Asian Institute of Transport Development dayal.pdf · • As late as in 1965, Pakistan and India as well as South Korea and Thailand had almost equal per capita income, of around

Asian Institute of Transport Development

Asian Institute of Transport Development

Past to Ponder• In 1750, South Asia accounted for about a quarter of the world’s

GDP. • By 1950, it had been reduced to a set of colonies of western powers.

• As late as in 1965, Pakistan and India as well as South Korea and Thailand had almost equal per capita income, of around US$90.

• By 1985, South Korea’s per capita income increased to over $2,500 and that of Thailand to over $800. • India and Pakistan had improved to $300. • China lagged – with a per capita income of $200.

• In the last 20 years, South Asian countries have barely doubled their per capita income; China has increased it 6 times; and therest of East Asian countries have trebled or quadrupled theirs.

South Asia, that was once upon a time the wealthiest part of theSouth Asia, that was once upon a time the wealthiest part of the world, now world, now competes with Subcompetes with Sub--Saharan Africa, to be the poorest one.Saharan Africa, to be the poorest one.

The Strategic Foresight Group in The Strategic Foresight Group in ““The Second Freedom: South Asian Challenge 2005The Second Freedom: South Asian Challenge 2005--20252025””..

Region IsolatedRegion at one time was well integrated with the neighbouring countries.British colonial rulers built a major new transportation infrastructure aimed primarily at taking tea and other resources out of Assam.Partition in 1947 cut old routes of communication and mobility across new national borders more dramatically than almost anywhere in the world.

---David LuddenThe partition caused the extreme isolation of the Northeast, for example it became a ‘land-locked state’.

Our Own Became Distant• Redrawing of borders distanced the region from the mainland.

Capital Distance from Kolkata (km)

Distance from Delhi (km)

Guwahati (Assam) 1170 1760

Shillong (Meghalaya) 1265 1855

Itanagar (Arunachal Pradesh) 1410 2000

Kohima (Nagaland) 1511 2101

Imphal (Manipur) 1634 2234

Aizwal (Mizoram) 1688 2278

Agartala (Tripura) 1752 2342

Gangtok (Sikkim) 720 1420

Historical HandicapsWith a colonial pattern of primary structure – many of our economies inherited skewed and underdeveloped infrastructure, large chunks of territory and people in the hinterland left out of the mainstream. ◦ Unbridged rivers and other impediments impacted transport facilities.◦ Emergence of independent states in South Asia, for instance, saw them

get increasingly isolated from one another. ◦ Distance between Dhaka and Lahore increased from 2,300 km to

around 7,200 km.Several lagging regions in South Asia are border economies. They suffer from the disabilities typically associated with land-locked countries: ◦ northeast India, ◦ northwest Pakistan, ◦ northern Bangladesh, ◦ parts of Nepal and Afghanistan.

Colonial BurdenThe British conquest of the Northeast led them to:

draw lines between the hills and plainsput barriers on trade between Bhutan and Assamtreat Myanmar as a strategic frontier, British India’s buffer against French Indochina and China.

The colonial power declared these hill districts as Excluded Areas:Introduced inner line permit to prevent entry of outsiders.Manipur, Tripura and Khasi states remained as princely states.The Excluded Areas covered four of the Northeast states

The inner line (1873), a colonial institution, still survives. Indian citizens require permit to enter Arunachal Pradesh, Mizoram and Nagaland.This has retarded the pace and level of assimilation of these areas in national mainstream.

The World’s Least Integrated Region

South Asia has experienced unprecedented growth, averaging close to 6% p.a. since the 1990s. (GDP in South Asia estimated to have expanded at 8.2% in 2006).

While South Asia made significant progress in integrating with the global economy, integration within the region remained limited. Restrictive policies within the region neutralise the beneficial effects of common cultural affinity, common geography, and the ‘gravitational’pull of proximity on movement of goods and people within the region.South Asia is the least integrated region in the world, where integration is measured by intraregionel trade in goods, capital and ideas.

Contd…

South Asia hosts 39% of world’s poor living on less than US$1/day

Intraregional trade as a share of total trade is the lowest for South Asia.

