A New Dawn of Regional Integration
The Consumer Unity and Trust Society (CUTS) International, a Jaipur (India) based NGO working in the areas of trade, economy and environment, organised a regional policy dialogue on “Connectivity Imperatives in the Bay of Bengal Region” in New Delhi on May 2 and 3. One of the key observations of programme was related to the improvements in the existing hard and soft infrastructures in order to facilitate the trade in the South Asian sub-region. Additionally, the role of private sector in leveraging connectivity and the ultimate impacts of connectivity initiatives on livelihood and gender were also discussed. All panelists agreed that the connectivity initiatives in the BBIN+M (Myanmar) region are crucial for the regional integration but their successful implementation entirely depends on the political will of the governments. Excerpts from the participants speeches and comments:
Connectivity Imperatives in the Indo-Pacific Region
The Indo-Pacific region stretches from the U.S. West Coast through the Bay of Bengal. This region represents more than half the global population and more than half of the global economy. The United States is one of the leading trading partners for the region and is also a major donor and investor, through its private sector companies and through its role as the largest or co-largest individual shareholder in both the World Bank and the Asian Development Bank.
From a security standpoint, the Indo-Pacific is the region in which the United States has its longest maritime border, several long-standing treaty allies, as well as being home to its Pacific fleet. United States is committed to this region because it is a part of it, and because it has a major stake in its success. The United States, as part of its focus on the Indo-Pacific region, places a high degree of importance on increasing connectivity in the Bay of Bengal. Rapid economic growth in this region during the last few decades has lifted millions out of poverty and allowed for the development of a thriving middle class. Still, there is a long way to go. Despite this rapid growth, South Asia lags behind Southeast Asia in measures of intra-regional trade and connectivity.
For centuries South Asia was a region bound together by the exchange of goods, people, and ideas. But today it is one of the least economically integrated regions in the world. Intra-regional trade has languished, sitting at around four or five percent of total trade. Compare that with ASEAN, where intra-regional trade stands at 25 percent of total trade. The World Bank estimates that the removal of barriers and streamlining of custom procedures would nearly quadruple intra-regional trade in South Asia from the current figure of $28 billion to over USD 100 billion. A fundamental prerequisite for economic growth is a regional commitment to rule of law and basic international norms. Countries should be able to ensure their own security, to help keep sea lanes open for trade, and to respond quickly to natural disasters. That means that meaningful, legally-binding codes of conduct, developed in accordance with international law, are essential. Next, expanding economic connectivity is a primary goal of the Indo-Pacific strategy.
Infrastructure can be transformative; it should meet internationally accepted standards and norms and be sustainably financed. The host country must be able to exercise oversight over construction, and ultimately must maintain its sovereignty. The Unites States, India, and Japan have begun to review their various infrastructure projects throughout the Indo-Pacific Region for opportunities to coordinate and multiply efforts to increase the pace of connectivity. The three parties held the Trilateral Meeting at in New Delhi on April 4, largely to hold consultations on regional infrastructure development.
One of the challenges countries face is the sheer expense of infrastructure improvements and the temptation to trade a more rigorously developed project, with quality assurances and international norms in finance, for a lower price point up front and quicker, less-sustainable results. When the US private sector and other high-standard developers approach a project, they look not only at the up-front costs, but also the costs associated with the project over the entire lifetime of the entity. Keeping in mind lifecycle costs at the onset also minimizes surprise expenses along the way, and reduce maintenance and repair costs down the road. In Nepal, though the Millennium Challenge Corporation, the US is funding $500 million in projects ranging from road maintenance to electrical grid upgrades. These projects will help ensure low-cost, reliable electricity to the people of Nepal, and will help to maintain roads and bridges well into the future, connecting the people of the region to allow them to trade and improve standards of living.
In Bangladesh, the Commercial Law Development Program (CLDP) of the U.S. Department of Commerce is working with government officials on medium- and long-term planning for policies related to importing liquefied natural gas and to help support Bangladeshi officials as they develop policies to transform their energy infrastructure. In India, the United States supports India’s emergence as one of the world’s most important civil aviation markets. Sales of U.S. aircraft, aircraft parts, and aviation services in India is growing.
