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The Daily Star, Dhaka, February 19, 2006

Bangladesh and Bimstec: A whole new opportunity, but are we up to it?


Dr. Abdur Rob Khan
With a well functioning free trade area within ASEAN, the signing of Framework
Agreement on free trade area among the BIMSTEC countries in February 2004 and the
South Asian Free Trade Area (SAFTA) in January 2005, heralded a season of regional
trading agreements (RTAs) in Asia. These RTAs also contributed to deepening of free
trade arrangements in Asia. The formation of the BIMSTEC spanning two contiguous
sub-regions where two regional cooperation processes are on-going is a significant
development. It opened the eventual possibility of Asia-wide cooperation, or what the
SAARC heads of states and governments recently visualized as Asian economic union.
As Bangladesh is a founding member of BIMSTEC, immense potentials are also open to
this otherwise least developed country in South Asia.
East Meets West
The initiative for BIMSTEC was taken by Thailand as part of its 'look west' policy. The
look west policy matched well with Bangladesh's, and later, India's 'look east' policy.
Consequently, Thailand, Bangladesh, India, and Sri Lanka formed BIST-EC (Bangladesh,
India, and Sri Lanka Thailand-Economic Cooperation on June 6, 1997 for promotion of
economic cooperation among themselves. With Myanmar's joining in December that
year, the organization became BIMST-EC. The group renamed itself Bay of Bengal
Initiative for Multi-sectoral Technical Economic Cooperation (BIMSTEC) in July 2004.
Later Bhutan and Nepal joined the group.
BIMSTEC Structure
While the structure of BIMSTEC is similar to SAARC, there are some differences as
well. Like SAARC, BIMSTEC decisions are made at the summit level but the decision
principle is not based exactly on unanimity, as in SAARC. The BIMSTEC summit takes
place every second year. The second tier of BIMSTEC is the Ministerial level meetings
among the Foreign Ministers, supported by meetings of the line ministers. The third tier
consists of senior officers' meeting (SOM) usually at the level of the Foreign Secretaries.
Below the SOM, a host of bodies like working groups, expert committees, and in the
context of the FTA, trade negotiating committee (TNC) work. Below the summit, the
ministers and foreign secretaries meet as many times as needed. The second summit is
expected to take place in 2006. The eighth Foreign Ministers meeting and 10th SOM
have taken place In December 2005.
BIMSTEC, unlike SAARC, is yet to set up a headquarters or Secretariat. The 6th
Ministerial meeting agreed to set up BIMSTEC Technical Support Facilitation Center as
a coordination mechanism of BIMSTEC's general cooperation. Thailand supported the
establishment of the Center, possibly as a foundation for the BIMSTEC Secretariat.
BIMSTEC Cooperation Process: Deepening and widening agenda

Following its foundation in June 1997, the BIMSTEC leaders identified six areas for
cooperation, trade and investment, technology, transport and communication, energy,
tourism and fisheries. Lead countries were identified to coordinate activities in the sector.
The initial thrust areas were road and air connectivity and energy sector cooperation.
However, guided by an urge for deeper economic integration, the leaders decided to go
for free trade area. While FTA process is moving on a fast track, the original six areas
remain high on the agenda and at the same time, other pertinent issues have been added.
Trade and Investment
Trade and Investment area led by Bangladesh is divided into two categories: (a) goods
and services with 8 sub-sectors: gems and jewellery (Sri Lanka), automotive industry
(Thailand), processed food (Sri Lanka), horticulture/ floriculture(Thailand), drugs/
pharmaceuticals(India), rubber, tea, coffee(Thailand), textile and clothing (Bangladesh)
and cocoanut/spices(India); (b) Trade and Investment facilitation with 7 sub-sectors:
customs procedures (Bangladesh), standards and conformity(Thailand), banking
arrangement(Sri Lanka), IT-BIMSTEC (India), intellectual property rights(India),
mobility of business people(Sri Lanka) and promotion of intra-BIMSTEC
investment(India). A Task Force has been constituted to review the trade and investment
cooperation.
Transport and Communications
Several rounds of Task Force meetings at the expert level on transport and
communication led by India have been organized to create air, sea and land linkages.
There is also a proposal for a deep sea port at Tavoy. The realization in BIMSTEC is that
the group's potentials will not be fully realized without development of infrastructural
facilities like transport and communications. BIMSTEC leaders tasked the EASCAP to
prepare the feasibility of providing the missing links on the Asian Highway. However, in
recent times, India-Myanmar Highway project has been launched and Thailand is
expected to join the highway. Whether such developments drop Bangladesh from the
much-talked about Asian Highway is not quite clear. Once the physical connectivity is
established, next step should be developing the software of transport and communication,
namely, rules and regulation facilitating the cross-country movements.
Technology
The focus of technology led by Sri Lanka have been agro-based technology, ICT and
capacity for disaster management. In the disaster management field, India has proposed
to set up a Weather and Climate Centre in New Delhi.
Agriculture and Fisheries
Originally fisheries, the sector was expanded to include agriculture and Thailand offered
to lead the composite sector. Major projects of the sector are: impact of offshore oil and
gas drilling on marine fisheries, and management and development of new fisheries in the
Bay of Bengal.
Tourism

