regional cooperation, economic corridors, and growth: the ... · share of south and southeast asia...

Regional Cooperation,

Economic Corridors,

and Growth:

The South Asia Context

Kavita Iyengar

Asian Development Bank

7 November 2014

Disclaimer: In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a

particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to

the legal or other status of any territory or area.

2

Share of Major Regions in World GDP

Baseline 2009 Asian Century Scenario 2050

South Asia: the Least Integrated Region in the World

29.4

2.70.1

10.9

38.23

4.315.8

9.14

0

5

10

15

20

25

30

35

40

45

ASEAN+3 South Asia Central and

West Asia

The Pacific

Islands

1990

2008

Intra-regional Trade Share (%)

Source: ADB ARIC Trade and Integration database (www.aric.adb.org); raw data from IMF DOTS.

100 hours for trucks to cross between Petrapole & Benapole 200 signatures in Nepal to trade goods with India

3

India’s Merchandise Trade

4

Region 1997-98 % exports

2010-11 % exports

1997-98 % imports

2010-11 % imports

EU Countries (27) 26.50 18.33 27.16 12.05

Other West and East European Ctys 1.77 1.51 3.20 7.20

North America 20.64 10.61 10.04 5.97

Latin America 1.42 4.08 1.46 3.84

Africa 4.03 6.27 5.85 7.05

Asia 41.48 52.05 39.35 61.16

East Asia 1.36 0.78 3.58 3.15

ASEAN 8.67 10.20 7.50 8.28

WANA 9.99 21.59 15.89 28.56

North East Asia 16.31 14.84 11.76 20.58

South Asia 5.15 4.64 0.62 0.59

Others 4.28 7.13 12.92 2.62 Source: Ministry of Commerce and Industry, Government of India, website

Transport • Road transport is the dominant mode (65–70% of

movement) but substantial missing links across national boundaries

• Post 1947, border management led to closure of historical land routes

• IWT transit was restored in 1972

• Transit through Pakistan from India to Afghanistan remains suspended

• Incompatible transport technology platforms emerged impairing interoperability, esp rail

Trade Facilitation Indicators

Bangladesh

Bhutan

China

India

Nepal

OECD members

Singapore

South Asia

Sri Lanka

Thailand

0

5

10

15

20

25

30

35

40

0 5 10 15 20 25 30 35 40 45

Tim

e to

imp

ort

(d

ays)

Time to export (days)

Source: World Bank, 2010.

6

Low Energy Integration

• South Asia has not yet fully utilized nor developed/ tapped its maximum energy potential from various sources, e.g. for hydropower, it is only using 15% of its total potential

• Regional energy trading would yield annual benefits of $12-15 billion.

7

ADB’s RCI Strategy

• Four ‘key pillars’ of regional cooperation and economic integration:

– Cross-border infrastructure and associated software

– Money and finance

– Trade and investment

– Regional public goods

8

Regional Cooperation in Practice in South Asia

Nepal

Sri Lanka

Afghanistan

Bangladesh

India

Bhutan

Pakistan

Maldives

Thailand

Myanmar

BIMSTEC (1997)

SASEC (2001)

SAARC

(1985)

9

Centrality of SASEC in

The Garland of an Integrated Asia

ASEAN Association of Southeast Asian Nations BIMP-EAGA Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area BIMSTEC Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation CAREC Central Asia Regional Economic Cooperation GMS Greater Mekong Subregion IMT-GT Indonesia Malaysia Thailand Growth Triangle PIF Pacific Islands Forum SAARC South Asian Association for Regional Cooperation

Asia is increasingly integrated economically stretching from the

shores of the Black Sea in the West to the Western shores of the

Pacific in the East and stretching from the Maldives and South

Pacific to PRC and Central Asia in the North

Disclaimer: In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or

geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

SASEC

10

Trade between South and Southeast Asia

USD billions

SASEC and GMS • SASEC: Focus on transport, trade facilitation and energy

• GMS: Impressive progress through transport, power and telecommunications networks

• Economic corridor development -

East Coast Economic Corridor (India)

12

ADB’s SASEC Initiative-Sectoral status

13

Transport: $4.1 billion

Energy: $532 million

Trade Facilitation: $48 million ICT: $26 million

SASEC Investment Projects, 2001-2013 Total Investment Projects:

$4.67 billion

ICT = information and communications technology; Source: SASEC Secretariat.

On-going SASEC Projects in India

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Bangladesh-India Electrical Grid

Interconnection Project

(ADB financed BAN part)

EA: Power Grid Corporation of India Limited. Operational since end-

2013. Initial power supply of 500 MW to BAN from IND grid, with

scope for expansion to 1,000 MW.