BBIN MVA’s Importance for Bangladesh
Regional trade, connectivity and integration with South Asian countries can be used to achieve rapid and sustained economic growth of Bangladesh. For example, India is one of the largest trading partners of Bangladesh and the Bay of Bengal region offers an immense potential for boosting trade opportunities. Bangladesh has demonstrated superior performance in boosting its exports and achieving a high rate of economic growth—more than 6 percent over the last decade and an impressive in 2016-2017. The total trade of Bangladesh was more than USD 78 billion in 2016-17.
Bangladesh ratified the Bangladesh Bhutan India Nepal (BBIN) Motor Vehicle Agreement, which can be a milestone in fostering transport and transit connectivity within South Asia. The BBIN MVA will increase cargo movement within the countries and ease many of the cross-border trade issues by replacing transshipment. It will make cross border trade and transport in and through the Northeastern region of India to and from Bangladesh, Bhutan and Nepal more efficient. The BBIN MVA will enable Bangladesh Customs to allow domestic transit from land ports, e.g., allowing an importer the opportunity to clear customs not at Benapole Custom House but at Narayanganj LCS or at ICD Kamalapur Custom House. In that case, Indian trucks can travel to Narayanganj or Dhaka or any other place within Bangladesh. The main challenge in this regard is that most of the consignments coming from India use open trucks. But, for security reasons, domestic transit cannot be allowed unless the goods carrying vehicle is a covered truck or a containerized trailer.
Bangladesh has also been active in SASEC, which aims to enhance transport connectivity, energy connectivity and cross-border trade facilitation with the support from ADB and other donors. The government of Bangladesh has prioritized the improvement of regional connectivity and the 7th Five Year Plan (2016-2020) supports the Trans-Asian Highway project. Other priority projects of Bangladesh include, Matarbari Deep Sea port, Payra Sea port, linking Bangladesh Railway system with destinations in India and Myanmar as weel as to the Asian Railway system. The government of Bangladesh has approved the Elenga-Hatikamrul-Rangpur Highway Four Lane Upgradation project and Akhaura Agartala dual gauge railway link project in 2016. Bangladesh has also decided to get construct a 129 km rail track between Dohazari to Gundum near Myanmar border via Cox’s Bazar as part of the Trans-Asian Railway. In addition, several other projects are on-going and are ready for investment. The World Bank Group is working on a Regional Connectivity Project, which aims to develop some selected ports of the country.
MVA’s Importance for Bangladesh
The government’s planning and strategies towards connectivity shows the importance of regional integration for Bangladesh. Considering the economic transition of Bangladesh as a result of LDC graduation, the country is now aiming to increase its trade within the region. This is important because the country will be losing some privileges after graduating from the LDC status. Bangladesh should negotiate/ renegotiate regional arrangements for market access. With deeper trade, investment and connectivity linkages within the sub-region, Bangladesh can benefit from new markets, acquire new sources of imports with high-quality and better prices, increase opportunities for transport and logistics services and get connected to the regional value chain.
Regional connectivity is even more significant for Bangladesh due to its unique geo-strategic position. Bangladesh can take advantage of its location in the Eastern sub-region of South Asia. It has the opportunity to become the centre point in connecting Bangladesh, Bhutan, India and Nepal (BBIN) with the ASEAN and other East Asian countries. Land locked Nepal, Bhutan and some Indian states can be benefit from using the sea ports of Bangladesh if those are developed adequately. Bangladesh can become a transit point between India and China by upgrading the necessary physical infrastructures. As per a study by the Asian Development Bank (ADB), full improvement of the transport connectivity between South and Southeast Asia will increase the real income of Bangladesh by 6.9 percent of the Gross Domestic Product (GDP) and increase export by 86 percent.
