Connectivity is paramount importance to landlocked developing countries that do not have direct links to the sea.
Strengthening connectivity across borders by facilitating seamless movement of goods, services, capital, technology and people is key to fostering economic growth and prosperity.
At a panel on “Talking Connectivity,” speakers highlighted that ‘connectivity’ encompasses three major elements: physical infrastructure, institutional framework and people-to-people exchange. Of these, improving physical connectivity between countries through better transport, energy and telecommunication services holds highest priority. However, economic gains from developing physical infrastructure are contingent upon favourable regulatory environment and procedural coherence among countries.
Take India and Pakistan for example. Trade through the Attari–Wagah border is affected largely due to poor or lack of internet connectivity, warehouses, quarantine testing laboratories, single-window systems and other support facilities.
Connectivity is of paramount importance to landlocked developing countries that do not have direct links to the sea. These countries depend entirely on neighbouring economies for international due. However, due to inadequate infrastructure, coupled with cumbersome trade procedures and lack of direct accessibility to world markets, trading agents experience exorbitant transport and logistics cost. Businesses suffer, too, due to delays and high cost of transit, which make their goods uncompetitive in the global markets.
A study by Radelet and Sachs (1998) estimates that landlocked countries bear about 50 percent higher transportation costs than advanced economies with easy access to sea routes. However, trade facilitation is essential for economic growth.
Central Asia is a cluster of six landlocked countries, namely Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Since landlocked countries experience weaker economic growth and fewer trade opportunities, they have started entering into bilateral/regional trade and transit agreements with neighbouring countries. As Central Asian countries are endowed with energy, natural gas and agricultural resources, other Asian countries such as India, China Russia and Pakistan, too, have invested in pipelines, port development information technology projects in Central Asia. The Chabahar Port project between India, Iran and Afghanistan; a pipeline project between Turkmenistan, Afghanistan, Pakistan and India; China’s One Belt One Road (OBOR) initiative; and the Russian Pricaspiysky pipeline project are some examples of regional connectivity and cooperation.
Regional trade and transport connectivity is critical for growth, productivity and competitiveness of all countries. Several economies in the world have expedited efforts to establish a well-connected network of transport, energy and telecommunication services. China is one of the biggest providers of infrastructure in Central and Southeast Asia. It is now expanding its footprint in South Asia through investments worth billions in Pakistan, Sri Lanka and Maldives. India is not behind either. It has invested in large infrastructure projects in several South Asian countries. However, India has reservations about Chinese investments in South Asia, which are driven largely by the latter’s geopolitical interests. For instance, Gwadar Port of Pakistan would provide China an access to the Indian Ocean Region as well as open Middle Eastern and African markets for Chinese goods.
Since both India and China are undertaking similar kinds of projects in South Asia, it is recommended that these two Asian powers build political trust and collaborate in their efforts to develop infrastructure. South Asian connectivity needs to be a more consultative process between India and China. India, on its Eastern side, aims to enhance connectivity between South Asia and Southeast Asia through the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). China further aims to improve land connectivity across Eurasia and Africa through its OBOR initiative. If Chinese match their OBOR aspirations with India’s BIMSTEC initiative, progress at regional level is guaranteed.
Additionally, building links for people-to-people connectivity through tourism, academic and cultural exchanges is the most viable investment for advancing integration in the world today. Many infrastructure projects have been stalled due to distrust between partner countries. South Asia is a classic case of stymied connectivity projects because of complex relations between India and Pakistan. Investment in human capital through capacity building programmes, skill development programmes, student exchanges and cultural fairs, among others, is therefore essential for strengthened bilateral relations.
Further, multilateral trade agreements such as Trans-Pacific Partnership Agreement and Regional Comprehensive Economic Partnership have helped connect various countries in the world. With such agreements eliminating tariffs and reducing non-trade barriers, there is greater scope for cooperation and connectivity. These multilateral arrangements are expected to integrate smaller and landlocked countries into global production chains. However, special focus remains on developing infrastructure such as transportation, logistics, mobile internet networks, and information and communication technology (ICT) to enable cross-border sharing of growth, knowledge and prosperity.
Panellists at the session agreed that multilateralism has promoted cooperation among a wider and diverse group of countries. G20 is an example of connectivity agenda actively pursued through collaborative efforts by member countries to synergise existing infrastructure connectivity projects. Given the vast infrastructural and connectivity deficit in the Eurasian and Central Asian regions, any kind of financial support is expected to bring benefits in terms of growth, poverty reduction and sustainable development for the countries involved. Asian Infrastructure Investment Bank was established to support infrastructural development activities in the Asia-Pacific region.
It is a common knowledge that building connectivity links with the outside markets brings added growth for the domestic markets, which otherwise would experience suboptimal growth. Therefore, governments must prioritise building infrastructure connectivity in its national agenda and budget.
The author is a former researcher with ORF.
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