BCIM and BIMSTEC: Two Competing Initiatives for Northeast India?

20 May 2014

http://www.ipcs.org/article/india/bcim-and-bimstec-two-competing-initiatives-for-northeast-india-4454.html

Leonora Juergens

Research Intern, IPCS 

Email: leonora.juergens@gmail.com

In June 2014, the second meeting of the Bangladesh-China-India-Myanmar (BCIM) forum for economic cooperation will be held in Dhaka, Bangladesh. The idea of a BCIM economic corridor was primarily initiated by the 'Kunming Initiative' to establish bilateral trade and investment along the old Southern Silk Road, linking the Bay of Bengal with India's Northeastern Region (NER), Bangladesh and Myanmar to Southwest China through the deeper integration of its constituent economies.

Likewise, the Bay of Bengal Initiative for Multi-Sectoral and Technical Cooperation (BIMSTEC) aims to build a sub-regional economic bloc as a part of India’s Look East Policy (LEP), linking the NER to Myanmar, Bangladesh, Nepal, Bhutan, Thailand and Sri Lanka. Economic cooperation in the geographically contiguous sub-region should have positive welfare implications particularly for the NER's economies through expanded legal trade, infrastructural connectivity and greater people-to-people contact.

However, with BIMSTEC's slow performance on the inconclusive Free Trade Agreement (FTA), New Delhi seems to attach increasing importance to the development of the BCIM corridor and has re-emphasised its readiness for closer economic cooperation with Beijing at the sixth India-China Strategic Dialogue in April 2014. This indicates a shift in India's foreign policy agenda away from the NER towards Kolkata and the Bay of Bengal as a gateway to Southeast Asia.

BCIM and BIMSTEC: Two Competitors in NER’s Development?

Once the BCIM corridor is established, it will combine India, China and the ASEAN Free Trade Area, comprising 7.3 per cent of the global GDP, thus granting India significant economic outreach to China through easy market access along its Northeastern borders. An important aspect of the corridor in this regard was the 3,000-km 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 NER to Myanmar and the Yunnan Province – and thereby to greater economic development. However a closer look at the geographical map shows that except for Manipur and Tripura, the corridor largely bypasses the NER, thus pushing its importance as a strategic centre for sub-regional development to the periphery. Instead, Yunnan as the most developed region in the cluster due to Chinese investments in Myanmar and Bangladesh, has a strong economic and political influence in the sub-region, and has moved to the fore of the BCIM.

India's Sinophobia prevents it from taking a proactive stance in a multilateral BCIM-FTA. China's claim on Arunachal Pradesh and its support of insurgency movements through drug trafficking and the supply of small arms are seen as critical in this regard. On the other hand, China's interest in the BCIM-FTA serves as an incentive to solve its border issues with India and can be utilised as a stabilising force. Tripura and Manipur for example would welcome Chinese investments in their rubber- and bamboo-based industries, while Assam has continuously made a strong plea for the re-opening of the Stilwell Road to Kunming.

Alternatively, India under BIMSTEC and the Kaladan Project for Multi Modal Transport has already invested a great deal in infrastructural connectivity and border trade with Myanmar and Bangladesh. When compared in terms of their economies (for example, their consumption and trading patterns, agricultural and industrial production, GDP) and geographical proximity, the NER shares greater structural similarities with both countries than China’s Yunnan province. This in turn can provide closer intra-industry trade and technology transfer, as well as the development of trade complementarities in the sub-region, leading to an overall economic growth in the NER’s economy. Moreover, with the completion of the Trilateral Highway between India, Myanmar and Thailand under BIMSTEC by 2016 and the Asian Highway Network, trade under the BIMSTEC-FTA is projected to increases by 5 per cent, which encourages a more liberalised trade. The establishment of a permanent secretariat in Dhaka in March 2014 also proves the significance of the BIMSTEC-FTA in the Indian-ASEAN Free Trade Area and the NER's economic development. 

Which Initiative is Better Suited for the NER's Development?

In order to counter-balance China's economic stronghold in the BCIM and in view of the greater economic gains outlined above, New Delhi should prioritise its stand in the BIMSTEC-FTA. However, a major bottleneck in the existing structure of the BIMSTEC is the NER's limited decision-making power. Consequently, India’s politico-economic approach to the NER must be re-thought and re-focused.

First, before the NER can serve as a hub of regional commerce, a stronger domestic NER connect with the rest of the country is essential, so that the NER can function as a major driver in its own development process. Second, similar to the economic structure of China’s Yunnan Province, considerable economic autonomy must be transferred from the centre to the state governments to transform the NER into an active regional body of India's foreign and domestic policy agenda. Only then are sufficient sub-regional cooperation and the strengthening of border trade between the NER and its neighbours possible.

Regarding the NER's increasing regional neglect in view of New Delhi's focus on the BCIM, a convergence of both - the BCIM and BIMSTEC - could also be an option to keep the NER in the LEP’s loop. However, unless the BIMSTEC and the BCIM develop a deeper sense of regionalism and move beyond their geo-political 'linkage syndrome', this is most unlikely.