Report

76 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
the main reason for informal trade (for lower value
goods) is to avoid high transactions costs. The inadequate
transportation systems between the two countries
have led to high transportation costs with respect to
port congestion, excessive documentation, slow
movement of goods, etc.
The Potential
It is estimated that the removal of all tariffs would
enhance intra-regional trade by a factor of 1.6, or 5%
increase in trade for every 1% reduction in tariff (Mehta
and Bhattacharya 2000). India has persistently had an
export surplus with Bangladesh and this surplus has
been increasing over time. However, we can expect an
increase in Bangladesh imports with the opening of the
Indian market due to the lifting of quantitative
restrictions on tradable in SAARC. Since SAFTA has
been adopted, SAARC countries are expected to further
reduce tariffs on a sectoral basis. With an increasing
pressure on an already weak infrastructure, the entire
system may collapse if appropriate remedial measures
are not taken with regard to the movement of goods
between the two countries.
Padeco (2005) computes that goods worth about
US$1,650 million are presently moved across the six
SASEC corridors and that transport cost savings of
about US$25 million may be annually realisable.
Reductions in transport costs have similar benefits to
reductions in tariffs as there is a general stimulus trade,
estimated at 5% for every 1% reduction in cost. The
reduction in the costs to end-users of goods moved
along the corridor is estimated at an average of 1.5%
average which will stimulate trade and lead to an
estimated 1% addition to regional GDP. The total first
year direct benefits for the proposed measures are
calculated as about US$25 million, with over 75% of
this sum being accrued from the Kolkata-Petrapole-
Benapole-Dhaka corridor. On this corridor, large
volumes of traffic are combined with large potential
benefits. The distribution of benefits will be between
international shipping companies which may gain about
6% of the total benefits; truck operators who may gain
about 41% of the initial total benefits from a combination
of savings in vehicle time through reduced delays;
reduced speed/facilitation payments; and reductions
cargo loadings; Bangladesh Railways and the Indian
IWTC, who may gain 5% of total benefits from reductions
in operating costs; and importers, consumers of
imports and producers of exports who may gain 48%
of total benefits, largely from reduced cargo detention
times.
These latter benefits are most likely to filter to the
poorest sections of the community. It is estimated that
Bangladesh, will gain about 63% of total benefits, this
mainly due to savings at the Bangladesh/Indian borders,
which will mainly benefit Bangladeshi consumers,
producers and Bangladeshi truck operators. India will
gain about 21% of total benefits and the proportion
of these savings that are likely to be absorbed by the
Indian trucking industry. Accordingly, GDP in
Bangladesh may grow by 1.6%. Subregional parts of
India, mainly Bihar and West Bengal, may grow by
0.4% growth which is lower than that for the region
as a whole, because of the very large population in the
subregion and the country’s share of benefits is
incommensurate with the population affected.
The socio-economic impact on the rural population
living along a transport corridor needs to be considered
and quantified. This includes impacts on agricultural
activities, non-agricultural activities, distance to
markets, and access to education, health facilities, and
to political participation. These translate into measurable
benefits (time savings, improved connectivity and
access to markets), reflected as:
• National benefits manifested as increased trade
between countries, reduced vehicular operating
costs, and times savings
• Local benefits such as increased local employment
due to better job opportunities, improved health
due to smoother traffic flows and less congestion,
better access to education due to improved
connectivity. 9
The Project
For this analysis, we consider a specific section of the
corridor which will help in immensely easing the heavy
current as well as future traffic flows. NH34 and SH1
have already been considered under ADB’s West Bengal
Corridor Development Project (ADB 2001a and b). We
9
AITD (2003) estimates that for a national highway: mobility for work increases 32%; use of the road for various purposes
increases 79%; probability of incidence of poverty reduces 17%; rural proportion of non-agricultural workers increases as
much as 50%; over all school enrolment increases 40%, and for girls alone 17%; and access to amenities such as electricity,
drinking water, and sanitation increases 22%