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Experts Friday emphasised establishing increased connectivity and regional value chain by resolving high tariff issues among the countries for navigating a changing global economic order stemming from some mega-events of the day.
They think these two mechanisms can help in deepening the Bay of Bengal cooperation with augmented trade relations, particularly among the BIMSTEC member countries.
In substantiating their recommendations for looking east to raise intra-regional trade and communications they cited incidents like Brexit, US-China trade war, and the covid-19 pandemic that are fuelling the latest geopolitical and economic changes.
They observed the pandemic generated the need for deepening the regional connectivity as it disrupted all kinds of cross-border activities -- trade, transport, tourism, investment, as well as people-to-people connectivity.
Such great disruptions are upending normal global order and leaving an extremely negative impact on life and business in the Bay of Bengal region.
The observations came in a panel discussion titled 'Global Trends and Bay of Bengal Integration' held as part of the 'Bay of Bengal Regional Trade and Connectivity Capacity Building Program' held in Dhaka.
South Asian Network on Economic Modelling (SANEM), through the USAID and US Department of State-funded Cross-Border Infrastructure and Connectivity project, organised the panel discussion online. Government and non-government officials from Bangladesh, Bhutan, India, Nepal, Sri Lanka and Thailand, who work on trade and connectivity issues, participated in discussion.
SANEM Executive Director Dr Selim Raihan moderated the two-day session while Centre for Policy Research (CPR-India) Senior Visiting Fellow Dr Sanjay Kathuria, World Bank Group Senior Trade Economist Dr Nihal Pitigala, Pathfinder Foundation Director (Centre for Indo-Lanka Initiatives) Sumith Nakandala, Senior Fellow at Pathfinder Foundation Dr Indrajit Coomaraswamy, Centre for Policy Dialogue (CPD) Distinguished Fellow Dr Mustafizur Rahman, Chief Economic Advisor of UNDP Regional Bureau for Asia and the Pacific (RBAP) Swarnim Waglé, and Executive Director of ASEAN Studies Centre at Chulalongkorn University in Thailand Dr Suthiphand Chirathivat spoke as panellists at the event.
Dr Arvind Panagariya, professor of economics at Columbia University, was the keynote speaker on the inaugural day.
In a presentation titled 'Regional Cooperation in the BIMSTEC Region: Covid-19 and Beyond', Dr Kathiria highlighted the need for deeper economic cooperation in the region for economic context, not strategic, expressing the belief that hard and soft measures can unlock significant potentials of the member-countries, particularly landlocked Nepal, Bhutan and India's northeast.
"Deeper economic exchange in the region makes sense for each country involved," he said.
The intra-regional trade among BIMSTE countries rose steeply to about US$ 45.9 billion in 2019 from $4.8 billion in 2000.
"That trend shows how high the trade potential among the BIMSTEC countries is and the global trade shifts ignited by Brexit, US-China trade war, Australia-China trade war, covid-19 pandemic, and India's attempt of decoupling from China etc will further enable the BIMSTEC countries for regional cooperation," he told his audience.
Referring to an initiative to sign a free-trade agreement (FTA) among BIMSTEC nations, he said as the BIMSTEC is not a strategic agreement rather an economic agreement, FTA is not necessarily crucial for improving the regional value chain rather better connectivity can greatly boost trade in the region.
The fellow of CPR Indian also suggested removing tariff barriers in the South Asian region and improving road connectivity within the eastern part of the BIMSTEC with its western part.
He also noted that sectors like pharmaceuticals, automobiles, plastic, garments, rubber and digitally-enabled services like health and education can be the areas of regional cooperation.
The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) was established in 1997 and is consisted of seven countries-Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand.
The CPD distinguished fellow, Mr Rahman, said trade connectivity is the most important condition for value-chain development, but, at the same time, investment connectivity, transport connectivity, logistics connectivity, and people-to-people connectivity are also required.
Mentioning that many of these connectivity linkages were disrupted by the pandemic, he said goods import in BIMSTEC region decreased 19 per cent from $79 billion in 2019 to $64 billion in 2020 while export also dropped by around 12 per cent in the same period.
In terms of services, export declined by 13 per cent while import dropped 21 per cent, while regarding tourist arrivals it came down to 13.7 million in 2020 from 60.9 million in 2019-in a 77.5-per cent decline.
However, expressing slight disagreement with the previous speaker, Mr Rahman said it should be found out whether much closer integrated FTA or comprehensive economic partnership in the Bay of Bengal region can further accelerate the trade connectivity or not.
"From my point of view, the issue of FTA becomes very important if the regional trade connectivity is discussed from the perspective of the pandemic," he said, adding: a massive disruption was observed to global value chain during the pandemic which taught the importance of more inclusive regional trade connectivity to avoid that type of shock in the future.
Dr Arvind Panagariya in his keynote speech on the inaugural day, laid importance on openness in trade from the point of competitive advantage as many developed countries in Asia succeeded by opening up the market.
He argued that openness or liberalization develops the capacity of the country to compete globally through shifting labour-intensive industries to capital-intensive ones helping keep the price level of products stable on the domestic market.
Citing examples of China, Hong Kong, South Korea and Vietnam, the keynote speaker also considered the bilateral trade deficit between the two regional countries, not a problem when the overall trade balance shows surplus.
He also stressed the need for convergence between trade policy and industrial policy along with social safety-net programmes to ensure social security.
The Indian economist said openness creates scope for trade into a 'much larger export market' shifting from labour-intensive industry or service to capital-intensive industry.