Is South Asia ready for a Regional Motor Vehicles Agreement?


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Trucks loading goods
Trucks waiting to unload their goods in Bangladesh. Photo By Erik Nora/World Bank

Judging by the number of views of the recent Facebook livestream event on intra-regional trade and investment in South Asia, there is significant interest in this topic. And there should be, given that there remain many important and untapped opportunities to use the power of trade and investment to enhance economic opportunities, including for lesser-skilled people and women in the region.

According to respondents of the Facebook poll conducted during the above event in May 2016, the most important policy to enhance intra-regional trade would be to invest in connectivity and border crossings.  Policy makers seem to realize this as well. Over the last two years, new efforts to deepen South Asian cooperation in trade have focused almost exclusively on trade facilitation issues. Let me elaborate.

In June 2015, the transport ministers of Bangladesh, Bhutan, India and Nepal (BBIN) signed a landmark Motor Vehicles Agreement (MVA) to allow smooth passage of goods and passenger vehicles in each other’s territories.  This agreement has now been ratified in all the four countries (Bhutan was the most recent to come on board, in June 2016), and paves the way for its implementation. For those who have seen the process of exporting country vehicles loading their cargo at the border into the trucks of the importing country, the implications are quite far-reaching for efficiency and costs. These developments are particularly important for landlocked Bhutan and Nepal.

Cooperation between India and Bangladesh is deepening at a faster pace than any other bilateral pair of countries in South Asia, and this includes developments in trade. Thus, in June 2016, they began transshipment operations, that would allow India to use Bangladesh’s Ashuganj port to send goods to Tripura and the rest of the isolated Northeastern belt of India. This is part of a revised inland trade protocol that would also allow Bangladesh to access Bhutan and Nepal via Indian territory. Earlier, in June 2015, two additional bus services, covering Kolkata-Dhaka-Agartala and Dhaka-Shillong-Guwahati, were flagged off by the Prime Ministers of the two countries. These would enable West Bengal to link with Northeast India via Dhaka.

Similarly, Nepal’s sea access got a major boost in June 2016, when India and Nepal agreed that India’s Visakhapatnam Port would be the second gateway port for Nepal, in addition to Kolkata-Haldia. On South Asia’s Western front, while there is currently less momentum to push regional cooperation, the emphasis has remained on trade facilitation. Thus, Pakistan and Afghanistan have focused much of their efforts on trade to improve the functioning of the 2010 Afghanistan Pakistan Trade and Transit Agreement (APTTA), and to also include Tajikistan in the agreement.

While the above summary points to some recent encouraging developments, especially on the Eastern side of South Asia, there remains a very big unfinished connectivity agenda. This could include the following steps. One, negotiate a Motor Vehicles Agreement for the whole of South Asia—a potentially transformative event. Two, address inefficiencies in border crossings to reduce costs and the time required for goods to cross. Three, agree on a framework to address non-tariff barriers, which are a constant irritant in trade. Four, negotiate and implement the protocols to implement the MVA in the BBIN countries, which could also inspire the rest of South Asia to do the same. 
Soumya Chattopadhyay
July 22, 2016

Bhutan has not yet ratified the MVA. The lower house of Bhutan's parliament has approved it in June 2016. Now the MVA will be considered for approval by the upper house of the parliament in November/December, 2016. The MVA will be ratified only if both houses of parliament approve it.

Sayoni Chaudhuri
August 03, 2016

Instead of having a proposed MVA in whole of SOuth Asia; i think a better connectivity option would be to focus on BIMSTEC and may be go for an MVA, thus increasing connectivity between South and Southeast Asia.

Nihal U Pitigala
August 03, 2016

Sanjay, This is, indeed, a timely article. The potential for the MVA, if implemented properly, will greatly facilitate trade and transport within the BBIN countries. However, my recent work in the region suggests that the benefits are not well-understood by stakeholders which can slow down implementation--ratification is only the start of a potentially long process to agree and implement the necessary protocols. With the growing economic opportunities in the adjacent Southeast Asia region, the extension of the MVA to BIMSTEC may be an avenue to garner greater support within the region.

Abu Reza
August 15, 2016

The connectivity projects are helpful promoting trade, but a connectivity pricing based on cost covering principle, as in Europe, is missing. Bangladesh is seen on borrowing spree for implementation of all projects proposed by India, without reference to cost efficient route, optimum allocation of traffic or their phase-wise development. WB should take the lead in devising a transit transport framework, among the four countries Bangladesh, Bhutan, India and Nepal, and recommend optimum solutions based on traffic development, efficient allocation of traffic as between routes and modes, on cost covering principle and the WB should take initiative to recommend a tariff structure for each route, mode and commodity. No one should feel cheated and deprived.