Strengthening Transport Connectivity for Regional Economic Integration in Southern and Central Asia

1. Strengthening Transport Connectivity for Regional Economic Integration in Southern and Central Asia Policy Dialogue on Strengthening Transport Connectivity in Southern Asia New Delhi, 6 March 2016 Nagesh Kumar

2. The Criticality of Connectivity for Southern and Central Asia • Changed external context and increasing criticality of regional economic integration • Despite geographical contiguity, least integrated region • Untapped intra-regional trade potential in Southern and Central Asia, is estimated at more than 50 per cent of potential • Southern and Central Asian subregion has also lagged behind in terms of poverty reduction • Southern and Central Asia together accounts for 36 percent of world’s extreme poverty • Poor transport connectivity and facilitation prevents the subregion from exploiting benefits of geographical contiguity, scale economies, potential for regional production networks • Prevents from benefiting from leveraging the strategic geographic location

3. Challenges to Connectivity • Transport infrastructure gap is huge for Southern and Central Asian countries • Investments up to US$ 2.5 trillion may be required to cover the overall infrastructure gap in South Asia alone • Require increase in spending up to about 9% points of GDP annually until 2020 • Transport infrastructure development scattered across disconnected subregional projects in the Southern and Central Asia • ECO, SAARC, BIMSTEC and ASEAN corridors are proceeded in isolation • Poorly developed soft connectivity and facilitation • Lack of region-wide transit and transport agreements • High trade costs are significantly higher for intra-regional trade than for overall trade of Southern and Central Asian countries • Intra-regional trade costs in South Asia is markedly higher at about 114% compared to that of South East Asia at 76% and East Asia at 51% • Intra-regional trade costs in Central Asia is prohibitively high at 121% • Hinders formation of regional value chains

4. Multilateral and Subregional Corridor Development • ECO • Facilitated by ECO Transit Transport Framework Agreement signed in 1998 and the ECO Transit Trade Agreement signed in 1995 • Multimodal; both transport and trade facilitation coverage • SAARC • SAARC Regional Multimodal Transport Study adopted in 2006 • Multimodal routes identified (10 road corridors and 6 rail corridors); Limited trade facilitation coverage • Motor Vehicles and Railway Agreements being finalized • BIMSTEC • BIMSTEC Transport Infrastructure and Logistics Study (BTILS) adopted in 2007 • Multimodal routes identified (10 road corridors and 6 rail corridors); Limited trade facilitation coverage • ASEAN • Master Plan on ASEAN Connectivity adopted in 2010 • Multimodal, comprehensive coverage including all dimensions of connectivity and trade facilitation measures

5. Multilateral and Subregional Corridor Development • International North–South Transport Corridor (INSTC) • 11 Member States • BCIM Corridor • Cross-border transport project under Bangladesh-China- India- Myanmar Forum for Regional Cooperation • SASEC Corridors – South Asia Subregional Economic Cooperation • Covers 6 Countries - Bangladesh, Bhutan, India, the Maldives, Nepal, and Sri Lanka • Facilitated by Trade and Transport Facilitation Monitoring Mechanism • Multimodal; broad coverage • BBIN Cooperation • BBIN Motor Vehicles Agreement provides transit across Bangladesh, Bhutan, India and Nepal • India-Myanmar-Thailand Trilateral Highway (IMT-GT) • Trilateral Motor Vehicle Agreement expected to be signed in 2016

6. Multilateral and Subregional Corridor Development • CAREC Corridors – Central Asia Regional Economic Cooperation • 10 Countries - Afghanistan, Azerbaijan, China, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Tajikistan,, Turkmenistan, Uzbekistan • Quadrilateral Transit Agreement between China, Kyrgyz Republic, Kazakhstan And Pakistan • Specific focus on cross border transport infrastructure • Limited coverage of trade facilitation measures

