Transport and Logistics:
Forging Sub-Regional Links
Meeting of Governmental Experts from
Landlocked and Transit Developing Countries
July 30 - Aug. 3, 2001
Uma Subramanian
The World Bank

Emerging Trends
•Globalization
•Decentralization of production, processing and
marketing
•Economic liberalization
•Deregulation of industries and markets
•Reduced role of the state and expanding role for the
private sector

Sub-region of Focus
Countries Indian
states
Bangladesh
Bihar
Bhutan
W. Bengal
Nepal Uttar Pradesh
India (East Orissa
and N.East) N.E. Region

Population
Comparative Statistics
Arunachal Pradesh Zambia
Manipur Iraq
Assam Kenya
Orissa Chile & Peru
West Bengal Iran
Bihar Mexico
Japan
Bangladesh
U.P Brazil
150 125 100 75 50 25 0 25 50 75 100 125 150
Population (millions)

Socio-economic Indicators
GNP % of pop < % of pop < Infant Life Male Female
per $1/day $2/day mortality Expectancy illiteracy illiteracy
capita rate per at birth rate rate 1997
1998 1000 live 1997 1997
births
430 47 87.5 71 63 33 61
Bangladesh
350 50.3 86.7 75 58 50 73
India
210 -- -- 83 57 44 79
Nepal
Bhutan 430 -- -- 63 61 -- --
750 22.2 57.8 32 70 9 25
China
4570 23.6 43.5 34 67 16 16
Brazil

Growth in FDI (1990 and 1997)
70,000.0
60,000.0
50,000.0
40,000.0
Foreign Direct Investment($ mill ions) 1990
Foreign Direct Investment($ mill ions) 1997
30,000.0
20,000.0
10,000.0
0.0
S.Asia East Asia & Latin America Sub Saharan Middle East Europe and
Pacific Africa and N.Africa C.Asia

Ratio of Total Trade to GDP
60
50
40
30 1975-1979
1990-1994
20
10
0
World OECD Developing Latin East Asia South Asia
Countries America

Exports within Regional Trade
blocs (% of total exports)
80
70
APEC
60
NAFTA
50
EU
40 Mercosur
SADC
30
ASEAN
20
SAARC
10
0
1980 1985 1990 1994 1995 1996 1997

India : Trade with neighbors
US $million 1998
Export % Import %
Bangladesh 1038 1.9 65 0.2
Nepal 324 0.6 147 0.5
Bhutan 12 0.0 15 0.05
Other 52987 97.5 28958 99.2
Countries
Total 54341 100 29185 100
Source: UN COMTRADE data

Bangladesh: Trade with neighbors
US $million 1998
Export % Import %
India 55 1.4 1179 16.1
Nepal 18 0.5 14 0.2
Bhutan -- 0.0 5 0.1
Other 3749 98.1 6115 83.6
Countries
Total 3822 100 7313 100
Source: UN COMTRADE data

Nepal: Trade with neighbors
US $million 1998
Export % Import %
India 145 32.9 440 30.7
Bangladesh 10 2.3 6 0.4
Bhutan -- -- -- --
Other 288 64.9 988 68.9
Countries
Total 444 100 1434 100
Source: UN COMTRADE data

Towards increased regional
integration
• SAPTA followed by SAFTA
• In terms of absolute value, intra-regional trade
is increasing. Between 1988-98:
– India exports to Bangladesh increased 6 folds
– Bangladeshi exports to India increased by 4 to 5
folds

Impediments to efficient transport
and logistics in South Asia
• Physical infrastructure gaps or inefficiencies
• Procedural inefficiencies --excessive and
complex documentation and customs
procedures
• Constraints due to protocol (on choice of
routes, border crossings, restrictions on
movements etc.)
• Institutional inefficiencies

Physical infrastructure: Roads
• The primary mode for freight movement
• Two lane highways, poorly maintained and congested in
many parts resulting in low speeds (200-400 kms/day)
• Small private sector owned and operated trucking services
• Competition and low turnover combine to enable low cost
operations (average operating cost $ 0.044 to 0.049 per
ton/km)
• Load limits vary (8.5 tons per axle for Bangladesh versus
10 tons for the others)
• Bilateral protocol restrictions

