Bay Initiative: Will delayed take-off bring meaningful gains?
Sunday, 19 August 2007
Shahiduzzaman Khan
The 15th Trade Negotiation Committee (TNC) meeting of the BIMSTEC is expected to be held in Dhaka next month to prepare a ground for signing free trade agreement (FTA) by the leaders of the member countries in the upcoming summit in New Delhi.
The BIMSTEC or Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation is an economic bloc of seven South and Southeast Asian countries comprising Bangladesh, Myanmar, India, Sri Lanka, Thailand, Nepal and Bhutan.
Earlier, differences between India and Thailand over finalising the percentage of value addition under the rules of origin criteria led to the failure of the meeting styled 'sub-group meeting on rules of origin,' According to the latest development, negotiators from the member countries of BIMSTEC free-trade area in their last meeting held early last year in New Delhi failed to reach a consensus on the criteria of rules of origin under the pact.
Thailand was in favour of a 30 per cent value addition for developing member countries while India opposed the proposal fearing a possible invasion of its market by Thai products. India lobbied for a 40 per cent value addition under the rules of origin criteria for developing member countries, but the Thai negotiators opposed the move. Bangladesh, Nepal, Bhutan and Myanmar proposed a 25 per cent value addition, which did not receive the required attention from the developing members as they were busy setting down their own issues of value addition.
According to the framework agreement of the BIMSTEC free-trade area, negotiations were supposed to be completed by December, 2005 to make the agreement operational on July 1 last year. But it could not be made operational within the stipulated time due to such differences among the nations. The framework agreement, which groups Bangladesh, India, Bhutan, Myanmar, Nepal, Sri Lanka and Thailand, was signed in February, 2004. Bangladesh signed the agreement on June 25, 2004.
Trade experts in the region projected that once the trade liberalisation takes place under BIMSTEC FTA, the volume of intra-regional trade will be worth US$ 40-$ 60 billion a year. They said regional trade in South Asia currently accounts for less than six per cent of the total trade in the region, 22 per cent within the ASEAN free trade and 65 per cent within EU.
However, more than 50 top BIMSTEC officials from foreign affairs, tariff commission, revenue board, and commerce ministry, are expected to attend the Dhaka meeting scheduled for September 24-26 this year. If consensus is reached over the undecided issues the leaders of member countries will sign an agreement in the upcoming BIMSTEC summit scheduled to be held in New Delhi by end of this year.
It appears that the member countries will try their best this time to resolve the issues relating to tariff and non-tariff barriers, rules of origin and benefits for the least developed counties including Bangladesh for signing the agreement. The meeting will also discuss setting up of timeframe for India, Sri Lanka and Thailand to reduce their duties on specific items under the first phase of the FTA. There will be another timeframe set for Bangladesh, Myanmar, Bhutan and Nepal to reduce duties on specified goods.
Besides, timeframe for implementation of the second phase of FTA by India, Sri Lanka and Thailand will also be rescheduled for reducing tariffs on selected products for the developing and the least developed BIMSTEC members. However, Dhaka is likely to provide 522 products of three least developed countries (LDCs) of BIMSTEC with duty-free access. The products now enjoy 10 per cent tariff.
The volume of intra-regional trade is expected to rise substantially every year once a 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 second area of cooperation will be to do with combating terrorism and transnational crimes. The BIMSTEC is already working to prepare reports on intelligence sharing and stop terror financing. Illicit trafficking of humans, drugs and explosive substances will also be checkmated on top priority basis as well. In addition to the six areas of cooperation originally identified, seven new areas have been added to the list.
Earlier, a ministerial meeting decided to issue Business Travel Card and introduce BIMSTEC visa exemption schemes. An expert's group meeting would finalise all relevant modalities. Introduction of a BIMSTEC visa exemption scheme for selected categories of officials and other persons is also 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.
The BIMSTEC provides a unique link between South Asia and Southeast Asia together having 1.3 billion people or 21 percent of the world population, a combined GDP of $750 billion and a considerable level of complementarity due to geographical contiguity, differing levels of development and resource endowments. A study conducted in 2004 shows the potential of $ 43 billion to $ 59 billion trade under the BIMSTEC FTA.
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 with in 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. Much greater cooperation as envisaged by the 1993 South Asian Preferential Trade Agreement (SAPTA) could make these gains from cooperation even larger.
Greater South 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 greater South Asian cooperation. However, the potential benefits of BIMSTEC-type arrangements in the region are 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.
Free trade fuels economic growth. It fuels investment, creates jobs, and raises incomes. Free trade lifts people out of poverty. This is not mere ideology. Recent World Bank studies show that developing countries that have embraced open-market strategies in the past decade have grown much faster than those that have not.
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.
The experiences of different regional groupings across the world suggest that industrial restructuring is an important outcome of regional economic integration. In Europe, the formation of a single European market in 1992, has led to a major process of industrial restructuring, where various enterprises re-engineered their production processes in such a manner as to exploit the economies of scale and specialisation.
Indeed, regional economic integration in South Asia has the potential to become a new engine of growth by helping to exploit the synergies for mutual benefit. As such, there is a need to make the Bay initiative a grand success.
