South Asia is the next world economic driver.

It has immense potential to be the

frontrunner of growth and prosperity. South Asia has positioned itself as a strong
consumer market base with a quarter of the worlds middle-class consumers
residing there. It has the largest working-age population, the right culture to foster
entrepreneurship and a dynamic industry sector. More importantly, South Asia has
the right combination of resources to boost agriculture, industry and investment.
The region also faces some of the worlds worst challengespoverty,
unemployment and illiteracy. It is at the bottom of the pyramid in terms of trade,
investment and finance. One way in which the region can address these challenges
is through the process of regional connectivity.
Regional connectivity can be defined as the ease with which people, materials, and
information can be moved from one location to another, within and between
regions.

Convenient location of Bangladesh offers her a unique opportunity to catalyze

connectivity for linking up to multiple centers of economic growth in a dynamic
and creative Asian century. Bangladesh views the issue of connectivity a from
holistic perspective. Bangladesh could act as a bridge between mainland India and
its North Eastern region. Recent political developments in Myanmar created a new
incentive for exploring a cooperative economic paradigm among Bangladesh, India
and Myanmar. China could also be brought into this mix. South Western China,
North Eastern India and South West of Myanmar and Bangladesh could gainfully
leverage on their shared resources and common goals.

Bangladesh's geographical location between three major regions of Asia provides a

unique opportunity for cross-border movement of goods and services and
investment flows. It will boost sustainable growth by promoting regional economic
integration. Bangladesh's real income gains will be 6.9 percent of its gross
domestic product and export will grow 86 percent by 2030 if connectivity between
South Asia and Southeast Asia improves.
Regional connections of Bangladesh:
Effective regional connectivity and better trade facilitation are being given higher
prominence at the policy level of Bangladesh. Bangladesh is a member of a
number of regional and sub regional trade arrangements and initiatives. These are:South Asian Free Trade Area: agreement to promote competition, increase the
level of trade and economic cooperation and to provide equitable benefits to the
countries involved.
The Bangladesh, Bhutan, India, Nepal (BBIN): agreement to promote safe,
economical efficient and environmentally sound road transport in the sub-region
South Asia Sub regional Economic Cooperation: aims to promote regional
prosperity, improves economic opportunities, and builds a better quality of life for
the people of the sub region.
South Asia Co-operative Environment Program SACEP: to promote and
support protection, management and enhancement of the environment in the
region.

BIMSTEC: to harness shared and accelerated growth through mutual cooperation

in different areas of common interests by mitigating the onslaught of globalization
and by utilizing regional resources and geographical advantages.
ACU: Asian Clearing Union (ACU) is the simplest form of payment arrangements
whereby the participants settle payments for intra-regional transactions among the
participating central banks on a multilateral basis.
South Asian Sea Program (SASP): The Sea Program is based on the regions
environmental challenges as well as its socioeconomic and political situation. It
may cover issues ranging from chemical wastes and coastal development to the
conservation of marine species and ecosystems.
Benefits from regional connectivity
The potential benefits are best appreciated by looking at geography. Bangladesh
has two natural positional advantages: open access to the sea in the South; and
providing a bridge between East Asia and the rest of South Asia leading on to
Central Asia and Europe. Bangladesh is situated in a unique location with two
land-locked countries, Nepal and Bhutan. Therefore, the country also bears huge
geographic potential of regional connectivity with Nepal, Bhutan and North East
India.
Bangladesh can be benefitted from regional connectivity in the following sectorsExport-Import:
Due to transit facility Bangladesh can expand export and import in Nepal, Bhutan
and Myanmar. Bangladesh now export 21.7 million$ in Nepal and 5 million$ in
Bhutan. New construction of railway and opening road transit will increase this

