Bay Initiative moves to enhance intra-regional trade
Sunday, 20 September 2009
Shahiduzzaman Khan
The 12th ministerial meeting of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is expected to be held in the Myanmar capital, Nay Pyi Taw, next month. At least four trade accords are likely to be signed at the meeting. Enhancing trade and investment through eliminating duties in phases among member countries, is the prime objective of signing the proposed agreements. These include a deal on trade in goods under the BIMSTEC Free Trade Area, providing for regional transit facilities among member countries with certain bias towards landlocked ones.
The draft agreement, which was finalised in July at the 18th Trade Negotiating Committee meeting in New Delhi, is scheduled to be placed at the cabinet meeting in Dhaka soon for approval. According to the draft on trade in goods deal, duty reduction among member countries will begin from July 1, 2010. Three developing member countries of the trade block--India, Sri Lanka and Thailand, will implement full duty exemption facility for products originating from four LDCs -- Bangladesh, Nepal, Bhutan and Myanmar, to their markets, by June 30, 2011. On the other hand, LDCs falling under the trade pact will give the similar duty facility to the developing member countries by June 30, 2013. Duty reduction will be implemented as per the 'negative' list concept.
The BIMSTEC comprises seven South-East Asian countries -- Bangladesh, Myanmar, India, Sri Lanka, Thailand, Nepal and Bhutan and was formed to strengthen trade and investment among its member countries. Although the Bay Initiative has been in force for over a decade, it has not yet made an impact on the economic fields of member countries. It could not come forward during natural disasters or during the price hike of food experienced by member countries. It is thus unknown as a regional body among the people by and large. BIMSTEC, was formed as an international organisation but, in fact, operates as a regional body, and its functions often overlap with those of other such organisations.
The last BIMSTC summit discussed the issue of free trading area (FTA) for boosting trade and investments for mutual benefits of its members. Existing trade as well as investment in the BIMSTEC is negligible. The last ministerial meeting of the sub-regional grouping took one most important decision relating to introduction of free trade in the region. In the first phase, it will be trading in goods, and then it will be in the services and investment under the free trade agreement (FTA) to be signed at the trade and economic ministers' meeting early next year. The volume of intra-regional trade would be increased between $40 and $60 billion every year once complete trade liberalisation takes place under the FTA agreement. Basically, trade will lead to incremental investment, sharing of the benefits of economies of scale and external competitiveness.
The existing intra-regional trade turnover in BIMSTEC is only a small fraction of the total trade of its member countries. Unlike other regional organisations the intra-regional trade and investment of the BIMSTEC countries is not much. It goes to show that there is considerable potential for expansion of trade and investment in this region. BIMSTEC brings together 1.3 billion people or 21 per cent of the world population, a combined GDP of US$ 750 billion, and a considerable amount of complementarities. A study shows that BIMSTEC has the potential to create trade worth US $43 to 59 billion with an FTA in place.
The main objective of this organisation was to conclude a Free Trade Pact by 2017, while three advanced countries (India, Thailand, and Sri Lanka) are committed to ensure trade liberalisation by 2012. With this vision, 13 major areas of activities were identified, such as, trade and industry, technology, energy, transport and communication, tourism, fisheries, agriculture, cultural cooperation, public health, environment and disaster management, people to people contact, poverty alleviation, counter terrorism and transnational crime control.
It is essential that the BIMSTEC members actively consider the impacts of climate change, global warming and recent price-hike of food and energy on poverty to tackle these challenges collectively. Developed nations should come forward along with the BIMSTEC member countries to successfully overcome these issues. The institutional framework of BIMSTEC member-countries should be devised for intensive and extensive research investigation, and ultimately development of programmes incorporating best practice examples. More focused programmes might be considered for cooperation among the member-countries to have a penetrative impact on poverty reduction.
BIMSTEC's FTA would be a more meaningful instrument for increasing intra-regional trade if the members were able to remove and dismantle all tariff and non-tariff barriers. The main issue of negotiation was to reduce the negative list of products to enhance trade among the member countries. Thailand and Myanmar want to bring down the negative list to 10 per cent of the total 5,226 tariff lines while others, including Bangladesh and India, want it at 20 per cent. At present, the member countries have 25 per cent items on the list. As per the Thai proposal, a product on the negative list of a particular country should not get duty-free export status in other countries of the grouping.
Regional cooperation is no longer a matter of choice for South Asia. At a time when countries throughout the world are regrouping on the basis of economic blocs, South Asia can ill-afford to remain immobilised in political discord. On the economic front, South Asian countries have been more enthusiastic about opening their domestic markets to countries outside the region rather than to each other. Only 13.3 percent of South Asian total trade is within the region compared to over 55 percent for ASEAN countries. A small step towards economic integration could translate into net benefits of nearly 1.5 billion dollars.
Just as the ASEAN Free Trade Agreement resulted in both greater intra-regional trade and greater foreign investment among South-East Asian nations, so too will be the benefits of BIMSTEC. The agreement carries the great promise of sustainable regional economic growth and development. It also promises to add momentum to the Doha development global trade negotiations, which the World Bank estimates can lift more than 300 million people out of poverty.
Bangladesh as a lead country in the area of trade and commerce can try to secure full advantage and opportunities in the areas of exports, foreign direct investment (FDI), tariff concessions, market access etc. The initiatives of Bangladesh to fight against poverty and reduce the same to half, as per targets of millennium development goals, might get support from BIMSTEC countries.
To meet the challenges facing it, BIMSTEC needs to strengthen its management structure in such a way that other regional bodies cannot get an advantage. As regards the areas of cooperation, there could be more significant, diversified, rewarding and viable programmes or projects for each member country to make the organisation more effective and attractive.
