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Trade Facilitation and Poverty Reduction in Asia and the Pacific: A Case Study of a South Asian Economic Corridor

Working paper by De, Prabir and Raychaudhuri, Ajitava/ARTNeT, 2013

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Based on primary survey data, this study assesses the potential impact of trade facilitation on poverty reduction in the region falling under SAARC Corridor 1, which is one of the leading corridors in South Asia that handles considerably good amount of overland trade between three major South Asian countries, namely, Bangladesh, India and Pakistan and also their global trade. One of the conclusions of this study is that poverty reduction, in the perception of the individuals connected with trade, depends on reduction in trade barriers through better trade facilitation. However, in the perception of the trading firms, better infrastructure which facilitates more trade is tagged with a positive response about decline of poverty.





















Trade facilitation and poverty
reduction in Asia and the
Pacific: A case study of a
South Asian Economic
Corridor















Prabir De and Ajitava Raychaudhuri









ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE


Working Paper


NO. 131 | | SEPTEMBER 2013













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© ARTNeT 2013
















NO.131 | SEPTEMBER 2013





Trade facilitation and poverty reduction in Asia and the Pacific:
A case study of a South Asian Economic Corridor








Prabir De* and Ajitava Raychaudhuri†







*An earlier version of the paper was presented at the ARTNeT Conference on ‘Empirical and Policy Issues of Integration in Asia and
the Pacific’, held at Colombo on 1-2 November 2012, and also at the ESCAP Seminar on ‘Pro-poor Trade Facilitation and Measures in
Developing Asian Countries’, held at Bangkok on 26 March 2013. Authors would like to thank one anonymous referee, conference
participants, Amrit Lagun, Rajan Ratna, Mia Mikic, and Yann Duval for their valuable comments on an earlier version of the paper.
Authors are thankful to Sandip Singha Roy for field level data collection and Sreya Pan for research assistance. Support of
ARTNeT/ESCAP is gratefully acknowledged. Views expressed by the authors are their personal. Usual disclaimers apply.
* Senior Fellow, Research and Information System for Developing Countries (RIS), India Habitat Centre, Zone 4B, Fourth Floor, Lodhi
Road, New Delhi 110 003, India; e-mail: prabirde@hotmail.com; prabirde@ris.org.in
† Professor and Coordinator, Centre for Advanced Studies, Department of Economics, Jadavpur University, Kolkata 700032, India;
e-mail: ajitava1@gmail.com.


WORKING PAPER
ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE


Please cite this paper as: De, Prabir and Ajitava Raychaudhuri, 2013, Trade
facilitation and poverty reduction in Asia and the Pacific: A case study of a South
Asian economic corridor

ARTNeT Working Paper No. 131, September, 2013, Bangkok, ESCAP.

Available at www.artnetontrade.org













Abstract: Relation between trade, inequality and poverty within countries is not beyond controversy.
Under free trade and competitive conditions, trade promotes growth, and growth reduces poverty. In


general, trade liberalisation has long been seen as an important element of an effective and sound


economic policy and trade facilitation is a necessary step for achieving it. Trade facilitation is aimed at


ensuring the movement and clearance of goods across borders within the shortest time at the minimum


cost. Reducing trade costs can have a profound impact on trade and therefore on poverty. Based on


primary survey data, this study assesses the potential impact of trade facilitation on poverty reduction in


the region falling under SAARC Corridor 1, which is one of the leading corridors in South Asia that


handles considerably good amount of overland trade between three major South Asian countries,


namely, Bangladesh, India and Pakistan and also their global trade. One of the conclusions of this study


is that poverty reduction, in the perception of the individuals connected with trade, depends on reduction


in trade barriers through better trade facilitation. However, in the perception of the trading firms, better


infrastructure which facilitates more trade is tagged with a positive response about decline of poverty.



Keywords: South Asia, Trade, Trade facilitation, Poverty, Economic Corridor

JEL codes: F14, F15





1


Contents



Introduction ................................................................................................................................. 3
1. Relevant literature ................................................................................................................. 5
2. Data and methodology ........................................................................................................ 14
3. India’s trade with Bangladesh and Pakistan ........................................................................ 16
4. Trade facilitation and poverty: Major empirical findings ....................................................... 19
4.1 Individual respondents................................................................................................... 20
4.1.1. Quality of trade infrastructure ........................................................................... 20
4.1.2. Quality of governance ...................................................................................... 20
4.1.3 Individual perceptions about trade barriers ....................................................... 22
4.1.4 Opinions about trade, trade facilitation and poverty reduction ........................... 25
4.2 Opinions of firms ........................................................................................................... 27
4.2.1.Availability of trade infrastructure ...................................................................... 28
4.2.2.Opinions about logistics costs in SC 1 .............................................................. 28
4.2.3.Transaction time at border ................................................................................ 30
4.2.4.Perception of customs process ......................................................................... 31
4.2.5.Trade barriers identified by Indian exporters and importers .............................. 32
4.2.6.Opinions of firms about trade facilitation and poverty ........................................ 34
Conclusion ................................................................................................................................ 37
Annex 1..................................................................................................................................... 40
Annex 2..................................................................................................................................... 41
Annex 3..................................................................................................................................... 42
References ............................................................................................................................... 52



















2


List of Figures


Figure 1: Sample size and distribution


Figure 2: Skill composition of individual respondents


Figure 3: Opinion of respondents about quality of trade infrastructure


Figure 4: Opinion of individual respondents on governance


Figure 5: Opinion of respondents on role of trade in poverty reduction


Figure 6: Distribution of firms in terms of trading partners


Figure 7: Skills composition in employment


Figure 8: Opinions on operational


Figure 9: Perception about poverty and trade facilitation




List of Tables


Table 1: India’s trade with Pakistan


Table 2: India-Pakistan trade through the Attari-Wagah border


Table 3: Bangladesh trade with India


Table 4: India's exports through major ports


Table 5: Poverty rate, Tendulkar Methodology


Table 6: Marginal effects in elasticity of Ordered Probit Regression


Table 7: Logit regression results (individuals): Trade facilitation to reduce


poverty


Table 8: Physical and non-physical trade barriers at Indian borders with Bangladesh and


Pakistan


(a). Availability of facilities


(b). Non-availability of facilities


Table 9: Border transaction times


(a). Indian exports to Pakistan


(b). Indian exports to Bangladesh


Table 10: Perception about customs processing at border crossings


Table 11: Trade barriers faced by


(a). Indian exporters and importers with Pakistan


(b). Indian exporters and importers with Bangladesh


Table 12: Logit regression results (firms): Reduction of poverty by trade facilitation










3


Introduction


The relationship between trade, inequality and poverty within any country is not immune to


controversy. Under free trade and competitive conditions, trade promotes growth; that


growth, in turn, reduces poverty. Reducing trade costs can have a profound impact on


poverty (Winters and others, 2004). In general, trade liberalization has long been seen as an


important element of an effective and sound economic policy, and trade facilitation is a


necessary step towards achieving that objective (Winters, 2002). Trade facilitation is aimed at


ensuring the movement and clearance of goods across borders within the shortest possible


time at the minimum cost.




During the past two decades, import tariffs have decreased significantly and non-tariff


measures aimed at further reducing international transaction costs have gained more


importance in promoting trade across countries. Removal of non-tariff measures has been


shown as a significant element in easing a country’s economic isolation (Arvis and others,


2012). Efficient transportation networks have become a more important factor in regional


cooperation, both in absolute and relative terms. Better trade and transportation infrastructure


(termed as economic corridors) would encourage fragmentation of production across


borders, enhance regional and global trade, and help in realizing the economic integration


process.1




Economic corridors became popular due to the Asian Development Bank (ADB) project in the


Greater Mekong Subregion (GMS). 2 An economic corridor can be national (e.g., the


Delhi-Mumbai Industrial Corridor), regional (e.g., GMS corridors) or even international (e.g.,


submarine telecommunication cables). In South Asia, the South Asian Association for


Regional Cooperation (SAARC) Regional Multimodal Transport Study (SRMTS) has


identified 10 highway corridors for the region; the SAARC Corridor 1 (hereinafter referred to


as SC 1) was selected for this study to assess the empirical relationship between trade


facilitation and poverty reduction.3





1 See, for example, Brooks and Stone (2010).
2 The economic corridor concept is one in which regions, covering two or more countries, are identified where
infrastructure is specially promoted to strengthen trade and economic integration. The basic idea behind this
concept is not just the promotion of trade across borders, but also economic development along such trade routes
(Wiemer, 2009). The main advantage of promoting economic corridors is realized when trade across such
corridors is sufficiently liberalized and seamless, thus lowering the cost of cross-border trading.
3 It was necessary to select a SAARC Highway Corridor (SAARC Corridor) for this study as the region, unlike
GMS, does not yet have an economic corridor in operation. Annex 1 contains a map of SC 1, which originates in
the State of Tripura, located in north-eastern India, passes through Bangladesh, re-enters India from the east and
then moves north into Pakistan through India’s western border.





4


Distinct economic corridors can have the following specific benefits:4


(a) Improvement of national and regional connectivity by making it faster, cheaper,


and easier for people and goods to move within and across borders;


(b) Aiding the reduction of poverty by improving poor people’s access to economic


opportunities, lowering the cost of the goods and services that they consume, and


providing better access to essential infrastructure services such as electricity


supply.




For most developing economies, economic corridors are viewed as stocks of public capital,


thereby constituting a major constraint to growth. Shortages of economic corridors (i.e.,


infrastructure) cause congestion and, as a result, a strong tendency towards diminishing


returns on capital in industry. A consequent low rate of return acts as a disincentive to


investment and trade facilitation.




The issue of poverty reduction is always an important one, and trade facilitation may help in


the process since it enhances competitiveness of a country or a region.5 The objective of the


current study is to identify some causal factors that relate trade facilitation to poverty


reduction. It is important to assess the trade facilitation and poverty linkage, since it can help


countries to undertake policy reforms in order to facilitate trade (e.g., by making


improvements in trade logistics).




In particular, this study attempts to assess the potential impact of trade facilitation on poverty


reduction in SC 1. The focus of the study is on the Indian side of the corridor since India has


undertaken trade facilitation measures relatively more intensively than its neighbouring


countries who are connected by this corridor.6




Rest part of this study is structured as follows. Section 2 carries a literature review on


economic corridor, trade facilitation and poverty, and identifies the research gaps. Data and


methodology are briefed in section 3. Section 4 presents India’s trade with Bangladesh and


Pakistan, more through land borders. The primary survey results and analysis are presented


in section 5, followed by the conclusion in section 6.





