Government of India and World Bank Sign $107 Million Agreement to Connect Mizoram with Bangladesh and Myanmar via Roads

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August 28, 2014

NEW DELHI, August 28, 2014 – The Government of India, the Government of Mizoram, and the World Bank today signed a $107 million credit agreement for the Mizoram State Roads II – Regional Transport Connectivity Project to improve transport connectivity for the landlocked state of Mizoram and to help open up the potential for regional trade among neighboring countries.

The project will enhance Mizoram and other northeastern states’ road links with Bangladesh, as well as with Nepal, Bhutan and Myanmar.

The link to Bangladesh will facilitate greater bilateral trade and access to the Port of Chittagong – the nearest shipping port for the northeastern region of India. The link to the border with Myanmar will facilitate connectivity to Myanmar and the rest of East Asia and beyond. The impacts on trade and employment will be felt at two levels, intra-state and between Mizoram and neighboring states and countries, namely Bangladesh and Myanmar.

Mizoram’s road network is of poor quality and under developed, and has among the lowest density in all of India. It faces severe constraints in its connectivity with larger markets. Travel from Aizawl to the nearest Indian port of Kolkata via the congested, 11 km-wide Siliguri corridor, also known as the “Chicken’s Neck,” is a 1,547 km long journey. Prices for basic staples like rice, sugar, tea and tomatoes can cost as much as three times more in Mizoram and other northeastern states when compared with most Indian cities or neighboring countries like Bangladesh.

According to estimates, annual intra-regional trade in the region can more than double from $16 billion to $38 billion annually, if barriers to trading with neighbors were removed. According to another estimate, investments in transport infrastructure could reduce trade costs by more than 20% in India, and 12.5% in Bangladesh. [1]

The loan agreement for the Mizoram State Roads II – Regional Transport Connectivity Project was signed by Nilaya Mitash, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; Ranbir Singh, Resident Commissioner, on behalf of the Government of Mizoram; and Onno Ruhl, World Bank Country Director in India, on behalf of the World Bank.

“Being strategically located between Myanmar and Bangladesh, a better connected Mizoram can open up huge trade potential for the entire northeastern region of India with South and East Asian countries. These countries will be able to export and import goods cheaper and faster. Consumers will also benefit from better pricing and choices,” said Onno Ruhl, World Bank Country Director in India.

The project will fund 91 km of roads that are design-ready. Roads that will be widened or strengthened include: a 22 km section of Lunglei – Tlabung – Kawrpuichhuah road on the border with Bangladesh; the 27.5km Champhai-Zokhawthar road on the border with Myanmar; and the 41.7km Chhumkhum-Chawngte North-South alignment connecting to the border roads with Bangladesh to the west and Myanmar to the south.

Another 330 km of road works may be considered for a follow-on project or additional financing when the designs are ready. The current project, approved today, will fund detailed studies and designs for these roads (330 km) mostly in the North-South corridor. Many of these roads, to be taken up in the next phase, will be greenfield projects and will increase the connectivity both within the state – improving access to transport infrastructure and services for isolated communities – as well as to key international trunk roads and transport corridors that connect to other northeast Indian states, Bangladesh, Chittagong Port and the rest of South Asia, and to Myanmar.

The project will also support Mizoram’s Road Sector Modernization Plan (RSMP) to strengthen its institutions, enhance accountability; introduce new technologies to promote cost effective road construction; and strengthen road safety management systems. This will help transform the state’s Public Works Department into a modern road agency.

Recognizing that road safety is a critical issue in the country today, the project will strengthen road safety management systems and initiate pilot projects to demonstrate good practices in road safety engineering measures that effectively address road safety hazards.

“Improving transport connectivity can play a vital role in enhancing growth in Mizoram, a remote, hilly, and mountainous region where road transport is the only mode of transport within the state. Better connectivity can help reduce freight and passenger transport costs, and provide quicker and safer access to all parts of the state and to neighboring states and countries,” said Diep Nguyen-van Houtte, Senior Transport Specialist and the World Bank’s Task Team Leader for the project.

The Project will be financed by a credit from the International Development Association (IDA) – the World Bank’s concessionary lending arm – which provides interest-free loans with 25 years to maturity and a grace period of five years.

Connectivity is crucial for a distant hill state such as Mizoram which, like the other northeastern states, is geographically isolated from the mainland. Long and difficult transportation routes over predominantly mountainous terrain have long hampered trade and development. The Mizoram State Roads Project helped build or rehabilitate over 400 kilometers of the state's core road network, reducing travel time by half, and triggering significant socioeconomic benefits in the project area.

[1] Dec 2013: Intra-regional trade can more than double if constraints are removed (US$ 16 billion to US$ 38 billion annually) Zhai 2010: Investments in transport infrastructure to increase Pan-Asian connectivity could reduce trade costs by more than 20% in India, and12.5% in Bangladesh.
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