Trade in Transport Services in South Asia. Prabir De RIS, New Delhi 18 April 2013
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1 Trade in Transport Services in South Asia Prabir De RIS, New Delhi 18 April 2013
2 Outline Importance of transport services GATS and transport services Transport services in South Asia Major barriers to trade and transport servcies Challenges Recommendations
3 Why so important? Essential for the physical movement of goods and services Produces tradable services Generates large scale employment (labour-intensive) Helps reduce poverty Transportation services is very unique in terms of generation of capital as well as labour. In some transportation services sectors such as air transportation, difficult to substitute capital for labour
4 Service links drive production network and integration Source: Kimura et al (2009)
5 Drivers of growth and rationale Trade in transportation services has grown rapidly, primarily driven by its import. In a static sense, benefits coming out of transport services have become negative or negligible for developing countries while import of transportation services has been helping India s trade to reach global market, surplus generated in services trade sector is being wiped out by the rise in import of transportation services. In a dynamic sense, benefits are large, having strong spill over effects. The expansion of transportation services and the emergence of new type of transportation services have been driven by income-related demand shifts, technological developments, falling costs of communications and the increased presence of MNEs. Transportation services trade liberalization is a necessity for the integration of the world economy.
6 Transport services in GATS Air transport Land transport Maritime transport Services auxiliary to all modes of transport Logistics services
7 Air transport services Air transport services are governed by a specific annex of the GATS. A first review took place in The second review is on-going. In preparation for the second review, WTO developed the Quantitative Air Services Agreements Review (QUASAR) database and methodology to assess, on a universal scale, the degree of liberalization achieved by the air transport sector. WTO also produced the Air Service Agreements Projector (ASAP), an analytical tool that allows for the visualisation of elements of the QUASAR database: information on an economy's network of bilateral Air Services Agreements and correlated traffic flows. On 16 January 2013, the WTO released an update to its ASAP tool, based on 2011 regulatory and traffic data.
8 Land transport Land transport sector covers a wide range of activities which often have little in common. Some types of transport are highly capitalintensive (rail transport, pipelines), whereas others require relatively little investment (taxis, trucks, even coaches). Some types of transport employ large numbers of people (rail transport, for example, taxis, HGVs), whereas in other cases labour costs are of only marginal importance (pipelines).
9 Maritime transport Maritime services have benefited in recent years by considerable expansion fostered by globalization. Many restrictive maritime policies have disappeared or ceased to be applied. Maritime services is an area where negotiations were scheduled to improve on the commitments included in the initial Uruguay Round schedules of commitments. Negotiations were originally due to end in June 1996 but participants failed to agree on a package of commitments. Talks resumed when the new services round of negotiations started in Commitments already exist in some countries' schedules, covering the three main areas in this sector: access to and use of port facilities; auxiliary services; and ocean transport.
10 Services auxiliary to all modes of transport Logistics services The sector includes cargo handling services, storage and warehouse services, freight transport agency services including other auxiliary transport services, and other supporting and auxiliary transport services (freight brokerage services; bill auditing and freight rate information services; transportation document preparation services; packing and unpacking services; freight inspection, weighing and sampling services; and freight receiving and acceptance services).
