Regional Conference on Strengthening Transport Connectivity and Trade Facilitation in South and South-West Asia 9-10 December 2013 Potential and Prospects of Strengthening Transport Connectivity in South and Southwest Asia K. L. Thapar Chairman Asian Institute of Transport Development Dominating Geography of Silk Routes In the crescent from Turkey to Dhaka lie the world’s oldest civilisations that have produced the world’s religions, its culture and indeed the fabric of its very weave. The two regions (South Asia and Southwest Asia) are a well-defined physical entity and have been the dominating geography for the ancient trade routes. They have centuries old historical links both by land and sea and have extensively traded with each other through the millennia. Disruption and Colonial Interests The region suffered grievously because of Russian and British empire-building in the eighteenth century. Most of South Asia became a set of colonies. This led to emergence of Empire specific transport links with inherent disconnects both in continuity and operational technologies. In the sub-continent, transport corridors were largely oriented to suit colonial commercial and political interests. The British Empire did not encourage the development of railways in Afghanistan, for the fear of providing Russia with access to India. Partition of the Sub-Continent The division of the sub-continent in 1947 disrupted traditional economic and transport linkages. Overnight 7,419 km of land borders were created leading to closure of several land routes. Some parts of the sub-continent became virtually land-locked. As a result, Pakistan now enjoys a special advantage in respect to West Asia and India with respect to the South-East Asia. Hostage to Geo-Political Environment The transport links once again became hostage to the geo-political environment. With the passage of time, operational technology disconnects have become more pronounced. Rail transport has suffered the most. Having lost the advantage of minimum critical mass in terms of traffic and network, the railway systems in Bangladesh, Pakistan and Myanmar are languishing. We have thus lost the advantage of a socially benign mode of transport which is staging a comeback through the rest of the world. Loss of Benefits of Common Geography Restrictive policy regimes have neutralised the beneficial effects of common cultural affinity, common geography, and the ‘gravitational pull’ of proximity on movement of goods and people. It has been hostage to closed and divisive mindsets and distrust of neighbours. It has been insensitive to high incidence of poverty in the countries. Nearly a third of the population lives below the poverty line. 10-15 percent of the youth is unemployed. Human development indicators are abysmally low, further compounded by gender bias. The region is home to 1.8 billion people and accounts for 26 percent of the world population but only 5 percent of its GDP. Contrast it with 25 percent share of the Indian sub-continent alone in the eighteenth century. Despite the fall in tariff rates, the costs of non-tariff and behind the border measures remain very high. There is potential of reducing these costs by as much as 30-40 percent. The prevailing trading regime is often saddled with several opaque measures. Land routes are restricted for movement of commodities even though these are not in the negative list. The benefit of proximity is thus lost and consumer welfare suffers. Dividend of Free Trading Regime The restrictive trade practices inevitably lead to smuggling activities. As a result, the state loses the revenue. Its institutional integrity also falls prey to criminal syndicates. Liberalised trade is an important instrument of economic development and poverty alleviation. It also has a huge dividend of peace and stability. These inherent benefits have the potential of lowering the likelihoods of democratic failures in the countries which is so important in case of South and SouthWest Asia where democratic polities have only recently emerged. Green Shoots Maritime sector has seen significant developments leading to opening of new sea-cum-land routes for bilateral and transit trade. Newly developed ports at Bandar Abbas and Chabahar (Iran) and Gawadar (Pakistan) have opened alternate sealand routes for accessing Afghanistan and beyond. Bhutan and Nepal have been allowed the use of Mongla and Chittagong sea ports in Bangladesh, in addition to the sea ports in India for their third country traffic. Myanmar has allowed the use of its port at Sittwe for transit traffic to North-East region of India. The recently completed road from Delaram-Zaranj links the road network of Afghanistan with Iran and its port at Chabahar. In the rail sector, Uzbekistan has extended its railway line from Termez (Uzb) to Mazar-i-Sharif (75 km). Turkmenistan has already a rail link with Afghanistan at Kushak (Turk)-Torghundi (Afg). Pakistan has planned to extend railway line from Chaman (Pak) to Spind Boldak (Afg), a distance of 12 km. Iran has completed its railway line from Bafq to Mashhad. This will enable building a spur line of 124 km between Khawaf (Iran) and Herat (Afghanistan). Iran has built a rail link from Kerman–Zahedan (Iran) to Kuh-i-Taftan (Pak) providing a multi-gauge rail corridor all the way from Bangladesh to Turkey. Iran has developed transport links to the Central Asian Republics, thereby opening a new corridor for South Asia to access these republics. Turkey has started a train ferry designed to carry rail traffic through Lake Van. This facility enables rail link between Razi (Iran) and Van (Turkey). Agreement on Trans-Asian railways and Asian highways networks has the potential of providing integrated intermodal transport corridors. In trade facilitation, an important initiative has been the development of integrated check-posts at the borders. Future Scenario Distance does matter, more so in the context of looming depletion of fossil fuels. Rising freight charges will give a fillip to the trend towards making products closer to the market. Regional rather than global production networks are likely to become more important in future. Availability and access to relevant technologies in the neighbouring countries would be cost-effective in the long run and would also bring about harmonization of transport technologies. Overland pipelines would be the most economical means for carrying energy from South-West Asia and beyond. Direction Markers Restoration of traditional transport links by road, rail and waterways would involve minimal investments and would result in maximum benefits in the shortest timeframe. This would help in revival of languishing railway systems as the transit traffic would add to their volumes and the additional earnings to their bottom lines. Trans-border pipelines carrying energy and optic fibers providing digital connectivity can be laid alongside the railway lines and highways. These corridors can thus become economic corridors of the countries for multiple developmental purposes. Transit traffic would account for trade in services and thus benefit the trade matrix of the transit countries. Harmonization of operational platforms would promote interoperability of transport services. Introduction of container services would reduce transport costs, improve efficiency and minimize losses. Use of ICT would reduce transaction costs, thereby making the goods cheaper. Pending integration at the regional level, sub-regional cooperation could yield substantial benefits. The building blocks would result in emergence of regional networks. Prospects There is a strong undercurrent of mutual good-will and amity among the people of the region. The new generation will focus on change for a life free from deprivation, hunger and poverty. Democratic polities that have emerged in the region, have a huge stake in peace and stability. There is a perceptible trend for liberalising the trading regimes. The process will, however, be painfully slow and often mired by security concerns drawing heavily on political sagacity. Role of Non-Govt, Non-Profit Institutions Regional cooperation need not be only at the government level. Non-government organisations having a regional footprint have an important role to play. AITD has taken several initiatives in this regard. The Institute has a special consultative status with the United Nations Asian Railways Association has been established to promote cooperative research, harmonization of hardware technologies and operational practices. Regional training programme, which is free of cost, has been launched for training of personnel in technical, economic and social aspects of infrastructure. The upcoming academic and training facilities of the institute could provide the habitat of a regional training centre for promoting sustainable transport. Message Poverty, disparities and low levels of human development indicators demand change in the mindsets. Integration of economies would strengthen democratic polities that have emerged in the region after long hiatus. Transport networks are basic instruments for economic growth and poverty alleviation. Make use of infrastructure already in place in the region. Make borders irrelevant and aim at integrated seamless south and south-west Asia thereby reducing the transaction costs. Message Promote investment in inter-country infrastructure and develop socially beneficial modes of transport. Promote regional production networks drawing on inherent synergies and physical proximity. Promote harmonisation of technology and operational platforms to minimise disconnects in regional network. Technical issues must not be held hostage to antagonistic political environment. Launch meaningful cooperative programmes that would enhance integration at various levels.