Regional Consultation : Trade Facilitation Needs Assessment in South Asia

1. Regional Consultation : Trade Facilitation Needs Assessment in South Asia 17 June 2006, CalcuttaNisha Taneja

2. Defining Trade Facilitation • Narrow Definition: simplification, harmonization and automation of trade procedures • Broad Definition : includes all the formalities and procedures related to international trade and the transportation of goods and services across borders- including contractual, transactional and payments issues. • The latter also includes technical standards and regulations.

3. Why is trade facilitation important? • Trade facilitation reduces transaction costs and improves competitiveness • Transaction costs in the South Asian region are very high and are largely responsible for informal trade flows in the region • Informal trade at US $ 1.5 billion which is 72% of formal trade (US$ 2.0) billion

4. Factors accounting for high transaction cost • costs related to obtaining information related to trade and payments • Complex and cumbersome procedures • Inadequate transport infrastructure • Inadequate and inefficient banking facilities • Trade and transport bilateral and regional protocol

5. 1. Information costs • Information costs are high because of lack of knowledge and lack of transparency in procedures • Traders are often not equipped to deal with trade policy documents and procedures in the English language and hence have to incur costs

6. Suggestions • Information related costs can be reduced through increased used of dissemination of trade related information through the internet • Allow forms to be translated back and forth between English and local languages. This can be done with the use of appropriate software.

7. 2. Complex and Cumbersome Procedures • For example in India in order to export a trader needs to obtain 258 signatures, make 118 copies of the same information -key punching of which takes 22 hours. • Procedures are complex because the system for receiving export subsidies is very complex. • Even though export procedures are more complex than for imports, clearance is much faster for exports than for imports. • The focus has always been more on reducing transaction costs related to exports than to imports

8. Suggestions • Reduce, rationalize and harmonize procedures and documents • Simplify the process of export subsidies and eliminate those subsidies which are not consistent with the WTO • Countries should give equal emphasis to reducing transaction costs related to both export and import activity

9. 3. Inadequate transport infrastructure There is a dependence on only one major route Indo-Bangladesh : Petrapole/Benapole Indo-Nepal: Raxual /Birganj Indo-Sri Lanka: Chennai port to Colombo port Indo-Pakistan: Mumbai-Karachi

10. 4. Banking facilities • Some of the border points don’t have any banking facilities at all • For instance there are no banking facilities available at Mahadipur at the Indo-Bangladesh border

11. 5. Trade and transport bilateral protocols • The bilateral protocols in fact are responsible for high transaction cost • Indo-Bangladesh: • Indo-Pakistan:

12. What Needs to be Done • We need to identify trade facilitation needs and priorities to enable us to arrive at cost implications. • Task ahead for South Asian countries involves identification of • Costless change through improved efficiency • Costs related to automation • Costs related to infrastructure

13. South Asian countries need to come together to ensure that resources are pooled in a co-ordinated manner – thus all prospective donors should engage in technical assistance in a co-ordinated manner. One suggestion could be that multilateral agencies and developed countries come in as partners.

14. Technical assistance should be sought for both intra-SAARC trade and trade with the ROW. • Lessons should be learnt form the TBT and SPS Agreements so that the provisions on technical assistance ‘ensure’ that technical assistance is provided by the developed countries.

15. Thank You!