Initially Sri Lanka was the lead country in tourism. Later India took over. Projects in the
tourism sector include BIMSTEC Tourism Institute, BIMSTEC Tourism Fund,
BIMSTEC Tourism Year 2005,later extended to 2006, regional tourism through joint
marketing and training IT.
Energy
Current important projects in the energy sector led by Myanmar are the development of
regional hydro projects, cooperation in energy infrastructure (Natural gas), energy
information centre and energy trading network. India organized a training programme for
energy officials of the member countries and also offered to host a summit on the sector.
The greater region of South and South East Asia contains huge reservoir of nonrenewable and renewable energy. As far as gas reserve is concerned, some of the
countries like Myanmar and possibly Bangladesh have reserves beyond their short and
medium term requirements. Nepal and Bhutan have immense untapped hydel power. A
comprehensive framework for cooperation in regional resources going beyond simple
energy trading and linking the region in an energy grid is needed to tap the full potentials
in industrialization and consumer needs.
BIMSTEC Free Trade Area
Framework agreement on BIMSTEC free trade area (BIMSTEC-FTA) was signed in
February 2004 covering three vital areas: trade in goods, trade in services and investment
cooperation. The BIMSTEC FTA on trade in goods is expected to be launched in July
2006 while FTA in two other areas will commence after 2007. The FTA is to be
implemented in two phases, fast track between 2006 and 2011,and normal track between
2007 and 2017. The least developed countries Bangladesh, Nepal, Bhutan and Myanmar
will get a grace period in both the phases. In the first phase or fast track that confines
only to trade, the three developing countries India, Thailand and Sri Lanka will give free
access to a number of products from the LDCs between July 2006 and 2007. In the
second phase or normal track, the developing countries will give access to most of the
LDC product. The LDCs, on their part, will give free access to a number of goods from
developing countries from July 1, 2011 under the fast track, while under the normal track,
they will free their market from July 2017.
Trade negotiations are being conducted by Trade Negotiating Committees (TNCs).
Several rounds of meetings have been held. The BIMSTEC officials have finalised a list
of 1300 negative item list. The 9th senior official level meeting was held in Dhaka in
June 2005. Bangladesh assumed chairmanship for the next one year. Trade experts were
expected to meet in Colombo to discuss and finalize the list of sensitive goods.
The expert level meeting at Bangkok in September 2005 considered the negative list
submitted by the member states. The earlier meeting held in August 2005 to discuss rules
of origin (ROO) failed to reach any agreement. They were also expected to discuss
matters relating to various direct and indirect taxes, revenue loss impact and
compensation mechanism.
Cooperation in Other Areas

