World Focus
India and the BIMSTEC: A Pertinent Link in the 'Act East' Chain
BIMSTEC - the acronym for Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation - a sub-regional organization encompassing member-States from both South and Southeast Asia - has been an integral part of India's foreign policy since its inception on 6 June 1997. Originally starting with Bangladesh, India, Sri Lanka and Thailand as founding members, the organization, christened as BIST-EC (Bangladesh, India, Sri Lanka and Thailand Economic Cooperation) extended its membership by including Myanmar in December 1997. Subsequently, full membership of the organization was granted to Nepal and Bhutan in 2003, following which, the grouping was re-christened BIMSTEC at its Inaugural Summit, held on 31 July 2004 at Bangkok. The pertinence of BIMSTEC for India's foreign policy in general and its neighbourhood policy in particular, may be viewed from the following perspectives: first, being a bridge between the countries of South and Southeast Asia by virtue of the array of its membership, BIMSTEC acts as a converging locus for India's South and Southeast Asia policies; secondly, the BIMSTEC region, with a population of 1.5 billion (almost 21% of the global population) and Gross Domestic Product (GDP) of more than US$ 2.5 trillion, has a vibrant potential for India's investment and economic interactions ; thirdly, the organization focuses on fourteen priority sectors like trade and investment; transport and communication; environment and disaster management; counter-terrorism and transnational crimes; energy; cultural cooperation; people to people contact etc., thereby providing India a pedestal for deliberations on a host of issues with its BIMSTEC partners; and finally, since the Northeast of India lies at the cusp of the BIMSTEC topography, the optimal exploration and enhancement of infrastructure and connectivity facilities in this sub-region would augur well for the development of India's Northeast. India's Northeastern states - Assam, Arunachal Pradesh, Meghalaya, Mizoram, Manipur, Nagaland, Tripura and Sikkim - share international boundaries with Myanmar, Bangladesh and Bhutan, which are all members of BIMSTEC. Arguably, India's primary objective within BIMSTEC has been to develop the Northeastern region by integrating it with existing trade networks while capitalizing on future opportunities, such that, BIMSTEC could emerge as a "potential game changer" for the Northeastern region's overall development.
As a model of multilateralism at the sub-regional level, straddling two geographically contiguous parts of Asia, BIMSTEC has been in existence for seventeen years now, replete with its attendant pointers to success and limitations. In particular, when the economic dynamics of India's interactions with the member-states is accounted for, the proposed BIMSTEC-Free Trade Agreement (FTA) promises to create a market integrating over 20% of the world population, with the potential for creating US$ 43- US $59 billion annual trade. While intra-regional trade could rise by as much as 60%, its global trade could grow by 30% if trade facilitation systems are raised to international standards. Given this promising premise, this article would endeavour to highlight the present trends of India's BIMSTEC policy on the whole; address the challenges and focus on the prospects for BIMSTEC's evolution as a model of economic cooperation and integration, in the context of the present Government's 'Act East' and 'Neighbourhood First' policies.
India's BIMSTEC Sojourn: Taking Stock of the Myriad Challenges
It is clear from the discussion above that the BIMSTEC as a sub-regional initiative, presents a host of opportunities for India's geo-political and political-economic development, contingent upon addressing the challenges and harnessing the opportunities that the organization showcases. With respect to the challenges that India's BIMSTEC policy encounters, four particular aspects may be identified and underscored:
First,it is argued that BIMSTEC members are guided by purely economic issues rather than political considerations. Although the magnitude of political tensions between the BIMSTEC member-states may not be comparable with that between India and Pakistan - the oft-repeated rationale for SAARC-bashing - there are some political issues which need to be addressed. For instance, India needs to put more political capital into sorting out its bilateral tensions with Bangladesh and Sri Lanka - the two BIMSTEC counterparts. In fact, Bangladesh's decision to tag the hitherto non-signing of the Teesta Water Sharing Agreement with India to its resolution to prevent India access to two Bangladeshi ports (Mongla and Chittagong) - which would have been extremely beneficial for its access to the north-eastern states, is a case in point. On its part, India should also harp on collaborating with Bangladesh to allow the latter's exports destined for Nepal and Bhutan transit through the Siliguri and Benapole corridors, which would be a major step in encouraging trade and considerably correcting the low share of intra-BIMSTEC trade. With respect to Sri Lanka, a viable solution to the devolution issue is, however, unlikely without a major initiative coming from the Indian side, which requires a great deal of brainstorming to reach a solution that at one level, can meet the aspirations of the Tamils, and at another, ensure that the coalition's standing with the Sinhala Buddhist majority is not seriously undermined. Likewise, in case of Myanmar, Bangladesh, Nepal and Bhutan, their commitment to denying safe haven and coming down heavily on insurgent groups operating along the border is also a significant political consideration for India.
