The Hindu : National : Toward better economic ties with neighbours

Online edition of India's National Newspaper
Wednesday, Jul 28, 2004

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National

Toward better economic ties with neighbours

By K. Venugopal

NEW DELHI, JULY 27 . In what will be his first visit overseas as Prime Minister, Manmohan Singh leaves New Delhi on Thursday for Bangkok to attend a summit that seeks to promote better economic cooperation among seven countries on the Bay of Bengal rim.

It was a trip that former Prime Minister Atal Bihari Vajpayee might have made as the summit was first scheduled for February this year. But the announcement of elections to the Lok Sabha that turned his into a caretaker role caused the summit to be postponed. Without a credible Indian participation, the summit would have had little meaning. India's gross domestic product is larger than those of the other six nations put together.

Known now by the rather inelegant acronym BIMST-EC, the regional grouping had started out seven years ago as BIST-EC at Thailand's initiative to foster better trade among three other contiguous countries around the Bay: Bangladesh, India and Sri Lanka. Myanmar, admitted to this grouping in 1997, provided the extra letter to the acronym. Nepal and Bhutan joined the membership early this year, but spared the acronym of further upheaval.

Yet this is only the first time that the leaders of the respective governments have got together, the earlier engagements being at the working level among trade Ministers and officials of the various countries. The involvement of the top leaders is expected to provide the impetus to regional trade that was missing till now.

Free trade

The prime objective of countries in this group is to have free trade among themselves, increase investments and tourism across their borders and to promote technical cooperation.

Thus far most of these countries have looked to the West for trade. Not without reason, as most countries in this grouping have the same kind of goods to export. For instance, Sri Lanka and India are both large exporters of tea and garments; Bangladesh and India compete as they sell jute, seafood and garments overseas.

Essentially, the range of goods is largely competitive rather than complementary, a condition that does not promote natural trade within the community. Indeed any suggestions or moves towards free trade or trade with low tariffs have met with resistance from domestic industry in each country.

The Indo-Sri Lanka free trade agreement that has been in operation for four years has set off considerable opposition amongst growers of tea and spices in southern India.

With the Indo-Thailand free trade agreement also kicking in on September 1 this year, the automobile industry is nervous at the prospect of competing with imports of automobile components and automobiles in knocked-down condition from Thailand. Ford Motor Company already imports its sports utility vehicle, Endeavour, from Thailand.

It is such resistance that the leaders of the region will factor in as they take the formal steps towards setting a time-table for lowering tariffs on trade within the grouping. Preliminary negotiations indicate that tariffs could be lowered for many items starting as early as 2006.

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