Rail
• Mix of broad and meter gauge in both Bangladesh and India; efforts to
integrate gauge and links across countries being undertaken
• Public sector run organizations in both India and Bangladesh
• Characterized by old rolling stock, overstaffing, poor maintenance despite
recent efforts to improve performance; in Bangladesh, track maintenance a
particular problem in flood prone areas
• Declining market share of freight
• With CONCOR, increase in container movement in India;
• Limited movement of containers in Bangladesh between Dhaka-Chittagong
due to anomalies in charges, regulations and problems. Only 10-12%
(<40,00TEU) of containers are moved by rail to Dhaka ICD)
• Protocol for exchange of wagons between Bangladesh and India

Table 10: Border Crossing Documentation
India to For India Customs – Customs Export Declaration, Bill of Lading, Invoice, Pacling
Bangladesh List, Letter of Credit,
For Bangladesh Customs – Import Permit, Bill of Lading, Packing List, Letter of
Credit, Consignment Insurance Cover, Certificate of Registration (VAT), Importer
Pass Book , and for goods for EPZ (bonded warehouse licenses, Value bonded Form,
Risk and Duty Bond
Nepal to India For Nepal customs – Customs Transit Declaration, Customs Export Declaration, Duty
Insurance Certificate, Invoice, Packing List, Certificate of Origin , Certificates of
Registration (income tax, VAT, company), Letter of Credit,
For India Customs – Customs Transit document, duty Insurance, Invoice, Packing
List, Letter of Credit, Certificate of Origin
Bangladesh to For Bangladesh Customs – export Registration Certificate, Invoice, Letter of Credit,
Nepal Packing List, Certificate of Origin, Truck Receipt
For Nepal Customs – Customs Import Declaration, Invoice, Packing List, Certificate
of Origin , Import License, Letter of Credit, Health/ Quarantine Certificate and
Equipment Interchange Receipt and Duty Insurance Coverage for Containers
Bangladesh Exports – Export Bill of Entry, Invoice, Packing List, Export Permit, Undertaking by
Ports Export of Company and Outpass Statement Letterhead, Export Permit, Risk Bond
Indian Ports Imports - Customs Transit declaration, Bill of Lading, Invoice, Packing List,
Certificate of Origin , Import License, Letter of Credit, Health/ Quarantine Certificate
and Equipment Interchange Receipt and Duty Insurance Coverage for Containers
Exports – Customs Transit Document
Source: Annex A

Approach
• Comprehensive approach -- physical and nonphysical barriers in
transport and logistics
• Development of an analytic framework that would facilitate rational
dialogue among public and private sector and among countries
• Inter-active or participatory approach to AAA; continual national, and
regional consultations with stakeholders from various sectors in order
to build ownership in the countries.
• Combining detailed case studies of commodity flows with transport-
logistics systems in the region
• Knowledge sharing with global case-studies from other regional trade
blocs such as Mercosur, NAFTA, SADC.

Two types of analyses
• identifying the critical impediments along a logistics chain (physical
gaps and constraints, policies, procedures, commodity type and
market conditions, helped determining where improvements in the
short term can bring about significant returns in terms of efficiency
improvements
• comparing among alternative routes (and modes), as a means toward
the more cost-effective route. The comparative analysis not only
provides information on the potential savings if these routes were
operationalized, but also allows a dynamic analysis of how
improvements in the components of both logistics chains would affect
overall benefits and route selection.

Logistics Cost Model

Commodity flow cases studied
Commodity Mode on land Route / Type of commodity
Domestic Cement Indian Rail Domestic/ low value bulk
General Indian Truck Domestic/ med value bulk
freight
Regional Cement Ind-BGD barge/truck Regional/ low value bulk
Agr. produce Nep-BGD trucks Regional/ Med value
Limestone Bhutan/BGD trucks Low value/bulk
Yarn Ind/BGD trucks High value/ containerizable
International Wool Ind-Nep trucks High value/container
Tea Indian truck Med value/break bulk
Carpet Nep-Indian trucks High value/container
Polypropelene Indian-trucks Med value/ break bulk
Garments BGD trucks High value/containerizable

• The core set of strategic commodities and
routes selected for this study, were chosen
for two reasons:
– they provide opportunities for landlocked areas
to reach markets;
– they are critical commodities that link the sub-
region to the global market.