The 15th Trade Negotiation Committee (TNC) meeting of the BIMSTEC is expected to be held in Dhaka next month to prepare a ground for signing free trade agreement (FTA) by the leaders of the member countries in the upcoming summit in New Delhi.
The BIMSTEC or Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation is an economic bloc of seven South and Southeast Asian countries comprising Bangladesh, Myanmar, India, Sri Lanka, Thailand, Nepal and Bhutan.
Earlier, differences between India and Thailand over finalising the percentage of value addition under the rules of origin criteria led to the failure of the meeting styled 'sub-group meeting on rules of origin,' According to the latest development, negotiators from the member countries of BIMSTEC free-trade area in their last meeting held early last year in New Delhi failed to reach a consensus on the criteria of rules of origin under the pact.
Thailand was in favour of a 30 per cent value addition for developing member countries while India opposed the proposal fearing a possible invasion of its market by Thai products. India lobbied for a 40 per cent value addition under the rules of origin criteria for developing member countries, but the Thai negotiators opposed the move. Bangladesh, Nepal, Bhutan and Myanmar proposed a 25 per cent value addition, which did not receive the required attention from the developing members as they were busy setting down their own issues of value addition.
According to the framework agreement of the BIMSTEC free-trade area, negotiations were supposed to be completed by December, 2005 to make the agreement operational on July 1 last year. But it could not be made operational within the stipulated time due to such differences among the nations. The framework agreement, which groups Bangladesh, India, Bhutan, Myanmar, Nepal, Sri Lanka and Thailand, was signed in February, 2004. Bangladesh signed the agreement on June 25, 2004.
Trade experts in the region projected that once the trade liberalisation takes place under BIMSTEC FTA, the volume of intra-regional trade will be worth US$ 40-$ 60 billion a year. They said regional trade in South Asia currently accounts for less than six per cent of the total trade in the region, 22 per cent within the ASEAN free trade and 65 per cent within EU.
However, more than 50 top BIMSTEC officials from foreign affairs, tariff commission, revenue board, and commerce ministry, are expected to attend the Dhaka meeting scheduled for September 24-26 this year. If consensus is reached over the undecided issues the leaders of member countries will sign an agreement in the upcoming BIMSTEC summit scheduled to be held in New Delhi by end of this year.
It appears that the member countries will try their best this time to resolve the issues relating to tariff and non-tariff barriers, rules of origin and benefits for the least developed counties including Bangladesh for signing the agreement. The meeting will also discuss setting up of timeframe for India, Sri Lanka and Thailand to reduce their duties on specific items under the first phase of the FTA. There will be another timeframe set for Bangladesh, Myanmar, Bhutan and Nepal to reduce duties on specified goods.
Besides, timeframe for implementation of the second phase of FTA by India, Sri Lanka and Thailand will also be rescheduled for reducing tariffs on selected products for the developing and the least developed BIMSTEC members. However, Dhaka is likely to provide 522 products of three least developed countries (LDCs) of BIMSTEC with duty-free access. The products now enjoy 10 per cent tariff.
The volume of intra-regional trade is expected to rise substantially every year once a 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 second area of cooperation will be to do with combating terrorism and transnational crimes. The BIMSTEC is already working to prepare reports on intelligence sharing and stop terror financing. Illicit trafficking of humans, drugs and explosive substances will also be checkmated on top priority basis as well. In addition to the six areas of cooperation originally identified, seven new areas have been added to the list.
Earlier, a ministerial meeting decided to issue Business Travel Card and introduce BIMSTEC visa exemption schemes. An expert's group meeting would finalise all relevant modalities. Introduction of a BIMSTEC visa exemption scheme for selected categories of officials and other persons is also 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.
The BIMSTEC provides a unique link between South Asia and Southeast Asia together having 1.3 billion people or 21 percent of the world population, a combined GDP of $750 billion and a considerable level of complementarity due to geographical contiguity, differing levels of development and resource endowments. A study conducted in 2004 shows the potential of $ 43 billion to $ 59 billion trade under the BIMSTEC FTA.
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 with in 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. Much greater cooperation as envisaged by the 1993 South Asian Preferential Trade Agreement (SAPTA) could make these gains from cooperation even larger.
Greater South 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 greater South Asian cooperation. However, the potential benefits of BIMSTEC-type arrangements in the region are 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.
Free trade fuels economic growth. It fuels investment, creates jobs, and raises incomes. Free trade lifts people out of poverty. This is not mere ideology. Recent World Bank studies show that developing countries that have embraced open-market strategies in the past decade have grown much faster than those that have not.
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.
The experiences of different regional groupings across the world suggest that industrial restructuring is an important outcome of regional economic integration. In Europe, the formation of a single European market in 1992, has led to a major process of industrial restructuring, where various enterprises re-engineered their production processes in such a manner as to exploit the economies of scale and specialisation.
Indeed, regional economic integration in South Asia has the potential to become a new engine of growth by helping to exploit the synergies for mutual benefit. As such, there is a need to make the Bay initiative a grand success.