Secondly,the delay in the signing of the BIMSTEC Free Trade Agreement (FTA): A Framework Agreement for BIMSTEC Free Trade Area was signed in Phuket, Thailand, in February 2004, committing the parties to negotiate Free Trade Agreements in goods, services and investments. However, even after ten years of FTA negotiations stretched over nineteen rounds, the member-states have not been able to reach a consensus over issues of market access, rules of origin, dispute settlement mechanism, and the list of goods with high tariffs. Problems also remain on product coverage of negative list, principle of reciprocity and distribution of products over Normal Track elimination and Normal Track reduction. In fact, the Agreement encounters several institutional and structural bottlenecks as well: since the BIMSTEC countries include both developing countries and Least Developed Countries (LDCs), they are characterized by higher tariff barriers on their imports, vis-a-vis their developed counterparts. It was expected that while on one hand, the preferential treatment would allow the countries to gain enhanced access in each other's market; the 'enabling clause' provision of the FTA would provide them the requisite safeguard to protect the sensitive domestic sectors, on the other. Moreover apart from the tariff barriers, it was believed that the trade facilitation measures would significantly lower the level of transaction costs, which put a downward pressure on the intra-regional trade volume. BIMSTEC does not have any provision for revenue loss compensation resulting from tariff reductions and elimination. Stemming from this limitation, the negotiation on BIMSTEC-FTA witnessed a setback in 2004, when Bangladesh felt unhappy on the revenue loss compensation provision for the LDCs in the bloc. Although it rejoined the negotiations in the following period, it preferred to have textile products in its negative list. Indian firms raised a similar concern on textile products as well. Moreover, the Indian auto industry was also wary of the completely-built units of all four-wheelers and two-wheelers from Thailand and was in favour of including them in its negative list. It is true that in addition to the given heterogeneity of the members in terms of their resource bases, the size of domestic markets and their development concerns, the exercise has other challenges emanating from factors like the linkages of most of the BIMSTEC counterparts through overlapping preferential or Free Trade Agreements. A majority of the members are already linked with each other through several sub-regional preferential arrangements. For instance, the South Asian countries are part of SAFTA, while the Indo-Sri Lanka FTA is in operation. India also provides preferential treatment to exports from Bhutan and Nepal. India, Thailand and Myanmar are common elements of the ASEAN-India FTA, while India already has signed FTA with Thailand. This wide array of multiplicity of preferences may substantially add to confusion once all the preferential arrangements come into play.
Thirdly,infrastructure bottlenecks and their linkages with India's Northeast: infrastructure needs range from physical infrastructure such as roads, ports of entry, airports, electricity, telecommunication, water supply, modes of transport to urban infrastructure and access. In order to harness and maximize the trade and investment potential of BIMSTEC members, the proper up-gradation and improvement of infrastructure facilities is an imperative. Since India's Northeast forms an integral part of the focus of BIMSTEC, facilitating the region's connectivity through Myanmar to Thailand and further Southeast Asia calls for addressing the infrastructure challenges as well. Towards this end, two major connectivity projects, the Kaladan Multi-modal Transit and Transport (KMMTTP) and India-Myanmar-Thailand Trilateral Highway, linking India, Myanmar and further to Southeast Asia are likely to be completed by 2016. While the KMMTTP will connect Kolkata to Sittwe Port in Myanmar and then further to Mizoram by river and road, the Trilateral Highway will run from Moreh in Manipur to Mae Sot in Thailand via Myanmar. However, the timelines of the Trilateral Highway and the Kaladan Multi-modal Projects need to be straightened out fast and even adhered to. Besides, the infrastructure facilities at the Land Custom Stations at Moreh (Manipur-Myanmar border) and Petrapole (West Bengal-Bangladesh border) need immediate up-gradation for providing and encouraging unhindered and formal trade operations.
