Infrastructure and Logistics Gaps to Regional Trade and Cooperation in South Asia Region

1. Infrastructure and Logistics Gaps to Regional Trade and Cooperation in South Asia Region 12 June, 2013 World Bank, Washington DC

2. SAR also lags behind other regions in terms of logistics performance…

3. especially among the landlocked states/regions

4. In 1909, freight could move by rail and road seamlessly from Karachi to Lahore to Delhi to Dhaka

5. In 2013, lack of regional transit agreement leads to significant inefficiencies in transport routes used for trade Current A container takes 35 days to get from New Delhi to Dhaka • Rail: New Delhi-Bombay • Maritime: Bombay-Colombo/Singapore-Chittagong • Rail: Chittagong-Dhaka Potential 5 days transit time via direct rail connectivity from New Delhi to Kolkata over Jamuna Bridge to Dhaka A container travels 7162km to get from Dhaka to Lahore using Maritime Route 2300km overland through India Assam tea travels 1400km to get to Kolkata Port Goods from Agartala (NE India) travel 1645km to reach Kolkata Port The southern border of Tripura State of NE India is only 75km from Chittagong Port if travel through Bangladesh is permitted A container traded between Afghanistan to India must travel through ports in Iran Overland transit through Pakistan would shorten distances significantly

6. The rail network in SAR Major trade corridors in India, Pakistan and Bangladesh are connected to rail networks But the landlocked states have no rail network Gauge differences, missing links, insufficient equipment and incompatibility but most of all lack of transit agreement prevent seamless cross-border movement

7. Challenges along SAARC Rail Priority Corridor 1: Lahore-Delhi-Kolkata-Dhaka-Mahishasan-Imphal PR financial and ops problems, trains return empty to Amritsar Shortage of airbraked locos and wagons. Only BCX covered wagons permitted. Train interchange daylight only. No thru transit – transloading required Ranaghat-Gede: duplicative inspection, rake marshalling/ deconsolidation, shortage of locos Insufficient capacity at Jamuna Bridge Rolling stock and gauge differences. Shortage of locos and wagons. Only BCX wagons allowed. Train interchange daylight only Kolkata: Long dwell time

8. Challenges along SAARC Rail Priority Corridor 4: Birgunj/Raxaul-Katihar-Rohanpur-Chittagong with links to Jogbaniand Agartala Missing rail link at Jogbani-Biratnagar, gauge incompatibility Rohanpur-Singhabad: gauge differences, insufficient BR rail lines cause deconsolidation, shortage of BR locos Missing rail link at Akhaura-Agartala, gauge incompatibility

9. The road network in SAR • Bangladesh, India, Pakistan and Sri Lanka have extensive road networks; road density highest in India and Sri Lanka • Landlocked States: Afghanistan, Bhutan and Nepal, have limited networks and lower levels of access. • Most countries need to increase proportion of paved roads • Main roads on major trade corridors narrow and of low quality: < 10,000km are multi-lane. • All ports were served by two lane roads with high traffic flows competing with pedestrians, bicycles, non-motorized vehicles, especially around urban areas.

10. Priority SAARC Road Corridors Raxaul-Birgunj: transloading, duplicative and manual procedures, no EDI Phulbari-Banglabandha: Nepali and Bangla goods must move by convoy thru Indian territory Wagah-Attari: transloading, no customs at border, insufficient border post infrastructure, positive list of 137 products, duplicative and manual procedures, no EDI, no thru transit of Afghan-India bilateral trade Petrapole-Benapole: transloading, 600 trucks/day, 80% of bilateral trade, duplicative/manual procedures, no EDI Barasat-Petrapole narrow congested road section No transit through Bangladesh for Indian goods from Kolkata to reach NE through Petrapole-Benapole-Akhaura-Agartala Mongla and Chittagong Ports insufficient capacity, rail missing link at Khulna-Mongla

11. Indo-Bangladesh IWT Protocol Route Short term of Bilateral Protocol prevents private sector investment; no night-time navigation permitted; dredging needed esp Nov-May; more and better navigational aids, cargo handling equipment and terminals needed, esp in Bangladesh Akhaura could soon become one of the main doorways to a $1billion/year trade corridor, but need wider approach roads on both sides, India building ICP Ashuganj Port needs better terminals, equipment, operations, Need rail connectivity from Tripura

12. Infrastructure Gaps exist but the real challenge is no freedom of transit, protectionist policies and NTBs In addition to investments in infrastructure, High Impact Solutions include:

13. Political Economy Considerations

14. A corridor approach focuses implementation efforts on one particular geographical area while addressing multiple sources of congestion – a supply chain is only as good as its weakest link Corridor management Institutions Economic cluster Dry port ICD Seaport/ Economic cluster Gateway / Economic cluster Mode interface Infrastructure Border International transit National transit • Seaport and shipping • Access to port • Transit • Customs and border management • Air freight • Customs and border management • Transit • Clearing and Forwarding • Vehicle change • Customs and border management • Storage • Consolidation • Clearing and forwarding • Customs and border management • Road and Rail Transport services Services

15. Challenges along a typical SAARC Priority Corridor: Kolkata/Haldia-Raxaul-Birgunj-Kathmandu: Road and Rail • Challenges: • Long dwell time at Kolkata/Haldia ports • Bilateral transit agreement limits Nepali transit to only one corridor, and only containerized cargo for rail • Poor and narrow roads in Nepal and India • No rail link in Nepal • No through bill of lading and inland clearance • Duplicative domestic licensing/documentation • Duplicative and manual customs procedures • Corruption/informal payments at border and along road corridor • No cross-border electronic data interchange • No mutual recognition of collaboration on SPS and standards • Insufficient parking/warehousing facilities

16. WB Approach and Lessons • A Corridor Approach to tackle multiple sources of congestion along a supply chain • Strengthening Bilateral Coordination Mechanisms • Strengthening National Multi-Sector Coordination Mechanisms: Role of National Trade and Transport Facilitation Committee (NTTFC) • Tacking Complex Multi-sector Project in a Weak Capacity Environment: trust fund support essential, significant resources devoted to capacity support during project preparation • Relationship and Confidence building • Big vs. Small country: letting smaller country take the lead and provide capacity/knowledge support • Showing early signs of success: the project design focused on showing early results (low hanging fruits) as well as long-term success • A regional study tour was key: to forming amicable relationships away from the negotiating table

17. Nepal-India Regional Trade and Transport Project Joint IDA-IFC Project: $101 million: financing $99m IDA, $2m IFC parallel co-financing First regional trade and transport facilitation project in South Asia Region Negotiations: May 17, 2013, Board: June 28, 2013 PDO: decrease transport time and logistics costs for bilateral trade between Nepal and India and transit trade along the Kathmandu-Kolkata corridor for the benefit of traders by reducing key infrastructure bottlenecks in Nepal and by supporting the adoption of modern approaches to border management. • Component 2 • ICT systems to automate processes for documents related to imports, exports and transit • Single Window • Trade Portal • PCO/NTTFC Institutional Strengthening • Component 3 • Trade-Related Infrastructure • Expand and upgrade the Narayanghat-Mugling road • Kathmandu Inland Clearance Depot (ICD) Development • Birgunj and Bhairahawa ICD Improvement • Multi-agency Labs • Component 1 • Modernize transport and transit arrangements between Nepal and India • TA for modernization of bilateral trade and transit framework • Automating of Customs Transit Document • Transport management regulations • Axle load control • Road safety