Role of BIMSTEC in Creating a Regional Economic Power in Trade and Investment

The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), comprising Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand, is strategically positioned to become a significant economic power in South and Southeast Asia. In 2023, the region’s collective trade of goods reached a substantial USD 1,863 billion, with exports and imports valued at USD 796 billion and USD 1,068 billion, respectively. Despite this large volume of trade, intra-regional trade only constitutes 6% of the total, indicating a vast untapped potential for greater regional economic integration and cooperation.

Expansion of Intra-Regional Trade

One of the primary objectives of BIMSTEC is to enhance intra-regional trade and investment. The region laid the foundation for this goal by signing the Framework Agreement on the BIMSTEC Free Trade Area (FTA) in 2004, which aimed to simplify customs procedures, foster mutual recognition arrangements, and establish effective measures to facilitate trade and investment. The establishment of a Trade Negotiation Committee, comprising various sub-groups, was a crucial step in this direction. Accelerating the operationalization of the BIMSTEC FTA is essential for the region’s economic growth and poverty alleviation.

India’s trade relations with its BIMSTEC neighbours highlight the region’s economic dynamics. In 2022, India’s trade with Myanmar stood at USD 1.80 billion, with Sri Lanka at USD 7.38 billion, and Thailand, its largest trading partner, at USD 17.29 billion. Other significant partners include Bangladesh, Nepal, and Bhutan. A comprehensive FTA could boost exports among the member countries and enhance their collective presence in global markets.

Addressing Tariff and Non-Tariff Barriers

BIMSTEC’s focus on removing tariff and non-tariff barriers is critical for facilitating trade and strengthening economic ties among its members. Learning from other regional trade agreements, such as the ASEAN FTA, BIMSTEC aims to develop a progressive and inclusive trade regime. Addressing these barriers will help BIMSTEC countries align their industries with global value chains and leverage their strengths for regional development.

The Working Group on Rules of Origin, a key component of the Trade Negotiation Committee, has made significant progress, meeting 21 times to finalize the Rules for Determination of Origin of Goods and Operational Certification Procedures. Finalizing these rules is crucial for establishing a seamless trade in goods under the BIMSTEC FTA. Additionally, an early harvest agreement with the reduction of tariffs among members could yield immediate benefits and support regional value chain integration.

Trade Facilitation and Industrial Corridors

BIMSTEC’s trade facilitation efforts, as outlined in the ADB report on the BIMSTEC Trade Facilitation Strategic Framework 2030, include digitization and automation of customs procedures, expansion of risk management systems, and improved compliance with international trade facilitation agreements. These measures aim to enhance the efficiency of cross-border movement of goods, thereby boosting the region’s trade competitiveness.

The development of aligned industrial corridors along specific trade routes can further bolster BIMSTEC’s economic integration. These corridors would support local jobs and incomes by promoting industries with high global value chain presence, such as textiles, pharmaceuticals, and electronics. The industrial parks, supported by multimodal transport linkages and facilitative border-crossing infrastructure, would ensure the rapid evacuation of goods.

Fostering Investment and Regional Supply Chains

BIMSTEC’s potential as a regional economic power is closely linked to its ability to attract investments. The Trade Negotiation Committee’s focus on developing an open and competitive investment regime is a step in the right direction. By creating strategic value chain nodes and designating investment zones, BIMSTEC countries can attract foreign direct investments (FDIs) and foster intra-regional investments.

The member countries need to collectively improve their investment climates by simplifying regulatory frameworks, offering fiscal incentives, and establishing dispute resolution mechanisms. Investment roadshows and a collective brand-building exercise can highlight the region’s investment opportunities to external investors, thereby strengthening regional supply chains and promoting services exports.

Way Forward

BIMSTEC’s role in creating a regional economic power in trade and investment hinges on its ability to facilitate trade, remove barriers, and foster investment. By capitalizing on its geographic and economic strengths, BIMSTEC can emerge as a significant player in the global economy, driving growth and development in the Bay of Bengal region.