Promoting Enhanced Regional Connectivity in South Asia

Akshaya S . #2405 . International Affairs Perspective . 31 May 2024 .

Akshaya S examines the challenges of regional connectivity in South Asia and discusses potential ways to improve it, highlighting the importance of developing transportation infrastructure and implementing more effective trade policies. Despite the region’s geographic proximity, which offers considerable opportunities for economic growth, geopolitical conflicts and outdated logistics systems continue to limit progress. The author argues that overcoming these obstacles and strengthening cooperation among neighboring countries can facilitate the movement of goods and people, ultimately promoting economic development and mutual benefits throughout the region.

Introduction

Emerging economies and aspirant powers actively shape South Asia’s intricate network of geopolitical strategies, positioning the region on a crucial trajectory where enhanced regional connectivity will significantly influence its future course. Despite benefiting from geographical proximity and numerous free trade agreements, the region’s total trade volume stagnates at an unacceptable 5%, failing to fully realize its potential.

This alarming statistic demands urgent attention, especially in a region that houses roughly 20% of the global population, with nearly 29% of its residents living below the poverty line.

In contrast to East Asia and the Pacific, where neighboring countries conduct about 50% of their total trade volume, South Asia sees significantly lower intra-regional trade. Ineffective trade and transportation facilitation mechanisms contribute to diminishing the benefits of trade liberalization promised by the South Asian Free Trade Agreement and other regional accords. Consequently, the World Bank labels South Asia as “one of the least integrated regions in the world.”

Prerequisites for Regional Integration in South Asia

Regional integration refers to the deliberate process through which two or more nation-states come to an agreement to cooperate closely in order to achieve peace, stability, and prosperity as divisions between countries created by geography, poor infrastructure and inefficient policies are an impediment to economic growth.

Regional integration allows countries to overcome expensive divisions by integrating the markets for goods, services, and factors. This process facilitates the flow of trade, capital, energy, people, and ideas, leading to increased interconnectedness and mutual benefits.

To leverage geographical proximity in South Asia, stakeholders must prioritize overland transport corridors to foster regional integration. In this context, they can efficiently manage land borders and develop infrastructure to reduce the time and costs associated with these initiatives. Experts widely recognize that sbolstering cross-border infrastructure, such as Integrated Check-Posts (ICPs), and expanding road, air, and rail links are essential prerequisites for creating a tightly interconnected South Asian region.

This assertion relies on a comprehensive body of literature on trade facilitation, which emphasizes the crucial role of establishing adequate physical infrastructure, suitable customs clearance frameworks, a unified single window system, and supplementary facilitation measures like ICPs to realize significant intra-regional trade benefits. Developing such infrastructure brings numerous benefits, as it not only enhances trade but also fosters interpersonal connections within the region.

With a heightened focus on land infrastructure, we must highlight that improving the inland waterway network offers a practical solution to ease congestion on land routes while aligning with India’s objective of effectively connecting the northeast with the broader hinterland through waterways. These infrastructure enhancements not only improve regional connectivity but also strengthen production networks and value chains.

Driving Forces Behind South Asia’s Connectivity Agenda

In any analysis focused on advancing regional connectivity in South Asia, we must acknowledge India’s pivotal role as a fundamental factor that significantly influences the outcome. Over the past decade, India has worked to improve infrastructure by modernizing customs stations into Integrated Check Posts (ICPs) and expanding rail networks such as the Agartala–Akhaura (India-Bangladesh) and Jogbani–Biratnagar (India-Nepal) lines, along with establishing new border checkposts, particularly between India and Myanmar.

India and Bhutan have recently signed an agreement to establish a cross-border railway link that will connect Kokrajhar in Assam to Gelephu in Bhutan. This initiative aims to create additional cross-border rail connections and immigration checkpoints, with clear expectations that economic trade, interpersonal relationships, cultural exchanges, and tourism between the two nations will significantly increase in the coming years.

The establishment of the Schengen Area has led to significant consequences in Europe. By eliminating internal border controls among participating nations, the Schengen Agreement enables the smooth transit of commodities, services, and people across a large part of Europe, enhancing trade by an average of approximately 2.8%.

By drawing comparisons to the accomplishments of the Schengen Area, India’s initiatives in the region are positioned to bring about comparable favorable results, fostering enhanced regional collaboration and prosperity in South Asia.

Moreover, India’s pivotal role in these connectivity initiatives is not only acknowledged within the country, but also by other nations. India is recognized as central in supporting and propelling these projects forward, with the understanding that its involvement is crucial for the successful implementation of such measures in the sub-continent.

