Bangladesh and India are lagging behind their comparable countries in Southeast Asia in logistical performance. The World Bank’s logistics performance index (LPI) is used to compare the performance among India, Bangladesh Cambodia, Malaysia and Vietnam on various parameters, including - efficiency of the customs clearance process, quality of trade and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, tracking and tracing consignment, and timeliness. The sub-parameters of the LPI show that Malaysia and India perform relatively better than Bangladesh, Cambodia and Vietnam (Figure 8). The dismal performance of Bangladesh on various sub-parameters of the LPI implies severe supply side constraints for the smooth functioning of global and bilateral value chains.

Lack of an effective multi-modal transport agreement and the absence of a harmonized transport system undermine the development of strong bilateral supply chains between India and Bangladesh. They also inhibit the countries from integrating with Southeast and East Asian production networks. Delays at border points due to poor infrastructure, regulatory and procedural bottlenecks, and inefficient customs clearance escalate the cost of intermediate products, which crosses multiple borders before it reaches their final markets. Given that India and Bangladesh are at different stages of T&C value chains, the prevailing inefficiencies in their supply chains may create the risk of being left out of global T&C value chains. However, the recent development of BBIN MVA and its effective implementation potentially a gamechanger for India and Bangladesh in improving the efficiency of value chains.

# **5 Role of Industrial Policies in GVCs**

Participation of firms in global GVCs hinges on policies and the institutional contexts in which they operate. Policies have the potential to facilitate the integration of countries into GVCs if they are in line with the operational principles of GVCs (OECD, 2014). Different policies apply to different stages of GVCs and they either facilitate or hinder the entry of firms into GVCs (Stephenson, 2014). Therefore, it is critical for policy makers to formulate policies that focus on the creation of capabilities, productivity, institutions, and incentives and augment the participation of firms into GVC-led markets. Globally, there are two types of policies, viz. horizontal and vertical policies that play a vital role in the emergence of GVCs. Horizontal polices focus on eliminating inefficiencies in a productive system, thereby stimulating the overall competitiveness of the economy. Such policies emphasize streamlining administrative procedures, simplifying rules and regulations, infrastructure development, capacity building of trade-related institutions and reducing the cost of doing business (Low et al., 2013). Horizontal policies are even less contentious under the WTO-led multilateral trading system and pose a lower level of risk in terms of unpredictable consequences of policy-induced price relationships. Vertical policies are policies that target a specific sector, either through protection from foreign competition, subsidies, export promotion measures, local content requirements, or other incentives (Baldwin, 2013).

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