1

Infrastructure and Logistics Gaps to Regional Trade and Cooperation in South Asia Region

12 June, 2013

World Bank, Washington DC

2

SAR also lags behind other regions in terms of logistics performance…

especially among the landlocked states/regions

3

4

In 1909, freight could move by rail and road seamlessly from Karachi to Lahore to Delhi to Dhaka

5

In 2013, lack of regional transit agreement leads to significant inefficiencies in transport routes used for trade

A container takes 35 days to get from New Delhi to Dhaka Rail: New Delhi-Bombay Maritime: Bombay-Colombo/Singapore-

Chittagong Rail: Chittagong-Dhaka

5 days transit time via direct rail connectivity from New Delhi to Kolkata over Jamuna Bridge to Dhaka

Current Potential

A container travels 7162km to get from Dhaka to Lahore using Maritime Route

2300km overland through India

A container traded between Afghanistan to India must travel through ports in Iran

Overland transit through Pakistan would shorten distances significantly

Assam tea travels 1400km to get to Kolkata PortGoods from Agartala (NE India) travel 1645km to reach Kolkata Port

The southern border of Tripura State of NE India is only 75km from Chittagong Port if travel through Bangladesh is permitted

6

Country Rail Network (Total Route

Km)Bangladesh 2,835

India 63,974Pakistan 7791Sri Lanka 1463

Source: World Development Indicators

The rail network in SAR Major trade corridors in India, Pakistan and Bangladesh are

connected to rail networks But the landlocked states have no rail network Gauge differences, missing links, insufficient equipment and

incompatibility but most of all lack of transit agreement prevent seamless cross-border movement

7

Challenges along SAARC Rail Priority Corridor 1:Lahore-Delhi-Kolkata-Dhaka-Mahishasan-Imphal

PR financial and ops problems, trains return

empty to AmritsarShortage of airbraked locos

and wagons. Only BCX covered wagons permitted. Train interchange daylight

only. No thru transit – transloading required

Kolkata: Long dwell time

Insufficient capacity at Jamuna Bridge

Rolling stock and gauge differences.

Shortage of locos and wagons. Only BCX

wagons allowed. Train interchange daylight

only

Ranaghat-Gede: duplicative

inspection, rake marshalling/

deconsolidation, shortage of locos

8

Challenges along SAARC Rail Priority Corridor 4:Birgunj/Raxaul-Katihar-Rohanpur-Chittagong with links to Jogbani and Agartala

Missing rail link at

Jogbani-Biratnagar,

gauge incompatibilit

y

Missing rail link at

Akhaura-Agartala,

gauge incompatibilit

y

Rohanpur-Singhabad: gauge

differences, insufficient BR rail

lines cause deconsolidation, shortage of BR

locos

9

Country Total Roads (Km)

Paved roads as

% of total roads

Road Density

(km of road per 100 sq km

of land area)

Afghanistan

42,150 29.30 6.0

Bangladesh

239.226

9.50 14.8

Bhutan 8.050 62.0 18.0India 4,109,5

9249.5 125.0

Maldives 88 100 29.0Nepal 19,875 53.9 14.0

Pakistan 258,350

65.4 32.9

Sri Lanka 97,286 81.0 173.9Source: Latest World Development Indicators, 2008-10

Bangladesh, India, Pakistan and Sri Lanka have extensive road networks; road density highest in India and Sri Lanka

Landlocked States: Afghanistan, Bhutan and Nepal, have limited networks and lower levels of access.

Most countries need to increase proportion of paved roads

Main roads on major trade corridors narrow and of low quality: < 10,000km are multi-lane.

All ports were served by two lane roads with high traffic flows competing with pedestrians, bicycles, non-motorized vehicles, especially around urban areas.

The road network in SAR

10

Priority SAARC Road Corridors CORRIDORS COUNTRIES

1 Lahore–New Delhi–Kolkata–Petrapole– Benapole–Dhaka (2,322 kms) - Agartala

Pakistan, India, Banladesh

2 Kathmandu–Birgunj/Raxaul–Kolkata/ Haldia

Nepal, India

3 Thimphu–Phuentsholing–Jaigon– Kolkata/Haldia

Bhutan, India

4 Kathmandu–Kakarvitta–Phulbari– Banglabandha- Mongla (1,362kms) or ii) Dhaka–Chittagong (1,442kms)

Nepal, India, Bangladesh

5 Sandrop Jongkhar–Guwahati–Shillong– Sylhet–Dhaka–Kolkata

Bhutan, India, Bangladesh

6 Agartala–Akhaura–Chittagong

Bhutan, India, Bangladesh

Wagah-Attari: transloading, no customs at border, insufficient border post infrastructure, positive list of 137 products, duplicative and manual procedures, no EDI, no thru transit of Afghan-India bilateral trade

Raxaul-Birgunj: transloading, duplicative and manual procedures, no EDI

Petrapole-Benapole: transloading, 600 trucks/day, 80% of bilateral trade, duplicative/manual procedures, no EDIBarasat-Petrapole narrow congested road section

