A strong sub-regional grouping in the making
The Financial Express (Bangladesh)
A strong sub-regional grouping in the making
Thursday December 22 2005
Shahiduzzaman Khan
As a new sub-regional group, the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is making its presence felt in this part of the world.
The outcome of the Dhaka ministerial has been indicative of the signs that the BIMSTEC is going to emerge as a sub-regional force to reckon with.
The membership of this forum spans India, Bangladesh, Sri Lanka, Nepal and Bhutan, on the one hand, and Myanmar and Thailand, on the other. The BIMSTEC, thus, girdles two flanks of Asia — South Asia and South East Asia.
According to reports published by the print media this week, the Dhaka ministerial of the sub-regional grouping took an important decision relating to introduction of free trade among its member-countries from July 1, 2006. In the first phase, it will be trading in goods and then would come services and investment. The free trade agreement (FTA) will be signed at the trade and economic ministers’ meeting in Dhaka early next year. The volume of intra-regional trade, as the projection suggests, will increase between $40 and $60 billion every year, once complete trade liberalisation takes place under the FTA agreement. Basically, trade is expected to lead to incremental investment, sharing of the benefits of economies of scale and external competitiveness.
The second area of cooperation under the BIMSTEC will deal with combating terrorism and transnational crimes. This forum is already working to prepare reports on intelligence sharing and stop terror financing. Matters relating to illicit trafficking of humans, drugs and explosive substances will also be dealt with, on a priority basis. In addition to the six areas of cooperation originally identified, seven new areas have been added to the list. The new agenda include: poverty alleviation, agriculture, cultural cooperation, disaster management, public health and people-to-people contact.
The Dhaka ministerial has also decided to launch Business Travel Card. Furthermore, introduction of a BIMSTEC visa exemption scheme for selected categories of officials and other persons is on the cards. An inter-governmental group comprising of representatives from the member states would be formed to examine the establishment of a permanent BIMSTEC secretariat.
Meanwhile, the Trade Negotiating Committee (TNC) of the grouping began a weeklong meeting in Kathmandu Wednesday to conclude negotiations on the FTA for trade in goods in the region. The TNC has been instructed to finalise the deal so that the FTA could come into force as scheduled on July 01 next year. All the seven member states of the BIMSTEC have stressed timely implementation of the FTA in order to boost intra-regional trade and investment and to enhance economic efficiency and external competitiveness.
The TNC has already progressed a lot and finalised almost all the issues, including rules of origin, sensitive lists and dispute settlement mechanism, paving the way for the agreement on trade in goods to be effective as scheduled.
The BIMSTEC provides a unique link between South Asia and Southeast Asia together having 1.3 billion people or 21 per cent of the world population, a combined GDP of $750 billion and a considerable level of complementarities due to geographical contiguity, differing levels of development and resource endowments. A study conducted in 2004 shows the potential of trade worth between $43 billion and $59 billion under the BIMSTEC FTA.
Regional cooperation is no longer a matter of choice for South Asia or South-east Asia. Countries throughout the world are regrouping on the basis of economic blocs. Greater South and South-east Asian co-operation could lead to a substantial peace dividend, without sacrificing human security in the region. Civil society initiatives can also gain new impetus from such cooperation. The potential benefits of the BIMSTEC-type arrangements in the region are, therefore, significant.
Regional trade in South Asia now accounts for less than 6.0 per cent of total trade, compared to 22 per cent within the ASEAN Free Trade Area, and 65 per cent within the EU. Just as the ASEAN Free Trade Agreement resulted in both greater intra-regional trade and inflows of greater foreign investment among the South-East Asian nations, so too are likely to be the benefits of an FTA under the BIMSTEC.
Unlike the South Asian Free Trade Agreement (SAFTA) with its scope being limited to trade in goods only, the free trade accord under the BIMSTEC, for which the agreement was reached in 2004, appears to be more ambitious in liberalisation of trade in goods, along with trade in services and investments. Unless combined with liberalisation of investment regimes and trade in services, trade in goods does not help much to exploit the full potential of regional synergies or industrial restructuring. The experiences of different regional groupings across the world suggest that industrial restructuring is an important outcome of regional economic integration.
This integration can facilitate various enterprises to re-engineer their production processes in a way that is favourable for exploiting the economies of scale and specialisation. In this context, sub-regional economic integration under the would-be FTA among the member-countries of the BIMSTEC has the potential to become a new engine of growth by helping to exploit the synergies for mutual benefits.
All concerned would like to cherish the hope that the BIMSTEC would provide the ground realities in order to become a strong sub-regional force and, thus, to play a pioneering role in regional economic integration.
