Bimstec’s trade potential remains underutilised, FTA key to unlocking growth: Experts

The vast trade potential of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (Bimstec) countries remains largely underutilised, with intra-regional trade accounting for only 7% of their total trade, compared to 25% for the Association of Southeast Asian Nations (Asean), according to economists.

"One of the major barriers to trade and investment within Bimstec is the absence of a Free Trade Agreement [FTA]. Despite a framework being established in 2004, a comprehensive FTA has yet to materialise," said Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), as the keynote speaker at a dialogue held at Bimstec secretariat in the capital's Gulshan area today (12 March).

Bimstec and Sanem co-hosted the special event, titled "Regional Cooperation and Development: Curtain Raiser to the 6th Bimstec Summit," ahead of the summit, scheduled to take place in Thailand in April.

"Challenges to finalising an FTA include disputes over sensitive lists, non-tariff barriers, protectionist policies, and a reluctance to open up economies. These factors hinder economic integration and regional competitiveness," Raihan said, adding that resolving disputes and reducing non-tariff barriers are crucial to accelerate FTA negotiations. 

He also highlighted additional challenges, including political commitment deficits from member countries, limited institutionalisation of Bimstec, conflicts between member states (e.g. Bangladesh-Myanmar tensions), and resource constraints, including an underfunded secretariat and a shortage of skilled personnel.

The Sanem executive director further noted that $120 billion in annual investment is needed to bridge infrastructure gaps across Bimstec countries.

Ambassador Sumith Nakandala, former secretary general, Bimstec, said virtually from Sri Lanka, "Some international organisations are in existential threat. The survival of Bimstec will depend on how we will come together."

Emphasising a deepening of south-south cooperation, he said, "We need to finalise FTA and grid connectivity as per Bimstec's master plan. Let's realise our common dream centering on the Bay of Bengal."

In his welcome speech, Bimstec Secretary General Indra Mani Pandey said that there are currently no plans for an FTA for Bimstec.

"A framework is under review on this matter. Multiple parties are working on the issue. However, for an FTA to proceed, the member countries need to reach a consensus first," he said.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), stressed the importance of trade, transport and investment connectivity. 

"Beyond these, we must also address logistics, people-to-people connections and longer visa validity to maximise benefits," he said.

Referring to the motor vehicle agreement among Bangladesh, Bhutan, India and Nepal (BBIN), he said, "Though Bhutan declined to join the motor vehicle pact, Bangladesh, India and Nepal agreed to proceed with it. However, it has not been implemented yet."

Dr Zaidi Sattar, chairman of the Policy Research Institute (PRI), concluded the session by suggesting that Bimstec should promote trade openness and value chain integration in Asia. He also suggested that Bimstec should cooperate with Asean.  

Bimstec vs Asean

Bimstec comprises seven member countries: India, Bangladesh, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan. These nations collectively account for 21% of the world's population and hold significant economic potential.

The GDP of Asean, a 10-country organisation, is $3.8 trillion, with trade volume amounting to $4.5 trillion.

On the other hand, the GDP of Bimstec, a seven-country organisation, is $4.7 trillion, with a trade volume of $2.5 trillion.

This means there is potential to increase internal trade among the Bimstec countries, said experts at the event.

They emphasised collaborative solutions for regional resilience amid complex global challenges such as trade wars, cybersecurity threats, persistent poverty and economic disparity.  

To enhance regional trade and cooperation, they recommended boosting connectivity, promoting regional health cooperation, advancing climate action and enhancing people-to-people ties.

Among others, Sineenat Sermcheep, director of the Asean Studies Centre at Chulalongkorn University in Bangkok, Prabir De, a professor at the Centre for Maritime Economy and Connectivity (CMEC) at Research and Information System for Developing Countries (RIS) in New Delhi, M Masrur Reaz, chairman of Policy Exchange Bangladesh, Kazi Faisal Bin Seraj, country representative of Asia Foundation Bangladesh, also spoke at the event.