4 See to Srivastava and Kumar (2012), in which a detailed account is provided of the economic benefits of GMS
economic corridors.
5 See, for example, Bandara and others (2011).
6 The idea being that where India has undertaken many more unilateral trade facilitation measures than its
partners of the corridor, then those partners may enjoy the same gains if they accelerate their trade facilitation
measures and vice versa. For example, India’s Integrated Check Post (ICP) project has motivated its neighbours
to develop their border infrastructure.





5


1. Relevant literature


The awareness of trade facilitation is as old as trade itself. Many of the international trade


agreements are designed to achieve this objective. Trade Facilitation as an independent


concept gained attention with the Doha Round of WTO negotiations. Trade facilitation is


aimed at ensuring the movement and clearance of goods across borders within the shortest


time at the minimum cost.7 The two elements which form the crux of the issue are time and


cost. Trade facilitation would mean addressing these issues and attempting ways and means


to minimize the cost and time taken for movement of import and export cargo.




The relation between trade, inequality and poverty has been dealt extensively in literature.


Most international trade economists have a perspective of a world in which countries


exchange goods, factors and ideas. Free trade in goods leads to equalization of factor prices


across countries according to the factor-price-equalization theorem. In the traditional


literature on neo-classical growth model, capital and labour play the central role as two main


factors of production. From the perspective of conventional one sector neo-classical growth


theory international linkages do not matter, but from the trade perspective they are the crucial


determinants.




Harrison et al (2010) presented a review of a detailed account of trade and inequality


literature, and indicated that trade can affect (and usually increase) income inequality mainly


because of within-industry effects due to heterogeneous firms; effects of offshoring of tasks;


effects of incomplete contracting; and effects of labour-market frictions.




Under free trade and competitive conditions, trade promotes growth, and growth reduces


poverty.8 In the literature on international trade, the issues of income distribution, growth as


well as distortions are more or less discussed in terms of endowments of capital and labour,


their growth and their relative prices. Countries that initially had a more regulated trade sector


experienced an increase in inequality where trade reform, however, does not appear to have


significantly affected changes in income distribution.9 In the income distribution literature, the


functional distribution of the two major factors of production again explains the movement of



7 The definition of trade facilitation in broader terms goes beyond what has been noted in the WTO. In literature,
trade facilitation has been identified as the means to move trade across borders which is not just restricted to
dealing country’s customs formalities.
8 The linkage between trade and growth has been dealt extensively in literature. For a thorough review of the
studies dealt the relationship between trade and growth, refer Singh (2010).
9 There is strong literature on trade and income distribution supporting the fact that trade liberalisation does not
necessarily lead to equality of income in the presence of trade distortion. See, for example, Edwards (1997),
Slaughter (1997).





6


Trade Facilitation


Growth International Trade Government Revenue


inequality in income distribution over time.10 Although infrastructure (or trade facilitation)


plays the role of a very important catalyst, it gets virtually no explicit mention in the relevant


literature on trade and inclusive growth.11 In fact, one may say that more trade openness or


globalisation is potentially beneficial to all but requires appropriate policy designs to realize it.


Trade facilitation may be seen in this perspective.




A group of literature indicates that trade facilitation potentially affects poverty through growth,


trade and revenue channels (Figure 1). For example, trade facilitation influences international


trade flows which modify the prices of goods and factors of production (capital and labour);


government revenue which can be used for pro-poor and social expenditures; and economic


growth. These changes alter income distribution and poverty levels.12




Trade liberalisation has long been seen as an important element of an effective and sound


economic policy and trade facilitation is a necessary step for achieving it. Trading more


efficiently tends to increase average incomes, providing more resources with which to tackle


poverty (Bandara et. al, 2011). And while it may affect income distribution, it may not do so in


a systematically adverse way.




Figure 1. Schematic Representation of Trade Facilitation and Poverty Linkages



















Source: UN (2003)






10 Refer, for example, Campano and Salvatore (2007), Gourdon et al. (2008).
11 However, development in endogenous growth theory has introduced the possibility of a productive role of public
expenditure on infrastructure with an associated possibility of increasing returns to scale (Barro 1990, 1991).
12However, in theoretical terms trade facilitation has a positive impact on the efficiency of the trading environment
which increases average incomes providing more resources to tackle poverty. However, as with most trade
reforms, trade facilitation may adversely affect some groups in society even if it increases incomes in total.


Income Distribution and
Poverty





7


Box 1. Trade Costs and Poverty in Rwanda
Increasing incomes in rural areas is necessary for poverty reduction in Rwanda since the
majority of the poor live in rural areas. Improvements in returns to exportable commercial
crops are the most direct and probably the most effective way of increasing the flow of cash
into rural areas and so must lie at the heart of poverty reduction in Rwanda. Diop et al (2005)
found that reducing trade costs can have a profound impact on poverty. The benefits of lower
transport costs, if reflected in higher producer prices, will be realized by all coffee farmers,
and indeed all commercial farmers. Reducing transport costs and providing access to
transport to those who are currently remote is therefore a crucial element in the poverty
reduction strategy. Similarly, this study has shown that the government’s strategy of
increasing returns by raising quality and therefore the market price of Rwandan produce will
have a significant impact on poverty, particular if small farmers are targeted and assisted in
improving the quality of their coffee crop. However, the success of this strategy requires
effective rural logistics services and transport capacity, to ensure that coffee is washed in
good time before its quality starts to deteriorate. This capacity is currently lacking. This study
has found significant impacts on poverty while only considering the most direct reactions to
changing prices. However, the effects will be considerably larger, since coffee farmers
typically have a high propensity to spend on other products produced in the rural
communities. Increasing returns to commercial farmers could have substantial multiplier
effects within rural communities. The challenge is to provide an infrastructure and framework
by which rural markets can develop and flourish. Given the current level of development in
Rwanda it is clear that this will require a significant response and engagement from the
international institutions and donors.

Source: Diop et al (2005)


The neo-classical as well as new trade theories rely on a two-country, two-factor and


two-goods model (the 2x2x2 model). Thus, infrastructure (trade facilitation) appears as a


complementary factor that facilitates trade.13 This will visible in following ways: (a) it has a


strong positive influence on trade volume (Deardorff 2001), or (b), it might influence trade


cost (Anderson and van Wincoop 2004). Appendix 2 provides a schematic view of the links


between trade and poverty. Falling trade cost can have profound impact on poverty in


developing countries (see Box 1). Analyzing the importance of different channels that link


trade reforms and household welfare, Isik-Dikmelik (2006) in a case study on Vietnam


commented that trade reforms has benefited everybody but especially the poor.




Economic corridor like infrastructure might influence trade cost more than tariff and non-tariff


barriers, but measurement is probably more difficult. Infrastructure is a composite term, for


example, measured as an average of the density of the road network, the paved road


network, the rail network and the number of telephone main lines per person. The supposed


impact of tariff and non-tariff barriers may be less in magnitude compared to


inefficiency-related and enforcement-related costs of infrastructure. Although it is difficult to


measure it accurately and directly, according to Limao and Venables (2001) trade costs

13 In some literature, trade facilitation has been seen as a process to improve country’s infrastructure. Refer, for
example, Brooks and Stone (2010)





8


depended heavily on infrastructure. A similar conclusion was reached in some recent studies,


which showed that port infrastructure was the most important factor in the reduction of trade


costs for Asian countries, given the preponderance of sea freight in trade costs for Asian


countries (De 2009a; Brooks and Hummels 2009).




Although an OECD (2003) study on trade facilitation dealt mainly with the World Trade


Organization (WTO) definition of border-related trade transaction costs, it made the following


interesting observations. After analysing border process quality across 102 countries it found


that those countries with a higher per capita income generally scored better with regard to


border process quality than countries whose inhabitants were less well off. However, some


countries those were not particularly well off exhibited better border processing. The study


concluded that low-income countries did not necessarily have to wait until they became rich


before being able to adopt good border practices. Meschi and Vivarelli (2009) analysed


intra-country income differences taking 65 developing countries spanning over 1980-1999.


Using a dynamic panel data analysis of Arellano and Bond variety, the authors found that


trade really does not significantly influence income inequality within countries, although some


other control variables like education (through skill-formation) and inflation rate do have


significant impact.


While dealing with the relative importance of trade-mandated effects on industry wage


premia; industry and economy-wide skill premia; and employment flows in accounting for


changes in the wage distribution during the 1988-1995 trade liberalization, Ferreira et al


(2009) commented that unlike in other Latin American countries, trade liberalization has


appeared to have made a significant contribution towards a reduction in wage inequality in


Brazil. Raychaudhuri and De (2012) analysed the impact of increased trade in services in


India on inequality. They found that one major component of India’s service sector growth


comprised information and communication technology (ICT) services. The study showed that


the ICT sector led the service trade in India. However, the sector is skill and infrastructure


intensive. The major IT and IT-enabled services are located in big metropolitan cities. As a


result, the sector does not support unskilled workers nor has it made its presence felt in the


rural areas. Thus, this type of increase in services trade has increased the inequality within


the urban regions of India as well as greater income divergence between rural and urban


incomes.




Reducing trade costs and facilitating transit is two of the key approaches to achieving a more


inclusive growth through trade, i.e., one that will reduce the gap between the economic core


and the outer periphery of each of the South Asian economies (De, 2009b). Doing so will





9


encourage economic activity at and across borders, eventually generating employment


through industrialization as well as benefiting the poor of the border areas and landlocked


countries. However, governments will also need to provide adequate education and


capacity-building opportunities for the people living in such areas so that they can effectively


engage in trade.




Box 2. Income Distribution Impact of Trade Facilitation in Developing Countries

• Trade facilitation has an impact on income distribution and poverty in developing


countries through its effects on international trade, economic growth and government
revenue.


• Small and medium sized enterprises (SMEs), the dominant actors in developing
countries, are the main beneficiaries of trade facilitation, since trade transactions costs
fall disproportionately on small firms.


• While trade facilitation may or may not reduce income inequalities within developing
countries, trade facilitation can enhance trade-induced growth, which increases average
incomes providing more resources with which to tackle poverty.


• Trade facilitation measures applied within a closed (or at least less liberal) trade
environment can still have a positive impact on exports and foreign investment.


• Trade facilitation may increase employment which may help some move out of poverty.
• Improvements in infrastructure allow the poor to trade more easily and profitably in


domestic as well as in international markets.
• Trade facilitation can increase government revenue which can benefit the poor if used to


finance social expenditures

Source: UN (2003)


Trade Facilitation and Poverty
Improved trade facilitation makes the trade efficient which tends to increase average


incomes, providing more resources to tackle poverty. And while it may affect income


distribution, it may not do so in a systematically adverse way (UN, 2003).14 Box 2 captures


some stylized facts on income distribution impact of trade facilitation in developing countries.


