS) measures in agricultural trade. On the other, firms also must address increasing pressures to comply with national pollution laws to protect biodiversity.
These regulations impose significant financial constraints on the coffee industry, for example (Damodaran, 2002). South Asian countries have recognised the importance of harmonisation of standards in the context of trade facilitation.
In 1999, the SAARC and the EU signed a Memorandum of Understanding to enhance cooperation to assist harmonisation of SAARC standards. India and Nepal included issues of standards in their discussions on their bilateral agreement. The Nepal Bureau of Standards and Metrology tries to harmonise national standards with international standards such as ISO, and provides the Nepalese industries with quality assurance services, consignment inspections, and programmes of environmental labeling for export industries (2002 study). Additional efforts are required in Nepal and other countries - many of which can be supported through regional cooperation platforms in standards.
INFORMATION TECHNOLOGY AND SERVICES SECTOR INFRASTRUCTURE: The countries in the South Asia region have made progress over the past decade in access to information technology and application of technology in trade transactions. Technology is being applied in customs and border clearance to facilitate trade transactions, such as EDI (Electronic Data Interchange) systems and networks.
India's performance in information technology production, in particular the software sector, is widely known. There has been significant progress in IT enabling services in Bangladesh and Pakistan over the past several years. Moreover, deregulation policies of SAARC countries for fixed line and mobile telephony have helped enhance competition and attract private investment.  
There remains, however, significant work ahead in broadening the use of information technology and electronic commerce to expand trade in the region. The number of internet hosts in the region relative to others, for example, is low and has significant room for expansion.
The number of individuals with access to the internet also needs to be expanded, including those in government and private sector engaged in trade transactions. The number of internet hosts and users per 10,000 in 2003 for East Asia is higher than those for South Asia.
The writer is Secretary & CEO, India-Bangladesh Chamber of Commerce and Industry.
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