A preeminent method to enhance cooperation in the region could be the creation of a regional fund or regional bank to finance aid projects, to prevent crisis and to provide finance to the private sector. South Asia could take lessons from the experience of the Association of Southeast Asian Nations (ASEAN) states in attracting intra-regional investment funds. Even, mobilising foreign exchange reserves for development projects and crisis prevention could play an important role. Secondly, establishing regional bodies to manage size, directions and effect of policies could be an effective dose for boosting regional economic cooperation in South Asia. Regional institutions are not only outcome of negotiation processes but also drivers of negotiation processes.
Good examples of regional bodies in other regions of the world are European Commission (EC) and European Central Bank (ECB) in EU, Chiang Mai Initiative Multilateralisation (CMIM) in East Asian and ASEAN+3 Macro-economic Research Office (AMRO) and very recently, the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC), which is in the offing. A possible solution to increase financial cooperation can be the building and implementing the mechanisms like Asian Clearing Union (ACU). However, the idea does not provide enough incentives.
BCIM-EC CONNECTIVITY: The Kunming Initiative, which is currently known as Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) began its journey in August 1999 in Kunming, the capital of China's southwestern Yunnan province. It has become an important sub-regional cooperation mechanism in the region, aimed at greater integration of trade and investment between the four countries. Subsequently, to facilitate and consolidate the process of regional economic cooperation and create cross border trade and investment opportunities both at public and private sector level, an organisation named as "China Kunming International Logistics & Finance Association (ILFA)" has been set up in Kunming with support from the Chinese Government. The forum as reached a consensus on establishing non-governmental financing mechanism for China-South Asia International Finance Opening and Cooperation. The Forum will also research on how to promote the International Finance Opening and Cooperation and create and market innovative financial products suitable for such objectives. Decisions taken at all meetings of the forum will be submitted to quarterly meetings of BCIM-EC governmental working group, China-Bangladesh governmental working groups, Greater Mekong Sub-region (GMS) leadership summit and other bilateral and multilateral economic forums where China is participating.
OBSTACLES TO COOPERATION: In South Asian region, transaction costs are high due to high prices of raw materials, high transportation costs, weak infrastructure and fragile financial services. The lack of scope for direct investment has been another obstacle in the market driven cooperation. Non-tariff barriers, such as inefficient border procedures, excessive documentation, cumbersome custom procedures and inefficient port operations add significantly to the transaction costs of intra-regional trade. Under the current scenario, South Asian economies need to play a greater and stronger role in the regional cooperation process. They have to avoid periodic provocations such as terrorist attacks or random economic shocks. Member states should enhance their stance by willingness to grant unilateral concessions. The common approach towards cooperation could be and must be such that it will create a functional platform, where comparable connections of interdependence, having common norms and confidence building, will be available.
AREAS OF COOPERATION: Again, in this context, South Asia Sub-regional Economic Cooperation programme (SASEC) that was started in 1996 between Bhutan, Bangladesh, India and Nepal for sustainable economic development could be extended to other areas of cooperation and states of the region. Furthermore, governments need to initiate a plan and negotiate with their counterparts on the one hand, and with domestic political lobbies, on the other.
To prevent conflicts in South Asia, it is necessary to give a big push to the process of regional cooperation both within and beyond the agenda of the South Asian Association for Regional Cooperation (SAARC). Establishment of peace and financial consolidation was a primary reason behind the initiation of regional cooperation process in war-affected Western Europe in the 1950s.
ROLE OF CIVIL SOCIETIES: Civil societies can act as catalysts in the initiation of regional cooperation initiatives as they generally have a significant voice in the policy-making processes of their respective states. This is also because of the fact that they are recognised across borders for their academic, research as well as philanthropic activities. Civil societies could therefore influence the regional cooperation process by providing a vision, interpreting and explaining that vision to different stakeholders, especially multilateral parties, in their respective nations. They can inform, educate and advocate the agenda of different groups, to achieve a consensus on several regional issues having economic importance.
SILK ROAD ECONOMIC BELT: In a bid to improve regional trade and nurture regional development, the Chinese President Xi Jinping came up with the initiative of jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, now renamed as Belt and Road Initiative or BRI . He discussed the project during his visit to Central Asia and Southeast Asia in September and October of 2013.