An illustrative example is the announcement made by King Jigme Khesar Namgyel Wangchuck of Bhutan regarding the creation of the Gelephu Special Administrative Region (SAR) as part of the Gelephu Smartcity Project.

Through this undertaking, an economic corridor connecting Bhutan with Assam and South Asia with Southeast Asia will be feasible and is poised to attract quality investments to the region. Nepal has also secured India’s commitment to provide the landlocked country with the use of its internal waterways for trade along with the development of two hydropower projects and the construction of a petroleum pipeline.

By tapping into India’s transmission grid, Nepal also plans to supply Bangladesh with up to 500 megawatts (MW) of hydropower, an initiative that is expected to amplify cross-border electricity trading within the South Asian vicinity. These activities, along with aligned policies and development efforts, show a promising path toward increased regional integration. As India engages in these regional initiatives, it’s crucial to promote collaboration and avoid any impression of a dominant ‘big brother’ position.

Likewise, the strategic geographical positioning of Bangladesh establishes it as a pivotal entity in numerous connectivity projects both within the region and inter-regionally, notably the Trans-Asian Railway and the Asian Highway. Sharing borders with India and Myanmar, Bangladesh plays a vital role in connecting South and Southeast Asia. The nation focuses on improving physical infrastructure and promoting interpersonal interactions within the region.

The pressing necessity for enhanced regional connectivity has been widely acknowledged by the senior political leadership in Bangladesh, reflecting similar sentiments across the region. Prime Minister Sheikh Hasina, for instance, eloquently emphasized the significance of improved regional connectivity during her address at the 18th SAARC Summit in Kathmandu in 2014, where she said “well-connected regions are crucial for the promotion of peace and stability within communities.”

Regional and Global Efforts to Enhance Connectivity in South Asia

Despite political deadlocks, regional alliances like the South Asian Association for Regional Cooperation enhance connectivity through initiatives such as the BBIN Motor Vehicle Agreement, the SAARC Regional Railways Agreement, and international efforts by the World Bank by allocating a substantial financing of $1.03 billion for enhancing regional trade in Bangladesh and Nepal.

According to the World Bank, the objective of this initiative is to decrease trade and transportation costs and to diminish transit duration along crucial regional routes. Moreover, the Bank’s ACCESS Program, geared towards expediting transport and trade connectivity in Eastern South Asia, is tailored to aid the respective governments in surmounting significant barriers to regional trade.

Transitioning from manual and paper-based trade processes to more efficient systems, upgrading insufficient transport and trade infrastructure, and reforming restrictive trade and transport regulations and procedures are essential parts of this program. The program also seeks to facilitate the integration of landlocked nations such as Bhutan and Nepal with gateway countries like Bangladesh and India, thereby enhancing their connectivity and trade prospects.

Challenges in Achieving Regional Connectivity in South Asia

The vision for better regional connectivity in South Asia faces several challenges. First, political issues and past tensions between India and Pakistan have led to limited trade agreements and transit rights. Different subregions are developing their infrastructure, with India focusing on the east and Pakistan on Afghanistan and Central Asia. This has increased rivalry between New Delhi and Islamabad, especially with China’s involvement with Pakistan through the Belt and Road Initiative (BRI). Second, while India has improved its infrastructure, other countries in the region have not progressed as much.

The infrastructure disparity, particularly in transportation and digital networks, hinders efficient regional integration and must be addressed as a priority. While constructing high-end infrastructure may involve substantial initial expenses, the long-term benefits underscore the value of these significant investments.

Furthermore, the region’s trade potential is underutilized due to varying customs procedures, bureaucratic delays, and inconsistent trade policies. This regulatory disharmony discourages businesses from engaging in regional ventures and affects the flow of foreign direct investments. Thus, overcoming these obstacles must be the foremost priority for all South Asian countries in their pursuit of enhanced regional connectivity.

Conclusion

In a region with rapidly growing economies like India and Bangladesh, improving regional connectivity is crucial for addressing common issues such as poverty, border conflicts, and climate change. In today’s interconnected world, better connectivity is not just about economic transactions; it is essential for deeper regional integration, achieving common goals, and fostering positive political dialogues.

Although enhancing regional connectivity in South Asia poses challenges, the potential rewards are significant and extend beyond economic gains. The collective efforts of South Asian countries, supported by institutions like SAARC and the World Bank, are vital for realizing a vision of a connected, prosperous, and unified South Asia. This approach not only promises to bridge physical distances but also to strengthen socio-economic bonds among the nations in the region, setting a precedent for collaborative success globally.

Ms. Akshaya S is a Post-Graduate Student at the Department of International Studies in Stella Maris College (Autonomous), Chennai, India.

Views expressed are of the author and do not necessarily reflect the views of the CHSIA.