11 Basic principles of GATS All services are covered by GATS MFN treatment applies to all services, except the oneoff temporary exemptions National treatment applies in the areas where commitments are made Transparency in regulations, inquiry points Regulations have to be objective and reasonable International payments: normally unrestricted Individual countries commitments: negotiated and bound Progressive liberalization: through further negotiations
12 GATS modes Services supplied from one country to another (e.g. international air or ocean shipping), officially known as cross-border supply ( mode 1 ) Consumers or firms making use of a service in another country (e.g. transport repair, fueling, etc.), officially consumption abroad ( mode 2 ) A foreign company setting up subsidiaries or branches to provide services in another country (e.g. transport company setting up operations in a country), officially commercial presence ( mode 3 ) Individuals travelling from their own country to supply services in another (e.g. transport engineer or consultants), officially presence of natural persons ( mode 4 )
13 Transport services in South Asia
14 South Asia s rising share in World trade in services world services trade World trade in transport services World trade in services (% World trade in transport services World trade in services World trade in transport services Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: BOPS, IMF
15 Transport services one of the major contributors to services trade (%) Bangladesh Bhutan , 48% India's Trade in Services in 2011 India Maldives Nepal Pakistan Export India , 52% Sri Lanka Source: BOPS, IMF
16 South Asia having rising share in world transport services, driven by India South Asia s Share in World Transport Services Trade in Transport Services % (share in world transport servcies (US$ billion) World South Asia India India s share in South Asia (%) Source: BOPS, IMF
17 Volume of transport services, 2011 South Asia Export Import Total Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: BOPS, IMF (US$ billion)
18 Trends in transport services Export of Transport Services Import of Transport Services Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: BOPS, IMF
19 Trends in transport services, freight Export Import CAGR CAGR (US$ million) (%) (US$ million) (%) Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: BOPS, IMF
20 Rising growth and increasing deficit in transportation services CAGR (%) Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Volume of Trade Deficit (US$ billion) Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: Calculated based on BOPS, IMF
21 Widening trade deficit Passenger Freight (US$ million) (US$ million) Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Source: BOPS, IMF
22 Three South Asian countries follow world trend in services trade deficit Total services Transport services Total services (US$ billion) Transport services Total services Transport services Banglades h Bhutan India Maldives Nepal Pakistan Sri Lanka World Source: BOPS, IMF
23 Major barriers and challenges to services trade
24 Major barriers Large trade and investment barriers (visa restrictions, domestic regulations, etc.) Inadequate infrastructure national and regional (inadequate & poor stock and missing links in infrastructure) Absence of regional transit trade (no regional transit) High trade costs (transport costs outweigh tariffs) Others
25 Trade and connectivity flow South Asia with neighbouring regions rising trade not supported by adequate connectivity Europe Southwest Asia Central Asia East Asia South Asia Strong Moderate Middle east/ Gulf Southeast Asia Weak ANZ + Pacific Africa Source: De (2012) Trade linkage (strong) Connectivity linkage (weak)
26 Logistics Performance Index Country India Afghanistan Bhutan Nepal Pakistan LPI Customs Infrastructure International shipments Logistics competence Tracking & tracing Timeliness Source: World Bank
27 Trading across Border Afghanistan Bhutan India Nepal Pakistan Documents to export (number) Time to export (days) Cost to export (US$ per container) 2,180 3,545 1,150 2, ,120 1,600 1, Documents to import (number) Time to import (days) Cost to import (US$ per container) 2,100 3,830 1,780 2,330 1,324 1,200 1,725 2, Source: World Bank
28 Some major challenges Cumbersome procedures, archaic laws and nontransparency in domestic regulations Poor logistics infrastructure and complex supply chain High time and cost to export and import Unfavourable payment system, mistrust and high bank & insurance premium Lack in simplification and harmonization of trade procedures, more particularly at the border. Absence of regional corridor and modern corridor management techniques No master plan for South Asia connectivity as yet Lack of financing and no resource mobilisation plan for implementing regional connectivity projects No regional institution for trade facilitation including services trade.