There is little cross-border investment within South Asia.

The flow of ideas as the number of phone calls or the purchase of technology and royalty payments are all low for South Asia.

In South Asia, only 7% of international phone calls are regional vs 71% for East Asia.

SAARC is home to 24% of world population; but contributes 2% to world GDP.

World Bank: South Asia: Growth and Regional Integration

The Region Lags…

Intraregional trade is less than 2% of GDP, compared to more than 20% of East Asia,

Trade within South Asia can multiply if appropriate regional agreements on roads, rail, air, and shipping are put in place, enabling seamless movement.

It takes on average more than 33 days to export from South Asia compared to 12 days from OECD countries and more than 46 days to import into South Asia compared to 14 days of OECD.

Intra-Regional Commerce Constrained

Restrictions over land routes often divert the trade over land-cum-sea routes◦ Resulting in increased transit time and transaction costsDeficient facilities and procedural hazards impede trade flows and slow down increases in tradeRecent studies by AITD on regional transport corridors between Bangladesh, India and Nepal show ◦ the additional burden on transport costs due to bottlenecks

at land crossing stations is at least US$ 6 to 7 per tonne of freight.

Contd…

ConstraintsThe trade flow corridors in the SAARC region encounter a number of physical and non-physical constraints:◦ Physical:

Ill-maintained and congested roads, incompatible rail equipment, ill-equipped IWT.Karachi and Lahore have the weakest air links with cities in South Asia. Connectivity between seaports is weaker than the connectivity between South Asian airports.There are no direct calls among the ports of Bangladesh, India and Pakistan. The Ganga, Brahmaputra and Meghna waterways remain in integrated with the seaports in India and Bangladesh.

◦ Non-Physical : Restrictive movement of vehicles across national borders, lack of harmonisation of documents, customs and other regulatory procedures, theft and pilferage, divergent weekly holidays and working hours. Contd…

Innumerable non-physical barriers hinder the movement of people and goods.

Documentation and procedures are restrictive, complicated and time-consuming; they greatly add to the transaction costs.Transit Documentation and Procedures

India Nepal Bangladesh

Type of Documents 29 83 22

No. of Copies 118 102 116

No. of Signatures 256 113 55

Manpower required 22 11 7

Cost of Procedure 10% of the value of traded goods NA 10% of the value

of traded goods

Asian Institute of Transport Development/The World Bank Contd…

There is unnecessary loading and unloading of vehicles at land border crossings

Transport and Transit

Routes

Time Delays (in days) Costs (US $/ton)

Transit BorderCrossing

Transfer Transit Border

CrossingTransfe

r

Kolkata-Petrapole-Benapole-Dhaka (Road)

1.5 - 2 0.5 – 2 1 – 2 64 2 – 3 7 – 8

Kathmandu-Biratnagar-Kolkata (Road)

5 – 7 1.5 – 2 1 – 2 10 - 40 1.5 – 3 7 – 8

Kathmandu-Birganj-Kolkata-Haldia (Multimode) 5 – 7 3 – 7 NA 20 - 40 7.5 - 10 7 - 8

Patna-Hili-Jamuna Bridge-Dhaka- Chittagong (Road)

10 - 15 1 – 3 0.5 – 2 8 - 10 5 – 10 7 - 8

Guwahati-Shillong-Dawki-Tamabil-Chittagong (Road) 6 – 10 0.5 – 2 0.5 - 2 NA NA NA

Source: Asian Institute of Transport Development

RoadsThe SAARC(7) countries had 3.82 million km of road network in 2002, which accounted for 10% of world road network.There is lack of a bilateral transport agreement to facilitate uninterrupted movement of goods and vehicles across borders between India and Bangladesh, as well as between Pakistan and India. Goods are required to be trans-shipped at the border between the trucks of neighbouring countries, as in case of India-Bangladesh and India-Pakistan trade.

