New Delhi: Despite massive connectivity plans and infrastructure development, South Asia remains the least integrated region in the world — just 5 per cent of its total trade takes place within the region. Greater integration and seamless connectivity could see trade increase by an estimated $44 billion, according to Cecile Fruman, director, Regional Integration and Engagement in the South Asia Region (SAR), World Bank.
“This is a region which is not well integrated in terms of connectivity. It takes 138 hours to move a truck across the border from India to Bangladesh, and there are 22 documents required and 55 signatures. So in many ways, South Asia is not well integrated,” Fruman, who was visiting India, said in an interview with ThePrint.
“Intra-regional South Asian trade is only 5 per cent of the total trade, and that’s only 1/3 of what it could be, according to our estimates. So, if this were to integrate on a trade level, we could see additional trade of about $44 billion,” she said.
She pointed out that, in comparison, intra-regional trade is 25 per cent of total trade in the 10-member Association of Southeast Asian Nations (ASEAN), and 60 per cent in the 27-member European Union (EU).
“Greater integration is a source of growth and it’s also a source for prosperity and inclusion. We see benefits in multiple areas. If we were to have more free trade agreements and seamless connectivity, we could see some of these benefits,” Fruman said.
According to her, India stands only to benefit if it does more trade with east Asia, ASEAN and others, thereby making value chains “more resilient”.
“There’s a role for many partners to come together on this. The needs are greater in investment and infrastructure. There’s a role for multilateral organisations like the World Bank and for bilateral organisations too,” she added.
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Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement
Highlighting some of the positive steps being taken in South Asia, Fruman said the signing of the Motor Vehicles Agreement (MVA) under the Bangladesh-Bhutan-India-Nepal (BBIN) framework is key to achieving seamless connectivity in the region.
The BBIN MVA was signed in June 2015 for seamless movement of passenger, personnel and cargo vehicular traffic among these four South Asian neighbours.
Last month, these four countries met again in order to explore ways to operationalise the MVA, at least in the passenger and cargo segment.
“In transport and connectivity, we have an MVA between Bangladesh-Bhutan-India-Nepal that has not yet been fully implemented. We conducted some studies and ran some estimates, and we believe that by implementing the MVA, considerable benefits could accrue to India and Bangladesh,” she said.
“For India, we estimate its national income could increase by 7.6 per cent, and for Bangladesh it will be 16.6 per cent.”
“Yet another area is electricity trade. This is a region where demand for electricity is going to increase. Cross-border electricity trade has increased threefold from 2015,” Fruman highlighted, adding, “Electricity is flowing between Nepal and India because in 2018 the protocols were signed. The next step is moving towards Bangladesh and integrating it into that.”
However, Fruman said, regional integration is “difficult” and can only be eased if there is a win-win scenario for all parties involved.
“Development even at the country level is difficult. We are adding a level of complexity. But when countries can identify an area — be it economic gain, be it social gain by way of cheaper energy prices and access to jobs — they are then willing to come together,” she said.
‘Geopolitical factors play a role’
While Fruman believes that “coordination is key” to making connectivity plans successful, be it the BBIN MVA or the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), geopolitical factors must also be factored in to make such frameworks successful.
BIMSTEC is a key connectivity plan amongst seven Bay of Bengal countries.
“The world is changing around us… We can never know what is going to come next. We had a Covid crisis, countries are re-emerging, we had conflict, unfortunately, in places like Afghanistan, and macro-instability in Sri Lanka, so obviously these are important factors in the conversation… It is about accommodating your own imperatives with those of your neighbours,” she said.
“Also factoring in the effects of the Ukraine war, we hope that this is a region that will come out stronger, that the growth trajectory will be green, will be sustainable, and will be better connected,” Fruman added.
This report has been updated to incorporate a change in the following quote by Cecile Fruman: “Intra-regional South Asian trade is only 5 per cent of the total trade, and that’s only 1/3 of what it could be, according to our estimates. So, if this were to integrate on a trade level, we could see additional trade of about $44 billion.”
(Edited by Rohan Manoj)
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