Case Studies presented -
• High value trade within the region
• High value commodity exports to
international market
• Medium value commodity movement
within the region

Case 1: Yarn Export
India to Bangladesh
Consignment Attributes
Commodity Yarn
Shipment Size 14.8 tonnes
Origin Calcutta, India
Destination Dhaka, Bangladesh
Landing Port Benapole, Bangladesh
Shipment Value $ 38,000
Mode of Transport Truck
Distance 360 kilometers

Cost Hours
Transport and Handling
Inland Transport $ 516 17
Cargo Handling $ 525 24
Crossborder Procedures
Cargo Transfer $80 156
Customs Inspec $97 73
Trade Related Logistics
Time Cost of $158
Transport
Other (Insurance, $817
Documentation
/Forwarding, L/C
processing
Total $ 2193 270
Transport
Logistics Cost $ 2193
Logistics Time 270 hours

Case 2: Carpet Exports
Nepal to Germany
Consignment Attributes
Commodity Carpet
Shipment Size 1 TEU
Origin Kathmandu, Nepal
Destination Germany
Landing Port Port Bremen
Shipment Value $ 90,000
Mode of Transport Truck and Ocean freight
Distance >1200 kilometers

Route A Route B
Kathmandu Thru’ Calcutta Kathmandu thru’ JNPT
Cost Hours Cost Hours
Transport and
Handling
Inland Transport $ 480 117 $ 740 88
Cargo Handling $ 260 74 $ 463 155
Ocean Freight $ 1200 528 $ 750 336
Cross Border
Procedures
Cargo Transfer 164 $80 37
Customs Inspec 20 $97 7
Trade Logistics
Time Cost of Transport $1252 $864
Other (Insurance, $1485 $1485
Documentation
/Forwarding, L/C
processing
Total $ 5343 $ 2193
Transport $ 5343 $ 2193
Logistics Cost
Logistics Time 903 623

Case 3: General Freight
Calcutta to Agartala
Consignment Attributes
Commodity General Freight
Shipment Size 8 tonnes
Origin Calcutta, India
Destination Agartala, India
Border Crossings Petrapole - Benapole
Akhoura – Agartala
Shipment Value $ 24,000
Mode of Transport Truck
Distance >1600 kilometers

Route A Route B Route C
All India Road Transshipment thru’ Transit thru’
Bangladesh Bangladesh
Cost Hours Cost Hours Cost Hours
Transport and Handling
Inland Transport $ 760 180 $ 263 41 $ 263 41
Cargo Handling $ 278 18 $ 270 20 $ 270 20
Cross Border Procedures
Cargo Transfer -- -- $ 106 35 $0 0
Customs Inspec -- -- $125 152 $75 12
Trade Logistics
Time Cost of Transport $ 73 $ 96 $96
Other (Insurance, $ 396 $ 516 $516
Documentation
/Forwarding, L/C
processing
Total $ 1507 $ 1,376 $ 1220
Transport Logistics $1507 $1,376 $ 1220
Cost
Logistics Time (hours) 198 248 73

Constraints highlighted
by Private Sector User Groups
– Regulatory and physical restrictions to potentially cost-effective
transit corridors
– Poor physical facilities and infrastructure at border points
– Poor harmonization of documents and complementary time-
consuming procedures
– Delays caused by current customs procedures, facilities and
communications
– Regulatory and physical restrictions to operation of cost-effective
vehicles including container transport
– Poor dialogue between public sector as facilitator and private sector
as user, as beneficiary of regulatory systems and as potential
contributor to public investments and facilities
– Constraints due to bilateral protocols and agreements
– Need for eliciting views from user groups before choice of transit
corridors in inter-country agreements

Constraints highlighted
by Private Sector User Groups
– Regulatory and physical restrictions to potentially cost-effective
transit corridors
– Poor physical facilities and infrastructure at border points
– Poor harmonization of documents and complementary time-
consuming procedures
– Delays caused by current customs procedures, facilities and
communications
– Regulatory and physical restrictions to operation of cost-effective
vehicles including container transport
– Poor dialogue between public sector as facilitator and private sector
as user, as beneficiary of regulatory systems and as potential
contributor to public investments and facilities
– Constraints due to bilateral protocols and agreements
– Need for eliciting views from user groups before choice of transit
corridors in inter-country agreements

Public - Private Roles
Public sector:
•Facilitate private sector capacity to contract, handle, and transport
the country’s foreign trade
•Update and conduct bilateral negotiations to improve transit
protocols and bilateral agreements
•Interact on a continual basis with private sector through trade
associations
Private sector:
•Keep government informed through trade associations of
constraints and realistic needs
•

