Trade Growth Hindered by Lack of Inter-country Infrastructure Connectivity in South Asia

Trade Growth Hindered by Lack of Inter-country Infrastructure Connectivity in South Asia

Participants in the second session of the first day of the Nepal Infrastructure Summit 2024highlighted that the absence of inter-country infrastructure connectivity in South Asia is obstructing trade growth in the region. The session, organized jointly by the Ministry of Physical Infrastructure and Transport and the Confederation of Nepalese Industries (CNI), featured experts emphasizing the need for inter-country infrastructure connectivity. Dr. Shankar Sharma, former Nepali Ambassador to India and former Vice Chairman of the National Planning Commission, was the keynote speaker for the session on Regional Infrastructure and Integration. He noted that despite South Asia being a large region in terms of population and geography, it exhibits the lowest levels of infrastructure connectivity and integration. “To enhance regional trade in South Asia, transportation connectivity among these countries must be improved,” he stated. He attributed the low connectivity to political issues, particularly the strained relations between India and Pakistan. Dr. Sharma stressed the importance of prioritizing rail transport, shipping, integrated checkpoints, and digital connectivity for achieving low costs and high returns. “In the context of Nepal, we must focus on integrating with other South Asian countries through the construction of power transmission lines. In recent years, electricity trade between Nepal and India has been increasing, and this should be further promoted. Bangladesh’s inability to import electricity from Nepal due to the lack of transmission lines highlights the importance of infrastructure integration among countries,” he said. He also emphasized the need to prioritize increasing private sector and financial institution investments for infrastructure project development. He pointed out that without integrating the services provided by regional infrastructure, countries and cities in this region cannot connect effectively, adding that the investment gap in South Asia presents a challenge to infrastructure integration. Devendra Dahal, Minister of Physical Infrastructure and Transport, who chaired the session, indicated that the government is prioritizing increasing interconnectivity through the development of the transportation sector in South Asia. “Connectivity will be enhanced through the development of aviation, railways, roads, and shipping. The government is committed to advancing the BBIN Motor Vehicle Agreement and taking necessary steps to boost inter-country trade and the economy,” he said. He mentioned that 57 projects under the Ministry of Physical Infrastructure and Transport are based on foreign assistance and that the government is placing a high priority on increasing private sector investment for infrastructure development. Another keynote speaker, Bo Lingam, CEO of AirAsia Group, shared that AirAsia is the fourth largest airline in Asia and is in the process of commencing operations in Nepal. “This will significantly contribute to the growth of transportation and tourism in Nepal and help increase the number of tourists arriving from the Southeast Asian region,” he stated. He emphasized that Nepal’s role in enhancing inter-country and inter-regional connectivity in tourism through air travel is crucial. He also underscored the need for an agreement to open up aviation between ASEAN and South Asia. Kulman Ghising, Managing Director of the Nepal Electricity Authority, highlighted that the construction of inter-country transmission lines is a priority. He noted that some transmission line projects with India are gaining momentum and that efforts are underway to establish necessary transmission lines for electricity export to Bangladesh. He also mentioned that the remaining segments of the East-West transmission line are progressing, which will enhance the availability of quality electricity. Soumya Chattopadhyay, Senior Program Officer at the Asian Development Bank's India Resident Mission, stated that efforts are underway to improve transportation connectivity among countries in the region through project development and trade growth. “The Asian Development Bank is making significant investments to provide landlocked countries like Nepal and Bhutan access to ports and facilitate smooth trade,” he added. He highlighted that enhancing access between Nepal's western region and India could provide substantial support for economic growth. He emphasized that Nepal should prioritize not only infrastructure development but also the software aspects related to it. Rajan Sharma, former president of the Nepal Freight Forwarders Association, noted the challenges faced due to the absence of freight forwarding regulations. He stated that while they are a crucial stakeholder in trade, they lack the necessary facilities and conveniences. “Whether for domestic or inter-country transport, the lack of effective coordination among stakeholders involved is the biggest issue,” he remarked. The session was moderated by Khadga Bahadur Bista, Executive Director of the Millennium Challenge Account (MCA) Nepal. The second session primarily focused on the ongoing initiatives in regional infrastructure development and the economic growth that integrated service promotion in infrastructure projects could bring