Physical and Digital Connectivity

limited catalytic intervention could help develop important relationships and networks in the short term that could lead to profitable trade and investment in the long term. Regional airport hubs that serve a cross-border clientele could also be feasible in some parts of the region: Varanasi in the Indian state of Uttar Pradesh, for example, could also serve parts of Nepal. Finally, trade-facilitation expenditures on technology and process simplification, and regional cooperation to ensure health security in the context of pandemics, would be important to reviving air travel. In this context, the issuance of business visas could be an important precursor to opening up tourist travel.

DEVELOPMENT OF LOCAL INVESTMENT INTERMEDIARIES

Entrepreneurs rarely have all the information they need to make investment decisions— but they should know where they can go to get such information. Investment intermediaries reduce entry costs by providing information at a lower cost than entrepreneurs trying to secure the knowledge on their own. The availability of these services, access to them at reasonable prices, and a wide awareness of their existence matter. However, there appear to be failures in the market for knowledge in South Asia. The survey indicates that most of the respondents were unaware of whether intermediaries such as consultancy firms that can provide due diligence on regional markets and implementation support existed. India has local affiliates of both international and national consultancy firms. However, pricing is an issue. The Sri Lankan pioneer Brandix, which invested in the development of an apparel special economic zone in India, was forced to do its due diligence in house for what turned out to be one-third of the price quoted by the Indian affiliate of a prominent global consulting firm. This revelation suggests that there is a profitable space for the private sector to provide high-quality consultancy services that specialize in cross-border issues. Existing consulting firms should be publicized in the national trade and investment facilitation portals. The absence of competitive consulting service providers may be related to a desire for secrecy, trustrelated issues, or other behavioral concerns of medium firms. Further work is needed to assess the actual landscape of investment consulting services, and knowledge-providing intermediaries more broadly, in each country.

It costs more to trade within South Asia than within any other region in the world (Kathuria 2018). The empirical evidence (chapter 4) indicates that these high trade costs also have a negative impact on investment. Investments in trade facilitation and transportation infrastructure are gradually reducing these high costs and will help not only to increase intraregional trade, but also promote investment within the region. Reduction of trade costs supports investment directly through greater vertical investments along the value chain, as well as indirectly through increases in market learning through the export experience. Some valuable initiatives include progress on electronic