Written by Surupa Gupta.
Prime Minister Modi’s two foreign policy initiatives – “Act East” and “Neighbourhood First” – have received plenty of attention. “Act East” – a policy initiative that emerged as “Look East” under Narasimha Rao in the 1990s – seeks to develop India’s ties to members of the Association of Southeast Asian Nations (ASEAN) and the extended neighbourhood in the Asia-Pacific region. “Neighbourhood First”, on the other hand, is designed to bring the focus back on South Asia and has its origin in the South Asian Association for Regional Cooperation (SAARC). One hears far less about the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) – a key effort at integration and cooperation that will likely serve as a link between Act East and Neighbourhood First. Analysing BIMSTEC’s prospects and challenges not only facilitates our understanding of the initiative but can tell us quite a bit about the challenges facing the other two.
After making an overture to Pakistan immediately after becoming Prime Minister, Modi concluded that an attempt at regional integration in South Asia would work only if Pakistan was not involved.
Formed in 1997, BIMSTEC is an intergovernmental group that has sought to enhance cooperation between South and Southeast Asia and more particularly, among the states around the Bay of Bengal region. Made up of Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand, BIMSTEC is home to 1.5 billion people and constitutes a $2.7 trillion economy. The region has experienced an average growth rate of around 6.5 percent during the past five years. While BIMSTEC was formed in 1997, for a long time it existed as one more item in the alphabet soup of regional integration efforts in Asia. In recent years, a confluence of a number of factors have brought renewed interest in the group.
From a strategic perspective, two factors have been salient. The first is the Indian government’s decision to pursue regional integration in South Asia and the realisation that at this stage, such an effort is likely to bear fruits only if the complicating factors around India-Pakistan relations are kept outside of that effort. After making an overture to Pakistan immediately after becoming Prime Minister, Modi concluded that an attempt at regional integration in South Asia would work only if Pakistan was not involved. That meant that any further effort at integration through SAARC was unlikely to yield results since Pakistan is a member of that group. BIMSTEC was a tailor-made alternative: it provided a ready platform for encouraging integration in South Asia. To emphasise the point and the government’s intent, Modi invited all BIMSTEC heads of state for a meeting during the BRICS summit in Goa in October 2016.
Secondly, BIMSTEC also offers an important platform for strengthening ties with Southeast Asian states as a way for India to respond to China’s growing influence in the region. Here, the Indian government’s strategic focus overlapped with that of the United States’ pivot to Asia during the Obama years. The US approach to this sub-region under the new administration remains unclear. Bangladesh’s interest in sub-regional integration, particularly in pushing cooperation within the Bangladesh, Bhutan, India and Nepal (BBIN) group has also eased some of the challenges that faced BIMSTEC and therefore, Act East and Neighbourhood First.
From the point of view of enabling economic integration, BIMSTEC’s potential role is significant; without creating physical and regulatory connectivity within this sub-region, Act East and Neighbourhood First policies will remain mere ideas. South Asia remains one of the least integrated regions in the world.
The Asian Development Bank pointed out in a 2013 study that while trade and cross-border investment between South and Southeast Asia have gone up in the last couple of decades, the levels still remain low. Tariffs have come down in both regions but non-trade barriers remain high and there are significant policy issues that constrain trade and cross border investment. South Asia, in particular, has underdeveloped cross-border supply chains and will likely gain from linkages with already established supply chains in Southeast Asia.
Further, in view of the expectation that a growing Asian middle class is likely to be one of the major drivers of growth in the coming decades, focusing energy on such integration can boost growth in both regions. Last but not least, cooperation efforts through BBIN, BIMSTEC and Act East have an intended domestic beneficiary – without developing these ties, the prospect of development of the north-eastern states in India remain dim. BIMSTEC’s members are natural trade partners for these states and their historical ties were severed by both the colonial and post-colonial politics in the region.
Despite prospects for cooperation and growth, levels of trade and cross-border investment in the BIMSTEC region remain low. Bilateral relations between countries within the region remain fraught. India’s alleged support for the Madhesi protest in Nepal in 2015 and the subsequent blockade of goods coming through that part of India-Nepal border soured relations between the two. More recently, the Rohingya crisis escalated tension in the region, particularly between Bangladesh and Myanmar. The security establishment in India has consistently showed concern about the prospects of any cooperation that involves Northeast India. One of the Indian government’s goals is to create a free trade area within BIMSTEC. At the same time, significant challenges remain, for example, in deepening bilateral trade integration between India and Thailand, the two largest economies in the sub-region.
Given the lack of progress as well as inherent political and economic challenges, why should we pay attention to the sub-region? First, as argued earlier, cooperation within BIMSTEC should be seen as a stepping stone to further integration within and between South and Southeast Asia. In view of China’s growing influence through the Belt and Road Initiative, strengthening both strategic and economic ties with Southeast Asia has emerged as a priority for India and others in the region.
Second, the Indian government’s words and actions have emphasised the importance of BIMSTEC. Not only did it host the 2016 meeting in Goa but in recent months, Sushma Swaraj, the Minister for External Affairs has emphasised BIMSTEC’s importance by outlining its possible role in fulfilling India’s key foreign policy priorities. Organisationally, earlier in 2017, the ministry assigned responsibility for BIMSTEC to the joint secretary who had already been in charge of SAARC issues.
Third, the Bangladesh government provided the venue to set up a secretariat for BIMSTEC, thereby signalling its commitment to the group. Nepal showed its commitment by hosting a ministerial meeting in Kathmandu in 2017. Fourth, the ratification of the Trade Facilitation Agreement (TFA) by most BIMSTEC members (the only exception is Bhutan which is not a member of the World Trade Organisation) will likely address several infrastructural and logistical and other non-tariff barriers to trade in the region. The TFA was negotiated by the members of the WTO in 2013 and came into effect in 2017.
Finally, connectivity projects are making progress, albeit slowly. Recently, India made additional commitments to complete the Trilateral Highway in Myanmar, necessary for creating an economic corridor through the sub-region. For the BIMSTEC group to yield concrete results, this momentum needs to be sustained.
Surupa Gupta is Associate Professor of Political Science and International Affairs at the University of Mary Washington where she teaches international political economy and courses on South Asian and Indian politics. She has a PhD in International Relations from the University of Southern California, Los Angeles, CA. Her research focuses on: Indian foreign economic policy; India’s role in global governance in economic issues; politics of trade liberalisation and agricultural policy reform in India; and comparative study of the process of trade policymaking in Brazil and India. Image credit: Indian Ministry of External Affairs/Flickr.