7. Benefits of Broadening Connectivity • Promote development of regional production networks • Wider connectivity networks enhance sourcing options for upstream firms and chances of market participation for downstream firms in the value chain • Efficiency of regional sourcing of inputs will increase proportionately with reach of regional transport networks to as many downstream production units as possible • Maximize network externalities • Strategic location of Southern and Central Asian subregion offers immense possibilities of inter-regional connectivity with EU and ASEAN • Besides facilitating intraregional trade can make Southern Asia a hub of East-West trade • Major boost for least developed and landlocked countries in Central Asia and South Asia like Afghanistan, Bhutan, Nepal • Easier to mobilize resources for infrastructure and institutional development in a broader regional framework • Synergies between overlapping corridor development programmes • Avoid duplication of investments

8. Contours of an Integrated Approach to Connectivity • Integration of subregional corridors into regional corridors by harmonizing both hard (physical) and soft (policy) infrastructure • Asian Highway (AH) and Trans-Asian Railway (TAR) route networks at the Asia-Pacific level can guide the integration of transport corridors • Collaboration between subregional organizations for coordination of subregional transport development projects • Follow a building block approach as a part of an agreed Connectivity Master Plan • Easier to mobilize resources for regional projects

9. ESCAP’s Pillars of Multimodal Connectivity in the Asia-Pacific • Asian Highways Network • Intergovernmental Agreement adopted on 18 November 2003 • Trans-Asian Railways Network • Intergovernmental Agreement adopted on 11 June 2011 • Dry Ports Network • Intergovernmental Agreement opened for Signature on 8 June 2013

10. Three Asia-Europe Continental Land Bridges • Southern corridor is the least integrated • Southern corridor passes through the most populous subregions of the world • Southern corridor has the maximum potential for consolidating factory Asia

11. Connecting Southern and Central Asia and Europe INSTC and ITI-DKD-Y Inter-modal Container Rail Corridors • Extend Istanbul-Tehran-Islamabad (ITI) container train corridor to Delhi-Kolkata-Dhaka (DKD) using existing physical infrastructure • Exploit multimodal linkages along TAR and AH networks • Interconnections with INSTC, CAREC, BBIN, IMT and other important subregional corridors • Only a transit trade agreement needed between concerned countries • Can become a major trade corridor linking South Asia with Afghanistan, Central Asia and Europe

12. Turkey-Iran-Pakistan-India-Bangladesh-Myanmar (TIPI-BM) Road Corridor along Asian Highway

13. UNESCAP Regional Cooperation Frameworks for Integrated Transport and Trade Facilitation • Regional Cooperation Framework adopted for AH and TAR networks; Framework for Dry Ports under development • Models for secure and efficient border-crossings and transit • Provide policy guidelines for integrating transport and trade facilitation programmes • Guidelines for formulating bilateral/subregional agreements to standardize operations • Guidelines for adoption of new technologies • Guidelines for simplifying intermodal interfaces • Encourage participation of member countries in international transport conventions

14. Building Blocks for Inter-regional Connectivity • Provide platform for cooperation between subregionalorganisations • Common member states can play a vital role in advancing this process • Taking stock of parallel developments in different parts of Southern and Central Asia • Recent developments include BBIN Motor Vehicle Agreement • Extension of Afghanistan Pakistan Trade Transit Agreement (APTTA) to include Tajikistan

15. Towards A Connectivity Master Plan Elements of the Connectivity Master Plan • Stock taking of physical infrastructure requirements of trunk corridors and their sublinks • Strategy for institutional cooperation between governmental agencies and multilateral bodies for implementing region wide transit and transport agreements • Plan for building synergies between ongoing corridor development projects in the Southern and Central Asia subregion • Plan for ICT development and digitization of documentation required for cross-border transit and transport in the subregion • Plan for resource mobilization and framework for cooperation in this regard between governmental and multilateral agencies and the private sector

16. The Way Forward • Regional Policy Dialogues • Connectivity Master Plan • Container train trial runs • Facilitate Production Hubs and Processing Centers for Key Locations alongside the Corridors • Platform for Coordination amongst subegional frameworks

17. Thank you 17