Report
Report
Report
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 73<br />
important role in facilitating informal trade at the<br />
border. However, while informal trade may have<br />
initially been confined within short distances and<br />
neighbourhood communities, it has expanded and<br />
enveloped the entire region.<br />
Taneja (2004 and 2005) has intensively worked on<br />
informal trade in the region and has analysed the<br />
magnitude and features of informal trade between<br />
countries. The main finding is that total informal trade<br />
in South Asia is US $1.5 billion, which is 72% of formal<br />
trade (for the years for which data are available). Some<br />
survey results even put the magnitude of informal trade<br />
at more than 100% of official trade, as in the case of<br />
Bangladesh exports to India (Bakht and Sen 2002).<br />
India’s Geographic Position<br />
India is the central actor in South Asia’s informal trade<br />
as it is the only country that shares borders with almost<br />
all the countries and the other countries do not share<br />
borders with each other except India. India is also a<br />
dominant and key player in the region due to its size,<br />
geographic location, and economic performance. India’s<br />
recent high growth can now be shared by the countries<br />
of the subregion. The analysis herein therefore takes<br />
on an Indo-centric approach to demonstrate the gains<br />
from transport and trade facilitation.<br />
Table 9.3 India’s Informal and Formal Trade with<br />
South Asian countries (US $ million)<br />
Trade Balance Total Trade<br />
Informal Formal Informal Formal<br />
Bangladesh (1992-93) 285.0 341.2 313.0 356.9<br />
Bhutan (1993-94) 30.1 4.0 32.6 10.0<br />
Nepal (2000-01) –48.0 –114.0 408.0 396.0<br />
Pakistan (2004-05) 503.8 416.6 524.6 602.0<br />
Sri Lanka (2000-01) 163.7 595. 207.3 685.2<br />
Source: Taneja, 2005.<br />
Some of the features of India’s trade with its neighboring<br />
countries in the region are as follows (Taneja,<br />
2005):<br />
• Although the north-east region of India would<br />
benefit more from trade with Bangladesh, due to<br />
its proximity, Taneja finds this is merely 4% of<br />
Indo-Bangladesh trade while the bulk of the trade<br />
is accounted for by West Bengal, probably due to<br />
cultural and linguistic similarities. Trade has been<br />
very concentrated and localised over land routes.<br />
Both official and unofficial trade surplus is with<br />
India. Although tariffs have come down substantially<br />
in the 1990s, the two countries have the<br />
highest NTB coverage in the region for primary<br />
and manufactured goods (66 and 52% respectively).<br />
There have been stringent over invoicing<br />
of both export and import between India and<br />
Bangladesh. The major official and unofficial trade<br />
items have been found complementary and noncompetitive<br />
to each other. 5 Detailed commoditybased<br />
surveys show that a significant share of<br />
household consumption of goods in Bangladesh<br />
comes from informal imports (Bakht and Sen<br />
2002). 6<br />
• India’s informal trade with Bhutan is three times<br />
as much as its formal trade. Bhutan’s trade deficit<br />
has increased from a low of 4.3% of GDP in 1996<br />
to 16.7% in 2000, and 22.6% in 2001. The 2001<br />
trade deficit was $81.7 million, 56% of which was<br />
with India. The 1995 Agreement between India and<br />
Bhutan allows for free trade between the countries<br />
and unhindered transit facilities to Bhutan’s trade<br />
with third countries. 7 Hence, the high informal<br />
trade figures are surprising.<br />
• India’s informal trade with Nepal is almost as large<br />
as its formal trade. It is observed that in the case of<br />
Nepal, a large part of informal imports to India<br />
comprise third country goods rather than a similar<br />
composition of commodities that occurs with<br />
formal trade. India shares a very porous border<br />
with Nepal and goods are carried across mainly by<br />
motorised and non-motorised transport over land.<br />
However, ambiguities in definition of rules of origin<br />
and consequent harassment by customs officials<br />
have driven traders to informal trade.<br />
• India’s informal trade with Pakistan is estimated<br />
at 87% of formal trade. Informal trade takes place<br />
through five major routes (Dubai-Bandar Abbas-<br />
Herat-Kabul-Jalalabad-Bara, Dubai-Bandar Abbas-<br />
Herat-Kandahar-Wesh-Chaman, Dubai-Bandar<br />
Abbas-Herat-Kandahar-Wesh-Noshki-Quetta, Sind<br />
cross-border, and India-Dubai-Karachi) and six<br />
5<br />
http://www.capexil.com/article/June-22nd-98.html<br />
6<br />
Household surveys comparing consumption with production and imports show a gap attributed to informal imports. For<br />
example 15% of cereal consumption come from informal trade. The ratio ranges from 61% for vegetables to 19% for rice.<br />
All of these were for the period 1995.<br />
7<br />
http://www.nationsencyclopedia.com/Asia-and-Oceania/Bhutan-FOREIGN-TRADE.html (U.S. Library of Congress)