Summary Findings
• Ports are critical in determining regional routes because of the high logistics
costs at the port. Elimination of delays in cargo handling and customs
procedures will move cargo to more efficient ports.
• Containerization of high value cargo at the earliest point in the logistics chain
would reduce inefficiencies at the port
• Customs clearances are not the only factors that constrain cross border
movements. Onerous procedures, inadequate preparation of document,
multiple copies and signatures, limited number of gates receiving cargo,
limitations on working hours etc. all add to inefficiencies
• High value goods in the region will continue to move mainly by truck.
Constraints at border crossings would be reduced if cargo was allowed to
move unrestricted across borders in bond.
• Intraregional shipments of perishables require tighter logistics by emphasizing
reliability and delivery time, minimizing damages/ losses. Allow cargo to
move in a single truck from origin to destination with minimum delays a
borders.

Summary Findings (continued)
• Extension and integration of the BG railway system in Bangladesh and India,
combined with efficiency improvements and capital investments in comaptible
rolling stock, may help capture some of the medium value bulk cargo.
• IWT role in transporting low value bulk cargo could be enhanced if the low
travel speeds could be compensated by improvements to facilitate night
navigation, and improvements in port operations to reduce turnaround time.
•

Priorities for the Region should
address -
• Alternative and more cost-effective routing from
landlocked countries/ regions to international markets
• Increased capacity in the region to trade in higher value
goods
• Easier movement of goods between eastern and N.E.India
• Regional markets for exports from Bhutan and Nepal, a lot
which would be perishables
• Increased trade between Bangladesh and neighboring
countries

Short term priorities
• Improve design/ provision of infrastructure (e.g. warehouses) at
selected border crossings e.g. Benapole; Birgunj; Bhairawa; Phulbari;
Akhoura) and market centers (e.g. Noapara; Siliguri)
• Use of freight operations information system for real time monitoring
of cargo and wagons. Tracking system for transit cargo by road
• Extend movement of container traffic particularly for high value
commodities (such as yarn). Concept for extending container
movements within Bangladesh is important.
• Expand e-commerce opportunities more broadly for remote sector/
regions for small enterprises to reach markets
• Improve port performance through multiple measures (e.g. create
greater competition among ports through flexible routings; dedicated
terminals operated by private sector so that feeder vessels can operate
to a fixed schedule; etc.)

Short term priorities (cont)
• Reduce/ eliminate need for transshipment
• Simplification and equally importantly, harmonization of
documentation and procedures
• Electronic communication among shippers and customs
• Reform of regulations on carriage of goods by different modes (assign
clearer liabilities for tighter intermodal operations
• Assignment of liability for goods carriage and harmonization across
borders

Long Term Needs
• Investments in the road network along with increased maintenance
• Strengthening and widening bridges (Bangladesh and N.E. India)
• Information services (e.g.EDI); introduction of smart card system
• Third party logistics providers

Recent Developments
• Subregional Quadrangle under SAARC
• Emergence of “champions” within the region -- private sector forum
• Revision of the IWT protocol
• India and Bangladesh have launched a direct bus service between Dhaka
and Calcutta
• Transshipment for Indian cargo through Bangladesh is being debated
• Rail integration (new border crossings open; Dhaka-Akhoura-Agartala)
• Phulbari treaty
• Pre-shipment Inspection introduced for selected imports in Bangladesh
• Agreement to air flights between Dhaka and Gauhati (Private sector led)
• Bus link between Dhaka -Sylhet to Shillong/Gauhati

Potential/Proposals for Private Sector
Participation
• Direct (private sector operated) flights between Dhaka and Gauhati
• Inland water transport vessels (sp. refinery products from Numaligarh)
• Port terminals
• Bonded warehouses/ ICD at strategic market centers and sea/ land ports
• Cold storage warehouses/ trucks for perishables
• Containers/ tractor trailers
• Joint industrial ventures
– cement factories; gas cracker plants
• Small enterprises - several possibilities
– horticulture, floriculture (orchids; medicinal herbs)
– handicrafts
– eco-tourism (cultural heritage)
• Third Party Logistics Provision

Institutions to Promote Private Sector
Participation
• I-WIN [WBIDC, ICICI, All India PFI]
• ILFS (India)
• Infrastructure Investment Facilitation Center (GOB, WB,
DFID, CIDA)
• Infrastructure Development Company Limited (GOB and
WB)