Connectivity infrastructure, combined with regulatory reforms like the implementation of the National Single Window in Bangladesh, is important in removing procedural obstacles. The effective establishment of single window at the national level will create opportunities to establish Regional Single Window, which will deepen the integration and promote regional trade and connectivity. Adequate attention of the policy makers is necessary in two critical areas: transport infrastructure and trade facilitation. In the area of Transport Infrastructure, eight routes are designated under MVA. The Bangladesh portion in most of these designated routes is generally poor. Although significant portions of National and Regional Highways along these routes satisfy the requirement of two-lane highway, some sections need to be widened and improved to carry heavy vehicles.
Bangladesh has ratified the TFA of the WTO and the Framework Agreement on Cross-Border Paperless Trade of the UN-ESCAP. Bangladesh has already notified the ‘Category A, B, and C’ measures under the TFA to the WTO. Gradual implementation of the measures under this agreement will improve regional trade and connectivity.
Myanmar has carried out a series of economic policy reforms that are needed to ensure, guide and facilitate the process of development in sustainable ways. Trade policies are also being amended in line with regional and global commitments and according to liberal principles. Myanmar has undertaken policy objectives to facilitate the transport of goods and services across our borders.
In spite of its best efforts to promote trade with all trading partners countries in the region and beyond, the existing level of trade, investment and connectivity among the countries in the Bay of Bengal Region has not met its economic potential. Myanmar's external trade has mostly been concentrated in Asia.
According to Myanmar’s trade statistics for 2017-2018 Fiscal year, over 85% of Myanmar’s external trade is with Asia, of which 35 percent is with Southeast Asia (ASEAN), 45 percent is with East Asia and only about 5 percent is with South Asia. Among the South Asia countries, Myanmar-India trade is about 80 percent and Myanmar-Bangladesh trade is only about 10 percent. Myanmar’s trade with the rest of the countries in South Asia have relatively been very low. Myanmar Border Trade with India and Bangladesh is also very low when compared to those of China and Thailand. India is the major investing country from South Asia.
A total amount of India FDI inflows to Myanmar as of March 2018 was USD 739.142 million (25 enterprises) which is 1.19 percent of total FDI inflow to Myanmar. So, it needs to strengthen investment-trade linkages which are vital to achieve higher levels of bilateral trade and its development impact.
Regarding Connectivity, the Government of India has been providing technical and financial assistances for Infrastructure development in Myanmar including Kaladan Multi-modal Transit Transport Project. Moreover other connectivity projects has also been implemented such as upgrading Kalaywa-Yargyi road which is also a part of India-Myanmar-Thai Trilateral Highway and upgrading India-Myanmar Friendship Bridge (Rhi).
After completion of those projects, there will be better connectivity between South East Asia and South Asia. Since Myanmar is in strategic location and it is a gateway for bridging South East Asia and South Asia, collective effort is essential to overcome existing challenges and enhance trade and connectivity in the region.
Creating a Multilateral Impact through Bilateralism
We have extensively worked on the connectivity linkages in BBIN. Under this initiative, we have emphasised India-Bangladesh connectivity. We have also worked on India’s connectivity with the Himalayan states, Nepal and Bhutan. For the last three years, we have been promoting the idea that extending our inland waterways and associating with each other through that particular channel will be greatly beneficial to both India and Nepal.
There were a few concerns regarding BBIN at the outset. At present, there are concerns related to developing our border mechanisms and border infrastructure as India has an open border system with Nepal and Bhutan. We need to ensure such infrastructures not only facilitates traders but also benefits residents in the bordering areas. I have visited the integrated check post (ICP) in Birgunj and saw ample scope for the betterment of connectivity. We have ICPs at bordering areas of India and Bangladesh.
The border customs should work in a harmonised manner. Bhutan has concerns regarding the BBIN MVA. In my opinion, it's better to promote BBIN as a separate sub-regional initiative; something beyond MVA, which is just one aspect of the BBIN Initiative. There are many other factors to work on under the BBIN umbrella. The projects should be promoted and executed on time. Infrastructural development, investment and investor-related concerns need to be dealt with.
