create distortions in the regional market. For example, it is reported that permanent Bangladesh workers receives Rs. 22 -23 per day compared to Rs. 57 for Indian workers.

- **_Auctions:_** One of the biggest problems noted in the tea sector in Nepal concerns lack of marketing – specifically the lack of a more structured form of access to markets, like the auctions in India. Without access to the auctions, and with serious restrictions on selling outside the auctions, Nepal’s tea farmers are forced to sell through a more narrow set of processors (both in Nepal and India), with output sold as low value-added green leaf tea to ‘bought leaf’ factories. Moreover, it results in a much larger share of output sold in the domestic market than might otherwise be efficient. Our analysis suggests that the auction provides a predictable and relatively efficient marketing outlet for producers (in India). For processors it may also reduce the challenges of organizing supply in a fragmented network, provides predictability, and overcomes the challenges of scale. By playing a central node position in the supply chain, the auction may also serve to facilitate more effective connectivity, again by concentrating supply, warehousing, and transport networks. This could come at some cost to producers, as it creates a structure where middlemen (traders, brokers) play an important role, extract margins and rents, and may limit upgrading potential – but for most farmers the efficiency and predictability the system brings is a trade-off worth taking.

- **_Other constraints_** : Other constraints for doing business in Siliguri were reported as inadequate marketing, need for broader economic development, labor shortage and climate change.  Shortage in rainfall is reported at Siliguri and Darjeeling (around 24 percent). Lack of government support for small farmers (after a decade of encouraging them) has led to declining productivity. In Jhapa and Ilam, too, there have been changes in rain patterns. This, along with labor shortages, political uncertainty and corruption were the main problems identified in Jhapa and Ilam. In Jhapa or Ilam, there are no universities and research institutes, only low quality colleges. There are also no professional tasters and production managers in Nepal. New courses in tea have started, however.<sup>15</sup> Government support is limited – a committee was formed for helping small farmers export to India but was dissolved due to financial problems. Compared to India, the incentives from the Government of Nepal to promote the tea industry are inadequate.

# **7. Conclusions**

International experience shows that border regions often flourish as gateways for cross-border commerce. But in South Asia, a combination of political, economic and geographic factors have curtailed a crucial source of local economic growth. We study a sub-region in the northeast of the Indian Subcontinent by using a combination of secondary data for desk-based quantitative analysis and field research on a case study involving an important traded commodity (tea). Together, we shed light on a range of existing constraints to greater regional integration, whose potentials we find to be vastly under-exploited.

We first assess the potential for greater economic activity among bordering districts by quantifying a measure of trade complementarity by using employment data that proxy for production patterns. We find that the Indian districts (Darjeeling and Uttar Dinajpur) demonstrate greatest potential for new trade opportunities with the Bangladeshi district Panchagarh. That is partly due to the importance of rice production in Panchagarh and in consumption in Indian districts. Complementarity between the Nepalese (Ilam and Jhapa) and the Indian districts is lower, partly because of the greater importance of tea production in Nepalese districts than in Indian households’

> 15 For example, an undergraduate program (BSc) in Tea Technology and Management has begun in the multiple campus of Mechi under Tribhuwan University.

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