South Asia: Emerging economic compulsions and the need for regional cooperation

A look at the South Asia Subregional Economic Cooperation (SASEC) countries - Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, and Sri Lanka - shows the importance of effective and modern trade facilitation measures, writes Partha Pratim Mitra for South Asia Monitor

Partha Pratim Mitra Jan 04, 2021
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The COVID-19 pandemic crisis is unprecedented. It is estimated to have thrown 150 million people into extreme poverty by 2021. There is also, the apprehension that too many poor countries could emerge from the COVID-19 crisis with a large debt overhang which could take years to manage.

To come out of such difficult situation countries would need to achieve a much greater level of productive investment and financing - for infrastructure, health, education, and employment. In such a  perspective when we view South Asia, it comes out as a region that includes the world’s largest democracy in India where China’s expanding presence is already reshaping it and is emerging as an area where US-China trade tensions have increasingly have begun to show their presence, thus  creating new challenges for countries in the region.

The emerging Sino-American strategic competition that could last for a while is likely to influence both the US and Chinese assessments and engagements in South Asia. The global economy as it stands  had External Debt Stocks in 2019 External debt stocks topped $8 trillion at the end of 2019, with the pace of debt accumulation much the same as in 2018. 

China’s shadow on South Asia

China accounted for 26 percent of the 2019 external debt stock of low- and middle-income countries with short-term external debt accounting for 57 percent. While China is an active participant in the international financial markets its shadow in South Asia, particularly on the terms of lending for projects of the China-Pakistan Economic Corridor (CPEC) is likely to be impacted with additional guarantees by lenders.

In the South Asian region in 2019  debt stocks of India rose by six percent, for Bangladesh an increase by  9.5 percent reflecting the implementation of large infrastructure projects, and for Pakistan a  7.8 percent increase driven by higher inflows of budgetary support from multilateral creditors turning to development financing. The World Bank Group (WBG) plays a significant role through its trust funds which are an integral part of the aid disbursement mechanism. The WBG trust funds support both World Bank executed and recipient-executed activities. For Bank-executed trust funds (BETFs), the Bank is responsible for implementing the agreed activities. For recipient-executed trust funds (RETFs), the Bank channelizes the trust fund resources to recipients which in turn implement the agreed activities.

The South Asia region in the year 2020 received 32 percent of RETF, eight percent of BETF, and eight percent of IFC (International Finance Corporation - the private sector arm of the World Bank) funds. However, 27 percent of RETF funds went to mitigate Fragility, Conflict, and Violence (FCV) which is a priority thematic area for the WBG. Afghanistan received 57 percent of FCV funds in 2020.

Given the economic compulsions of the South Asia region, its complimentary strategy, which is a combination of regional integration and bilateral dependence on global powers for development is but a natural corollary of mobilising maximum resources on terms which are mutually acceptable in a resource-scarce situation.

Regional cooperation in transport and custom infrastructure 

We shall see the green shoots of this model of integration in the areas of transport and customs infrastructure and the need to further strengthen regional cooperation in the region.

In Bangladesh, the Mongla Port Authority signed an agreement with a Chinese company to dredge the inner segment of the Mongla Port channel to allow the anchoring of container ships with 10-metre draught. Ships have started sailing to and from the newly dredged channel on Mongla Port’s outer bar. The Takka 754.08 crore project is likely to begin this month  and end in July 2022. 

Mongla Port lies on the bank of the River Pashur, which is a river in southwestern Bangladesh and a distributary of the Ganges. Navigability problems of the Pashur channel, have forced ships to first unload the containers at Chattogram (Chittagong) Port and then come to Mongla Port after reducing the draught size.

The Indian government has approved the 6th multi-facilitated Integrated Check Post (ICP) along the India-Bangladesh border to boost trade, economy and easier movement of people of the two neighbouring countries. The Agartala-Akhaura (Bangladesh), ICP is the second-largest trading point between the two neighbours after the Petrapole-Benapole ICP in West Bengal. Adjacent to Agartala, the Agartala-Akhaura ICP is the most important international trading land port in northeast India with an average of about 80-100 trucks loaded with various goods for trade coming to Tripura each day from Bangladesh.

