Abstract
The final report of the ninth South Asian Association for Regional Cooperation (SAARC) summit, held in Maldives in the year 1997, framed by the Group of Eminent Persons, reflected the vision of SAARC transforming into a South Asian Economic Union (SAEU) by the end of year 2020. However, during all these years, this vision was far from turning into reality. However, this does not mean that regional cooperation among SAARC member countries has faded out. Lack of evidence of strong cooperation at the regional level the economic and trade coherence has definitely increased on bilateral and sub-regional levels as an outcome of various unilateral, bilateral and multilateral agreements among SAARC nations, which has eventually led to formation of free trade area in the region known as SAFTA (South Asian Free Trade Area).
Despite these developments over the years, the overall level of regional cooperation and integration in SAARC is nowhere near to its potential. Although there is a notable decline in tariffs across the region, be it on the grounds of obligations of multilateral commitments or on the basis of mutual understanding, a large number of non-tariff barriers (NTBs) are hindering the free movement of goods and services from one country to the other in this region. Complicated customs procedures, lack of harmonization in standards and certification, insufficient physical infrastructure at the ports and land borders, inefficient transport connectivity across borders, sanitary and phytosanitary (SPS) measures, licensing system, lack of transparency in procedures, low use of information and communication technology (ICT) in sharing information and electronic exchange of data, and other technical barriers are to name a few non-tariff measures (NTM) prominent in this region.
These NTMs not only discourage trade but also increase cost of doing business, thereby increasing the gap between actual and potential gains from trade. These barriers obstruct the growth of supply chains and also sabotage the interests of regional integration of the economies. Trade facilitation is, therefore, gaining significance in all regional trade agreements (RTAs) including SAFTA because this is a huge priority area to be tackled immediately by the economies to derive potential gains from regionalism. The idea of trade facilitation is widely accepted as beneficial not only at the micro level by the stakeholders like exporters, importers, producers and consumers, but it is also empirically verified that it could lead to positive implications at the macro level causing significant rise in gross domestic product (GDP) levels of the economies by reducing cost of doing business and increasing volume of international trade.
In view of the above arguments, the volume under review, edited by Mustafizur Rahman, brings forward a compendium of important analytical works, highlighting the present scenario of regional integration in South Asia and the bottlenecks that continue to hinder the potential gains of SAFTA. This volume comes up with a few strong proposals to remove these bottlenecks in broadening and deepening of regional integration in South Asia by promoting trade facilitation. These proposals are an outcome of years of research based on empirical evidence and analysis of primary and secondary data collected by the authors and the teams at Centre for Policy Dialogue (CPD), Bangladesh and their exposure in several national bodies in Bangladesh.
Although this compendium revolves around the issues and challenges of regionalism in South Asia, it also specifically focuses on the problems of NTBs faced by or prevalent in Bangladesh. This volume consists of three chapters, each dealing with a separate issue of NTMs and a concrete proposal of trade facilitation measures in the same regard.
Chapter 1 (Trade and Transport Facilitation in Bangladesh: An Audit of the State of Play), written by Mustafizur Rahman, Khaleda Akhtar and Naimul Gani Saif, provides a comprehensive account of Bangladesh’s trade within and outside South Asia. It reveals the dynamics of international trade of Bangladesh across SAARC region and its performance over the years and thereby identifies the major loopholes in trade logistics in Bangladesh. The authors state that the volume of trade of Bangladesh with South Asian countries is very low as compared to its trade with rest of the world, and India is the most important source of import as well as export for Bangladesh in the SAARC region. Not only this, the composition of import and export basket with India is entirely different from that of trade with rest of the world. This provides it avenues for trade and production diversification along with low cost of trade.
One section of this chapter provides explicit details about major trade routes and corridors in Bangladesh connecting it with the rest of the South Asia through roads, sea, railways, inland waterways and Asian highways. Six major road corridors, two sea ports, seven rail corridors, four inland water transport (IWT) corridors and three Asian highways are identified in this chapter connecting Bangladesh with South Asia and various countries of South Asia with each other through Bangladesh. However, the authors admit that the operationalization of these routes is a huge challenge owing to large investment and cooperation required for it.
The authors discern that trade logistics in Bangladesh including documents required, time required and cost incurred in trading are improving over time but are still below the regional best performance.
In the last section, the authors conduct an audit of ongoing trade facilitation activities in Bangladesh ranging from infrastructural measures of developing land ports, sea ports, railways, road connectivity and regional transport connectivity to automation of customs procedures and strengthening of Bangladesh Standards and Testing Institution (BSTI) along with establishing a ‘Single Window’ for trade facilitation. The authors provide a detailed account of seven road connectivity projects, four railway infrastructure development projects, four port trade facilitation projects, three major initiatives for customs automation, four projects to strengthen BSTI, one pilot project for ‘Single Window’, two regional transport connectivity projects and one trade policy support programme along with their total cost and source of funding.
This chapter is a very informatively rich manual of trade facilitation practices operationalized in Bangladesh. It also identifies the major causes of low volume of Bangladesh’s trade within South Asia and paves the way for discussion of these causes and the relevant proposals in the next two chapters of the book, that is, SPS measures and transport connectivity.
The role of SPS measures in obstructing trade between Bangladesh and India is intricately examined in Chapter 2 (Addressing Sanitary and Phyto-sanitary Concerns in Bangladesh–India Trade: Framework for an Agreement), written by Mustafizur Rahman, Khaleda Akhter and Naimul Gani Saif.