Rail NetworkSouth Asia has one of world’s largest railway networks spreading over 77,000 route km. Some major barriers include the lack of standardization of technologies, operation and maintenance practices: different types of gauges, braking systems, couplings, incompatibility of rolling stock, in addition to inadequate loop lengths, some missing links in border areas, load restrictions on bridges, restrictions on movement of open wagons and oil tankers, etc.Another barrier is the lack of a multilateral rail transport agreement. For want of warehousing adequate to hold a full train load, freight rakes from India crossing into Bangladesh are broken into smaller units and taken to locations for unloading or transhipment.

PortsSouth Asia is endowed with some 25 major ports, of which 10 are gateways of regional significance. The major barriers include capacity constraints at many ports. Cargo and ship handling equipment as well as floating craft are old. Poor road and rail connectivity, lack of ICDs and CFSs are other limitations. Other barriers which impact port performance include lack of EDI/IT to link up stakeholders. Customs procedures have remained generally complicated, and port documentation cumbersome.

Inland WaterwaysThe Ganga-Brahmaputra-Meghna basin is one of the world’s largest water systems. An efficient inland water transport system would enhance the efficacy of inter-country trade. These traditional modes are in various stages of neglect and decay:◦ Rivers silted, ◦ Country crafts overladen and unsafe, ◦ Motorized bulk transport generally outmoded. Ganga, which was navigable up to its upper reaches, is no longer so◦ Poor condition of jetties, piers, lack of sufficient storage, cargo

handling equipment and support craft.The India-Bangladesh bilateral inland waterway protocol was renewed biennially; lately, the periodicity of the interval has been reduced.

Riverine Transport

• Extensive inland waterways and tributaries in the Indian sub-continent once provided economic, eco-friendly transport in the sub-region.

• Ganga-Brahmaputra-Meghna river basin links India and Bangladesh. Nepal and Bhutan can also be linked with this network through tributaries.

• There is considerable scope for re-activating this network that is presently in a state of neglect.

BangladeshMultimodal transit of goods over land route cheaper by 35%, faster at least by 70%Traditional India-Bangladesh trade transport is sub-optimal: incurs high transaction cost: time-consuming transportation, inventory, in-transit storage and transhipment.Goods carried by road transshipped across borders:

temporary storage in warehouses/open yards/transit sheds –with dwell time of up to 7 dayshundreds of trucks queue at Bongaon and Petrapole on Indian side; detention of up to 10 days is not uncommon.an average of 6.2 days for a truck to complete 100 km journey from Kolkata to Benapole.

AITD Study of Trade and Transport Facilitation: India-Bangladesh

Indicative Transaction Costs for Moving a TEU or Equivalent Cargo Load: India to

Bangladesh

Origin Mode Via Destination Cost (US $)

Ludhiana Rail Delhi-Kolkata-Gede-

Darsana

Dhaka 1468

Ludhiana Rail-cum-sea Delhi-Mumbai-Colombo

Chittagong 2430

Ludhiana Rail-cum-sea Delhi-Mumbai-

Singapore

Chittagong 2430

Ludhiana Rail-cum-sea Chittagong 2330

Contd…

The actual cost of an average shipment from Kolkata to the point of Customs clearance in Bangladesh: 12.31% of the value of the shipment compared to an “ideal” of 1.93%.This is an average of shipments of different values; this can be as high as 18% in some higher value shipments.Impact for low value commodities is very high, though nominal for high value goods.

Congestion and logistics deficiencies add as much as 9% to the landed cost of wheat from Kolkata through Petrapole to Bangladesh Customs clearance point at Benapole.

The World Bank: India-Bangladesh Bilateral Trade and Potential Free Trade Agreement (December 2006)

NepalBasic multimodal infrastructure of an ICD each at Birgunj, Bhairahawa, Biratnagar and Kakarbitta in place.The flagship rail-linked ICD at Birgunj has progresses yielded increasing

gains:◦ Rail transport of containers from Kolkata port to Birgunj economical:

Rs./TEU

By Rail By Road

(up to 24 t.)up to 18 t. up to 24 t.

Line haul cost: 17,000 21,60028,800Total cost: 27,000 41,00048,000

Time for a box to reach ICD-Birgunj by rail after arrival at port now averages 5-6 days vs 10.5 days by road.