Noted in UN (2003),15 there are three main ways that trade facilitation initiatives can affect


the distribution of income, and hence aid poverty reduction in a society (Figures 1 and 2).




One, trade facilitation increases the volume and range of a country's international trade, by


reducing the transaction costs of trade, making exports more competitive, leading to increase


in wages and the numbers employed in the exporting sectors, and imports less expensive,


thereby also increasing real wages. One example of the direct effect of how an improvement



14 For example, in context of 14 Asia-Pacific countries, Raychaudhuri and De (2010) found strong influence of
trade openness and infrastructure on income inequality but not the reverse one. Country-specific factors turned
out to be important determinants of trade openness and income inequality. Further, this study also argued initial
values of both income inequality and trade openness as important determinants in the evolution of these variables,
apart from the positive influence of infrastructure as a determining variable.
15 Based on Overseas Development Institute (2003)





10


in the supply chain can help Lao PDR or Nepal to higher market access in ASEAN and


SAARC, respectively.




Two, trade facilitation can then contribute to economic growth, which in turn will lead to higher


incomes, greater employment and a positive effect on poverty. The process also generates a


number of by-products; firstly, as the economy becomes stronger, with a broader trading


base, it becomes less vulnerable to exogenous shocks. Secondly, an improved milieu for


trade changes the incentives to invest, leading to greater foreign direct investment and


increases in investment in human capital.




Three, the final way that trade facilitation can impact on income distribution and poverty


relates to the increase in government revenues, that is the concomitant of increased trade,


improved efficiency and reduced corruption, allowing greater expenditures on social


programmes.


Figure 2. Trade Facilitation Helps in the Reduction in Poverty

































Source: Authors based on Raychaudhuri and De (2010)


Trade Facilitation


Hardware (e.g. national &
international infrastructure)


Software (e.g. customs,
transparency, etc.)


Area of
Intervention


Productivity &
efficiency


Quality of life Transaction
costs


Areas of
Influence


Indirect
channel


Industrial
development


Trade
expansion


Human
development


Direct
channel


Employment


Real Income /
Consumption of the Poor


Poverty Reduction


Areas of
Concern





11


Trade, Poverty and Labour Market


The link between international trade (and also trade facilitation) and poverty in developing


countries is normally via the labour market (Winters 2000). If opening up to international trade


allows a country to export more labour-intensive goods and replace local production of capital


and skill-intensive goods by imports, it increases the demand for labour - typically in the


formal sector. If poverty is concentrated among people who are actually or potentially part of


the labour market, increasing demand will help to alleviate poverty. But how, and whether, it


does so depends significantly on how the labour market operates.




Figure 3. Demand for Labour
(a) (b)


Wage Wage













Employment Employment



Source: Adapted from Winters (2000)




Consider following two assumptions.16 In Figure 3(a) we assume that the supply of labour to


the formal sector is completely fixed. When the demand for labour shifts out from DD to D'D',


employment cannot increase and the market must be brought back to equilibrium by an


increase in wages from w0 to w1. If some of the workers in this market were poor - or were


part of poor families – the increase in wages has a direct and beneficial impact on poverty.


This is the classic "Stolper-Samuelson" result that appeared to work so strongly in East Asia


over the 1970s and 1980s.




In the Figure 3(b), the supply of labour is perfectly elastic at the prevailing wage. Now an


increase in labour demand is accommodated by increasing employment to l1, with no change


in wages. The effect on poverty depends heavily on what the additional workers were doing


before accepting these new jobs. If they were engaged in subsistence activities - agriculture,


scavenging - and earning the equivalent of w0 initially, there is no change in their situation.

16 Adapted from Winters (2000)


D’
D’


D’ D’


D


D


D


w1


w0


l0 l0 l1


w0


D





12


Only if the switch into this labour market was so great as to significantly reduce labour supply


to the subsistence sector and hence raise its "wage" there would be a poverty impact. In this


case, the increase would apply to all workers in formal and subsistence sectors and so


potentially would have very widespread benefits. However, the increase in labour demand


would have to be huge to have a material effect on the wage. This case is really no less than


the case of successful development, through which whole economies are transformed over a


period of decades. Trade liberalisation is probably an important part of the process, but it is


not the only one.




Figure 4. Trade Facilitation and Economic Outcomes



Source: CIE (2012)




Trade Facilitation and Economic Outcomes


Open policies and trade facilitation help in achieving economic outcomes, through which


poverty reduction (CIE, 2012). The most visible case is the development of economic


corridors in GMS subregion, where improvements in trade and transport facilitation have



Transport and trade facilitation Economy openness policies


Transport
infrastructure


Simplification
of formalities


Trade
liberalisation


Customs
efficiency


Investment
liberalisation


Services
liberalisation


Physical
connectivity


Access to
markets


• Reduce time and costs of
trade


• Efficient trade
• Reliable and transparent


trade system


• Trade flows grow
• Investment flows grow


Better use of skills
and resources


Access to technology Access to skills and
management techniques


• Productivity growth
• Exports competitiveness
• Savings to government


• Per person income growth
• Employment growth
• Cheaper and more products for consumers/


inputs for producers


GDP growth and poverty reduction





13


assisted the GMS region in further reducing poverty and improving living standards.17 Figure


4 illustrates the way in which trade facilitation policies complement open trade and


investment policies in enabling growth and poverty reduction.




Actions on the trade facilitation agenda may include improving physical connectivity through


transport infrastructure projects; easing the transit of vehicles, goods and people between


borders; simplifying processes and procedures to trade; making customs systems more


efficient and transparent through automation and sharing of information between crossing


points; among others. In a broad sense, these actions reduce transaction costs of trade,


making trade more efficient and reliable and stimulating its growth.18




Application of CGE and Gravity Models


There have been several studies attempting to estimate the benefits of trade facilitation. The


impact of trade facilitation activities is seen in view of reduced time and costs of trading


across borders stimulating trade and socio-economic outcomes.




There are two broad approaches for conducting the modelling. One is the use of gravity


models. These models predict bilateral trade flows according to the sizes of the economies


and the distance between the two countries analysed. Additional variables are included to


analyse the impact of policies in the international trade sphere such as preferential trade


agreements. These models have been useful for testing the relation between trade costs and


increases in the volume of trade.19 A second approach is the use of computable general


equilibrium (CGE) models which are more suited for explaining economy-wide effects of


policies. The use of the Global Trade Analysis Project (GTAP) model is common for capturing


such effects. This model incorporates relations between economic sectors and countries,


resource constrains and an economic framework that accounts for the behaviour of


consumers and firms. 20





17 Refer, for example, Warr et al (2009), Menon (2006), etc.
18 Refer, for example, Raychaudhuri and De (2013)
19 For example, Edmonds and Fujimura (2008) (gravity model and panel data) show lower transport cost along
GMS corridors benefits trade directly and reduces poverty.
20 For example, Menon and Warr (2006) (CGE model) analyzed relationship between road improvement and
poverty reduction in Lao PDR, and found strong correlation with reduced poverty incidence but important
differences depending on type of roads and initial access conditions. This study shows importance of improving
rural access to main GMS corridors to maximize inclusive impact. Besides, several ADB studies estimate transit
costs reduction along EWC and the NSEC to range from 30-50 percent. In an another study (CGE model) on
GMS, Stone et al (2010) found very significant improvement in welfare mainly originating in improved terms of
trade and trade facilitation followed by allocative efficiency and transport.





14


GTAP is a modelling framework that assists in quantifying the impacts of policy issues and


has commonly being used for analysing impact of trade liberalization and trends. As with any


other model it simplifies the real world to allow for analysis and prediction of the impact of


policies on economic activity. It is a computable general equilibrium model that incorporates


multiple economic sectors and regions, capturing the links between them by modelling the


behaviour of and interaction between consumers, producers and government. The standard


GTAP model is supported by the GTAP database which includes 57 sectors and over 100


countries. The database take account of bilateral trade patterns, production, consumption


and intermediate use of commodities and services.




Finally, the foregoing discussion provides a synoptic view of the role of trade facilitation in


growth and income distribution. The point that is emphasised throughout this paper is that


trade facilitation basically appears as a complementary factor in the standard literature. The


positive impact of trade facilitation on income and poverty reduction is proved through growth;


however, the important point to note is that trade facilitation is a factor whose efficiency is as


equally important as its quantity. Possibly this applies to all factors of production, but for trade


facilitation this is emphasised time and again. The developing countries unambiguously show


this positive impact, unlike some of the developed countries.




Unfortunately, most of the studies do not address either trade or income distribution issues


due to complex relations more in an open economy framework. Causality is rather unknown.


The literature that deals with inclusive growth and poverty highlights the fact that accessibility


to infrastructure, like rural roads or electricity, does not benefit the poor much. Hence, the


result may be an unintended widening of income disparity. Therefore, a group of literature


suggests that the government has a stronger role to play in reducing poverty through


improved trade facilitation programmes. The GMS case shows that improved regional


connectivity is an important element in reducing poverty and making growth more inclusive


through expansion of trade. The literature indicates that while transport improvements bring


large benefits, improved trade facilitation has an even larger impact. This is where policy


priorities are for developing countries.




2. Data and methodology


This study is based on both secondary and primary data. Econometric methods were used


(e.g., ordered categorical regressions) to identify the existence of specific barriers to


facilitation and to make a quantitative assessment of the impact of trade facilitation on poverty





15


reduction. The analysis was based on field survey data, collected at selected places on the


Indian side of SC 1. Firms and individuals were both covered through primary survey. The


route of SC 1 (which is part of the Asian Highway 1) is via Lahore-New


Delhi-Kolkata-Dhaka-Agartala. It connects three SAARC countries, i.e., Bangladesh, India,


and Pakistan, and therefore carries a considerable amount of regional trade. Figure 5 shows


the survey region and corresponding sample sizes. The field survey was conducted through a


structured questionnaire (see annex 3) on a small scale (279 sample size) in the form of a


pilot survey. The primary objective was to gain information quickly on the empirical


relationship between trade facilitation and poverty reduction as well as to improve the


efficiency of the main survey if conducted in future.21


Figure 5. Sample size and distribution



















Note: Numbers in parentheses are sample size and corresponding share of total. Total sample is 279, of
which samples of firms and individuals are 100 and 179, respectively.




