Strong road links in South, Southeast Asia to boost trade: ADB
Road links between South and Southeast Asia could properly be established for a modest $986 million, which will have a huge and positive impact on trade between the regions, according to the Asian Development Bank.
“The time is ripe for greater South and Southeast Asian integration through enhanced transport infrastructure, stimulating growth and boosting prosperity,” the Manila-based lender said.
Trade between the eight countries in South Asia and 10 nations in Southeast Asia rose to $90 billion in 2013 from $4 billion in 1990.
“Still there is enormous potential for future growth,” the ADB said.
With economies elsewhere in doldrums, the countries of South Asia and Southeast Asia are growing steadily and forging closer ties. In 2015, the ADB projects South Asia to grow at 6.9 percent and Southeast Asia at 4.4 percent. This compares with a projection of 1.9 percent for major industrial economies.
The bank said closer integration between South Asia and Southeast Asia is being held back by poor road and rail links between Bangladesh, India, Myanmar, and Thailand, the key land connection between the two regions. Ports in the Bay of Bengal suffer from low capacity, inefficiency, and a lack of road and rail access.
Improving the quality of transport infrastructure, and building new roads and railways to link the two regions will lower unit transport costs, reduce shipping times, and raise the quantity of goods, all of which will lead to increased trade, said the lender.
The total cost of comprehensive new regional transport projects linking the two regions (through roads, railways, and ports) is estimated at $62.6 billion, while the cost for priority transport projects is estimated at $8.4 billion.
The biggest investments in priority regional transport infrastructure will be in railway projects ($5.1 billion); this is followed by ports ($2.3 billion) and highways ($986 million).
The estimated potential benefit of reduced transport costs between the two regions ranges from $89 billion to $358 billion over the next decade.
“This conservative estimate shows how investment in infrastructure can pay huge dividends in the medium and long term.”
The ADB said financing infrastructure to promote integration in the region is not easy and public-private partnership (PPP) has an important part to play. “Improving political risk guarantees, transparency, regulatory frameworks, coordination, support, and project governance will all help boost PPPs.”
Multilateral and regional financiers like the ADB can play a useful role as honest brokers in coordinating regional projects as well as in providing finance and technical expertise, it said.
Coordinating regional infrastructure connectivity can be improved by reducing duplication by overlapping organisations. New institutions may be needed to facilitate and maintain regional economic links. Existing institutions may need to rethink their approach to connectivity.
Linking South Asia and Southeast Asia would create a regional market of 2.3 billion people, many with increasing purchasing power. This would be a key driver for the next phase of Asian growth and rising prosperity, according to the bank.
It said there is a historic opportunity to link South Asia and Southeast Asia through transport infrastructure with an Asean Economic Community, an integrated market and production base among its 10 members, expected by the end of 2015.
A pro-business Indian government is hastening domestic reforms and prioritising cross-border infrastructure and trade, and the opening up of Myanmar now meaning closer infrastructure-led connectivity can become a reality.
fazlur.rahman@thedailystar.net