SASEC Tourism Development

Project (BAN, IND, NEP)

India component covers developing West Sikkim’s nature-based sites,

expanding facilities around Rumtek monastery, and strengthening the

Himalayan Training Institute.

SASEC Trade Facilitation RETA

All countries, with WCO and

Program loan for BAN, BHU, and

NEP only

UNESCAP strategic partnership

Covers trade logistics development, capacity building, and application of

business process and cost-time-saving methodologies to measure trade

facilitation.

India and Bhutan plan to pilot electronic tracking system for Kolkata-

Phuentsholing.

SASEC Information Highway

Project

The first cross-border project in

South Asia; IND using own funds

Components include establishing: (i) regional network with fiber-optic

and data interchange capacity (ii) regional research and training network

of institutions and (iii) village network connecting 110 CeCs in all four

countries.

SASEC Road Connectivity

Investment Program

(i) 37 km between Nepal-Bangladesh and (ii) 90 km between Bhutan-

Bangladesh (iii) 100km of highways in Manipur to improve India-

Myanmar connectivity, and the Meichi bridge at Panitanki between India

and Nepal.

SAARC Corridor 1

SAARC Corridor 2

SAARC Corridor 3

SAARC Corridor 4

SAARC Corridor 5

SAARC Corridor 6

SAARC Corridor 7

SAARC Corridor 8

SAARC Corridor 9

SAARC Corridor 10

River

(click on the colors)

9. Project Name: Subregional

Transport Enhancement Project

Project Loan: US$ 20M

Completion Date: Year 2009

7. Project Name: Subregional

Transport Enhancement Project



2. Project Name: West Bengal

Corridor Development



4. Project Name: North Eastern State

Roads Investment



16. Project Name: National Highway

Corridor (Sector 1)



Going Ahead: The Challenge Poverty, Jobs, Productivity

• 500 million live below $1.25 a day

• Need to create 1 million jobs per month

• Better high productivity jobs are generated in industry and services

Relative labor productivity by income

and sector (1991-2010)

Source: UNIDO. 2014. Industrial Development Report

Enabler 1. Trade Facilitation

Ranking on the ease of trading

across borders:

South Asia Lags

ADB. July 2012. Asia Economic Integration Monitor

Trade Facilitation Costs Per Subregion (2012)

Real cost to

export

(man days)

Real cost to

import

(man days)

Time to

export

(days)

Time to

import

(days)

Documents

to export

(number)

Documents

to import

(number)

High-income countries 6 6.4 8.9 8.6 4 4.7

Latin America 25.1 28.5 20.7 15.2 6.2 6.3

Africa 114.7 152.3 38.3 29.5 9.1 8.2

Asia 9.9 12 16.4 14.8 5.7 5.4

East Asia 7.2 7.6 16 14.1 5.7 4.7

Southeast Asia 9.4 11.7 13.2 13.2 4.9 5.9

Central Asia 41.4 64.8 56.5 59.9 8.6 10.2

South Asia 34.5 35.6 20.4 17.2 7.8 8.7

GDP effect of reducing supply chain barriers is

much higher than for tariffs

Enabler 2. GPNs Share of South and Southeast Asia in World

Total Production Network Exports, 1992–2011

Source: Connecting South Asia and Southeast Asia—Interim Report

World Bank. 2009. World Development Report

Average cost of a telephone

call to the US Freight costs own

ARIC

India remains a small player in GPNs……

0

10

20

30

40

50

60

70

80

90

% Share of network products in manufacturing exports

1990-91

2000-01

2010-11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990-91 2010-11

Network exports from developed countries

Network exports from developing countries

….despite huge shift in network exports

from developed to developing countries

Source: Athukorala (2013), compiled from UNCOMTRADE database

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Implications of limited participation in trade and GPNs

• Forgone opportunities in export markets and FDI

India, 7.5

PRC, 49.6

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009 2010

$ b

illio

n

FDI inflow in Manufacturing

17%

83%

Composition of FDI in India , 2003-2010

Manufacturing

Non- Manufacturing

58%

42%

Composition of FDI in PRC, 2003-2010

Source: Hoda & Rai (2013), ADB

Missing out on:

• Gains from trade through “learning-by-exporting” and “disciplining” effect of import competition

• Benchmark for assessing policy support

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Industrial Clusters Urban

Clusters

Trade and Transport Corridor

Access,

Distribution, Collection

Labour, Technology, Knowledge, Innovation, Commerce

Access to Markets, Gateways

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Enabler 3. Economic Corridors

For more information: www.sasec.asia

email [email protected]

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