Fourthly,institutional problems in the manufacture and services sectors: the recent experience in South Asia (other than that of Bangladesh) of a growing merchandise trade deficit and the challenge of job creation have forced attention back on the role of manufacturing. Among the South Asian economies, Bangladesh has been able to successfully capture a large share of the global exports of readymade garments driven by low labour costs. A second factor that is now being discussed on the relative roles of services and manufacturing is with regard to not only the creation of jobs, but also the quality of jobs. Job creation poses a major challenge in the light of rapid growth in the labour force and the dominance of informal employment, either in agriculture, which has been shrinking, albeit slowly, or in the urban informal sector. The widespread belief is that, a successful structural transformation process requires the manufacturing sector to take the leading role in creating better quality employment, which would lead to a reduction in poverty and a more inclusive growth path. However, even when jobs are created in significant numbers in the manufacturing sector, their quality could remain poor, as reflected in the case of the garment industry in Bangladesh. Thus, at the implementation level, the Governments of the BIMSTEC member-states must be aware of and responsive to the challenges countenanced by the manufacturing and services sectors, such that the intra-BIMSTEC trade volume may be encouraged and skewed Balance of Trade, particularly faced by the LDC members be officially addressed.
Identifying the Prospects for BIMSTEC's Rejuvenation
Having analysed the challenges facing India's BIMSTEC policy, the subsequent part of the present article would identify some prospects that could pave the way for this sub-regional organization's rejuvenation.
First,the expedited signing of the BIMSTEC-FTA: the Third BIMSTEC Summit, held in Myanmar (March 2014) provided a greater thrust towards expediting the signing of the BIMSTEC-FTA, where the leaders not only directed the Trade Negotiating Committee to accelerate work for conclusion of the Agreement on Trade in Goods by the end of 2014, and to continue its efforts for early finalization of the Agreement on Services and Investments, but also resolved to move ahead with the proposal to ink agreements on dispute settlement and cooperation in customs matters. It was also agreed to enhance cooperation in expanding the skill and technology base of member countries through collaborations and partnerships targeted towards micro, small and medium scale enterprises. The leaders converged on accelerating efforts for the early finalization of a framework for establishment of the BIMSTEC Technology Transfer Facility.3 Given this endeavour, efforts are still underway and with expectations of the wrapping up of the Free Trade Agreement by 2015, it remains to be seen whether this year can emerge as a game-changer in this respect.
Secondly,exploring means of trade and investment facilitation towards measures for trade and investment facilitation include export diversification and trade development facilities among the BIMSTEC member-countries. For instance, while for Bangladesh and Sri Lanka, there is the possibility of diversifying the export basket into more complex products (or value chain segments) so that the new export products yield higher returns, for India, whose exports are already both diverse and complex, there is not much scope for movement into new products; therefore, in this case, the requirement is that of innovation. Also, while a major step in increasing manufacturing employment is to overcome infrastructure bottlenecks and improve the business climate, employment in higher return activities depends on the possession of the requisite capabilities of the projected workforce. In addition to the usual requirement of improved infrastructure and business climate, it is important to undertake various types of capability-building, for both higher value-added industries and innovation. Simultaneously, the growth of manufacturing does not automatically translate into good jobs, particularly when labour markets are not tight. Institutions strengthening labour and improved regulation of labour standards would be needed to provide not only more but also better jobs. In this context, the three components of policies to boost manufacturing include: improving infrastructure and the business climate; developing capabilities for higher value-added production and innovation; and improved regulation of labour standards. The core postulates for addressing these institutional and governance issues like delays in decision-making at the level of large projects, delays in environmental and other clearances that take into account the rights of the displaced, and the continuing rent-seeking at the local level, underscore the importance of responsive governments, which accept the imperative of inclusive development.