Essentially, the 'belt' includes countries situated on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe. The initiative calls for the integration of the region into a cohesive economic area by building infrastructure, increasing cultural exchanges, and broadening trade.
Apart from this zone, another area that is said to be included in the extension of this 'belt' is South Asia and Southeast Asia. Many of the countries that are part of this 'belt' are also members of the China-led Asian Infrastructure Investment Bank (AIIB). The Maritime Silk Road, also known as the "21st Century Maritime Silk Route Economic Belt", is a complementary initiative aimed at investing and fostering collaboration in Southeast Asia, Oceania, and North Africa, through several contiguous bodies of water including the South China Sea, the South Pacific Ocean, the wider Indian Ocean area and Bay of Bengal in particular.
More intimately the China-Pakistan Economic Corridor (CPEC) and the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor are officially classified as "closely related to the Belt and Road Initiative."
FINANCING RELATED PROJECTS: The Asian Infrastructure Investment Fund (AIIB) was founded by China in 2014 with the participation of 56 other countries. It is a development bank dedicated to lending for projects that are a part of the initiative. In November 2014, Xi Jinping announced plans to create a US $40 billion development fund, also known as Silk Road Fund, which will be different from the banks created for the initiative. As a fund, its role will be to invest in businesses rather than lend money for projects. The Karot Hydropower Station in Pakistan is the first investment project under the Silk Road Fund, and is not part of the much larger CPEC investment.
Along with this, the 'Leading Group for Advancing the Development of One Belt one Road' was formed sometime in late 2014 and its leadership line-up was made public on February 01, 2015. This steering committee reports directly to the State Council of the People's Republic of China. It is composed of several political heavyweights, which is another evidence of the importance of the programme to the Chinese government.
HISTORIC IMPORTANCE OF SILK ROAD: In March 2014, the Chinese Premier called for accelerating the "One Belt One Road" initiative along with the Bangladesh-China-India-Myanmar Economic Corridor and the China-Pakistan Economic Corridor in his government's work report that was presented at the annual meeting of the country's legislature.
The Silk Road was a network of trade routes, formally established during the Han Dynasty. The road originated from Chang'an (now Xian) in the east and ended in the Mediterranean in the west, linking China with the Roman Empire. As China's silk was the major trade product, German geographer Ferdinand von Richthofen call this route the 'Silk Road' in 1877. It was not just one road but rather a series of major trade routes that helped build trade and cultural ties between China, Myanmar, Bangladesh, India, Persia, Pakistan, Iran, Arabia, Greece, Rome and Mediterranean countries. It reached its height during the Tang Dynasty. The popularity of the route declined in the Yuan dynasty, established by the Mongol Empire, as political powers along the route became more fragmented.
The Silk Road ceased to be a shipping route for silk around 1453 with the rise of the Ottoman Empire, whose rulers opposed the West.
BELT AND ROAD INITIATIVE (BRI): At the heart of One Belt, One Road lies the creation of an economic land belt that includes countries on the original Silk Road through South east Asia, Central Asia, West Asia, the Middle East and Europe, as well as a maritime road that links China's port facilities with the African coast, pushing up through the Suez Canal into the Mediterranean.
The Belt and Road Initiative (BRI) aims to redirect China's own domestic overcapacity and capital for regional infrastructure development to improve trade and relations with ASEAN, Central Asian and European countries. It could have as much impact on China's internal economy as it will have internationally.
China's top priority is to stimulate the domestic economy via exports from industries with major overcapacity such as steel, cement and aluminium. Most of these will be under build-transfer-operate schemes in which large state-owned enterprises (SOEs) will lead the way while smaller companies will follow.
The domestic plan divides China into five regions with infrastructure plans to connect with neighbouring countries and increase connectivity. Each zone will be led by a core province: Xinjiang in the Northwest, Inner Mongolia in the Northeast, Guangxi in the Southwest and Fujian on the coast.
Dr Muhammad Abdul Mazid is former Secretary to the government and former Chairman, NBR.
mazid.muhammad@gmail.com