Published on 07:00 AM, June 15, 2023

Trade, connectivity in SA: $1.03b WB project to boost national income by 16pc

The World Bank has launched a $1.03 billion inter-country connectivity project in the South Asia region that will lead to an increase in national income by over 16 percent in Bangladesh.

At present, Bangladesh and Nepal are the participants of the flagship regional programme titled Accelerating Transport and Trade Connectivity in Eastern South Asia (ACCESS).

Of the $1.03 billion allocated for the programme, Bangladesh will get $753.45 million and Nepal $275 million. The project was launched yesterday in Bangladesh, two days after it was unveiled in Nepal.

"This project is part of a flagship regional programme aimed at increasing the efficiency and resilience of transport and trade -- not just in Bangladesh -- but across the eastern South Asia region," said Guangzhe Chen, the WB's vice-president for infrastructure, at the event.

In the second phase of the programme, the WB will give $100 million to Bhutan. The lender is in discussions with India to get the largest country in the region on board.

Trade and regional transport connectivity in South Asia is critical, especially for Bangladesh.

The forthcoming graduation from least-developed country status is a testament to its development success, Chen said, adding that LDC graduation will help it attract investment and spur economic activity.

However, it will also bring challenges caused by the phasing-out of preferential market access, which could lead to an annual reduction in exports by as much as 11 percent. Bangladesh will therefore need to find new drivers of exports and growth.

The intra-regional trade could offer a new, and largely unexploited avenue for growth.

In South Asia, regional trade is about 5 percent of total trade. This compares poorly with East Asia, where intra-regional trade accounts for 50 percent of total trade. Each country in the region has unexploited potential for regional trade; for Bangladesh, the unexploited potential is estimated at 93 percent.

This low level of intra-regional trade reflects the high cost of connectivity.

Bangladesh and other countries in the region trade on better terms with distant economies than with their neighbours.

For example, the WB's Connecting to Thrive report found that it is less expensive for a company in Bangladesh to trade with a company in Germany than with a company next door in India.

Enhanced trade and transport connectivity can bestow significant gains for Bangladesh.

Estimates by the WB suggest that Bangladesh's exports to India could increase by 182 percent from the current levels if the countries implement a free trade agreement.

Improving transport connectivity between the two countries could increase exports even further, yielding a 297 percent increase in Bangladesh's exports to India.

"The economic benefits from removing all border frictions on the movement of trucks between countries would be vast," Chen said.

The WB estimates that full transport integration between Bangladesh and India, where exports and imports would be cleared at the destination, could lead to an increase in national income by over 16 percent in Bangladesh, contributing to job creation and poverty reduction, he added.

The $753.45 million given to Bangladesh will go towards projects to be implemented by the Bangladesh Land Port Authority, the National Board of Revenue and the Road and Highways Department for completion by 2029.

One of the components involves upgrading the 43-kilometre two-lane Sylhet-Charkai-Sheola road to a climate-resilient four-lane road, connecting the Sheola land port with the Dhaka-Sylhet Highway and in so doing, cutting down the travel time by 30 percent.

The programme will support digital systems, infrastructure and more streamlined processes at Benapole, Bhomra, and Burimari land ports, the three largest land ports in Bangladesh handling approximately 80 percent of land-based trade.

There is little communication (electronic or otherwise) between the customs and the Bangladesh Land Port Authority on what goods are present at any given time at the land ports.

Arriving goods for import are normally discharged from trucks and unless they are perishable, are stored in warehouses under the jurisdiction of the BLPA before customs clearance begins.

This has created a system of "border men" that collect documents from truck drivers on the Indian side of the border before arrival and "proxy" customs and freight (C&F) agents standing in line to ensure that the slot is kept while the C&F agents interact with the NBR or other government agencies elsewhere.

Such human facilitation highlights the need for improved processes, which the project will address.

The project will support the development and improvement of IT-enabled services for trade, to reduce touch points and human interaction, enhance transparency and reduce congestion and truck idling, resulting in faster border clearance time and greater cargo throughput.

Electronic tracking of truck entry and exit, electronic queuing and smart parking would be installed.

It will also support the modernisation of the Chattogram customs house, which handles 90 percent of all import/export declarations in Bangladesh and services more than 45,700 unique traders per year.

The rapidly growing trade volumes have overburdened the Custom House, Chattogram, which was initially constructed in 1920.

Subsequently, the project will entail constructing a state-of-the-art green-building certified, resilient Custom House Chattogram with enhanced capacity to process rapidly growing trade volumes with required infrastructure, collaborative laboratory and other facilities including facilities for women.

It will also support the country's implementation of the World Trade Organisation's Trade Facilitation Agreement and Customs Modernisation Strategic Action Plan and preparation for the Motor Vehicles Agreement (MVA) implementation.

The MVA was signed on June 15, 2015 by the transport ministers of Bangladesh, Bhutan, India and Nepal. The agreement will permit the member states to ply their vehicles in each other's territory for transportation of cargo and passengers, including third-country transport and personal vehicles.

But due to the lack of necessary infrastructure, MVA is yet to take off.

Khalid Mahmud Chowdhury, state minister for shipping; Sharifa Khan, secretary of the economic relations division; Abu Hena Md Rahmatul Muneem, NBR chairman; Naquib Khan, president of Bangladesh Supply Chain Management Society; and Erik Nora, task team leader of ACCESS, also spoke.

The loan agreement was signed in May during Prime Minister Sheikh Hasina's visit to the WB headquarters in Washington DC to celebrate 50 years of partnership between Bangladesh and the WB.