‘Act East’ for better connectivity

Connectivity in South and East Asia has lately become a frequently discussed issue in various diplomatic, bureaucratic and academic corners. The prime driver in this initiative is the economic interest of two emerging Asian economies: China and India.

India’s ‘Act East’ policy essentially reckons that opening the trading corridors with its eastern and south-eastern neighbours will usher in an era of development of its north-eastern States. Further, connectivity is also meant to unlock the tremendous untapped trading potential of India with its immediate South Asian neighbouring economies.

India signed the multilateral landmark Motor Vehicles Agreement (MVA) for the Regulation of Passenger, Personnel and Cargo Vehicular Traffic along with Nepal, Bhutan and Bangladesh on June 15, 2015.

This will pave the way for a seamless movement of people and goods across the borders of Bangladesh, Bhutan, India and Nepal (BBIN), leading to regional integration and development.

Prime Minister Modi’s visits to Bhutan, Nepal and very recently Bangladesh helped bring India’s neighbours on board. This agreement allows the four countries to work on bilateral or trilateral agreements and pave the way for transit of personal and commercial vehicles. Movement of vehicles across borders has been thought out to facilitate trade and movement of freight with passenger carrying vehicles, a value addition.

The framework will be in place for one year, within which period countries would have to sign bilateral or trilateral agreements.

Saarc is one of the least integrated regional blocs in the world with just 5 per cent of its overall trade being inter-regional. This agreement could turn things around.

Multimodal transport connectivity has been the buzzword for the Saarc region since the 2004 Lahore Summit. Subsequent summits have endorsed the need for such connectivity by road, rail and air. A study by the Asian Development Bank (ADB) proposed 10 regional road networks as South Asian Corridors (SAC), out of which seven have been identified in the BBIN region. The land-locked trading centres of Nepal and Bhutan can get access to ports in India and Bangladesh. The idea is to link the South Asian Corridors with the Asian Highway network. Tripura can get access to Bangladesh’s Ashugunj port; and Chittagong and Mongla ports can be accessed to move foodgrain from Kolkata to the North-East.

The opening of the Bangabandhu Bridge over the Jamuna river (the Jamuna multipurpose bridge) and the development of the Padma bridge, the Dhaka-Chittagong transport corridor, and other strategic transport corridors can facilitate trade between Bangladesh and India’s North-East and West BengalIndia trades the most in the BBIN sub-regional bloc. Bangladesh’s exports to India in the financial year ending April 2013 were $554 million and India’s exports to Bangladesh were $514 billion.

Bangladesh’s exports to India comprise 2.09 per cent of its total exports. Bangladesh’s exports today stand at $27 billion. Similarly, 1.79 per cent of India’s exports are bound for Bangladesh. India’s trade ties with Nepal and Bhutan comprise a significant share of the total international trade of the latter two countries. Bhutan’s exports to India account for about 90 per cent of its total exports.

However, what is not really clear are the sunk costs of construction of roadways, and the recurring externality cost, once some of the proposed roadways come up. These externality costs are social and environmental.

There are certain costs to be borne by the communities in the context of relocation, as also in the context of ecological costs.

One example is the Terai Arc Landscape, which can actually inhibit transboundary wildlife movement and affect the livelihood of the poor. The concern is whether these social-environmental costs are going exceed the expected benefits of trading.

To proceed to the next level of bilateral and trilateral agreements, there needs to be a more comprehensive cost/benefit assessment, going beyond trade benefit. Therefore, while as a framework agreement the MVA marks a good beginning, a sustainable approach to infrastructure development is called for.

Ghosh is a senior fellow and Bhonsale a research assistant at the Observer Research Foundation, Kolkata chapter