On average, trades valued at anywhere between Rs 3 - 4 crore takes place every day through the Agartala-Akhaura ICP. There are about 35 operational land customs stations along the India-Bangladesh and India-Myanmar borders adjoining the seven Northeast States. Four Indian north-eastern states - Tripura, Meghalaya, Mizoram, and Assam - share 1,880 km borders with Bangladesh, while Mizoram, Manipur, Nagaland, and Arunachal Pradesh share 1,640 km unfenced borders with Myanmar.

Boosting efficiency in trade

As national lockdowns begin to ease and supply chains resume operations, difficulties in cargo movement and clearance processes are expected to compound and linger if strong intervention does not take place with the cooperation of all countries in the region. A look at the South Asia Subregional Economic Cooperation (SASEC) countries - Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, and Sri Lanka - shows the importance of effective and modern trade facilitation measures.  

Automation and zero-contact customs clearance procedures were attempted, along with enhanced staff health protocols and new task forces to assist trade. Customs clearance was provided 24 hours a day/ seven days a week at key locations, with the faster disbursal of refunds in order to provide immediate relief to businesses, particularly medium and small enterprises affected by the pandemic.

These reforms have helped make clearances faster, boosted the efficiency of trade, and enhanced the transparency and predictability of trade processes. While these South Asian countries have made progress to expedite trade in recent years, the pandemic exposed core bottlenecks in trade facilitation processes across the sub-region which need a speedy resolution for seamless border trade. 

Difficulties had come in the way of customs agencies at the height of the COVID-19 pandemic to position staff at clearance locations. As a result border crossings couldn’t happen efficiently, if at all. The private sector - including importers, exporters, customs brokers, and freight forwarders also found it difficult to mobilize staff.

They also had to face issues meeting clearance requirements like providing original documents and paying duties at the bank. These bottlenecks affected the movement of goods and services, including time-sensitive products like medicine and relief goods.

Need for digital connectivity

International experience shows that automation of clearance processes play a greater role in helping cargo move seamlessly across borders, with limited need for human contact, affords an example of the gaps in trade facilitation progress. Although the SASEC countries have made progress in automation, there is still a need for physical interfacing and paper filings, which is difficult during the pandemic. Inadequate digitization in many of the cross border regulatory agencies, and lack of digital connectivity among these agencies, ports and terminal operators, and shipping lines further hindered the flow of cargo.

The pandemic has brought out the importance of trade facilitation, particularly for responding to crises. The need to clear cargo expeditiously, with the minimum physical interface, and to maintain efficient supply chains has highlighted the need for an enhanced trade facilitation environment.

The pandemic has also highlighted the need to institutionalize business continuity protocols, cross-border pandemic management protocols, and workplace and staff safety procedures.

The South Asian region is one of the most poorer regions of the world face enormous challenges of  ensuring affordable health and decent livelihood opportunities to its people in the aftermath of the COVID-19 pandemic. The situation has become even more difficult with international financial markets becoming more stringent with stricter conditions and guarantees imposed by private lenders.

The role of national governments in South Asia in facing these multifarious challenges becomes all the more important in these difficult times. The redeeming feature is that people at large have come out to meet these growing challenges in their own way. It is now for the governments to come together with a plan for regional cooperation in South Asuia that would help each country in coming out of this unprecedented crisis.

(The writer is a retired Indian Economic Service officer who worked in the labour ministry. The views expressed are personal. He can be contacted at ppmitra56@gmail.com)  

References:

David Malpass President The World Bank Group International Debt Statistics 2021© 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433https://openknowledge.worldbank.org/bitstream/handle/10986/34588/9781464816109.pdf?sequence=4&isAllowed=Yp,viii

China’s Influence on Conflict Dynamics in South Asia

Wednesday, December 16, 2020 / BY USIP China-South Asia Senior Study Group https://www.usip.org/publications/2020/12/chinas-influence-conflict-dynamics-south-asia

KrishnanAnanth, The corridor of uncertainty, the Hindu, NewDelhi, Jan 3,2021.p13

International Debt Statistics 2021© 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433https://openknowledge.worldbank.org/bitstream/handle/10986/34588/9781464816109.pdf?sequence=4&isAllowed=Yp,viii,p1-12

Ibid,p39
Mongla Port dredging
https://www.maritimegateway.com/mongla-port-dredging/Jan1,2021
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