Thirdly,underlining physical, digital and smart connectivity as a driver of cooperation and integration, it is essential to identify and implement priority projects of regional and sub-regional significance, while simultaneously developing the supporting architecture of rules and regulations to facilitate cross-country movements. In the case of Myanmar and India's Northeast in particular, the rapid development of its Rakhine State (Myanmar) in the Western sector, the extension of the broad gauge rail line that is supposed to be built in Imphal by 2018 to Moreh and then on to Kalay in Myanmar's Sagaing division as a crucial connectivity link, and the proposal to develop Moreh into a major township, equipped with hospitals, educational institutes and banking facilities would go a long way in boosting connectivity and trade. In this direction, the Imphal-Mandalay Bus service as well as the India-Nepal direct bus services (Kathmandu-Delhi, Kathmandu-Vanarasi already launched) and Kathmandu-Patna (awaiting) have the prospects of boosting people-to-people contact and improving physical connectivity. Finally, the prospects of a shipping line between India and Myanmar should be examined for direct trade between them. This would not only become profitable and boost direct trade flows, but also act as a check on cross-border informal trade. In this connection, it would be pertinent to refer to an Asian Development Bank (ADB) study -BIMSTEC Transport Infrastructure and Logistics Study/BTILS - submitted in 2014, which identified a number of projects and divided then into a Long List and a Short List, aimed at enhancing connectivity in the region. The Long and Short Lists included 116 projects (costing around US$ 45-50 billion) and 65 projects (costing around US$ 15 billion) respectively. The Short List, to be implemented between 2014 and 2020, mentions 16 projects in Bangladesh, 4 in Bhutan, 17 in India, 9 in Myanmar, 6 in Nepal, 5 in Sri Lanka and 8 in Thailand. However, these projects will have to be implemented by the respective national governments either by themselves or with donor money. Thus, it is imperative for the member-states to prioritize the projects and work towards their early implementation. As a matter of fact, the means of connectivity, including roads, railways and shipping, need to be either improved or standardized and updated; roads are a priority in the BIMSTEC region as 70% of regional trade moves on-road; for the railways to be useful, they should be standardized because, some countries have meter gauge (like Bangladesh) and others (like India and Sri Lanka) have broad gauge; and to facilitate trade by sea, deep water ports will have to be constructed. Towards this end, a recent achievement has been the operationalization of the Myawaddy-Thinggan Nyenaung-Kawkareik section of the Asian Highway, which runs from Moreh in India to Thailand's Maesot via Myanmar's Tamu, Mandalay and Myawaddy, linking India, Myanmar and Thailand. With the 25.6-km-long section becoming operational, travel time between Thinggan Nyenaung and Kawkareik will be reduced from three hours to forty-five minutes.
Finally,developing tourism in India's Northeast: since 2015 happens to be the "Year of BIMSTEC Tourism", the development of high-value tourism among the BIMSTEC counterparts could also emerge as a prospect of greater cooperation. Unfortunately, the potential of India's Northeast remains to be explored fully for attracting tourists, towards which, a close collaboration of the public sector with the private sector hospitality industry, building high-quality infrastructure and well-targeted promotion could be considerable factors. Furthermore, repair and maintenance-based services related to road, river, rail and air travel; special international packages in consultation with other BIMSTEC counterparts like Bangladesh, Bhutan, Nepal, Myanmar and Thailand; simplification and relaxation of Restricted Area Permit (RAP) regime etc. are other proposals for binding the member-states, otherwise linked by deep-rooted bonds of history, geography, culture, religion and architecture.