29 Regional corridors in neighbouring regions Central Asia CAREC Economic Corridors South Asia SRMTC? Southeast Asia IMT-GT Economic Corridors GMS Economic Corridors BIMP-EAGA Regional Corridors
30 Trade and connectivity flow within South Asia lopsided flows, but having high subregional potential Central Asia WSAS ESAS AFG Nepal Bhutan Southwest and Gulf Pakistan India ILS Bangladesh 38% share in regional trade (2011) Corridor modes Source: De (2012) Air Ocean Land MDS Sri Lanka 29% share in regional trade (2011) Strong Moderate Weak Southeast and East Asia
31 Established railways, but gauge changes lead to multiple handling Source: taken from TAR, UNESCAP
32 Multiple handling in rail and road Trade Procedures at South Asia border points Source: Based on ADB
33 Supply Chain complexity
34 Need to facilitate express delivery chain in South Asia Pick-up Local station Gateway export Hub Gateway import Local station Delivery Source: Author
35 A Thai Case BPA Example Documents related to Exportation of Rice (from purchase order until the cargo container leaving the sea port) Documents involving 15 parties, and more than 1,140 data elements to be filled in Proforma Invoice (35) 2. Purchase Order (39) 21. Master Sea Cargo Manifest(17) Buy/Pay Docs 3. Commercial Invoice (51) 22. House Sea Cargo Manifest (37) 4. Application for Letter of Credit (24) 23. Export Declaration (114) 5. Letter of Credit (32) 24. Good Transition Control List (27) Packing List (25) Cargo Insurance Application Form (20) 25. Application for Permission to Export Rice (KP. 2) (24) 8. Cover Note (23) 26. Sales Report (KP 3) (21) Transport Docs 9. Insurance Policy (24) 27. Application for the Collection of the Permit for the Export of Rice (A. 3) (35) 10. Booking Request Form Border Crossing (25) 28. Permit for the Export of Rice (A. 4) (35) 11. Booking Confirmation Border Crossing (30) 12. Booking Request Form Inland Transport (16) 13. Booking Confirmation Inland Transport (18) 14. Bill of Lading (42) 15. Empty Container Movement Request (TKT 305) (20) 16. Request for Port Entry (TKT 308.2) (27) 29. Application for Certificate of Standards of Product (MS. 13/1) (44) 30. Certificate of Analysis (17) 31. Certificate of Product Standards (MS. 24/1) (45) 32. Certificate of Fumigation (21) 33. Application for Phytosanitary Certificate (PQ. 9) (29) 17. Equipment Interchange Report (EIR) (24) 34. Phytosanitary Certificate (33) 18. Container Loading List (28) 35. Application for Certificate of Origin (42) 19. Container List Message (32) 36. Certificate of Origin (38) 20. Outward Container List (34) * Number in parenthesis is the no. of data elements Regulatory Docs
36 A Business Process Analysis - in Exporting Jasmine Rice from Thailand - Day days 1 16 days are required for these procedures and documents transaction 2 days 2 3 days 3 4 Time-Procedure Chart 1 day 2 days day 11 3 days 12 1 day 13 4 days 14 Process 1. Buy - Conclude sales contract and trade terms 2. Obtain export permit 3. Arrange transport 4. Arrange the inspection and fumigation 5. Obtain cargo insurance 6. Provide customs declaration 7. Collect empty container(s) from yard 8. Stuff container(s) 9. Transfer to port of departure 10. Clear goods through customs 11. Handle container at terminal and stow on vessel 12. Prepare documents required by importer 13. Verify the accuracy/authenticity of exported cargo 14. Pay - Claim payment of goods
37 Export of carpet by Nepal through Port of Calcutta Product: Carpet Time procedure chart
38 Export and import time in transit corridor Process Product Exporter Importer Procedure Time (Days) Buys (pre-shipment procedure) 5.00 Export Carpet Nepal Third Export/Import procedures Documents preparation 8.00 country Inland transportation 2.00 Time at Customs 2.00 Time at border 2.00 Time at transit 9.00 Pay 1.00 Buys (pre-shipment procedure) 4.00 Import CSO Third country Nepal Export/Import procedures Documents preparation Time at transit Time at Customs 1.00 Time at border 1.00 Inland transportation 1.00 Pays (post-shipment procedure) 1.00