Another concern is the increasing influence of China in the sub-region. China’s heavy investment in the infrastructural development of neighbours is also a primary concern of India. We have seen Chinese investments have turned into debt traps for a nation like Sri Lanka. In my opinion, the neighbours within BBIN are now fully aware of the consequences of China's investment. These issues should be dealt with maturity. We should understand that both Nepal and Bhutan have their own foreign policy approaches. India shares a special relationship with Nepal and Bhutan which is full of historical legacies and cultural influences. BBIN has the potential to emerge as an integrated consumer hub. India and other countries should work to identify the products that can be traded in the region. India should take the initiative considering it has a bigger role to play. BBIN can emerge as the hinterland of the Bay of Bengal. It will be difficult for India to connect with its North East states using the bay without this sub-regional connectivity. This strategic vision will play its role in terms of trade negotiations. Bilateralism will be one of the major ways towards multilateral cooperation among BBIN members. Strengthening the bilateral relations between all four countries is key. India is also trying to improve its relations with Nepal, which was affected by the blockade in 2015.
Multilateralism will work in South Asia because of the political culture of the nations. They are comfortable in building long-lasting bilateral relationships. We shouldn’t compare the regional relations of South Asia with the regional relations in other parts of the world.
Bhutan’s concept of Gross National Happiness is linked to its fragile ecosystem; a cause of concern for the country. But, at the moment, Bhutan enjoys a great relationship with India. The country can use Indian territories and ports with no charges for third country trade. Bhutan should find its role in MVA.
High Success Potential as a Sub-regional Agenda
The government of Bhutan signed the BBIN MVA and submitted it to parliament for ratification.
The National Assembly (lower house) passed the agreement and after which it went to the National Council (upper house) for the review. The council cast doubts on the agreement and sent a list of 15 questions to the National Assembly. So it is still in the parliamentary process. When will Bhutan join the BBIN MVA depends on how fast the issues related to the agreement are resolved in the parliament.
Our primary concern is related to asymmetry. Bhutan is a small country with fairly small population. Looking at the situation in the region where there are big countries with a large population like India, Bhutanese worry that the country won’t be able to handle a big traffic.
I hope the new initiative won’t replace the South Asian regional forum. The BBIN has its own dimensions and was not formed because of SAARC's failure. Being the largest country in the region and a major economy of the world, it is obvious for India to play a key role. And as small neighbours, we are also dependent on India. For India, there is nothing to lose in terms of enhancing trade with its neighbours.
There were some issues between the nations in this region in the past. At present, things have improved and there are not many long-standing issues between them.
BBIN as a sub-regional agenda is poised to become a success as it is easier to work in a small group. The collaboration between the countries will have positive impacts in the South Asian sub-region. In today’s world it has become very important for all of us to join hands for mutual benefit and a better future.
Constructive Step towards Regional Integration
The failure of SAARC due to the India-Pakistan conflict has shifted the focus towards the eastern South Asia linking up with Association of Southeast Asian Nations (ASEAN). BBIN MVA is a constructive step towards regional integration. This initiative will facilitate faster movement of goods, which will reduce the cost of the products. As a result, trade among the countries in the region will expand. For instance, Nepal can trade with Bangladesh with fewer hassles. People will invest in infrastructure if they see a potential return. Return is solely possible if the investment benefits the production. Along with the government, even the private sector has invested in areas like roadways on Public-private partnership (PPP). Domestic economic reforms are extremely important. The countries should increase productivity to gain maximum benefit from the region. If countries push for increasing production, the private sector will invest in potential areas.
Considering the situation between Nepal and India, there is a fixed currency exchange rate, so there will not be payment troubles. The payment system has no issue with multilateral or bilateral trading. While there are a number of obstacles in trading, they can be dealt with as and when they occur. We decided to set up a committee comprising a representative from each country, which will help bring the agendas forward. This will benefit all the countries in the region.