Taking the BIMSTEC Policy Forward: NDA -II Government's Initiatives
The present Government (National Democratic Alliance/NDA - II), which came to power in May 2014, under the premiership of Narendra Modi, has exhibited a sharp focus on policies pertaining to both its immediate and extended neighbourhoods. This policy focus was evidently manifested in the Election Manifesto (2014) of the Bharatiya Janata Party (BJP) - the most prominent coalition partner of the incumbent NDA administration - which had a pronounced emphasis on its regionalization drive, through a fundamental reboot and reorientation of the foreign policy goals, content and process, in a manner that would locate India's global strategic engagement in a new paradigm and on a wider canvas, not just limited to political diplomacy, but also including the economic, scientific, cultural, political and security interests, both regional and global. Towards this developmental end, the BJP, in its Election Manifesto, aimed at crafting a "web of allies to mutually further our interests.... There is a need to integrate our soft power avenues into our external interchange, particularly, harnessing and focusing on the spiritual, cultural and philosophical dimensions of it." It is in this perspective of heralding a "proactive diplomatic" role in its immediate and extended neighbourhood, that the Election Manifesto laid down the BJP's Guiding Principles of Foreign Policy, among which, the most significant has been: "Equations will be mended through pragmatism and a doctrine of mutually beneficial and interlocking relationships, based on enlightened national interest.... Instead of being led by big power interests, we will engage proactively on our own with countries in the neighbourhood and beyond." In the wake of assuming power following the BJP's landslide victory in the Sixteenth Lok Sabha Elections (May 2014), the new Government has consciously adopted a "neighbourhood first" approach, pursuing friendly relations to strengthen its stance in regional and sub-regional fora like SAARC, ASEAN and BIMSTEC. In this context, the Indian Minister of External Affairs, Sushma Swaraj, in course of her visit to Vietnam in August 2014, officially unveiled the "Act East Policy" - the rechristened, reactivated 'avatar' of,the "Look East" - when she declared: "Now it is time to not just look but act. Under the Narendra Modi government, we will have an Act East Policy." A renewed emphasis on the "Act East" policy by the present Government would naturally reinvigorate its initiatives vis-a-vis sub-regional, multilateral organizations of the ilk of BIMSTEC, since it constitutes an inseparable link in India's neighbourhood chain, tethering both its South and Southeast Asian counterparts. In particular, the NDA-II's endeavours catering to the developmental necessities of India's Northeast deserve emphasis, as the region forms a definitive agenda of the country's BIMSTEC policy. In this respect, the Government's Budget of 2014-2015 earmarked Rs. 537 billion for infrastructure and telecommunications projects in the Northeast, of which, Rs. 280 billion was allocated for the proposed extension of railway networks to connect capital cities of the Northeastern states by 2020; the Central Government's allocation of Rs. 50 billion to provide 2G mobile coverage in this area for comprehensive telecommunication development plan; and the projection of developing the Northeast Region on a par with the rest of the country by 2022 - offer bright prospects for addressing the region's much-needed developmental concerns.
Another success of the present Government has been the signing of a Memorandum of Understanding/MoU between India and Bangladesh on the Use of Chittagong and Mongla Ports for Movement of Goods to and from India in course of Prime Minister, Narendra Modi's visit to Dhaka undertaken in June 2015. This MoU provides that Bangladesh shall allow use of Chittagong and Mongla Ports for the movement of goods to and from India by using Chittagong/Mongla to Agartala, Chittagong/ Mongla to Dawki, and Chittagong/Mongla to Sutarkandi routes. Movements of goods to and from Chittagong and Mongla Ports may be conducted by waterways, rail, road or multimodal transport, thereby removing a major obstacle related to the infrastructure and transportation issue between India and its BIMSTEC counterpart, Bangladesh. Besides, India has been involved in multiple connectivity projects within the BIMSTEC region, including the India-Myanmar-Thailand Trilateral Highway, building bridges and upgrading the 120 km road between Kalewa and Yargyi, land connectivity projects between Northeast India with Myanmar, the building of Mekong-India Economic Corridor, a Delhi-Hanoi road and railway link and the transportation networks including the East-West Corridor project, etc.
According to the Economic Survey of 2014-2015, with over 3,100 start-ups, India has been ranked as the fourth largest start-up hub in the world, mainly driven by 'hyper-growth' in the technology start-up and software product landscape. Software development and information technology-enabled services, including Business Process Management (BPM), software engineering, Research and Development services and product development have emerged as the most dynamic and vibrant sectors in India's economy." Therefore, given India's expertise in technology, especially Information Technology (IT), the technological cooperation holds immense possibilities for intra-BIMSTEC growth and collaboration. The economic and technological collaborative initiative could be further facilitated and encouraged by the 'Make in India' dream, also espoused in the Economic Survey of2014-2015, and the initiatives suggested within the wider corpus of the 'Make in India' project include: improving the business environment by making regulations and taxes less onerous, building infrastructure, reforming labour laws, and enabling connectivity, aimed at reducing the cost of doing business, increasing profitability, and, hence, encouraging the private sector, both domestic and foreign, to boost investments.
Above all, with the NDA-II Government's proactive commitment towards its neighbourhood as manifested in the "Neighbourhood First" and "Act East" Policies, both of which form the anchor for a revitalised BIMSTEC policy, the manner in which the ambitious vision can be translated into meaningful, time-bound action would be an acid test and could go a long way in ushering greater BIMSTEC fraternity.
