DON’T MISS THE BIMSTEC BUS
Manmeet Ajmani, Vishruta Choudhary and Devesh Roy
Pulses; Credit: Adam Jones (Flickr)
The swearing-in of the Modi government for its second term had a distinct guests list comprising leaders from Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). BIMSTEC, which comprises Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand, is a bridge between South Asia and Southeast Asia. Looking beyond SAARC and dealing with BIMSTEC has been a cornerstone of India’s policy shift. The two Southeast Asian countries in BIMSTEC Myanmar and Thailand, have a crucial place for India’s ambitious connectivity plans for north-eastern region. An India-Myanmar-Thailand highway viz. the Asian highway is hallmark of government’s Act East (earlier Look East) policy. With the India-Pakistan bickering persisting and affecting the South Asian Association for Regional Cooperation (SAARC), BIMSTEC is poised to overcome failings of SAARC and advance India’s regional cooperation.
Modi’s invitation to BIMSTEC leaders is to reach out to neighbours. Beyond geopolitics, what does this outreach mean from an economic standpoint, specifically from the perspective of trade? Export promotion is a focal strategy for Modi’s government, the downslide in exports in recent quarters notwithstanding. Former Commerce Minister, Suresh Prabhu, emphasised strategic regional partnerships where BIMSTEC also figured in. In 2016, BIMSTEC’s total trade stood at US$1.1 Trillion; India’s share was a mere 2.4%. Though with GDP (US$2700 Billion) at least five folds larger than Thailand’s (2nd largest GDP in BIMSTEC), India certainly has not capitalized on BIMSTEC market.
Here, as a first cut, we look only at agriculture sector where new export markets are the need of the hour. Could BIMSTEC be the answer? In 2016, agriculture trade comprised 15% of BIMSTEC’s countries’ total trade. Free trade in agricultural commodities ensure availability, accessibility and stability of food supplies, which can address chronic hunger and malnutrition in the BIMSTEC nations. Therefore, given geographical proximity and failure of domestic agricultural markets, enhancing agricultural trade should be a priority.
Apart from the levels of trade, an important marker for the success of regional arrangements is the capacity to withstand shocks i.e. resilience. Resilience can be measured by response to the national, regional or global shocks. After the food price crisis of 2007/2008, all regional groupings’ viz. ASEAN, BIMSTEC and SAARC’s intra-regional trade decreased sharply. While the Intra BIMSTEC trade shrank by 24%, the intra SAARC trade went down by as much as 31%. Interestingly, after crisis (recovery period from 2009 to 2011), SAARC agricultural trade increased by 83% while BIMSTEC increased by 108%, although SAARC had already established a free trade area. This indicates the untapped potential between BIMSTEC countries in agricultural trade.
To highlight the trade performance among BIMSTEC countries, we present results from an IFPRI study on the “assessment of ASEAN-SAARC agricultural trade relationship,” which derives the trade potential based on empirical models of trade. It assesses the trade performance relative to the estimated benchmarks to determine under-trading, over-trading or normal trading. The analysis reveals that India over-exports around 56 and 14% to Bhutan and Nepal, respectively. Myanmar, which mostly exports dried legumes and beans to India, also over-exports around 4% to India. Bangladesh and Thailand on the other hand under-export to India (around 0.4 and 1%, respectively). Bhutan over-exports to India over 30 times, given Bhutan’s economic fundamentals.
With lower than potential trade with important BIMSTEC partners, India may benefit with establishing Free Trade Agreement (FTA) with BIMSTEC. In this regard, there are lessons to draw as ever from China when talking trade. India might imbibe from China in terms of pace and alacrity in forging trade alliances. Also, the experience of SAARC should be a ready reminder of doing too little, too late. China implemented the ASEAN – China Free Trade Agreement (ACFTA) in 2005 while the framework agreement was entered in 2002, i.e., within 3 years. India also entered into the framework agreement in 2003; the ASEAN – India FTA was realized only in 2010. The pace difference is for all to see. Tardy progress towards closures create trust deficits and sub-par returns from groupings, sort of afflictions that in the first place, BIMSTEC is aimed at overcoming vis-à-vis SAARC.
In case of BIMSTEC moving forward, there are lessons also from ASEAN. Agreements such as ASEAN Comprehensive Investment Agreement (ACIA), entered into force on March 29, 2012, aim to facilitate greater flow of financial capital and intra-regional long-term investment between the ASEAN member countries. Inward intra-FDI flows among ASEAN countries was around $6.5 Billion in 2006; increased to $24 Billion in 2016. If BIMSTEC were to deliver for India, India needs to conclude agreements expeditiously. India has often missed the bus in trading and investment. She need not repeat history to avoid meeting the fate of SAARC and/or being swamped by the Chinese juggernaut.
Sharing land and maritime border with BIMSTEC countries, India should expedite growth in connectivity (through road, rail, maritime and air) within BIMSTEC. Salient in this regard are developing well-connected quality ports like deep-sea container terminal by India in Sri Lanka,” and the “India-Myanmar-Thailand Trilateral Highway”. Alongside, focusing on trade facilitation measures such as “simplification and harmonisation of trade procedures,” “setting regional single windows for custom clearance,” “recognition of custom transit documents,” and “proper coordination between border authorities” will facilitate expansion of trade in BIMSTEC. With 22% of world’s population, a GDP of $2.5 Trillion, BIMSTEC can become one of the strongest political and economic unions.
Manmeet Ajmani is Senior research assistant, Vishruta Choudhary is Research analyst and Devesh Roy, Senior research fellow, International Food Policy Research Institute
This article was originally published in Business Standard
