Economic Corridor Development in South Asia
4 February 2025
This Asian Development Blog article explores the role of economic corridor development in South Asia, highlighting its potential to enhance trade, industrialization, and regional connectivity. Economic corridors, which include transportation networks and industrial hubs, are crucial for stimulating economic growth, creating jobs, and promoting regional integration across SASEC member countries—Bangladesh, Bhutan, India, Nepal, and Sri Lanka. By addressing infrastructure gaps and business constraints, these corridors aim to boost manufacturing competitiveness and integrate local economies into global value chains. The development of economic corridors is seen as a key strategy for sustainable economic growth, poverty reduction, and balanced regional development in South Asia.
From Roads to Riches: Economic Corridors Can Supercharge South Asia
Economic corridor development in South Asia enhances trade, industrialization, and connectivity while addressing infrastructure gaps and business constraints. By creating jobs, promoting regional integration, and improving manufacturing competitiveness, corridors contribute to sustainable economic growth and poverty reduction.
Economic corridors are drivers of economic growth and structural transformation and are integral to the pursuit of regional development and economic integration. They not only enhance connectivity and trade but also foster industrialization, job creation, and balanced regional growth.
In South Asia, particularly in Bangladesh, Bhutan, Nepal, India, and Sri Lanka the development of economic corridors presents a promising pathway to unlock economic potential, strengthen regional ties, and promote sustainable development.
Economic corridor development efforts aim to improve a country’s manufacturing potential by addressing key constraints such as cumbersome business processes, infrastructure bottlenecks, and low competitiveness of domestic manufacturing leading to low manufacturing jobs and less integration with global value chains.
An economic corridor is a network of infrastructure projects designed to stimulate economic development across and between regions. These corridors typically include transportation routes, such as highways, railways, and ports, as well as industrial hubs and trade facilitation zones. The aim is to enhance connectivity, reduce trade barriers, and promote investment, ultimately spurring economic activities and job creation.
India, with its vast and diverse economy, plays a crucial role in the development of economic corridors in Bangladesh, Bhutan, Nepal and Sri Lanka. The country's strategic initiatives, such as the NICDP and the Prime Minister Gati Shakti (PM-GS) National Master Plan, aim to enhance connectivity and promote economic integration.
In Bangladesh, the development of economic corridors is focused on enhancing infrastructure and trade logistics. Notable examples include the South West Economic Corridor, spanning from Khulna and Jessore to Dhaka, and the North East Economic Corridor, connecting Dhaka to Sylhet. These corridors are designed to improve the country's trade infrastructure, diversify production networks, and integrate with regional and global value chains, all the while stimulating economic activities in less developed areas.
Bhutan has planned to develop Gelephu Mindfulness City which will be the biggest economic hub of Bhutan attracting foreign investment and integrating with the rest of South Asia and Southeast Asia. Multimodal connectivity of Gelephu with India and Bangladesh will be a critical factor of its success in future.
India's efforts in industrial corridor development aim to boost the manufacturing sector by addressing key constraints like cumbersome business processes and infrastructure bottlenecks.
The National Industrial Corridor Development Program, in collaboration with the Asian Development Bank, focuses on creating a conducive environment for manufacturing, thereby enhancing sectoral growth. The Prime Minister Gati Shakti (PM-GS) National Master Plan further aims to enhance connectivity and promote economic integration across the country.
Nepal, a landlocked country with challenging terrain, faces unique obstacles in its quest for economic development. The development of economic corridors, such as the East-West Highway and the North-South Corridors, is crucial for improving connectivity, reducing trade barriers, and fostering regional integration. These corridors aim to link Nepal more effectively with its neighbors, promoting economic activities and development in the region.
Sri Lanka's Colombo-Trincomalee Economic Corridor (CTEC) connects the Western Region including Colombo Port with the East Coast to Trincomalee Port, aims to facilitate economic growth through a network of export zones and free trade zones. This infrastructure is expected to boost trade, attract investments, and promote balanced regional growth.
Economic corridor development involves a building block approach of construction and enhancement of transport networks, energy grids, and trade facilitation measures that connect key economic hubs within and across borders.
The transport and trade corridors are designed to streamline the movement of goods, services, and people, thereby reducing costs, increasing efficiency, and boosting competitiveness. The initiative also emphasizes the importance of aligning national policies and regulations to ensure seamless operations and to maximize the benefits of regional integration.
Gradually these corridors will be transformed into economic corridors by addressing both hardware and software aspects of development. Effective corridor development also entails creating a conducive environment for businesses to thrive and for economies to grow.
One of the key objectives of economic corridor development is job creation. This is a critical development objective for the countries in South Asia. The creation of formal jobs through the expansion of the manufacturing sector directly contributes to poverty alleviation.
By facilitating the formalization of labor and incentivizing firms to adopt modern technology, corridor development helps to increase productivity and wages, thereby improving the standard of living for workers. Government actions to provide gender-inclusive housing, upgrade the skills of female workers, and appoint female board members in industrial node boards, further enhance economic corridors’ impact on poverty reduction and gender equality.
Economic corridors are pivotal in shaping South Asia’s economic future by enhancing trade, industrialization, and regional cooperation. Continued investment, policy alignment, and inclusive development strategies will be essential in maximizing their benefits and ensuring sustainable, equitable growth.
Related links
From Roads to Riches: Economic Corridors Can Supercharge South Asia