.........................................................
szkhan@thefinancialexpress-bd.com
The 12th ministerial meeting of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is expected to be held in the Myanmar capital, Nay Pyi Taw, next month. At least four trade accords are likely to be signed at the meeting. Enhancing trade and investment through eliminating duties in phases among member countries, is the prime objective of signing the proposed agreements. These include a deal on trade in goods under the BIMSTEC Free Trade Area, providing for regional transit facilities among member countries with certain bias towards landlocked ones.
The draft agreement, which was finalised in July at the 18th Trade Negotiating Committee meeting in New Delhi, is scheduled to be placed at the cabinet meeting in Dhaka soon for approval. According to the draft on trade in goods deal, duty reduction among member countries will begin from July 1, 2010. Three developing member countries of the trade block--India, Sri Lanka and Thailand, will implement full duty exemption facility for products originating from four LDCs -- Bangladesh, Nepal, Bhutan and Myanmar, to their markets, by June 30, 2011. On the other hand, LDCs falling under the trade pact will give the similar duty facility to the developing member countries by June 30, 2013. Duty reduction will be implemented as per the 'negative' list concept.
The BIMSTEC comprises seven South-East Asian countries -- Bangladesh, Myanmar, India, Sri Lanka, Thailand, Nepal and Bhutan and was formed to strengthen trade and investment among its member countries. Although the Bay Initiative has been in force for over a decade, it has not yet made an impact on the economic fields of member countries. It could not come forward during natural disasters or during the price hike of food experienced by member countries. It is thus unknown as a regional body among the people by and large. BIMSTEC, was formed as an international organisation but, in fact, operates as a regional body, and its functions often overlap with those of other such organisations.
The last BIMSTC summit discussed the issue of free trading area (FTA) for boosting trade and investments for mutual benefits of its members. Existing trade as well as investment in the BIMSTEC is negligible. The last ministerial meeting of the sub-regional grouping took one most important decision relating to introduction of free trade in the region. In the first phase, it will be trading in goods, and then it will be in the services and investment under the free trade agreement (FTA) to be signed at the trade and economic ministers' meeting early next year. The volume of intra-regional trade would be increased between $40 and $60 billion every year once complete trade liberalisation takes place under the FTA agreement. Basically, trade will lead to incremental investment, sharing of the benefits of economies of scale and external competitiveness.
The existing intra-regional trade turnover in BIMSTEC is only a small fraction of the total trade of its member countries. Unlike other regional organisations the intra-regional trade and investment of the BIMSTEC countries is not much. It goes to show that there is considerable potential for expansion of trade and investment in this region. BIMSTEC brings together 1.3 billion people or 21 per cent of the world population, a combined GDP of US$ 750 billion, and a considerable amount of complementarities. A study shows that BIMSTEC has the potential to create trade worth US $43 to 59 billion with an FTA in place.
The main objective of this organisation was to conclude a Free Trade Pact by 2017, while three advanced countries (India, Thailand, and Sri Lanka) are committed to ensure trade liberalisation by 2012. With this vision, 13 major areas of activities were identified, such as, trade and industry, technology, energy, transport and communication, tourism, fisheries, agriculture, cultural cooperation, public health, environment and disaster management, people to people contact, poverty alleviation, counter terrorism and transnational crime control.
It is essential that the BIMSTEC members actively consider the impacts of climate change, global warming and recent price-hike of food and energy on poverty to tackle these challenges collectively. Developed nations should come forward along with the BIMSTEC member countries to successfully overcome these issues. The institutional framework of BIMSTEC member-countries should be devised for intensive and extensive research investigation, and ultimately development of programmes incorporating best practice examples. More focused programmes might be considered for cooperation among the member-countries to have a penetrative impact on poverty reduction.
BIMSTEC's FTA would be a more meaningful instrument for increasing intra-regional trade if the members were able to remove and dismantle all tariff and non-tariff barriers. The main issue of negotiation was to reduce the negative list of products to enhance trade among the member countries. Thailand and Myanmar want to bring down the negative list to 10 per cent of the total 5,226 tariff lines while others, including Bangladesh and India, want it at 20 per cent. At present, the member countries have 25 per cent items on the list. As per the Thai proposal, a product on the negative list of a particular country should not get duty-free export status in other countries of the grouping.
Regional cooperation is no longer a matter of choice for South Asia. At a time when countries throughout the world are regrouping on the basis of economic blocs, South Asia can ill-afford to remain immobilised in political discord. On the economic front, South Asian countries have been more enthusiastic about opening their domestic markets to countries outside the region rather than to each other. Only 13.3 percent of South Asian total trade is within the region compared to over 55 percent for ASEAN countries. A small step towards economic integration could translate into net benefits of nearly 1.5 billion dollars.
Just as the ASEAN Free Trade Agreement resulted in both greater intra-regional trade and greater foreign investment among South-East Asian nations, so too will be the benefits of BIMSTEC. The agreement carries the great promise of sustainable regional economic growth and development. It also promises to add momentum to the Doha development global trade negotiations, which the World Bank estimates can lift more than 300 million people out of poverty.
Bangladesh as a lead country in the area of trade and commerce can try to secure full advantage and opportunities in the areas of exports, foreign direct investment (FDI), tariff concessions, market access etc. The initiatives of Bangladesh to fight against poverty and reduce the same to half, as per targets of millennium development goals, might get support from BIMSTEC countries.
To meet the challenges facing it, BIMSTEC needs to strengthen its management structure in such a way that other regional bodies cannot get an advantage. As regards the areas of cooperation, there could be more significant, diversified, rewarding and viable programmes or projects for each member country to make the organisation more effective and attractive.
.........................................................
szkhan@thefinancialexpress-bd.com