It seems to be the season of regional trade arrangements in this part of Asia. In January, a framework agreement on South Asia Free Trade Arrangement (SAFTA) was finally signed in Islamabad after years of haggling. At the ministerial meetings of Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Co-operation (BIMSTEC) in Phuket, Thailand on 7 and 8 February 2004, yet another regional trade agreement (RTA) in this part of Asia is taking off. The framework agreement for free trade agreement (BIMSTEC FTA) is likely to impart a fresh dynamism into a grouping initially formed in 1997. The grouping is also being expanded to cover Nepal and Bhutan at these meetings.

The BIMSTEC ministerial meetings were also to be followed by the first Summit of the leaders that was postponed due to the Indian Prime Minister?s inability to participate in it for domestic reasons. With the signing of the FTA, a foundation for the launching of the process of deeper economic integration and evolution of a Bay of Bengal Economic Community has been laid. Of major importance is the fact that the grouping could reach a decision to evolve a FTA based on negative list approach within five-six years of its formation. SAARC took nearly 18 years to adopt the highly publicised SAFTA Treaty last month.

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. BIMSTEC has identified six sectors for cooperation viz, trade and investment, technology, transport and communication, energy, tourism and fisheries. The combined size of BIMSTEC economies is $750 billion with a 1.3 bn population. The members are at different levels of economic and industrial development and share different natural resource endowments. Hence, the complementarities between them are substantial. Although the intra-regional trade turnover is small, it?s increasing faster than the overall trade of member countries even without any preferential arrangement suggesting the presence of complementarities. Full potential of intra-regional trade remains untapped due to tariff and non-tariff barriers, poor communication and transport links, lack of information about the supply capabilities, among other barriers.

The draft framework agreement for BIMSTEC FTA proposes a fast track of liberalisation between 2006 and 2011 and a normal track between 2007 and 2017, depending upon the level of development. Besides the liberalisation of trade in goods, the draft framework agreement also proposes liberalisation of trade in services and investment albeit on positive list basis. One may argue that India has now got a framework for trade liberalisation with the South Asian countries included in BIMSTEC namely Bangladesh, Sri Lanka, Nepal and Bhutan also under SAFTA besides bilateral arrangements with Sri Lanka, Bhutan and Nepal. Similarly, there is a framework for trade liberalisation with ASEAN members of BIMSTEC viz, Myanmar and Thailand, available under the ASEAN-India Framework Agreement for FTA signed at the Bali Summit in October 2003 besides a bilateral FTA with Thailand. Then what does BIMSTEC bring to India?

BIMSTEC FTA, like the India-ASEAN Agreement, is more comprehensive in scope covering trade in goods as well as services and investments than SAFTA that confines only to trade in goods. More than the comprehensive coverage, it?s the greater potential of BIMSTEC to unleash industrial restructuring and provide connectivity to the geographically contiguous region on India?s eastern border that provides its rationale. It has the potential to change the economic activity in northeast India. While the FTA?s formation provides much-needed cohesion to the grouping with a binding preferential trade agreement, the grouping?s potential will not be realised without due emphasis on the development of transport infrastructure and trade facilitation. Although India-Myanmar and Thailand are contiguous neighbours, poor physical connectivity doesn?t allow them to reap the benefits of this contiguity such as the movement of trade overland so that industrial restructuring could take place across the countries.

Road connectivity is poor due to missing links besides poor condition of roads. Railway links are also similarly poor and suffer from the additional problem of compatibility. Inefficient customs and clearance procedures at borders take days to clear a consignment besides adding to transaction costs. In this context, the recent launch of the India-Myanmar-Thailand Highway project is an important step in promoting overland connectivity between BIMSTEC countries. Restoring railway links between India-Myanmar and Thailand should be the next priority. Beyond the development of transport linkages, BIMSTEC needs to pay attention to trade facilitation. Simplification and harmonisation of customs and transit procedures across the region will facilitate the restructuring of industry across the region efficiently.

Energy cooperation presents another opportunity for fruitful regional cooperation. The region combines countries having large gas reserves beyond their short and medium-term domestic requirements, such as Myanmar and probably also Bangladesh, and those with immense untapped potential of hydropower, such as Nepal and Bhutan and net energy importing countries like India. India has been buying a lot of power from Bhutan and Nepal for many years. Indian companies like ONGC Videsh Ltd and GAIL have invested in oil and gas fields in Myanmar and are considering various options for pipelines to transport gas to India. A comprehensive framework for regional resource cooperation going beyond simple energy trade relations and linking the region in an energy community is desirable for fully exploiting the potential of energy cooperation in the region.

There are many other areas of fruitful cooperation also. Joint tourism packages linking various Buddhist pilgrimage sites in different BIMSTEC countries could be one such. Cooperation could also help strengthen their collective competitiveness in their third country trade. Asia has lagged behind other regions in regional cooperation. Groupings like BIMSTEC should now make up for lost time by quickly bringing policy coherence in the region. These sub-regional groupings should act like building blocks for evolving a broader Asian Economic Community that will give Asia the necessary leverage in its dealings with the United Europe and the Americas.

The author is Director General, Research and Information System for the Non-aligned and Other Developing Countries. These are his personal views. Email: nkumar@ris.org.in.