Another objective for selecting SC 1 was that some of the industrial clusters connected by


this corridor supply intermediate products to regional/bilateral production networks in the


South Asia region. Exports of yarn from India's Ludhiana, India, to Dhaka, Bangladesh are a


case in point. 22 As a large number of people are involved when international trade is


conducted along SC 1, their employment is directly linked with trade flows. The primary



21 The time and resources available for completing the project were sufficient for the pilot survey. This was exactly
the purpose of this survey. A large-scale survey is possible now since the results from the pilot survey give a
clearer vision of the role of trade facilitation in poverty reduction, based on perceptions of individuals and firms.
However, a large-scale survey will need large-scale funding and sufficient time (for example, 24 months).
22 Exports of yarn from India to Bangladesh alone contributed about 35 per cent of India’s total exports to
Bangladesh in 2010. In 2010, India exported over US$ 1 billion textile goods including yarn to Bangladesh, where
most of the yarn export originates at Ludhiana in Punjab state of India.




SC 1


Pakistan-India border India-Bangladesh border


Pakistan
India India Bangladesh


Wagah Attari


Petrapole Benapole
Attari




Amritsar




Ludhiana




Kolkata






Bongaon




Petrapole




Ghojadanga






16


survey therefore looked at whether or not improvement in trade facilitation along SC 1 has


helped remove poverty.




Trade facilitation in SC 1 is therefore an important factor contributing not only to the


expansion of trade but also production fragmentation within or across countries such as


Bangladesh. With production processes and tasks becoming increasingly fragmented across


national borders, trade facilitation measures such as time-sensitive logistics services together


with information and communication technology are the key to assisting production networks


across borders. The primary survey data identify the barriers to trading with Bangladesh and


Pakistan along SC1.




3. India’s trade with Bangladesh and Pakistan


Bilateral trade between India and Pakistan witnessed an upward trend only in the second half


of the past decade, when it increased sharply owing much to the India-Pakistan “Composite


Dialogue” in 2004. India’s trade with Pakistan trebled in 2010 and reached an all-time record


of US$ 2.56 billion (table 1). India’s exports to Pakistan increased much faster than imports


from the latter country, thereby increasing India’s trade surplus from less than US$ 100


million at the beginning of the past decade to just over US$ 1.94 billion in the first year of the


ongoing decade (table 1). However, compared to their economic strength, trade between


India and Pakistan is negligible and much below potential.



Table 1. India’s trade with Pakistan


Year Exports Imports Total trade
(US$ million)


1990 43.49 44.86 88.35
1995 70.40 37.37 107.77
2000 163.33 65.05 228.38
2005 647.19 158.42 805.61
2010 2 252.89 310.44 2 563.33
CAGR (%)
1990-1999 9.22 9.88 9.56
2000-2009 27.45 17.32 25.18


Source: United Nations COMTRADE database.


The composition of Indian exports to Pakistan was primarily limited to about 14 commodities


in 2010-2011, and which on average accounted for some 78 per cent of the total Indian


exports to Pakistan. These commodities include sugar, raw cotton, synthetic fabrics, tea,


petroleum products and chemicals, reflecting India’s more diversified industrial base. Shares





17


of both raw cotton and woven fabrics in India’s exports to Pakistan increased from almost


zero in 2000 to more than 13 per cent in 2010, whereas the share of oil-cake and other solid


residues contracted from about 16 per cent to 3 per cent during the same period. The


composition of official major imports from Pakistan to India has been limited to 18


commodities, such as fruit and vegetables, wool and wool products, petroleum products,


chemicals, lead and, more recently, cement. These products together share about 88 per


cent of India’s total import from Pakistan. In 2010, the sectors with large shares in Pakistan’s


exports to India were fruit (19 per cent), followed by petroleum products (12 per cent), and


cement (11 per cent) (De and others, 2013).




Trade between India and Pakistan has never expanded to the extent that it would have been


in a normal trade environment due mainly to political disturbances. Until recently, the


restrictive trade policies of both countries, with a variety of embedded trade barriers aimed at


each other’s market, did not allow bilateral trade to grow. Pakistan has 1,209 items on the


negative list that are likely to be phased out, and there will be no restriction on tradeable


items; this would encourage border trade between the two countries, particularly through


Attari and Wagah, along SC 1. Trade valued at about Rs 41.79 billion was carried out in


2010-2011 through the Attari-Wagah border (table 2); this is likely to increase in view of


Pakistan’s proposal to India for most favoured nation (MFN) status and the dismantling of the


positive list of trade at the India-Pakistan land border.



Table 2. India-Pakistan trade through the


Attari-Wagah border
(Unit: Rs billion)


Year Exports Imports Total
2007-2008 17.40 34.67 52.07
2008-2009 43.53 42.12 85.65
2009-2010 79.81 39.59 119.40
2010-2011 37.17 4.62 41.79


Source: Sahai and Laxmi, 2013, based on
Indian customs data.



Trade by Bangladesh with India has been growing steadily. India is Bangladesh’s primary


trading partner in South Asia, followed by Pakistan. Bangladesh has a high deficit in its trade


with India – having increased from US$ 44 million in 1981 to US$ 2.5 billion in 2009. The


10-year period of 2000-2009 saw the fastest rise in Bangladesh’s exports to India (20.49 per


cent CAGR), while the growth of imports from India declined to 12.59 per cent per annum


(table 3). Nevertheless, Bangladesh exports account for only 1 per cent of India’s total


imports and the range of products is small, comprising mostly fertilizers and jute products.


Ready-made garments form Bangladesh’s major exports, but the share going to India is very





18


small, at least so far. A large part of India-Bangladesh trade passes through Petrapole (India)


and Benapole (Bangladesh) along SC 1.




Table 4 gives some idea about the trade that passes through this border along SC 1. It clearly


shows that land trade overwhelmingly outweighs sea trade, with the Petrapole border alone


contributing about 57 per cent of India’s exports to Bangladesh. Hence, the importance of SC


1 in regional trade cannot be ignored. This fact alone was an important reason for selecting


this corridor for further investigation of the empirical relationship between trade facilitation


and poverty.



Table 3. Bangladesh trade with India


(Unit: US$ million)
Year Exports Imports
1990 21.68 170.27
2000 50.13 945.45
2010 320.91 3 859.82
CAGR (1990s), (%) 9.61 22.06
CAGR (2000s), (%) 20.49 12.59
Source: United Nations COMTRADE database.



Table 4. India's exports through major ports


(Unit: Per cent)
1996-1997 2003-2004 2010-2011*
Land (road and rail)
Petrapole (mainly road) 56.6 36.2 57.2
Ranaghat (Gede) (rail) 5.2 11.5 17.5
Radhikapur (rail) 0.6 1.9 2.4
Hili (Road) 2.9 5.9 6.1
Kotwaligate(Mohedipur by
road)


4.3 6.9 2.8


Sea
Mumbai 9.3 1.3 0.6
Nhava Seva 3.3 5.3 7.1
Chennai 1.9 2.5 1.3
Tuticorin 1.8 1.5 0.7
Vishakapatnam 0.7 2.8 1.1
Kakinada 0.9 2.5 0.4
Others 12.5 21.7 2.8


Source: Calculated based on DGCIS, Ministry of Commerce, Government
of India
*Based on Indian Customs data.






19


As shown in table 5, SC 1 passes through six Indian States (table 5), of which two – Bihar


and Uttar Pradesh - have poverty rates that are higher than the national average.23 In


addition, in absolute numbers, the percentage of poor people is relatively higher in those two


States, compared to the other four States. Between 2004-2005 and 2009-2010 the rural


poverty rate in Bihar only declined marginally from 55.7 per cent to 55.3 per cent,


respectively. Therefore, trade facilitation in SC 1 is an important avenue for the lowering


poverty rate.



Table 5. Poverty rate, Tendulkar Methodology


(Unit: Per cent)
State 2004-2005 2009-2010
Rural Urban Total Rural Urban Total
Bihar 55.7 43.7 54.4 55.3 39.4 53.5
Delhi 15.6 12.9 13.0 7.7 14.4 14.2
Haryana 24.8 22.4 24.1 18.6 23.0 20.1
Punjab 22.1 18.7 20.9 14.6 18.1 15.9
Uttar
Pradesh


42.7 34.1 40.9 39.4 31.7 37.7


West Bengal 38.2 24.4 34.2 28.8 22.0 26.7
India 42.0 25.5 37.2 33.8 20.9 29.8


Source: “Press Note on Poverty Estimates, 2009-10”, Planning Commission,
Government of India, 13 March 2012.




4. Trade facilitation and poverty: Major empirical findings


The primary survey was conducted among individuals residing near the borders at Attari


(India-Pakistan), and Petrapole and Ghojadanga (India-Bangladesh), and who were


dependent on trade with Bangladesh and Pakistan along SC 1. This section presents the


major findings of the field survey for two separate categories – individuals and firms.





23 The poverty rate developed by the Tendulkar Committee was followed here. The methodology uses implicit
prices for estimating State-wise poverty lines for 2004-2005. Using these poverty lines and the distribution of
monthly per capita consumption expenditure, based on a mixed reference period, the Tendulkar Committee
estimated poverty ratios for 2004-2005. Implicit price indices (Fisher Price Index) have been computed from the
66th Round NSS (2009-2010) data on the Household Consumer Expenditure Survey. As per Tendulkar
Committee recommendations, the State-wise urban poverty lines of 2004-2005 have been updated for 2009-2010
based on price rises during this period, using Fisher Price indices. The State-wise rural-urban price differential for
2009-2010 has been applied on State-specific urban poverty lines in order to get State-specific rural poverty lines.
The head count ratio (HCR) is obtained using urban and rural poverty lines, which have been applied to the MPCE
distribution of the States. The aggregated BPL population of the States has been used to obtain the final all-India
HCR and poverty lines in rural and urban areas.





20


4.1 Individual respondents



Of 179 individual respondents directly associated with trading by India with Bangladesh and


Pakistan, the survey found 49 per cent respondents were skilled while 42 per cent and 9 per


cent were semi-skilled and unskilled, respectively (figure 6). Therefore, the respondents were


assumed to be relatively aware of the need for, and benefits of trade facilitation in India.



Figure 6. Skill composition of individual respondents



Note: Sample size is in absolute number, and share is in percent




4.1.1. Quality of trade infrastructure



The majority of the respondents said trade infrastructure such as customs and transport had


improved over time. However, compared to customs and transport, the performance of


banks, hotels and restaurants, servicing facilities and communication facilities were way


behind the average (figure 7). The perception of the respondents also indicated further scope


for improvement in trade facilitation.