◦ Actual rail transit less than 3 days vs 4 days by road; ◦ problems on roads at checkpoints which become real chokepoints.

Some further steps like a legislative cover through bill of lading and EDI

Contd…

PakistanThere is an apparent need for rational multimodal linkages between India and Pakistan.

Route Mode Distance km Transport CostUS$/TEU

Delhi-Attari Rail 478 325

Delhi-Attari Rail-Road 479 338

Delhi-Mumbai-Karachi Land-Sea 2,274 1010

Mumbai-Karachi Sea 885 550

Mumbai-Dubai-Karachi Sea 3,127 750-950

Mumbai-Karachi (switch B/L)

Sea 885 550

Some Simple PalliativesThe state highways serving important land customs routes should be declared as national highways. Further, all national highways serving these routes should be upgraded to four-lanes.Multimodal transport infrastructure being non-existent, the trade is not able to derive the benefits of container technology– acknowledged world over as cost-effective, safe, speedy, and convenient.International conventions and agreements evolved over the last 50 years for facilitating cross-border trade and commerce have been adopted by a large number of countries.

The SAARC secretariat may determine the utility and efficacy of relevant conventions and follow up with the countries to adopt and ratify these conventions not yet done.

Contd…

It appears there is considerable merit in pursuing a path of unilateral initiative in promoting regional cooperation. Long-term benefits would far outweigh short-term costs.Restoration of the old transport links by rail, road and waterways would involve minimal investments and result in maximum benefits in the shortest time-frame.In the eastern and north-eastern parts of the sub-continent, riverine routes can provide a cost-effective and environment-friendly mode of transport.

A New InitiativeICPs Along International Borders

Petropole (On AH 1, NH 35)60 km of NH 35 between Petrapole and Barasatprogrammed for 4-laning (under NHDP IIIA)

Moreh (On NH 39)The 110 km length of NH 39 between Imphal and Moreh, 90 km stretch already 2-laned, remaining 20 km stretch too almost complete

Contd…

ICPs Along International Borders

Raxaul (On AH 42, NH 28 A)NH 28 A (Raxaul-Motihari): 52 km programmed for improvement to 4-lane (under NHDP III)

Wagah (On AH 1, NH 1)Of the 75 km NHI between Jalandhar and Wagah, 4-laning in progress between Jalandhar-Amritsar (49 km), likely to be completed by November 2009. Amritsar-Wagah (26 km) programmed for 4-laning.

A New ParadigmGlobalisation and the essential restructuring of logistics systems lead to increases in distances over which goods are transported. Ten years ago, 94% of the merchandise stocked on Wal-Mart shelves was made in America; today, four-fifths of its products are sourced from China. A McKinsey analysis three years ago led to the projection that, by the year 2020, 80% of the goods in the world will be manufactured in a country different from where they are consumed, compared with 20% now.Developments like that of the container since the early 1970s signified rising capacity and falling costs of transportation, leading to a virtual “death of distance”. Low transportation cost made labour arbitrage a profitable option. The current ceaseless surge in oil prices has the potential to drastically alter the whole supply chain production system and outsourcing of manufacturing.

Regional vs GlobalIn the new context, distance does matter, regional rather than global production networks are likely to become more important. Rising freight will only give a fillip to the trend towards making products closer to the market.Economist Jeffrey Rubin of CIBC World markets predicts, with oilat $135/barrel, we are just about halfway mark for oil to touch $225/barrel by 2012, which incidentally will see some manufacturing returning to the United States inasmuch as increasing freight costs, reflecting fuel prices, will make imports more expensive.A Canadian Bank study has ominously revealed that, in 2000, whenoil was $20 per barrel, transport cost was equivalent to 3% US tariff. Today’s extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on these goods entering the US. And at oil prices of $200 per barrel, the tariff-equivalent rate will rise to 15%.

A Way Out

Look at mole-hillsMountains can be climbed in due course

Fix simple mattersThey involve no high technologyThey demand no high investmentThey will help reduce costs and delays

They do need a strong will, a new mindset