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The Financial Express

Kunming Initiative and sub-regional free trade

| Updated: October 24, 2017 15:46:55


Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Kunming Initiative and sub-regional free trade

'Kunming Initiative', a part of Belt and Road Initiative, was originally developed by Chinese scholars. It is a modern version of the Silk Road. The 'Kunming Initiative' came under focus during the first meeting of Bangladesh-China-India-Myanmar (BCIM) Forum for Regional Cooperation held in 1999. It will connect India's Northeast, Bangladesh, Myanmar, and the Chinese province of Yunnan through a network of roads, railways, waterways, and airways under a proper regulatory framework.

 

 

The current focus of BCIM talks is on an inter-regional road network. This makes sense as roads are still the cheapest route of trade. If the BCIM Economic Corridor is implemented, economies of the region will experience a robust growth. The corridor of about 3,000 km was experimented with a car rally in February 2013 via Kolkata, Dhaka, Imphal and Mandalay to Kunming, which initially strengthened the notion that the BCIM would subsequently open up the north-eastern region (NER) of India to Myanmar and the Yunnan Province of China and thereby facilitate greater economic development.

 

 

This linking of all four countries by road has further strengthened the notion that this corridor would subsequently open the whole of the NER of India to Southeast Asia and China and turn it into a significant channel of trade. It also strives to find ways to promote economic cooperation based on mutual complementarities among the BCIM countries by making best use of their comparative advantages in terms of the abundant natural, human and other resources.

 

 

The BCIM Corridor intends to contribute to socioeconomic development in the region by developing (1) connectivity and infrastructure (road, railways, waterways, and airways), (2) energy resources, (3) agriculture and (4) trade and investment.

 

 

CONNECTIVITY AND INFRASTRUCTURE: The Corridor aims to connect NER of India, Bangladesh, Myanmar, and the Chinese province of Yunnan (which is relatively underdeveloped than other provinces) through a network of roads, railways, waterways, and airways. This will facilitate growth and economic development.

 

 

ENERGY RESOURCES: There are abundant resources in both Yunnan and India's North-East and the initiative has proposed for their conservation and development and setting up a number of hydropower plants to generate low-cost electricity for all members.

 

 

AGRICULTURE: Cooperation will generate more production and help establish agro-based products for regional market and export to other regions.

 

 

TRADE AND INVESTMENT: Promoting trade and investment in the region through trade facilitation measures and greater participation of the public and private sectors, is one of the stated objectives. The BCIM Corridor presents South Asia with an opportunity to secure commercial and developmental gains.

 

 

The linkages of transport, energy, and telecommunications networks will enable the region to emerge as a flourishing economic belt that will promote social development of communities along the corridor. Further, the BCIM region has a geographical advantage of connecting South, Southeast and East Asia. This sub-region is viewed as having the potential of promoting economic integration of Asia.

 

 

BCIM cooperation is expected to revive the centuries-old Silk Road running from Chittagong to Yunnan through Myanmar, a way that will help facilitate transit and thus improve trade among the countries by utilising ports of Bangladesh as well as the proposed deep seaport. This will induce further trade and investment in the region and will be particularly helpful for India in communicating with its eight provinces, i.e., Arunachal, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura and Sikkim.

The idea to set up a Pan Asia Stock Exchange will help organise a joint committee to investigate how to develop stocks, bonds, gold and other financial derivative instruments to be used for construction of BCIM and other Asian Economic Corridors (like railway, highway, river, and others) for regional countries, building of Sonadia Port, Chittagong Port, Kyaukpyu Port and others, development of energy like electricity, natural gas and others and other infrastructural fields.

 

 

BCIM EC needs huge funds from both private and public sectors to support construction of infrastructural facilities like ports, railways, highways and areas like industrial park/free trade zone and many other projects related to BICM economic co-operation. It has promoted the concept of establishing a specialised regional stock exchange and has got the currency to serve as investment and trading platform. It could lead to China-South Asian investment cooperation in both public and private sectors, determine appropriate methods of financing and select currency denominations for projects undertaken under BICM and regional initiatives.

 

 

All these are to be supported through international financing mechanism for infrastructure connectivity possibly with cross-border investments by Chinese investors and other enterprises under PPP etc. It has been agreed upon by stakeholders to establish non-governmental financing mechanism to promote financial market for cooperation, support commercialised services for RMB settlement and RMB clearance cooperation, advance mutual participation by banks, insurance and stock exchanges, build joint transactional credit assessment system, create risk monitoring and controlling platform, a common regulatory framework, which will cover all kinds of financial markets, financial organisations, financial products, financial instruments and settlements of transactions.

 

It can provide closer intra-industry trade and technology transfer, as well as development of trade complementarities in the sub-region leading to an overall economic growth in the sub-region.

 

 

The North-East region of India has no communication links with the rest of the country and other parts of the world. BCIM can give the region an opportunity for such connectivity. Bangladesh will get access to the large Indian and Chinese markets and can also benefit from connectivity to China through Myanmar and become a commercial hub of South and South East Asia. Myanmar on its part can benefit from linkages with India and Bangladesh which will reduce its overdependence on China.

 

 

A study finds that upgrading of the 312-kilometre stretch of Stilwell Road, which connects Northeast India with Yunnan through northern Myanmar, could lower transportation costs between India and China by 30 per cent and promote already growing Sino-Indian trade through the BCIM Corridor.

 

 

Along with the economic factors, a strong cultural affinity, closer geographical proximity and huge informal cross border trade among the countries of the forum have triggered a strong optimism for formation of a regional trade bloc of BCIM countries. The forum has already agreed to extend support for setting up of pilot projects on BCIM Free Trade Zones and reached a consensus to support the governments of four countries under the framework of 'Governmental Land Ports Agreement' of UN-ESCAP.  This aims to build all the land ports under the BCIM Free Trade Zones including international land ports like Dhaka- Kamalapur Land Container Depot (Bangladesh), Kunming-Tengjun International Land Port (China), Kolkata-Durgapur International Land Port (India), Mandalay International Land Port (Myanmar) and others.

 

 

The corridor would also dovetail the China-ASEAN Free Trade Area, the India-ASEAN Free trade Area and the ASEAN Free trade Area turning them into the largest global free trade area. However, the Indian manufacturing industries are strongly against FTA with China. The industries always complain of dumping of Chinese products in India, and authorities have already imposed anti-dumping duties on these products.

 

 

China's Belt & Road policy focuses on connectivity in many dimensions including trade, infrastructure and telecommunication connectivity called the   "Information Silk Road". China hopes to sign 60 free trade agreements with countries along the new Silk Road. It currently has 12 free trade agreements in place.

 

 

Both India and China are interested in free trade agreement with Bangladesh but free trade is not our priority due to internal weakness in administration and tax structure. Bangladesh has agreed to and is in the process of implementing free trade under SAARC framework (SAFTA). But BCIM free trade may be the best choice for Bangladesh since both China and India, its biggest trade partners, are in the group and a better alternative to South Asia Free Trade Agreement (SAFTA) and Bay of Bengal Initiative for Mult-isectoral Technical and Economic Cooperation (BIMSTEC) considering the regional geo-political factors.

 

 

The writer is a Legal Economist.

 

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