Phulbari-Banglabandha: Nepali and Bangla goods must move by convoy thru Indian territory

Mongla and Chittagong Ports insufficient capacity, rail missing link at Khulna-Mongla

No transit through Bangladesh for Indian goods from Kolkata to reach NE through Petrapole-Benapole-Akhaura-Agartala

11

Indo-Bangladesh IWT Protocol Route

Ashuganj Port needs better terminals, equipment, operations, Need rail connectivity from Tripura

Akhaura could soon become one of the main doorways to a $1billion/year trade corridor, but need wider approach roads on both sides, India building ICP

Short term of Bilateral Protocol prevents private sector investment; no night-time navigation permitted; dredging needed esp Nov-May; more and better navigational aids, cargo handling equipment and terminals needed, esp in Bangladesh

12

Infrastructure Gaps exist but the real challenge is no freedom of transit, protectionist policies and NTBs

Rail Road IWTGauge/

Equipment Standards

Harmonization

TIR CarnetMotor Vehicle Agreement

Road Design Harmonization

Longer-term IWT Protocol/

Agreement

Regional BondThrough Bill of Lading

Customs Simplification, Harmonization, and Cross-border Cooperation

Simplification, Harmonization and Mutual Recognition of Quality and Technical Standards

Removal of NTBs (rules of origin, standards, etc..)Restrictive Trade Agreements (positive list, etc..)

In addition to investments in infrastructure, High Impact Solutions include:

13

Political Economy ConsiderationsLevel Issues

Global - China vs. India competition for spheres of influence

- Smaller countries benefit from cheap capital/investments

Regional Countries using transit rights as political or negotiation bargaining chip

National Ethnic tensions and political disputes within national boundaries, lobbying power and resistance to change by vested interests

Subnational-Local

- Corruption by officials and informal groups

- weak regulation/monopolies (e.g. trucking services)

Corridor managemen

t

Economic

cluster

• Road and Rail Transport services

• Customs and border management

Gateway /

Economic cluster

Mode interfac

e

Dry portICD

• Seaport and shipping• Access to

port• Transit• Customs

and border management

• Vehicle change

• Customs and border management

• Storage• Consolidati

on• Clearing

and forwarding

International transit National transit

Seaport/Economic cluster

• Air freight• Customs

and border management• Transit• Clearing

and Forwarding

Bord

er

Institutions

Services

Infrastructure

A corridor approach focuses implementation efforts on one particular geographical area while addressing multiple sources of congestion –a supply chain is only as good as its weakest link

15

Challenges along a typical SAARC Priority Corridor:Kolkata/Haldia-Raxaul-Birgunj-Kathmandu: Road and Rail

Challenges: Long dwell time at

Kolkata/Haldia ports Bilateral transit agreement limits

Nepali transit to only one corridor, and only containerized cargo for rail

Poor and narrow roads in Nepal and India

No rail link in Nepal No through bill of lading and

inland clearance Duplicative domestic

licensing/documentation Duplicative and manual customs

procedures Corruption/informal payments at

border and along road corridor No cross-border electronic data

interchange No mutual recognition of

collaboration on SPS and standards

Insufficient parking/warehousing facilities

16

A Corridor Approach to tackle multiple sources of congestion along a supply chain

Strengthening Bilateral Coordination Mechanisms Strengthening National Multi-Sector Coordination

Mechanisms: Role of National Trade and Transport Facilitation Committee (NTTFC)

Tacking Complex Multi-sector Project in a Weak Capacity Environment: trust fund support essential, significant resources devoted to capacity support during project preparation

Relationship and Confidence building◦ Big vs. Small country: letting smaller country take the lead and

provide capacity/knowledge support◦ Showing early signs of success: the project design focused on

showing early results (low hanging fruits) as well as long-term success◦ A regional study tour was key: to forming amicable relationships

away from the negotiating table

WB Approach and Lessons

17

Nepal-India Regional Trade and Transport Project

Component 1Modernize transport

and transit arrangements

between Nepal and India

TA for modernization of bilateral trade and transit framework

Automating of Customs Transit Document

Transport management regulations

- Axle load control

- Road safety

Component 2ICT systems to

automate processes for

documents related to imports, exports

and transit

Single Window Trade Portal PCO/NTTFC

Institutional Strengthening

Component 3Trade-Related Infrastructure

Expand and upgrade the Narayanghat-Mugling road

Kathmandu Inland Clearance Depot (ICD) Development

Birgunj and Bhairahawa ICD Improvement

Multi-agency Labs

Joint IDA-IFC Project: $101 million: financing $99m IDA, $2m IFC parallel co-financingFirst regional trade and transport facilitation project in South Asia RegionNegotiations: May 17, 2013, Board: June 28, 2013PDO: decrease transport time and logistics costs for bilateral trade between Nepal and India and transit trade along the Kathmandu-Kolkata corridor for the benefit of traders by reducing key infrastructure bottlenecks in Nepal and by supporting the adoption of modern approaches to border management.