Scripting a new role for BBIN outside SAARC

Is it time Bhutan, Bangladesh, India and Nepal converted the loose-knit BBIN sub-regional grouping into a formal entity, outside SAARC (South-Asian Association of Regional Cooperation), to pave the way for increased trade and cross-investments among these countries?

The issue came up at a recent Delhi Policy Group conference on ‘Advancing BBIN sub-regional cooperation’.

Swarnim Wagle, member of the Nepalese National Planning Commission, emphasised that deeper trade and investment ties, and the creation of a regional production and exchange value chain were important to take the BBIN agenda ahead.

Manufacturing is a key factor that can pull in all other economic activities. Since India has a more broad-based and robust manufacturing sector — which Prime Minister Narendra Modi wants to push through the Make in India campaign — Wagle suggested the regional economies build on that.

This had been the recipe for the rise and success of ASEAN.

Despite increasing cooperation in energy, connectivity, etc, official trade in the region is more or less stagnant.

India-Bangladesh trade has been still for three years. Officially, India-Nepal trade is worth around $4 billion, but informal trade is estimated at $7 billion. And, unless the formal trade relationship deepens, investments will remain a dream.

According to Wagle, the high wall of sensitive list put up by Bangladesh (over 1,000 items) and Nepal (928 items) should be dismantled to give BBIN trade a chance. Nepalese businesses have already demanded this.

BBIN countries follow SAFTA (South-Asian Free Trade Agreement) for trade liberalisation. SAFTA is negotiated through a negative list mechanism. And, as with SAARC, it has not worked.

While India has reduced the negative list to 25 items for Afghanistan, Bangladesh, Nepal and Bhutan, these nations are yet to reciprocate.

Selim Raihan, Professor of Economics at Dhaka University and executive director of Bangladeshi think tank South Asian Network on Economic Modelling (SANEM), offered a simple solution: make BBIN a formal bloc. His point was that without WTO endorsement, Bangladesh and Nepal would not attempt tariff liberalisation. “If BBIN aims to work on tariff liberalisation, there is no alternative but to get an endorsement from the WTO under Article XXIV,” Raihan said.

BBIN, he said, should work for wider integration of goods and services trade, which SAARC failed to deliver. “Both Bangladesh and Nepal need to be convinced that in South Asia, BBIN can be the only ‘effective’ regional platform which can deliver,” Raihan said.

Indian economists working on trade issues appreciated Raihan’s views.

“Member countries of SAARC are allowed to form sub-regional groups such as BBIN. Geographical contiguity, access to sea and vast natural resources and demographic advantage are some of the USPs of BBIN, which if nurtured can yield sustained benefits,” said Prabir De. Coordinator of the ASEAN-India Centre at the Ministry of External Affairs-sponsored Research and Information System for Developing Countries (RIS), De said: “BBIN is a win-win for all” though as the largest partner, India will benefit the most. De also proposed Indian rupee-based trade in the region to address the trade deficit issue.

According to Ajitava Raychaudhuri, Professor of Economics at Jadavpur University, WTO allows contiguous states to leverage each other’s advantage to promote ‘frontier trade’.

It means India has to play the key role in stitching BBIN together. And, with that comes the concern of neighbours’ acceptance.

BBIN, Raychaudhuri said, should promote investments which will generate more jobs in the participating economies, leading to a multiplier effect that will act as an incentive to prune the sensitive list.

Amid all this, there is one key factor: China. “One does not know what counter-strategy China could play to keep such an agreement less effective,” said Raychaudhuri.

COMMENT NOW