4.1.2. Quality of governance



The perception of the respondents revealed a mixed result for quality of governance (figure


8). The opinion of individual respondents was that trade along SC 1 had not been disturbed


by local mafia, cheating and fraud, or religious tensions. These aspects, therefore, cannot be


termed as barriers to trade. However, trading faces major security issues. Strikes and


closedowns do happen, but they are not a major issue.




Skilled, 87,
49%


Semi-skilled,
76, 42%


Unskilled, 16,
9%


Skilled


Semi-skilled


Unskilled


Total = 179





21


Figure 7. Opinion of respondents about quality of trade infrastructure


















12%


57%


31%


Customs
Average


Good


Very
good


31%


4% 8%
22%


35%


Transport infrastructure


Very bad


Bad


Average


Good


Very good


37%


23% 5%


13%


22%


Banks


Very bad


Bad


Average


Good


Very good


29%


46%


1%
6%


18%


Hotels and restaurants


Very bad


Bad


Average


Good


Very good


42%


24%


10%


7%


17%


Servicing facilities


Very bad


Bad


Average


Good


Very good


25%


37%
10%


12%


16%


Communications facilities


Very bad


Bad


Average


Good


Very good





22


Figure 8. Opinion of individual respondents on governance










4.1.3. Individual perceptions about trade barriers



All the respondents agreed that better trade would reduce poverty through the creation of


more jobs, higher skill levels, better income opportunities and higher local production, among


other positive advances. Thus, more extensive border trade was perceived by the local


populations as reducing poverty in the dimensions mentioned above. The present survey


thus attempted to find out, from the perspective of local individuals, what the most important


High security


47%
53%


Good
Very good


Local mafia


87%


6%
4% 2% 1%


Very bad
Bad
Average
Good
Very good


Non-transparency in information
6%


6%


27%


52%


9%


Very bad
Bad
Average
Good
Very good


Minority / religious tensions


0%


1%


0%


98%


1%


Very bad
Bad
Average
Good
Very good


Cheating and frauds


80%


14%


5%
0% 1%


Very bad
Bad
Average
Good
Very good


Strikes and closedown of operation


55%35%


9% 0% 1%


Very bad
Bad
Average
Good
Very good





23


barriers were to increasing border trade between India and Pakistan as well as between


Pakistan and Bangladesh.




The methodology used for the survey was a detailed questionnaire that was given to 179


individuals connected with the border trade process. The respondents were asked about their


types of job (either skilled or unskilled), their experience and their annual income. All these


variables were taken as control variables. On the other hand, the perception of the individuals


was ranked on a scale of 1 to 5, with 1 representing the highest barrier and 5 as the least


barrier. The following categories of variables were taken as acting as barriers to trade (hence,


obstacles to poverty reduction through trade):


(a) A lack of infrastructure, i.e., customs, transport, banks, hotels and restaurants,


servicing facilities, communication;


(b) A lack of governance, i.e., security, mafia presence, non-transparency in


information, cheating and strikes.




Table 6. Marginal effects in elasticity of Ordered Probit Regression
(Calculated at mean values)


Variables Skill
levels


Experience Annual
income


Customs 0.0730 -0.2238 0.1978**
Transport -0.0453 0.0374 -0.0424
Banks -0.1446 -0.0716 0.1411
Hotels 0.0645 -0.2767 0.2609**
Servicing facilities -0.2052 -0.3206 0.1744
Communication -0.2171 -0.3736* 0.1734
Lack of security 0.2607 0.0760 0.0328
Mafia dominance 4.4633*** -1.6234 -0.4178
Lack of transparent
information


-2.0745*** -0.5506* 0.1208


Cheating in transactions 4.0489*** 0.2563 -0.3357
Strikes by workers -2.1594** -0.0024 -0.4132
Notes: (a) The values are the changes in probability of having an outcome value of 5 in
the ranking of the respective categorical variables. Thus, a negative sign indicates less
area under that value in the probability of outcome curves, and opposite for a positive
sign;


(b) The values are all elasticities, and a value greater than 1 indicates elastic
and less than 1 implies inelastic;


(c) The asterisks denote significance levels, with * = 10 per cent, ** = 5 per cent
and *** = 1 per cent significance



Although the survey involved a total of 179 respondents, the observations of only 143 were


actually used since the remaining respondents provided incomplete responses or, in some


cases, indicated income levels that were too high. An Ordered Probit Regression analysis


was made of the categorical variables on which the ordered responses were received. The


main purpose of the study was not to deliberate on the coefficients of the regression but on





24


the resulting marginal effects that showed the shift of the underlying probability distribution


consequent upon change in the levels of some of the control variables. The aim was to get an


estimate of the degree and sign of change in the perception of those individuals who


considered the respective barrier to be the least problematic. Table 6 summarises the


Ordered Probit regression results.




With regard to infrastructure barriers to trade, surprisingly none of the independent variables


affect the outcome probabilities significantly, except for (a) income, which affects customs


and hotels; and (b) experience, which affects communications. Those with higher incomes


considered customs and hotels to be lesser barriers. The respondents with more extensive


experience in their jobs considered communications to be more of a barrier. Other values


were not significant. Thus, perceptions of individuals about possible barriers were not


significantly related to either skill levels or experience, or even income levels, except in just


three cases. Further, the changes were not elastic, signifying a less dramatic response to


changes in the control variables.




With regard to governance-related issues, the skills variable is the most important. People


with more skills are likely to consider mafia dominance as well cheating as less of a problem.


Also, they consider a lack of transparent information and strikes by workers as more of a


hindrance to trade. These are all highly significant effects. At the same time, they are highly


elastic, signifying dramatic change in perception as a person moves up the skills ladder.


Experience significantly affects the perception of a lack of transparent information as a


possible barrier. Income levels do not affect perception significantly in these categories.




Looking at table 6, it can be seen that the type of job, i.e., skilled or less skilled, matters most


in the formation of differential perceptions about barriers. Thus, a loader on a truck or a


restaurant worker view mafia and cheating as hindering the trade more compared with the


perception of a clearing agent or exporter. Although this may appear disturbing it could point


towards a nexus between the latter and mafia and cheating practices. However, this can only


be established conclusively by larger and focused surveys. Experience in terms of the


number of years worked does matter, as the more experienced respondents complained


more about the lack of both communications and transparency in information.




Surprisingly, income levels play a comparatively moderate role. People with either higher or


lower incomes did not differ much in perception except with regard to customs and hotels.


Thus, the poor and the wealthy connected with trade in the border areas, indicated relatively


similar views of trade barriers. All the respondents believed that trade would reduce poverty





25


through the creation of more jobs and skills as well as more local production, and those at the


bottom of the income scale did not view possible trade barriers any differently from those at


the top of the scale. Therefore, poverty reduction, in the perception of the individuals


connected with trade along SC 1, depends on the reduction of trade barriers through better


trade facilitation. The type of trade facilitation that may help in reducing poverty does not


appear to differ according to whether a person is wealthy or poor.




4.1.4. Opinions about trade, trade facilitation and poverty reduction



When asked whether trade was one of the responsible factors in reducing poverty, 59 per


cent of the respondents agreed (figure 9). However, the other 41 per cent felt that trade had


not succeeded in reducing poverty. Therefore, in an attempt to understand whether or not the


opinions of respondents regarding trade facilitation showed any relationship with poverty


reduction, a Logit regression was employed to assess this point. There are two issues: (a)


trade reduces poverty; and (b) trade facilitation accelerates trade. In a logistic regression,


both cannot be there in the Odds Ratio. Assuming that the second issue is true by definition,


the logic of transitivity implies an Odds Ratio in terms of whether individuals or firms believe


trade reduces poverty allows the binary variable (trade reduces poverty, where 1 = Yes and 0


= No) can be regressed on categorical variables that are entirely trade facilitation variables.


Thus, it is possible to answer the question of whether it is likely, from the perception of those


who are involved in cross-border trade, that trade facilitation will reduce poverty.24




Figure 9. Opinion of respondents on
role of trade in poverty reduction





24 A Logit analysis based on perception survey is not historical in nature. However, the significance of predictions
is checked based on such surveys. Hence, in a sense it cannot be a prediction based on historical time-series or
panel data. On the other hand, since this study takes the approach that higher trade facilitation promotes more
trade, the Logit analysis does show a direct link between trade facilitation and poverty reduction.


Yes


59%


No


41%





26


The Odds Ratio in the Logit regression is the probability that trade has reduced poverty. The


independent variables are category ranking responses on a scale of 1 to 5 regarding the


perception of barriers to trade by individuals. A value of 5 implies a low barrier of the


concerned variable and 1 implies a high barrier. Thus, the sign of the coefficients of the


regression implies how a one unit change in the explanatory category variable affects the


Odds Ratio.




Table 7. Logit regression results (individuals): Trade
facilitation to reduce poverty


(DV = Log of Odds Ratio by which poverty is reduced)


Variables Estimated coefficient
Better customs -2.488***
(1.853)
Better transport infrastructure -1.801***
(0.360)
More banks 0.677*
(0.493)
More hotels and restaurants -0.324
(0.779)
Better servicing facilities 1.387**
(0.883)
Better communications facilities -0.0737
(0.786)
Higher security -1.732*


(0.933)
Less local mafia -1.163**
(0.490)
More transparency in information 1.015**
(0.577)
Less cheating 1.541**
(0.735)
Fewer strikes/closedowns of operation -0.586
(1.203)
Constant 19.561***
(12.145)
Observations 175
Pseudo R2 0.619
Wald chi2(11) 113.26
Prob > chi2 0



Note: Robust standard errors in parentheses; *** p<0.01, ** p<0.05 and * p<0.1.




Table 7 presents the Logit regression results. It can be seen that in the perception of


individuals, only four trade barriers (or facilitation) variables affect the reduction of poverty,





27


i.e., banks, servicing facilities, more transparency in information and less cheating in


transactions. These are all statistically significant variables. However, better facilitation in


terms of infrastructure variables such as customs or transport, and governance variables


such as local mafia or high security does not appear to be important in increasing the


probability of a positive response regarding poverty reduction. The usual caveat is that the


Logit regression result needs deeper introspection. In other words, in the view of individuals


engaged in trade along SC 1, trade facilitation alone may not create opportunities for poverty


reduction.


