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This study analyses the trends and patterns of South Asian trade, and constructs a trade facilitation index (TFI) using Principal Component Analysis to address the question: why is South Asian export performance so poor? The newly constructed TFI is employed within the standard gravity modelling framework to identify the impact of trade facilitation in lowering transport costs and improving trade performance. The results suggest that trade facilitation contributes to lower trade costs and increases exports significantly. They also show that intraregional transport costs play a dominant role in increasing costs and lowering trade volumes. We also document that a breakthrough for reducing trade costs is to improve the TFI. This would contribute to reducing trade costs significantly. A one index point increase in TFI, on average, results in a reduction of trade costs by more than 1.3 per cent, which will increase the trade volume, on average, by 12 per cent.