39 Good progress, but manual handling of documentation still in South Asia Indian Export of Fabrics to Bangladesh, 2010 Sr. No. Process Submission of Documents 1 Buy Electronic and manual 2 Obtain export permit Electronic 3 Contract registration and inspection Electronic and manual 4 Excise inspection Manual 5 Obtain cargo insurance Electronic 6 Arrange pre-shipment inspection Manual 7 Obtain certificate of origin Electronic and manual 8 Obtain SAFTA certificate Electronic and manual 9 Submit customs declaration Electronic 10 Arrange transport for loading Manual 11 Transfer to LCS Manual 12 Parking of goods Manual 13 Customs clearance Electronic and manual 14 Send the goods to importer s warehouse Manual 15 Pay Electronic
40 Absence of international conventions on trade & transport facilitation Convention Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Convention on Road Traffic (1968) Convention on Road Signs and Signals (1968) Customs Convention on Temporary Importation of Commercial Road Vehicles (1956) Customs Convention on Containers (1972) Convention on International Transport of Goods under Cover of TIR Carnets (1975) Convention on the Contract for the International Carriage of Goods by Road (1956) Convention on the Harmonization of Frontier Controls of Goods (1982) No Yes No Yes No No Yes Yes No No No Yes No No Yes No Yes No No No No No No No No No No No No No No No Yes No No No No No No No No No No No No No No No No No No No No No No No
41 Demonstration run of container train between ECO and SAARC? Source: Drawn based on information of ECO & UNESCAP
42 SAARC connectivity mixed progress Negotiation of Regional Transport and Transit Agreement, and a Regional Motor Vehicle s Agreement (ongoing). SAARC Expert Group finalized the text of the Regional Agreement on Railways in August Launch of feasibility studies of pilot projects: Birganj and Kathmandu (160 km) completed in October 2008 negotiation ongoing Kathmandu-Birgunj-Kolkata/Haldia rail corridor Birgunj-Katihar-Singhabad-Rohanpur-Chittagong with links to Jogbani, Biratnagar and Agartala rail corridor Agartala-Akhaura-Chittagong rail corridor Construction between Agartala and Akhaura (14 km) is about to commence. Phuntsholing and Hashimara road corridor Ferry link - between Colombo and Tuticorin (started already) and Colombo and Cochin Karachi Mumbai ferry link Air link - Malé-New Delhi and Islamabad-New Delhi; Establishment of modern border crossing facility at Phuntsholing. Indian ocean cargo cooperation On-going projects: Feasibility study for India - Bhutan rail link Construction of railway line from Jiribam-Tupui (near to Imphal, India) has commenced Construction of Kaladan Multimodal Transport project has started in December 2010 Railway infrastructure improvement projects in Sri Lanka Intermodal connectivity Air Services Agreement (single ticket to fly between South Asian nations) Demonstration run of container train involving Bangladesh, India and Nepal is being planned
43 Progress in modernizing and opening of land customs stations India s Integrated Check Post (ICPs) project Attari already started working since April 2012 [spread over 118 acres, a passenger terminal 9,600 s.m; cargo terminal 4,700 s.m; separate import and export warehouses, 10,000 s.m., parking space 50,000 s.m., etc.) Opening of Banglabandha Fulbari land port for trade Opening of border haat in Baliamari (Bangladesh) Kalaichar (India), and ffew more border haats (e.g. between India and Bangladesh) coming up
44 Progress in Customs cooperation SAARC Agreement on Mutual Administrative Assistance in Customs Matter, signed in 2005 The Seventh Meeting of the Sub-Group on Customs Cooperation (11-12 February 2010) made following recommendations with a view to facilitating trade in goods in SAARC. Building infrastructure including roads and railways networks near the LCSs. Customs clearance procedures at LCSs need to be smoothened; Customs Administrations may consider a system of customs facilitation in which export documentation of one Member State could be considered by the Customs Administration in the importing country for the purposes of assessing and clearing the consignment. Need for developing an Electronic Data Exchange System within the region, including at LCSs, with a view to ensure better facilitation of trade in goods among the SAARC countries including improved compliance. SAARC Secretariat to develop a regional/sub-regional project to set up automated customs clearing mechanism at the designated LCSs. Harmonisation of 8-digit tariff lines is needed, and in order to make this task easier, all Member States would further provide upto only digit tariff lines with a trade potential of 75% (in value terms) in the region.
