The Hindu : Call for setting up of Bay of Bengal economic, energy community

Online edition of India's National Newspaper
Sunday, Feb 22, 2004

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National

Call for setting up of Bay of Bengal economic, energy community

By Sushma Ramachandran

NEW DELHI, FEB. 21. An economic think-tank has urged the regional grouping BIMSTEC (Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Co-operation) to go beyond the framework of a free trade agreement and create a Bay of Bengal Economic and Energy community. The BIMSTEC has recently included Nepal and Bhutan as members.

It has argued that the grouping has a rich potential for regional economic integration owing to complementarity of economies and resources. While establishment of a free trade area is described as a good beginning, it is felt the grouping should set a goal to form a Bay of Bengal Economic Community by 2020. It notes that Bangladesh and Myanmar have large natural gas reserves while Nepal and Bhutan have hydropower resources. With net energy importers like India and Sri Lanka available to utilise surplus gas and hydel power, it is felt the BIMSTEC can ultimately form a Bay of Bengal Energy community. It may be recalled that the European Union began as a Coal and Steel community and only later metamorphosed into a comprehensive economic grouping.

Earlier this month, the first step towards a free trade area in the region began with the conclusion of a framework agreement on an FTA by trade ministers of the member-countries. The think-tank, Research and Information Systems (RIS), attached to the External Affairs Ministry has suggested, however, that the implementation of FTA needed to be expedited and complemented by trade and investment facilitation measures, development of transport and communication links. This will lead to deepening integration with formation of a Customs Union and eventually to an Economic Community. "The grouping should set its goal to form a Bay of Bengal Economic Community by 2020", says a report on the long-term prospects for the BIMSTEC.

While making these proposals, the RIS points out that the combined size of BIMSTEC member economies is $ 750 billion with a population of 1.3 billion. Although the intra-regional trade turnover is small, it is increasing faster than the overall trade of the member-countries. The full potential of intra-regional trade remains untapped, the report says because of tariff and non-tariff barriers, poor communication and transport links and lack of information about supply capabilities. Similarly the intra-regional investment is described as "negligible" despite tremendous potential that exists for market seeking as well as efficiency seeking investments within the region. Regional economic integration, it is felt, may help in exploiting this hidden potential of intra-regional cooperation for mutual benefit.

On energy security, the report notes that the BIMSTEC countries are endowed with vast untapped resources of energy but emphasises that development, distribution and efficient utilisation of these resources will require cooperation and trade among the countries of the region. "The prime objective of energy cooperation among the BIMSTEC nations would be to ensure energy security of member countries", it says.

The RIS argues that the energy demand-supply sectors in Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan offer a potential for regional resource cooperation, which can go beyond export-import trade relations and link the region in a Bay of Bengal Energy Community and thus contribute to the process of regional integration. It says a regional institutional mechanism needs to be created for devising the reform and restructuring of the energy sector in the member-countries that would be required to make them more competitive and efficient to integrate into a seamless market.

The BIMSTEC regional grouping was formed in 1997 with the decision to constitute an inter-governmental group to prepare a concept paper on approach towards a preferential trading arrangement leading to free trade areas. The BIMSTEC has identified six sectors for cooperation, including trade and investment, technology, transport and communication, energy, tourism and fisheries.

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