4.2 Opinions of firms


Interviews were held with 100 Indian firms doing business with Pakistan and Bangladesh,


mostly located along SC 1 in places such as Amritsar, Ludhiana and Kolkata, of which 58 per


cent are trading with Bangladesh, 21 per cent with Pakistan and the remaining 21 per cent


with other countries such as Afghanistan, Central Asia, the Middle East and Gulf States,


Europe and East Asia (figure 10). As of March 2012, the interviewed firms had generated


direct employment of 32,820 people, of whom 89 per cent were skilled employees and


remainder unskilled (figure 11). The surveyed firms were exporting and importing various


goods, including agricultural products, via SC 1. Such goods pass through Attari-Wagah


(trade with Pakistan) and Petrapole-Benapole (trade with Bangladesh).25




Figure 10. Distribution of firms in terms of trading partners






25 These traded items are not discussed here as that is beyond the scope of this study. However, a list of such
items is available on request.


Trading with
Pakistan


21%


Trading with
Bangladesh


58%


Trading with
other


countries
21%





28



Figure 11. Skills composition in employment






4.2.1. Availability of trade infrastructure


Table 8 presents the perception of the surveyed firms concerning the availability of trade


infrastructure. All the firms felt that dispute settlement arrangements and weigh bridge


facilities were available. However, regarding the availability of the remaining facilities and


services, perception varied across firms. While only 10 per cent of the respondents said


container handling equipment was available (90 per cent disagreed with this perception), 33


per cent firms said telephone facilities were not available (67 per cent disagreed with this


view). Nonetheless, all the firms said some facilities were not available at all such as transit


services, fast track cargo clearance, post offices, waiting rooms, health facilities and banks.


4.2.2. Opinions about logistics costs in SC 1


While the opinions of the majority of respondents indicated port and airport charges in India


were high, a large majority suggested that the rate of road and rail transportation charges as


well as warehouse and loading service charges were average (figure 12). Thus, logistics


costs (domestic) are a critical factor in facilitating trade with Bangladesh and Pakistan.












Unskilled,
3 641 (11%)


Skilled, 29 179


(89%)





29


Table 8. Physical and non-physical trade barriers
at Indian borders with Bangladesh and Pakistan*



(a). Availability of facilities


Availability Perception (%)
Weigh bridge 100
Dispute settlement 100
Telephone 67
Customs 56
Security 56
Container handling yard 56
Standards (customs) 56
Internet 46
Shops, hotels and restaurants 36
Immigration 33
Warehouse and parking 33
E-commerce of customs 23
Currency exchange 23
Container handling equipment 10





(b). Non-availability of facilities
Non-availability Perception


(%)
Banks 100
Health facilities 100
Waiting rooms 100
Post offices 100
Fast track cargo clearance 100
Transit 100


* Border check posts/land customs stations only on SC 1.







30


Figure 12. Opinions on operational logistics costs











4.2.3. Transaction time at border


The opinions of firms indicate that the processing of India’s exports to Pakistan take a shorter


time at the border compared with India’s exports to Bangladesh. According to 97 per cent of


the respondents, India’s exports to Pakistan take one day without physical inspection, while


88 per cent of the respondents said processing required two days with physical inspections


(table 9).


Port Charges


2%


80%


18%
Very high


High


Average


Low


Very low


Airport Charges
4%


78%


18%


Very high


High


Average


Low


Very low


Road Transport Rates


29%


59%


12%


Very high


High


Average


Low


Very low


Rail Transport Rates
0% 10%


72%


18%


Very high


High


Average


Low


Very low


Warehouses/loading service charges


1%
19%


78%


2%


Very high


High


Average


Low


Very low


CHA Fees


11%


43%


46%
Very high


High


Average


Low


Very low





31


However, the results were mixed for Indian exports to Bangladesh. Although 66 per cent of


the firms said Indian exports to Bangladesh took one day with or without a physical


inspection, 27 per cent said it took two days without physical inspection. At the same time,


about 7 per cent and 22 per cent of the respondents said it took three days at the border


without and with physical inspections, respectively.





Table 9. Border transaction times



(a). Indian exports to Pakistan


(Unit: Per cent)
Time Without


physical
inspection


With
physical


inspection
1 day 97 -
2
days


3 -


1 day - 12
2
days


- 88



(b). Indian exports to Bangladesh


(Unit: Per cent)
Time



Without
physical


inspection


With physical
inspection


1 day 66 -
2 days 27 -
3 days 7 -
1 day - 66
2 days - 12
3 days - 22






4.2.4. Perception of customs process


The perception among firms regarding the customs process was mixed. As shown in table


10, about 77 per cent of the respondents said they were unaware of being able to complete


customs declarations online, whereas all the respondents said customs does not:


(a) Allow pre-arrival clearance of merchandise/shipments for imports:


(b) Use post clearance audit for imports:


(c) Allow traders (or their agents) to choose the location of the final clearance of


goods for imports:





32


(d) Allow goods to be released pending final clearance against an accepted


guarantee.




At the same time, all the firms said that the customs code required importers to use a


licenced customs broker to clear goods, Customs does interact formally to discuss about


policy, and receive advance notification of binding changes with regard to tariff classification,


valuation or rules of origin from customs. In addition, about 35 per cent of the respondents


were unaware of the availability of a review/appeal procedure in cases of disputes with


Customs.


Table 10. Perception about customs processing at border crossings
(Unit: Per cent)


Yes No Do not know
Can a customs declaration be submitted online? 23 77
Does customs allow for pre-arrival clearance of
merchandise/shipments for import?


100


Does the custom code require importers to use a
licenced custom broker to clear goods?


100


Does customs use a post-clearance audit for
imports?


100


Are you and your customers able to choose the
location of the final clearance of goods for imports?


100


Can goods be released pending final clearance
against an accepted guarantee?


100


Are you and your peers invited for dialogue by
Customs through a formal process (periodic
meetings, consultative forums or committees etc.)?


100


In cases of disputes with customs or other border
agencies, is a review/appeal procedure available?


65 35


Do you receive advance notification of binding
changes with regard to tariff classification, valuation
or rules of origin?


100




4.2.5. Trade barriers identified by Indian exporters and importers



During the survey, 40 per cent of the interviewed firms identified some barriers that they had


faced while exporting and importing with Bangladesh and Pakistan. Tables 11(a) and 11(b)


contain lists of barriers and relevant regulators. These barriers are a mixture of physical and


non-physical bottlenecks, and cover many issues ranging from the repair and development of


roads and highways to slow access to the Electronic Data Interchange (EDI) system.


Subnational cases such as value-added tax (VAT) were also identified as a barrier to trade.







33


Table 11(a). Trade barriers faced by Indian exporters and importers with Pakistan
Sr.
No.


Types of barriers Authority/subject


1


Although cheaper, rail is time-consuming because
(a) absence of wrecks, and (b) availability of equal
numbers from both sides for exchange.


Railways


2


Traders are afraid to send cargo by rail because of
drug incidents.


Customs


3


A bank is only in Amritsar Town. There are no banks in
or near Attari ICP.


Banks


4


Imported crude drugs get wet in the rain as there are
not enough sheds to accommodate the cargo.


Storage and
warehousing
(CWC)


5


Storage space made for trade but used by Border
Security Force (BSF) for their accommodation.


Security and
storage and
warehousing


6


Products are taken away by customs as samples,
thereby causing shortages of merchandise.


Customs


7 Both weighing bridges at Attari ICP are defective. Highways
8




Free trade through Kashmir is affecting trade at Attar. Customs,
Directorate-General
of Foreign Trade
(DGFT)


9


VAT in Punjab is 1 per cent higher than in adjoining
States making products uncompetitive.


Punjab
Government


10




Contract registration required for exporting cotton yarn
is valid for only 30 days. If export is not made in time a
penalty of Rs 10,000, or 1 per cent of value is incurred,
whichever is higher.


DGFT


11


Insufficient space, so less time available for loading
and unloading of vessels.


Shipping


12


Road conditions in Ludhiana are very bad. Highways, Punjab
Government


13 Machinery at Ludhiana dry ports is very old. Railways
14 Gateway ports are very congested. Shipping
15


Exporters and importers prefer forwarders in lieu of
carriers as they give credit.


Banks, customs


16 Strikes at ports disturb the entire chain. Labour, shipping
17


Policies related to exporting changes frequently, which
puts exporters in a bad position with customers.


Commerce






34


Table 11(b). Trade barriers faced by Indian exporters and importers with Bangladesh
Sr. No. Types of barriers Authority/subject


1


Policies related to export changes frequently puts firms
in a bad position with customers.


Commerce


2 Frequent strikes at port. Labour, shipping
3


VAT is high. West Bengal
Government


4




If cargoes miss a vessel then the next ship is available
after a week. Traders have to bear daily port charges
and give discounts to customers. Roll-over charges are
also expensive.


Ports


5 EDI system of customs is very slow. Customs


6



The number of shipping lines sailing to Bangladesh is
steadily declining. Previously there were five shipping
lines; this figure is now only two shipping lines today
(APL and NYK).


Shipping


7 Shortage of electricity. Power
8 EDI system of customs is slow. Customs
9 The United States dollar exchange rate is high. Finance, RBI
10


High labour rate at CWC (Rs.3000) whereas outside
labour rate is Rs1,500.


CWC


11


Private parking is Rs 50 per day and Rs80 per day at
the CWC warehouse,


CWC


12


A Bangladesh warehouse can accommodate 300-400
trucks, whereas in India 80-100 trucks can be
accommodated.


CWC


13


There are no online document exchange facilities
between India and Bangladesh.


DGFT, customs


14


Ghojadanga LCS has no phytosanitary and quarantine
office.


Customs


15 No bank at Ghojadanga LCS. Bank
16 No warehouse at Ghojadanga LCS. CWC
17 No government parking at Ghojadanga LCS. CWC
18 No import through Ghojadanga LCS. DGFT
19


Bridge leading to Ghojadanga border is damaged, so
heavy trucks (10 wheels and above) are not allowed.


Highways




4.2.6. Opinions of firms about trade facilitation and poverty


In the survey, about 86 per cent of the respondents said poverty had declined during the past


five years, 72 per cent of whom felt India’s trade with India and Pakistan was one of the major


factors responsible for the reduction of poverty (figure 13). The survey therefore attempted





35


with the help of Logit regression to assess whether or not there was any empirical


relationship between trade facilitation and poverty reduction from the perspective of exporters


and importers.




Figure 13. Perception about poverty and trade facilitation







Table 12. Logit regression results (firms):
Reduction of poverty by trade facilitation


(DV = Log of Odds Ratio by which poverty is reduced)


Variables
Estimated


coefficients
Better infrastructure at checkpoints


9.59***
(1.413)


Better transportation infrastructure
for accessing checkpoints


31.70***
(1.552)


Better telecommunications
infrastructure at checkpoints


-6.76***
(0.518)


Less bureaucracy and red-tape at
checkpoints


47.09***
(2.863)


Less corruption and bribery at
checkpoints


-15.87***
(1.035)


Faster handling equipment


27.96***
(1.577)


Less lengthy paper work at
checkpoints


-79.31***


(1.526)
Observations 100
Pseudo R2 0.869
Wald chi2 (Prob > chi2) 70.91 (0)


Note: Robust standard errors in parentheses; ***p<0.01, **p<0.05
and *p<0.1.




