September 15, 2017 21:42:17

http://thefinancialexpress.com.bd/views/kunming-initiative-and-sub-regional-free-trade-1505490137

Kunming Initiative and sub-regional free trade

M S Siddiqui |

'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 Multi-sectorial Technical and Economic Cooperation (BIMSTEC)
considering the regional geo-political factors.

The writer is a Legal Economist.

mssiddiqui2035@gmail.com or shah@banglachemical.com