Costs and Benefits of Regional Connectivity: An Analysis from Bangladesh Perspective

Abstract

Aims: This paper aims to investigate the costs and benefits of regional connectivity in Bangladesh from the economic perspective through using the analytical tools of benefit-cost analysis.
 Study design: The study is conducted based on forecasted secondary data from different related published sources. A qualitative stakeholder survey is conducted to evaluate the intended impact of regional connectivity on the economy of Bangladesh.
 Methodology: The study uses qualitative research tools to assess the impact of bilateral or multilateral connectivity and uses the tools of benefits-costs analysis (NPV, BCR, and IRR) applied to evaluate the effectiveness of regional connectivity from bilateral and multilateral perspectives. Our key hypothesis is that ‘regional connectivity improves benefits’.
 Results: The study shows that Bangladesh can gain from connectivity. However, gains from regional connectivity, especially, bilateral connectivity is very sensitive to the changes in the variables particularly, transshipment charge, volume of transshipment, and cost of building physical infrastructure. With modest values of the parameters, we find that connectivity generates a positive net present value, if Bangladesh can charge rationally against the cost of building infrastructure. From the stakeholders’ point, connectivity is beneficial, particularly multilateral connectivity generates more net benefit than the bilateral connectivity. Besides, the economic costs, the security concern can play a big effect on the social cost of such connectivity. Meanwhile, grave concern is aired on incurring a huge project cost, if Bangladesh implements the project with a higher interest tide loan from India. Moreover, the imposition of congestion fees, water pollution, and traffic fees derive the benefit from transit facilities.
 Conclusion: The net gains from regional connectivity depend on trading patterns’ transshipment of goods, trade creation, and trade diversion among the partners through the connectivity process. Bangladesh needs to adopt gains-optimizing strategies for fixing the direct and indirect fees. Bangladesh should prioritize the silk-route connectivity more than the Asian Highway to attract FDI and sunset industry from China.