Development partners are encouraging broader connectivity in South Asian countries for poverty alleviation.
"Lack of trade and cooperation is costly and it has an adverse impact on income and poverty," said lead economist of the South Asia Region at the World Bank David Gould.
Overall, the poor benefit in the transition to freer trade, as net consumers of those products which experience price declines and prices of net producers of goods increases, he said, adding that the non-poor will experience a reduction in welfare. "In Nepal, prices of wheat products, milk, some meat products, edible oils, non-durable goods, carpets and textiles will increase by six to 65 per cent, whereas prices of eggs, sugar, cheese, poultry, motor cars, motorcycles, fuels and lubricants will decrease by three to 40 per cent," he said, citing the study of the World Bank 'Breaking Down Barriers to Regional Trade and Cooperation in South Asia'.
Likewise, tweaking institutional relationships, broadcasting the costs of lost opportunities and taking actions — policies and investments — to build coalitions for change will have an impact, Gould added.
The report has highlighted rail networks like Birgunj-Raxaul-Katihar-Rohanpur-Chittagong with links to Jogbani and Agartala as landlocked states like Nepal, Bhutan and Afghanistan have no rail network. "Likewise, landlocked Nepal, Afghanistan and Bhutan also have limited road network and lower levels of access apart from non-tariff and tariff barriers that are blocking economic integration of the region," it said, adding that a common vision for energy trade and service trade will boost trade in the regional bloc.
However, trade experts argued that historical baggage and political domination coupled with bureaucratic mentality have blocked regional economic integration in South Asia despite a huge intra-regional trade potential.
"Bilateral economic and trade relations have been guided by political relations rather than bilateral and multilateral agreements," according to former commerce and supplies secretary Purushottam Ojha. If the political relations between two countries are good, trade flourishes, otherwise, the bilateral agreements are also useless as the countries find various ways to block trade, he said.
"There has been various incidents of blockage of Nepali goods by Indian states, despite bilateral agreement between Kathmandu and Delhi," said senior economist Prof Dr Bishwhambher Pyakuryal.
"Despite bilateral and multilateral trade agreements, politicisation in the countries has been the key reason for low trade and investments in the South Asia," said commerce and supplies secretary Lal Mani Joshi.
Lack of regional transit agreement, weak institutions and infrastructure and policy-induced regulatory barriers have hurt trade in South Asia, according to executive chairman of South Asia Watch on Trade, Economics and Environment (SAWTEE) Dr Posh Raj PandeyThe report also seeks to understand the reasons for low trade and cooperation in the South Asian region and attempts to measure the costs and economic consequences of this low cooperation. The findings have benefited from extensive data analysis and consultations with a wide range of stakeholders in almost all the countries of the region.