To economically integrate South Asia, immediate attention must be given to trade facilitation. India and Bangladesh, for example, must improve border infrastructure to bridge the export lag at the Petrapole-Benapole check post, write Preety Bhogal and Shiva C Sharma
South Asia, a region showcasing great momentum in terms of economic growth (clocking a growth rate of 7.1 per cent), has 336 million people suffering from hunger. A well-knitted region, with a strong food trade network can help combat food security challenges.
South Asia is the least economically integrated region in the world. Despite immense potential of trade in various product categories, it remains low at a mere 6.8 per cent as compared to other regional groupings such as the Association of Southeast Asian Nations (25.3 per cent), the North American Free Trade Agreement (50.2 per cent) and the European Union (EU, 62.6 per cent). This clearly does not corroborate with the India’s vision to strengthen ties with its neighbours.
Several studies have highlighted the plausible factors contributing to this lack of trade between South Asian countries, with a special emphasis on trade facilitation. The average time to import, in terms of border compliance, in the South Asian region is 113.9 hours, which is significantly higher than Asean at 54 hours, and a far cry from EU with 1.9 hours.
As per a 2009 Asian Development Bank report, trade facilitation reforms could increase trade volume by $36.7 billion in South Asia, and spur a simultaneous growth in employment and income.
Trade facilitation in South Asia, India and Bangladesh: India is a lynchpin for South Asia, sharing land border Pakistan, Nepal, Bhutan and Bangladesh. Among these, Bangladesh has emerged as a major trading partner for India, with its eastern region alone making for 31.5 per cent of India’s total trade with South Asia, according to EXIM Bank.
Majority of this trade passes through the Petrapole-Benapole land custom station. However, several bottlenecks continue to hamper trade between the two countries.
The Government of India launched a Customs SWIFT (Single Window Interface for Facilitating Trade) clearances to facilitate trade, which enables importers and exporters to file a common electronic ‘integrated declaration’ on the e-commerce portal, unlike the earlier requirement of manually filing separate forms to six different agencies: Customs, Food Safety Standards Authority of India (FSSAI), Plant Quarantine, Animal Quarantine, Drug Controller, Wildlife Control Bureau, and Textile Committee (Central Bureau of Excise and Customs).
To facilitate this single window operation, several integrated check posts (ICPs) are established to combine these different agencies at border check points to expedite the trading process. Yet, the recently opened Petrapole ICP, established at an estimated cost of `172 crore, falls short in achieving the principles of this single window system. For instance, FSSAI is absent at the Petrapole ICP, and Animal Quarantine and Plant Quarantine departments do not have adequate testing facilities.
Since Bangladesh has yet to establish infrastructure commensurate with India’s ICP, exports continue to follow the old trading route, skipping the ICP, which results in lower export volumes. For instance, the ICP has a potential of exporting 500 trucks a day, but due to lack of infrastructure on Bangladesh’s side, India is currently exporting only 200 trucks a day.
Also, the ICP itself suffers from several problems. Parking security is a major issue — several private stakeholders have rated the security of the Central Warehousing Corporation’s parking zone to be very low in a Consumer Unity and Trust Society (CUTS) survey. Persistent Internet connectivity issues delay trade as electronic data inter-change (EDI) platform, which was set up to facilitate trade,
is affected.
Another problem is the lack of testing facilities at this ICP. As of now, food samples are sent to the Export Inspection Council and Central Food laboratories in Kolkata. Setting up testing infrastructure may not be viable at the border, given the high cost of such labs and relatively low volume of food traffic at the ICP.
However, a joint inspection by India and Bangladesh can be considered to harmonise processes and reduce repetitive practices, as suggested in the CUTS survey. Alternatively, a uniform certification system, similar to the EU’s Admission Temopraire Roulette can also be implemented.
Trade facilitation is a crucial issue in South Asia with pressing concerns that require immediate attention in order to enhance trade. India and Bangladesh need to establish concrete time lines for setting up of Bangladesh’s border infrastructure to bridge the current export lag through India’s ICP.
Simultaneously, the land Port Authority of India (lPAI) — the regulatory port authority, needs to strengthen the operation of its ICPs, and amend its shortcomings such as failure of Internet connectivity, low security at CWC parking, and slow testing processes. lPAI should conduct regular surveillance meetings at the ICPs to ensure its proper functioning.
(Preety Bhogal is Research Associate and Shiva C Sharma is Research Assistant at the Centre for Policy Research, New Delhi)