Regional integration in the Bay of Bengal: In search of a new agenda

Academics, policymakers and other stakeholders in the Bay of Bengal region and beyond agree on the need for greater integration in this region. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), founded in 1997, offers a platform to carry the regional integration agenda forward. However, the progress in the integration process in the Bay of Bengal region has remained slow. Also, achievements, in terms of trade, connectivity and cooperation, have been little and segmented.

In the context of an interdependent and interconnected world, the national economic and security priorities of the countries in the Bay of Bengal region are strongly connected to collaboration across boundaries. Yet, the question remains, given the record of slow progress, whether there is any prospect of deeper integration in the Bay of Bengal region.

While the importance of trade and investment integration—through trade in goods and services, removal of tariff and non-tariff restrictions and promotion of a regional investment and trade nexus—is critical, deeper regional integration in the Bay of Bengal needs favourable political economy factors.

The political economy perspective shows how various actors influence national and regional decision-making contexts, as well as the impacts their actions (or lack of actions) have on the integration process. The interplays of different actors shape the political economy perspective. In this context, the role of official institutions (at the regional level and in respective countries) entrusted to carry out the regional integration process is vital.

As a result, the functioning of the BIMSTEC Secretariat and relevant ministries in member countries is critical. Furthermore, the integration process is influenced by the roles of the private sector, private sector associations, civil society organisations and media. The status of regional connectivity and regional trade facilitation in BIMSTEC countries affects trade and investment integration.

Finally, the success of the regional integration initiative in the BIMSTEC region will largely depend on how the political elites in BIMSTEC countries see this integration process, and whether there is a general agreement among them to carry the integration agenda forward. The experiences so far, however, suggest that there has not been any strong momentum of the aforementioned political economy factors in the BIMSTEC region to deepen the integration process.

Now the question is, given the lacklustre progress, do we need any major overhauling in the integration initiatives in the Bay of Bengal region, and therefore, do we need any new architecture of regional integration? In my view, the answer is yes.

The prospects of trade and investment integration among the BIMSTEC countries are well documented in various empirical literature. Intra-regional trade can go up by a few times if proper trade liberalisation and facilitation measures are undertaken. At the same time, intra-regional investment can be enhanced through effective operationalisation of the special economic zones in the countries of this region to attract intra- and extra-regional investments. The prospects of larger integration with the regional value chain (RVC) and the global value chain (GVC) can be enhanced if countries can use the regional integration mechanism effectively.

To enhance the trade and investment nexus in the BIMSTEC region, the Free Trade Area (FTA) negotiation needs to be finalised and efforts should be made for a comprehensive economic partnership agreement. There are 14 areas of cooperation in the BIMSTEC agreement and they need to be consolidated, focused, interconnected, pragmatic and operationalised. The BIMSTEC comprehensive economic partnership has to take into account the contexts and developments in the ASEAN integration process and also the Regional Comprehensive Partnership Agreement (RCEP). BIMSTEC integration should go beyond the seven-member countries (Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand) and include other economically advanced countries like Singapore, Indonesia and Malaysia.

The China factor is critical in the Bay of Bengal integration process. This has both economic and political dimensions. While India has reservations about China due to its bilateral political relations, all BIMSTEC countries, in reality, have China as a major trading partner and a source of foreign direct investment (FDI). Therefore, there is a need for reconciliation of the China factor in the Bay of Bengal integration process.

Despite the fact that there are diverse interests among the BIMSTEC countries, to make the BIMSTEC process effective, as the largest country in this region, India has a compelling justification to put greater focus on regional connectivity and relations with Southeast Asia. Also, small BIMSTEC countries should see this cooperation as an opportunity in raising their capabilities to enjoy the benefits of integrating with large markets in India and Southeast Asia. There is a need for a range of operational and substantive reforms to enhance the regional movements of goods, services and people, through prioritising seamless physical connectivity and high-quality infrastructure.

Efforts to overhaul the integration process in the Bay of Bengal region requires normative dialogues about the desirable and substantive form of regional architecture. For BIMSTEC to thrive, India, as the most influential country in the region, would have to take the lead, spend resources and take proactive measures to make the BIMSTEC Secretariat the leading institution of the Bay of Bengal. All members of BIMSTEC have to provide the Secretariat with sufficient resources and undertake reforms to improve its capabilities.

Finally, while we talk about the political commitment for regional integration, we should keep in mind that political commitment is not strongly exogenous. It is also dependent on certain factors like domestic politics, bilateral political relations between countries, the country's overall development strategy, and external factors beyond this region, primarily geo-political ones. We often blame bureaucrats for the slow progress in regional integration. However, it is the political elite that finally decides. Unless clear messages and signals are there from the political elite, bureaucrats can hardly make any progress. The lack of effort for integration in the BIMSTEC region is not primarily an economic or bureaucratic problem; it is primarily a political economy problem. There is a need for agreement among the elite—both political and economic—at the regional level. While the economic elite feel the necessity of integration, the political elite are divided. Regular consultations, people-to-people connectivity, interactions among political and economic elites, and promotion of political liberalism can help to reach a "regional political agreement" for a successful Bay of Bengal integration.

Dr Selim Raihan is Professor, Department of Economics, University of Dhaka, Bangladesh, and Executive Director, South Asian Network on Economic Modeling (SANEM). Email: selim.raihan@gmail.com.