At the Summit in July 2004, the BIMSTEC leaders agreed to expand cooperation to a
number of new areas, such as, culture, education, public health (including HIV/AIDS,
malaria, tuberculosis and polio), protection of bio-diversity and traditional knowledge,
rural community development, small and medium scale enterprise, construction,
environment, information and communication technology, biotechnology, weather and
climate research, natural disaster mitigation and management.
The Working group report on counter-terrorism through intelligence sharing and
combating trafficking in narcotics was considered at the 9th senior officials meeting in
Dhaka in June 2005. The report will be considered by the Foreign Ministers meeting in
Dhaka in December 2005. In December 2004, the Joint Working Group on counterterrorism and trans-national crime decided to enhance operational and strategic
capabilities in preventing and suppressing terrorism and trans-national crime which
included currency counterfeit, forged travel documents, illegal movements of people
including human trafficking. Ministerial meeting on poverty alleviation is to be hosted by
Bangladesh in 2006.
Bangladesh and BIMSTEC
Bangladesh is a founding member of BIMSTEC and has been playing an active role in
the sub-regional cooperation process. Location-wise, Bangladesh provides the essential
bridge between South and Southeast Asia. In what follows, Bangladesh's role in
important BIMSTEC fora is briefly outlined.
On FTA, at the negotiation stage of the framework agreement, Bangladesh wanted a
SAFTA-like revenue compensation provision for the LDCs. Bangladesh's point of view
was guided by getting an equitable share of the vast market of SAARC and part of
ASEAN. Bangladesh initially stayed out of signing of FTA framework agreement on
ground of LDC compensation issues which was not sufficiently addressed in the
document. Bangladesh later signed FTA in June 2004 in order that Bangladesh is not left
out of this important cooperation process and its external trade and FDI did not suffer.
But the fact remains that Bangladesh raised the issue of compensation on behalf of the
four LDCs in the sub-region.
As far as rules of origin is concerned, Bangladesh has decided to propose in the next TNC
for adaptation of value addition criteria only with 35% value addition for non-LDCs and
25% for LDCs for rules of origin criteria. Bangladesh has also decided to oppose
country's position on rules of origin criteria that requirements of value addition in
fallback position would be 40% for non-LDCs and 30% for LDCs.
On anti-dumping issue, Bangladesh took a moderate line and decided to propose prior
consultation with the LDCs after finalisation of anti-dumping consultation and before
imposition of anti-dumping duty. In fact, earlier position of Bangladesh was consultation
prior to initiation of anti-dumping measures but in the face of opposition from India and
Sri Lanka, Bangladesh shifted its position.
Wider Scope of Cooperation

BIMSTEC FTA is more comprehensive in scope covering trade in goods as well as


services and investment than SAFTA. Apart from the comprehensive coverage, the
greater potential of BIMSTEC in unleashing industrial restructuring and providing
connectivity to the contiguous countries will remove the barriers of movements to such
an extent that continental nature of the two sub-regions will clearly emerge. In fact,
transport connectivity will hold up the potentials to be fully realized even in the field of
preferential trading arrangements.
The combined size of BIMSTEC economies is $750 billion with a 1.3bn population. The
members are at different stages of economic and industrial development and share
different natural resource endowments. Hence complementarities between them are
substantial. Combining some geographically contiguous South Asian and ASEAN
countries in the Bay of Bengal, BIMSTEC is widely seen as the bridge between SAARC
and ASEAN. As is well known, there are significant developmental and technological
gaps between the SAARC and ASEAN countries. The BIMSTEC may provide a
mechanism of reducing the gaps between the two sub-regions.
In the field of energy, mutual gains are enormous. The region combines countries having
large gas reserves beyond their short and medium term domestic requirements such as
Myanmar, and those with immense untapped potentials of hydroelectricity such as Nepal
and Bhutan.
An issue of critical significance for Bangladesh is trade imbalance which stood at $ 873
m last year with the BIMSTEC countries. Bangladesh has balance of payments trade
deficits with all the BIMSTEC countries. But while the gap is enormous with India, trade
intensity with Myanmar and Thailand remains far less than the potentials. BIMSTEC
FTA with Myanmar and Thailand may raise the level of trade with these countries and
bring some moderation in trade gaps with India.