FROM DHAKA: Regional connectivity and transit

 

 

 

Habibullah N Karim*

 

The Asian Highway network or AH for short, has been promoted by the UN-ESCAP since the late-1950s as a long-term vision of seeing Europe connected with the remotest part of the Asia-Pacific region through a continuous road and rail network encompassing 141,000 kilometre of land transportation infrastructure.

 

The vision was adopted as an intergovernmental agreement by 32 Asian countries in November 2003. Since then participating governments have spent US$ 26 billion for upgrading their respective portions of the AH network. But according to UN-ESCAP, a further sum of $18 billion would be needed to complete the upgradation of the AH network, the bulk of which is in the Indo-Pak-Bangla sub-region of the Asia-Pacific.

 

The AH standard calls for a minimum of 10 ton axle-load bearing capacity whereas highways in Bangladesh have been built for 8.2 ton axle-load capacity. For regional integration all our highways will need to be upgraded to at least 10 ton axle-load capacity and new ones will also need to be built to this specification or higher. At the same time, gaps in the AH network within our borders will need to be plugged by building new highways, rail-links and bridges.

 

Experts estimate that Bangladesh will need to raise nearly $7.0 billion to complete these works over a period of ten years. The bilateral loan of $1.0 billion from India will defray a part of this requirement. There are also indications the multilateral funding organisations such as the Asian Development Bank, Japan International Cooperation Agency and the World Bank are willing to finance part of the funding requirement.

 

However, the bulk of the funding will need to be mobilised through private sector funding in the form of long-term (say 30 years) toll-concessions for purpose-built expressways and through Public-Private-Partnership (PPP) financing of rail-links and bridges. Now the billion-dollar question is how would the private investors recoup their money?

 

Our portion of the AH network would primarily be used by India for their transit or transshipment traffic from Paschimbanga to its Seven Sister states on our eastern side while the road and rail links from north of our border to Mongla Port would be used by Nepal and Bhutan.

 

It is generally known that a truckload from Kolkata in Paschimbanga to Agartala in Tripura through the chicken's neck of Shiliguri costs around Indian Rs 40,000 whereas the same trip through Bangladesh will cost somewhere around Tk 15,000, roughly equivalent to Indian Rs 10,000 and thus the saving would be to the tune of Indian Rs 25,000 per truckload. Moreover, the time saving would be at least four to five days. The Indian traders would be crazy not to share this windfall with the private investors who would bankroll the building of the expressways.

 

If we consider a win-win proposition of sharing the benefit equally i.e. Indian traders paying an extra Indian Rs 12,500 on top of the regular cost of Indian Rs 10,000 then the private concessionaires will be able to recover their investments within a reasonable period of time. This equal sharing of cost-saving benefits is understood to be favoured by the Indian traders as this still represents a cost-saving of more than 30 per cent over the alternate longer route, not to mention the 75 per cent time-saving.

 

Similar calculations could be made for the Mongla to Bhutan/Nepal rail links or Indian transit rail links between their western and eastern parts. This win-win kind of equal sharing of cost-savings can be a graceful way out of making elaborate charge calculations for investments, maintenance, pollution, congestion etc.

 

On the other hand, if we are looking to charge an arbitrary fee and the other parties are trying to lower how much they pay, then it creates a situation where one party's gain is seen as another party's loss, i.e., a typical win-lose type of negotiation. Of course, we still have to make detailed load-charge calculations - not for rate negotiation but for figuring out investment-recovery tenures.

 

Experts estimate that 18 billion tonnes of cargo will move through Bangladesh to and from Bhutan, India and Nepal when our road and rail infrastructure is able to handle the load. At that rate, the investment recovery is estimated at around 15 years, which is not too bad for long-term infrastructure projects.

After the 15th year, investors and operators on the Bangladesh side can earn an estimated $1.0 to $1.5 billion each year from this external cargo traffic going through Bangladesh. With such numbers in hand, what I cannot understand is why Indian investors are not yet lining up money in hand at the Board of Investment to get going on these expressway, railway and bridge projects either under concessions or PPP schemes. May be we are not doing a good job of selling the projects to the potential investors!

 

 

The writer is an IT entrepreneur, policy activist and the anchor of Orthonitir Chaka.  Originally this piece appeared in The Financial Express, Bangladesh. Now it is being carried here with author’s permission - Editor