export time. Inland waterway connectivity between India and Bangladesh will
boost up trade and reduce cost and time of export-import. Bangladesh can import
goods from Nepal and Bhutan. Bangladesh can import gas from Myanmar through
the proposed tripartite gas line. Bangladesh can import cheapest hydropower from
Bhutan.
Lower cost of transportation:
South Asia has logistic costs that range between 13% -14% of GDP. If regional
connectivity increased this cost will be reduced and make export-import more
favorable.
Boost Revenue Earning:
Transit-As Bangladesh is providing transit facility to India, Nepal and Bhutan it
can impose transit charges that will yield sizeable revenue. Bangladesh can impose
charges based on emissions and size of transit vehicles as measured by the number
of axles. It can also levy toll charges on transit traffic.
Seaport-Land locked Nepal; Bhutan and North East Indian states can be extremely
benefited from two sea ports of Bangladesh. At present, Bangladesh makes use of
only 60 percent and 25 percent of the total capacity of Chittagong and Mongla
ports. Bangladesh can sell off the remaining 40 and 75 percent of the services of
the two seaports and earn revenue. The potential of developing a deep sea port is
under active planning which may be used by other countries of the region
including China, India and Myanmar and boost up our revenue earning.
Air port-Bhutan wants to use the airports of Bangladesh along with five new land
customs (LC) stations under a proposed 'Protocol on Transit' between Bhutan and
Bangladesh. Bangladesh can sell the service of airports and earn revenue.

Service sector-Bangladesh can also be benefited from service sector. Tourism is a

potential sector for Bangladesh. It can explore different tourist spots and increase
facilities for tourists of neighboring countries. Bangladesh can also enhance
banking facilities for neighboring countries.
Blue economy:
Bangladesh can utilize the resource of blue economy. It can provide feeder
services, inland waterway transport facility to the neighboring country. It can
explore the gas reserve in Bay of Bengal with the help of regional connectivity. It
can provide coastal tourism, cruise tourism and arrange recreational water sports,
yachting and marinas for tourist.
Increase foreign direct investment:
Regional connectivity will attract the foreign investors to invest in potential
sectors. China is interested to invest in deep sea port, India is providing 1 billion
dollar for communication infrastructure development. For developing the transit
infrastructure Bangladesh need 2.3 billion dollar. World Bank and Asian
Development Bank will finance for transit corridor development, enhancing the
capacity of sea port and developing land port. JICA is also interested in investing.
This huge investment will change our economic scenario.
Impact of regional connectivity on Balance of Payment:
Regional connectivity has a significant impact on balance of payment. It will
enhance trading and foreign investment which will reduce the disequilibrium in
balance of payment.
Balance of payment contains details of all the economic transactions of a country
with the rest of the world for a given period of time.

Balance of payment has two main components Current account: Current account includes international trade in goods and
services and income from investment and gifts.
Capital account: Capital account includes i) Direct investment, ii) Portfolio
investment, iii) Capital movements and iv) Countrys official reserve.
Impact on current account: The balance of current account will be increased.
Regional connectivity will increase export-import and boost up revenue earnings
from selling different services which will lead to surplus in current a/c balance.
Impact on capital a/c: The balance of capital a/c will also be increased.
Connectivity will attract more foreign investment and capital movement for our
infrastructural development and potential business sectors which will make capital
a/c surplus.
Impact of Regional connectivity on foreign exchange reserve:
Regional connectivity has a direct impact on forex reserve. The relationship can be
shown as
Regional connectivity

Surplus production

Export

Forex reserve

Regional connectivity will enable Bangladesh to produce more goods as the

investment will increase. Bangladesh can export the surplus production (goods and
services) as well as expand export to newly connected territory. It also can import
products cheaply from neighboring countries. This will lead BOP position to
surplus. Foreign exchange earnings will increase and thus forex reserve will be
increased.
This higher reserve will serve
1.
2.
3.
4.
5.

To stabilize exchange rate during high volatility and financial crisis

Provide support in terms of foreign liquidity crisis
Increase confidence to pay all the external obligations and debt
Increase foreign investors confidence to get more FDI inflow
Helps to pay import bill during the crisis time.

Regional connectivity will make Bangladesh a well-connected and open country,

and facilitate economic integration, greater regional trade and investment. This will
help Bangladesh to earn more foreign currency and boost up foreign exchange
reserve.