Increased regional trade can accelerate Bangladesh’s growth and create more jobs for men and women, the report said.
Trade within South Asia, according to the report, can grow three times, from $23 billion to $67 billion, by reducing manmade trade barriers.
The report ‘A Glass Half Full: The Promise of Regional Trade in South Asia,’ launched on Wednesday, documents the gap between current and potential trade in South Asia and provides a roadmap for deepening regional trade.
It identified four critical barriers to regional trade: tariffs and para tariffs, real and perceived nontariff barriers, connectivity costs, and a broader trust deficit.
Intraregional trade in South Asia remains one of the lowest in the world and accounts for about five percent of region’s total trade, compared with 50 percent in East Asia and the Pacific. Bangladesh’s trade with South Asia is only nine percent of its global trade.
“Bangladesh can become an economic powerhouse by deepening regional and global integration in trade, connectivity, energy and investment,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan, and Nepal.
“For increased regional trade, the country needs to focus on improving its trade policy regime, which currently has a strong anti-export bias.”
The costs of trade are much higher within South Asia compared with other regions: the average tariff in South Asia is more than double the world average.
South Asian countries have greater protection for imports from within the region than from the rest of the world.
Countries impose high para tariffs, and more than one-third of the intraregional trade falls under sensitive lists, comprising goods not included under South Asia Free Trade Area (SAFTA)’s tariff liberalization.
In the case of Bangladesh, nearly 46 percent of its imports from South Asia fall under sensitive lists.
Countries are yet to reap the benefits of shared land borders. This arises from deficiencies in border regimes, including limited information flows on nontariff measures, and inadequate use of modern clearance procedures. Limited air connectivity makes regional trade and investment costlier.
“Trust between countries is in short supply in South Asia. Border haats between Bangladesh and India, aimed at recapturing the once thriving economic and cultural relationships are now changing cross-border relations,” said Sanjay Kathuria, World Bank Lead Economist and lead author of the report.
“Haats are not just about trade. They’re about using trade to foster people-to-people connect and trust. South Asian policymakers can aim to reinforce the virtuous circle between trade and trust – the experience of Bangladesh-India border haats offer several useful insights in this context.”
The report recommended targeting sensitive lists and para tariffs to enable real progress on Safta and calls for multi-pronged efforts towards addressing non-tariff barriers, focusing on information flows, procedures, and infrastructure.
The report also suggested that policymakers draw lessons from the India-Sri Lanka air services liberalisation experience, where liberalisation was gradual and incremental, but policy persistence paid off.
Connectivity is another key enabler for robust regional cooperation in South Asia, said the World Bank.