Do You Think Poverty Has Gone Down
over the Last 5 years?


No
14%


Yes
86%


If Yes, Do You Think Trade with Pakistan
and Bangladesh is One of the Major
Responsible Factor for Reduction of


Poverty?


No
28%


Yes
72%





36


Table 12 presents the Logit regression results. As discussed above, the Logit regression


presents the probability that trade has reduced poverty. The opinions of firms towards poverty


and trade facilitation are considered here. The independent variables are categorical ranking


responses on a scale of 1 to 5 with regard to perception of barriers to trade by the firms. A


value of 5 implies the lowest barrier of the concerned variable as in the individual regression


while 1 implies a very high barrier. Thus, the sign of the coefficients of the regression implies


how one unit changes in the explanatory variable affects the Odds Ratio (outcome variable).


It was found that four trade barrier (or facilitation) variables were perceived as affecting


reduction of poverty, i.e., less bureaucracy and red-tape, better infrastructure, better


transportation and faster handling equipment. These variables are statistically significant at


the 1 per cent level. With 87 per cent Pseudo R2, regression is also robust. However, poor


border telecommunications infrastructure, less corruption and bribery at checkpoints and


lengthy paperwork do not appear to be significantly important in increasing the probability of a


positive response regarding poverty reduction.




The results obtained from the survey are quite startling. This may be due to the pooled


regression of firms operating at the two borders – Wagah at the India-Pakistan border and


Petrapole at the India-Bangladesh border. Although the infrastructure at Wagah has


improved considerably in the past few years, the same is not the case at Petrapole. More


firms operating on the Bangladesh border believe that poverty has declined despite the


inadequate trade-related infrastructure. In the case of governance-related variables, there is


not much difference. Thus, poor transportation or inadequate infrastructure may be


hampering cross-border trade, especially between India and Bangladesh, but that has not


prevented firms from believing that poverty is getting less over time.




With regard to governance-related variables, the survey shows that even if firms believe that


less corruption and bribery or less lengthy paperwork may facilitate trade, they have not


influenced the firms’ perception of poverty reduction. In other words, in general, the


perception of firms engaged in trade along SC 1 is that trade facilitation may create


opportunities for reduction of poverty. However, the perception is mixed and the connection


of the variables to poverty alleviation needs to be clarified through follow-up surveys of the


specific variables. Thus, the usual caveat is that the Logit regression result needs more


detailed assessment.





37


Conclusion


The major findings of the study are presented in two separate categories – individuals and


firms. The majority of the individual respondents noted that trade infrastructure quality such


as customs and transport had improved over time. However, compared to customs and


transport, the respondents indicated that the performance of banks, hotels and restaurants,


servicing facilities and communication facilities were much below average. They also


indicated that a there was further scope for improvement in trade facilitation.




However, trading faces the issue of heavy security.




With regard to the quality of trade governance, of the reactions of the individual respondents


was mixed. They indicated that trade along SC 1 had not been disturbed by the local mafia,


cheating and fraud or religious tension. These issues therefore cannot be termed as


barriers to trade in the present context. Although strikes and closedowns occur, they are also


not a major issue. However, trading faces the issue of heavy security. The individual


respondents all agreed that better trade would reduce poverty through the creation of more


jobs, higher skills, better income opportunities and higher local production, among other


benefits. Thus, expansion of border trade was perceived as helping to reduce poverty within


the dimensions discussed in this study.




Regarding infrastructure barriers to trade, surprisingly none of the independent variables had


affected the outcome probabilities significantly with the exceptions of income, which had


affected customs and hotels, and experience, which had affected communications. Those


with higher incomes considered customs and hotels to be lesser barriers. People with more


experience in jobs considered communications as a more significant barrier. Other values


were not found to be significant. Thus, the perceptions of individuals about possible barriers


were not significantly related to either skill levels or experience, or even income levels, except


in just three cases. In addition, the changes are not elastic signifying a less dramatic


response to changes in the control variables.




With regard to governance-related issues, it was found that the skills variable was found to be


the most important. People with better skills were to be more likely to consider mafia


dominance and cheating as less of a problem. Instead, they considered a lack of transparent


information and strikes by workers to be more of a problem hampering trade. These are all


highly significant effects and are highly elastic, signifying dramatic changes in perception


while moving up the skill ladder. Likewise, experience significantly affected the perception of





38


a lack of transparent information as a possible barrier. Income levels, however, did not


significantly affect perception of these categories.




It can be concluded that the type of job, i.e., skilled or less-skilled, matters most in forming


perceptions about barriers. Thus, a loader on a truck or a restaurant worker view mafia and


cheating as hampering trade more compared with the perception of a clearing agent or


exporter. While this may appear disturbing it might point towards a nexus between the latter


and both the mafia and cheating practices; but this can only be confirmed by larger and


focused surveys. However, experience, in terms of the number of working years, does matter


as the more experienced respondents placed greater emphasis on complains about the lack


of communications and transparency in information.




Surprisingly, income levels were found to play a comparatively minor role. Respondents with


higher or lower income levels differed little in perception except in the case of customs and


hotels. Thus, the poor and the wealthy connected with trading in the border areas had similar


views of trade barriers. All believed that trade facilitation reduced poverty through more jobs


and skills creation, and increased local production. Thus, in the opinion of those individuals


connected with border trade, poverty reduction depended on a reduction of trade barriers


through better trade facilitation. Also, whether a respondent was wealthy or poor, there was


generally little difference in the perception of the type of trade facilitation that might help to


reduce poverty.



On the question of whether trade was one of the factors responsible for the reduction of


poverty, 59 per cent of the respondents gave an affirmative reply. However, the other 41 per


cent felt that trade had not succeeded to reduce poverty so far. This study shows that in the


perception of the individuals, only four trade barriers (or facilitation) variables affect the


reduction of poverty, i.e., banks, servicing facilities, more transparency in information and


less cheating in transactions. These are all statistically significant. On the other hand, better


facilitation in terms of infrastructure variables (such as customs and transportation) and


governance variables (such as local mafia or high security) did not appear to be important in


increasing the probability of a positive response regarding poverty reduction.




A similar exercise carried out with firms revealed that 86 per cent believed poverty had


declined and 72 per cent saw trade as major catalyst for that result. It is important to note that


the India-Pakistan border trade infrastructure was found to be much better than that for


India-Bangladesh border trade. In terms of governance variables (such as mafia, security and


bribery), the difference in perception was much less. However, for the Logit regression to





39


assess the link between trade facilitating variables and poverty reduction in the perception of


the firms, a pooled regression was taken in order to provide a reasonable sample size. This


might have even out the responses to a certain extent. In general, in the perception of the


firms, better infrastructure that encouraged more trade was also seen as facilitating a decline


in poverty. However, the same was not true with the perception of some governance


variables, such as cheating or extensive paperwork requirements.




The pilot survey described here is on cross-border trade. It must be kept in mind that a major


proportion of the income earners covered by the survey are employed in unskilled and


semi-skilled jobs on an informal contract basis. However, it was almost impossible to get any


official historical data about these workers and the analysis was thus unable to progress any


further. So, the perception survey appears to be the best alternative. Large-scale surveys


spanning a wide region can certainly be an alternative.




The results, for both individual and firms, need more in-depth examination as, in the


perception of those firms engaged in trade along SC 1, simply facilitating more trade may not


create opportunities for the reduction of poverty; it may be necessary to do so together with


better governance. The perception is mixed and the connection of the perception variables to


poverty alleviation needs to be clarified through follow-up surveys that focus on the specific


variables.






40


Annex 1



SAARC Highway Corridor 1



Source: SAARC Secretariat, Kathmandu.







41


Annex 2




Trade policy and poverty : Causal connections


























Source: Winters (2002)




Trading domain


Tradeables


Pass through, competition




National
Taxes, regulation, distributors, procurement



Regional


Distribution, taxes, regulation, co-ops


Cooperatives, technology, random shocks


Subsis-
tence


World prices
and quantities


Border price


Wholesale price


Tariffs,
QRs


Retail price




Tariff Revenue






Welfare


Exchange
rate


elderly


Household
welfare


Prices, wages,
endowments,


profits, other income


Elderly


Young


Males


Females


Enterprises


Profits,
wages,
employment


Tariff revenue


Taxes


Spending





42


Annex 3


Questionnaire survey for trading firms


Sr. No


1. Identification of the sample
8.1. Name of the


respondent:___________________________________________________________
8.2. Address


___________________________________________________________
____________________________________________________________________


_____
_______________________________________________________
Telephone:_________________________ Fax:


______________________________
Mobile: ______________________


E-mail:_____________________________
Website (if


any):____________________________________________________________
8.3. Name of the enumerator:


Mr/Ms_________________________________________________
1.4 Date of survey:_______________________


For Office Use Only:
• Co-operation of respondent: Good/Moderate/Poor
• Reliability of information: High/Moderate/Poor/Very Poor
Reviewed by: ____________________________ Date:______________________
If sent back for verification/correction:
Verification done: Yes/No. If yes, date of verification:__________________________
Verified by: ______________________________ Date:_______________________




2. Background
8.1. Type of ownership
Codes: 1 = Individual proprietorship


2 = Joint family (HUF)
3 = Partnership
4 = Private Limited Company
5 = Public Limited Company
6 = Government department enterprises
7 = Joint venture between domestic and foreign private companies
8 = Joint venture between domestic private company and government enterprises
9 = Co-operative Society
10 = Other (specify)_______________________


8.2. How would you describe your business in terms of capital when it was
established?


(1) Status of the company________
Codes: 1 = Independent
2 = Under holding company


3 = Subsidiary of domestic firm
4 = Subsidiary of foreign firm





43


5 = Other (specify)_____________________
If (3) or (4), name of the parent firm _____________________________


(2) Family based? Yes/No

2.3 Year of establishment: ___________________




3. Export/import products

3.1 Major export/import products. (Please add separate page, if needed.)


Sr.
No.


Name of
export/import


products


HS
codes


Volume
2000-01


(Rs)


Volume
2006-07


(Rs)


Volume
2011-12


(Rs)


Destinations/sources




























3.2 What are the major barriers you face while exporting or importing your products


with Bangladesh/Pakistan/both? (Please add separate page, if needed.)
Sr.
No.


