Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation

This paper shows that there are significant prospects of rise in intra-regional trade among the four Eastern South Asian countries. The partial equilibrium modelling exercise helps identify the products with high export potentiality. Simulation exercise based on a global general equilibrium model suggests that though there are prospects of welfare gains for India, Pakistan and Sri Lanka, there are risks of welfare loss for Bangladesh and other LDCs in South Asia out of FTA in goods under the SAFTA agreement because of the fact that the trade diversion effects could be larger than trade creation effects for these countries. However, such welfare loss could be well compensated by the rise in welfare due to improvement in trade facilitation among the South Asian countries. It also appears that the gains from trade facilitation are much bigger than the gains from trade liberalisation. Interactions with the stakeholders in Bangladesh helped identify a number of factors which are constraining trade in Eastern South Asia sub-region. These include inadequate facilities at the land and sea ports, weak physical infrastructure, inefficient bureaucracy, corruption and several forms of NTBs. Removal of such trade barriers though improvement in trade facilitation measures will generate significant rise in trade among these countries.