45 Recent development in Customs cooperation Declaration of the Fifteenth Meeting of the Committee on Economic Cooperation - Maldives, July 2012 (Source: SAARC Secretariat Press Release July 24, 2012) The Meeting recognised delays in customs clearance procedures and decided that henceforth electronic copies of specimen signatures and seals of officials authorised to sign SAFTA Certificates of Origin may also be accepted in addition to sending the original copies of such documents in order to save time and to ensure that the consignments are not held up at the customs border points. India Pak customs cooperation agreement, mutual recognition of standards and redressal of trade disputes
46 Encouraging progress in transit Common transit is must for a common market All SAARC countries have in-principally agreed to regional transit. Motor Vehicle Agreement is being negotiated. SAARC Expert Group finalized the text of the Regional Agreement on Railways in August Sub-regional transit has been agreed between India, Nepal, Bhutan and Bangladesh. Bilateral document between India and Bangladesh signed during the state visit of Indian PM to Bangladesh in September 2011 to facilitate overland transit traffic between Bangladesh and India Demonstration run of container train between Bangladesh, India and Nepal is getting ready. Huge trade opportunities if Afghanistan Pakistan Transit Agreement covers Western South Asia and Central Asia
47 Subregional transit better option to open regional transit ESAS AGH NPL BHU PAK IND BDG Proposed transit WSAS SOUTH ASIA Source: Author ESAS: Eastern South Asia Subregion WSAS: Western South Asia Subregion
48 Linking South Asia with neighbours Uzbekistan Afghanistan railway line (a section till Mazar-i-Sharif already opened) Highway in Afghanistan, aided by India TAPI gas pipeline China Nepal highway and railway India Nepal railway project, India Bhutan railway project, etc. India Myanmar Thailand trilateral highway (a section already in operation) India ASEAN ocean shipping network India ASEAN open sky Others
49 Three important developments on regional connectivity (Strong Impact on South Asian Trade Flow) 1. Transit for traffic between India, Bangladesh, Nepal, and Bhutan. 2. Integrated check posts (ICP) in Attari in Punjab, Moreh in Manipur, Petrapole in West Bengal, and Raxul in Bihar. 3. Pakistan ECO and India ASEAN connectivity projects, particularly Mekong India Economic Corridor (MIEC) and BIMSTEC Trilateral Highway
50 Policy options Overland connectivity is not a distant dream, it would increase transport services trade Strengthen Afghanistan - India Pakistan road, rail and air link South Asia Economic corridor! More direct links among ports. Few ports are directly connected No direct call of container shipping Open sky???. few airports are directly connected. New routes for cargo + passengers Complete ASA, & implement with all South Asian countries
51 Fostering South Asia transport services: Enabling environment 1. Accession to the International Conventions 2. Multimodal Transport and Transit 3. Strengthening and Harmonizing Rules, Regulations, and Standards 4. Demonstration Projects 5. Financing Cross-border Transport Projects 6. Strengthening Coordination among Countries and Stakeholders 7. Closer Cooperation on Security 8. Strengthening Regional Cooperation
52 Policy recommendations
53 Simplification of domestic regulation Domestic regulations perform the role of tariffs in regulating services. Domestic regulations need to be disciplined to help the growth of the services sector and exports Also need to retain those essential domestic regulations which support the growth of the sector itself.
54 Liberalisation of transport services Liberalization of trade in transportation services is must. Reforms should be undertaken to strengthen domestic transport services. Liberalisation would encourage: FDI flows, integration national economies more effectively reduce income and other disparities within and among countries.
55 Improvement in transport infrastructure Countries are characterized by high restrictions in services trade as well as dearth of infrastructure. Services trade facilitation indicators focus on both infrastructural barriers and regulated market structure. Infrastructure development would facilitate trade and income Convert land-locked into land-linked country Regional infrastructure and transit more important for LLDCs. Regional infrastructure fund important to support the development transport infrastructure Border infrastructure development More involvement of private sector and PPP initiative.
56 Some specific recommendations 1. Strengthen cross-border infrastructure (move from road corridors to economic corridors) 2. Accept subregional and subsequently regional transit 3. Fast track lane and priority of goods in transit to cross the border 4. Set-up SAARC Single Window (Customs) (pilot run of authorized economic operator, AEO; and mutual recognition agreement) 5. Simplification and harmonization of trade procedures, more particularly at border. 6. Introduce modern corridor management techniques in selected corridors 7. Promote multimodal transportation (with rail transit, regular container train in the region) 8. Improve the efficiency of border corridors (both side of border improvement in ICP project in parallel) 9. Liberalize visa regime 10. Open sky in South Asia 11. Effective project coordinationamong government stakeholders 12. Stronger institution (public-private interface)for trade facilitation is urgently needed. 13. Regional study for SAARC Master Plan of Connectivity should be done. 14. Set-up SAARC connectivity coordination committee to coordinate the Master Plan and its feasibility.
57 Thank you
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