Type of barrier Regulating authority(s) Scope of
improvement























3.3 Cost components of export (for every unit of major export) specifically to


Bangladesh/Pakistan/both (Rs, or specify unit:__________)
(i) ``Production costs ________________________________
(ii) Transportation costs ___________________________


(a) India part _____________________________
(b) Bangladesh/Pakistan part ________________________


(iii) Insurance costs ______________________________
(a) India part _____________________________
(b) Bangladesh/Pakistan part ________________________


(iv) Bank charges _______________________________
(a) India part _____________________________
(b) Bangladesh/Pakistan part ________________________


(v) Export duty (net of duty drawback) _________________________________
(vi) Import tariff ________________________________


(vii) Other charges/costs (specify) ___________________________________





44



3.4 What are the checkpoints (customs stations) through which your product is
exported/imported to/from Bangladesh/Pakistan? (Please add separate page, if
needed.)


Name of checkpoint Pakistan Bangladesh
Attari Wagah
Petrapole Benapole




3.5 Impediments to exports/imports at the checkpoints
(a) Waiting time at the check-posts Yes/No
If Yes, no. of days for each consignment __________________
(b) Paper work at the customs Yes/No
If Yes, costs and time incurred in clearance: Rs ______ or time ___________
(c) Different insurance for two countries Yes/No
If Yes, Bangladesh/Pakistan side insurance amount: Rs______________
India side insurance amount: Rs______________________________
(d) Different bank charges in two countries Yes/No
If Yes, Bangladesh/Pakistan side bank charges: Rs ________ or %________
India side bank charges: Rs _________ or %____________

3.6 Facilities available for imports/exports at the checkpoints (put a √ against each
facility)


Physical impediments Non-physical impediments
 Customs
 Immigration
 Security
 Bank
 Health
 Warehouse and parking
 Weigh bridge
 Container handling yard
 Container handling


equipment
 Waiting room
 Shops, hotels and


restaurants
 Internet
 Telephone
 Post office
 Currency exchange
 Any other


 e-commerce of customs
 Fast-track cargo clearance
 Working days (per week) for


customs
 Transit
 Dispute settlement
 Standards
 Any other



3.7 Barriers faced by exporters/importers at the checkpoints (put a √ against each
barrier)


Very
low


Low Average High Very
High


1 2 3 4 5
Inadequate infrastructure at checkpoint
Poor transportation infrastructure to
access the checkpoint






45


Poor telecommunications infrastructure
at checkpoint




Bureaucracy and red-tape at checkpoint
Corruption and bribery at checkpoint
Restrictive government policy and
regulations




High cost of transportation
Lack of warehouse facilities
Lack of faster handling equipment
Lack of trained human resources
Lengthy paper work at checkpoint
Others (if any) (specify)



4. Employment



4.1 Number of employees

Please fill in the following table for employees (possibly average, if not at the end of
the periods)


At the time of
establishment


(specify
year__________)


2006-07 2011-12
(Other ,


specify______)


Total employees
Skilled

Permanent




Casual
Unskilled

Permanent




Casual

5. Service Quality
5.1 Rate the efficiency of the clearance process (e.g., speed, simplicity and


predictability of formalities) by border control agencies including customs (put
a √ in the relevant cell)

(a) Speed


LCS Country Very
low


Low Average High Very
high


1 2 3 4 5
Attari India
Petrapole India
Wagha Pakistan
Benapole Bangladesh



(b) Simplicity


LCS Country Very
low


Low Average High Very
high


1 2 3 4 5
Attari India





46


Petrapole Pakistan
Wagha Bangladesh
Benapole



(c) Adherence to rules


LCS Country Very
low


Low Average High Very
high


1 2 3 4 5
Attari India
Petrapole Pakistan
Wagha Bangladesh
Benapole



5.2 Evaluate the quality of services in trade and transport related infrastructure (i.e.


airports, ports, railways, roads, information technologies, etc) (put a √ in the
relevant cell)



(a) Airport


Very
low


Low Average High Very
high


1 2 3 4 5
India
Pakistan
Bangladesh


(b) Rail
Very


low
Low Average High Very


high
1 2 3 4 5
India
Pakistan
Bangladesh



(c) Road


Very
low


Low Average High Very
high


1 2 3 4 5
India
Pakistan
Bangladesh



(d) Ports


Very
low


Low Average High Very
high


1 2 3 4 5
India
Pakistan
Bangladesh



(e) Information technology


Very
low


Low Average High Very
high





47


1 2 3 4 5
India
Pakistan
Bangladesh



5.3 What is the level of your overall ease of trading with the following countries?


(put a √ in the relevant cell)
Very


difficult
Difficult Average Easy Very


easy
1 2 3 4 5


India
Pakistan
Bangladesh



5.4. Rate the ability to track and trace your consignment while in transit to the


following countries (put a √ in the relevant cell)
Very


difficult
Difficult Average Easy Very


easy
1 2 3 4 5


India
Pakistan
Bangladesh



5.5. Evaluate the cargo shipment requirements such as logistics, security and


insurance requirements (i.e., screening, advance information etc.) (put a √ in the
relevant cell)


Very
difficult


Difficult Average Easy Very
easy


1 2 3 4 5
India
Pakistan
Bangladesh





5.6. When arranging shipments to the countries listed below, how often do the


consignments reach within the scheduled or expected delivery time? (put a √ in
the relevant cell)


Hardly
ever


Rarely Sometime Often Nearly
always


1 2 3 4 5
India
Pakistan
Bangladesh



5.7. Based on your experience describe the operational logistic costs in India,


compared with other costs of your production (put a √ in the relevant cell)
Very high High Average Low Very low


1 2 3 4 5
Port charges
Airport charges





48


Road transport rates
Rail transport rates
Warehouses/translation
service charges




Agent fees
Other (specify)



5.8 Evaluate the quality of trade and transport-related infrastructure (i.e., ports,


railways, roads, information technologies etc.) in India (put a √ in the relevant
cell)


Very low Low Averag
e


High Very
high


1 2 3 4 5
Port
Airport
Road
Rail
Warehouses/trans-loading
facilities




Telecommunications
infrastructure and IT services





5.9 Evaluate the competence and quality of services delivered by the following in


India (put a √ in the relevant cell)
Very low Low Averag


e
High Very high


1 2 3 4 5
Road transport services provider
Rail transport services provider
Air transport services provider
Maritime transport services provider
Warehouses/trans-loading and
distribution operators




Freight forwarding
Customs agents
Quality/standards inspection agencies
Health/SPS (Sanitary Phytosanitary)
agencies




Trade and transport related
associations




Consignees or shippers


5.10 How many documents do you submit to border-related government agencies


involved in the clearance process for export and imports including customs?
Number of


documents
Pakistan (Attari)
Bangladesh
(Petrapole)








49


5.11 The average time taken for imports and exports after declaration and notification
of clearance


(Unit:________)
Pakistan Bangladesh
Without physical inspection
With physical inspection



5.12 Evaluate the following statements regarding customs at check post (put a √ in


the relevant cell)
Yes No N/A Do not


Know

Can the customs declaration be submitted online?
Does customs allow for pre-arrival clearance of
merchandise/shipments for imports?




Does the customs code require importers to use a
licensed custom broker to clear goods?




Does customs use post-clearance audit for
imports?




Are you and your customers able to choose the
location of the final clearance of the goods for
imports?




Can goods be released pending final clearance
against an accepted guarantee?




Are you and your peers invited for dialogue by
customs through a formal process (periodic
meetings, consultative forums, committees etc.)?




In the case of a dispute with customs or other
border agencies, is a review/appeal procedure
available?




Do you receive advance notification of binding
changes with regard to tariff classification,
valuation or rules of origin?





6. Perception of poverty



6.1 Do you think poverty has gone down during the past five years for you? Yes/No.


If yes, do you think cross-border trade with Pakistan/Bangladesh is one of the major
factors responsible for this? Yes/No



Perception of local people/exporters/importers about poverty-alleviating role of


international trade


Sr. No
1. Name of the respondent:______________________________________
2. Address: __________________________________________________


___________________________________________________________
_______________________________________________________
Telephone:_________________________ Fax: ________________________
Mobile: ______________________
E-mail:_____________________________
Website (if any):______________________________________________________


3. Date of survey:_______________________





50



4. Type of ownership:


Codes: 1 = Exporter 2 = Importer 3 = Individual 4 = Other (specify):_____________

5. How are you related to this trade?


 Transporter
 Foreign exchange dealer
 Helper in loading/unloading of cargo
 Local trade agent
 Repair mechanic
 Dhaba worker
 Dhaba employer
 Hotel operator
 Any other (please mention)



6. In which year did you join in this service?

7. How much do you earn from this trade activity?


First year
(2000-01)


2006-07 2011-12


Daily (in Rs)
Weekly (in Rs)
Monthly (in Rs)



8. Do you want trade to rise? Yes/No


If Yes, what are the impediments to an increase in trade activity?
(a) Lack of infrastructure (on a scale of 1 to 5)


Very
bad


Bad Average Good Very
good


1 2 3 4 5
Customs
Transport
infrastructure




Banks
Hotels and
restaurants




Servicing
facilities




Communications
facilities





(b) Poor governance (on a scale of 1 to 5)


Very
bad


Bad Average Good Very
good


1 2 3 4 5
High security
Local mafia
Lack of
transparency in
information




Minority/religious
tensions




Cheating





51


Strikes and
closedown of
operation





If no, specify the reasons:


9. Exporters/importers

(i) Do you think better trade will reduce poverty locally? Yes or No. If Yes, rank the
following on a scale of 1 to 5, where 5 is agree and 1 is disagree.
 More jobs
 Higher income
 Better skills
 Better knowledge about income opportunities
 Expansion of local production

(ii) Do you think improvement of trade facilitation at borders will reduce poverty locally?


Yes or No. If Yes, rank the following on a scale 1 to 5 where 5 is agree and 1 is disagree.
 More jobs
 Higher income
 Better skills
 Better knowledge about income opportunities
 Expansion of local production



(iii) Do you think upgrading skills has created improvements? Yes or No. If Yes, rank the
following on a scale of 1 to 5 where 5 is agree and 1 is disagree.


• Faster cargo handling
• Well informed/quality decision at work
• More professionalism at work
• Honesty and integrity at work
• Better communications



10. Do you think poverty has gone down during the past five years for you? Yes/No.


If Yes, do you think cross-border trade is one of the major responsible factors for this?
Yes/No





52


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