Trade dynamics between Bangladesh and India suggest that the volume of total bilateral trade between the two countries grew at a compound annual growth rate of whooping 13.5 per cent during the last decade. However, the bilateral trade balance of Bangladesh with India has always remained in deficit due to larger imports from India as compared to exports. Not only this, the trade deficit is constantly rising since the year 2001. India is the largest source of imports for Bangladesh in South Asia and second largest in the world. The authors highlight another notable fact that the product composition of exports of Bangladesh to India is quite different from that of its global exports. The authors state that the ratio of Bangladesh’s global exports of readymade garments (RMG) and non-RMG items was 80:20, while the same ratio for exports to India was 20:80 which provides Bangladesh an opportunity for product diversification as well as market diversification while trading with India. Recently in SAARC summit of 2011, India offered duty-free and quota-free (DF–QF) market access to all the least developed countries of SAARC, including Bangladesh, and the authors believe that it stands to gain the most from this offer in South Asia owing to its production capacity and knowledge of Indian market.
The authors disclose that Bangladesh’s major exports to India constitute export of agricultural items, including food stuffs, fruits and nuts, edible oils and fish. The international trade in agricultural products is governed by and subject to SPS measures such as testing. These measures are posing as strong NTBs to trade between the two countries, and the authors propose the need for a bilateral SPS agreement between the two countries.
As discussed in the chapter, there are a few measures of trade facilitation already taken by the two countries to overcome the barriers arising out of SPS measures such as the bilateral memorandum of understanding between BSTI and Bureau of Indian Standards (BIS) in India; recent bilateral cooperation agreement between the two bodies; case for National Accreditation Board for Testing and Calibration Laboratories (NABL), India accreditation of BSTI, Bangladesh to harmonize testing, packaging and labelling standards; strengthening of BSTI and multilateral cooperation through South Asian Regional Standards Organization (SARSO). However, the authors find the above measures inadequate and incomplete without a concrete SPS agreement between the two countries, for which they provide a framework in this chapter.
In the framework, the authors propose to define the objectives, scope and coverage of the agreement clearly and the clauses of harmonization, equivalence, mutual recognition of conformity, transparency and exchange of information of SPS measures to be included in the final agreement. Along with the above clauses, the authors also suggest the establishment of an SPS committee and a dispute settlement committee under the bilateral SPS agreement. The authors have put forward this framework by taking key notes of best practices of SPS agreements across the world.
Chapter 3 (Trade Facilitation in South Asia through Transport Connectivity: Operationalising the Motor Vehicle Agreements) by Mustafizur Rahman, Md. Zafar Sadique and Nirman Saha analyzes the state of transport connectivity in South Asia and its prospects and challenges to international trade in the region. The authors claim that lack of inter-country seamless connectivity in transit is the main cause of low intra-regional trade in South Asia, which is nearly 5 per cent of South Asia’s global trade.
On the basis of field surveys conducted at the Bangladesh–India land borders, the authors identify several barriers to trade, including lack of adequate transport facilitation at land customs stations, limited legal framework for cross-border transport movement and lack of harmonization of cross-border transport rules and regulations. In this chapter, the authors identify and review the drafts of three major motor vehicle agreements (MVAs) in the SAARC region, which are Bangladesh–India bilateral MVA, SAARC MVA and Bangladesh–Bhutan–India–Nepal (BBIN) MVA.
Before assessing the draft MVAs of South Asia, the authors draw a list of nine MVAs across the world, which display international best practices and review these MVAs to arrive at ideal components of an MVA, including its objectives, principles of governance, enabling criteria for transit, technical specifications, customs regime, revenue requirements, facilitation measures and other issues. Following this, authors review three identified MVAs on several bases.
While evaluating Bangladesh–India bilateral MVA draft, the authors find that the draft eloquently defines the customs formalities, incident management system, transport documentation, environmental control system, third-party liability, road traffic information system and the road development systems, whereas it lacks details on routes of operation, technical requirements and fees and charges. However, the implementation mechanism of this MVA is believed to be strong with a provision of Joint Working Group of the two countries.
In contrast to the Bangladesh–India bilateral MVA draft, the SAARC MVA draft was found to be weak by the authors, despite a number of revisions. The authors state that the draft has no provision for protocols, road quality development system and monitoring of environmental impact, whereas it allows for third-country transport and abolishes quota system for road traffic. The authors describe the BBIN MVA draft to be analogous of the SAARC MVA draft with an additional provision for new membership.
However, on the openness scale, the authors review BBIN MVA better than the other two MVAs, which means that this MVA will lead to greater cost-cutting of traders as compared to the other two MVAs. Towards the end of the chapter, the authors discuss the operational modalities for implementing BBIN MVA, which requires preparation for operationalizing, institutional strengthening, financing and financial institutions, addressing security concerns, amendments in legal framework, joint collaboration of member countries, cross-border management and increased use of ICT. In this way, the authors articulate the best way of operationalizing this MVA in order to reap the potential benefits originating from it.
It is obvious that a book cannot cover all the relevant aspects while dealing with a variety of complexities of South Asia regional cooperation. Yet, whatever is presented in this book can be classified as an important contribution to the literature. This volume comprehends some of the most critical issues for South Asian region to lead towards greater regional cooperation by promoting trade facilitation and enhancing transport linkages across the region. It is an outcome of several researches carried out at CPD, Bangladesh over the years on the issue of trade barriers and trade facilitation in SAARC region, which brings us well thought out and concrete proposals in addressing these issues. The proposals could serve as basis for policy-makers in Bangladesh and the other countries of SAARC region, which are practically dealing with these issues and framing policies to broaden and deepen the regional integration in South Asia. Overall, it is an important reading for researchers, scholars, policy-makers, government officials and investors in South Asia.