Sub-Regional Cooperation in South Asia: A New Lease of Life?

23 Feb, 2015    ·   4839

Saurabh Kaushik looks at recent trends to gauge the momentum towards deepening economic engagement

Saurabh Kaushik
Saurabh Kaushik
Research Intern

During the 18th SAARC Summit held in November 2014, Prime Minister Modi remarked that regional integration in South Asia would go ahead “through SAARC or outside it, among all of us or some of us.” It is evident that SAARC as a regional arrangement has been unable to act as a ‘consensus-building’ forum, largely due to the intractable nature of problems between India and Pakistan. With Modi indicating that an alternative could be forged by taking the initiative at the sub-regional level, it is imperative to analyse the reasons for the lack of progress in this regard. Also, what do the recent trends indicate? Is sub-regional cooperation gaining momentum in South Asia and does it hold promise?

It is obvious that bilateral relationships act both as the bedrock as well as a roadblock in achieving regional cooperation. The effort to engage simultaneously in addressing bilateral irritants and bringing about deeper economic cooperation has the potential to pave the way for sub-regional cooperation in South Asia.

There are multiple sub-regional forums in the region such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), South Asia Sub-regional Economic Cooperation (SASEC) and India Bangladesh Myanmar Sub-Regional Cooperation (IBM-SRC). Their failure in achieving any meaningful outcome or significant progress stems from a combination of domestic political, foreign policy, and economic factors.

Being the fulcrum of the sub-region and its window to Southeast Asia, IBM countries, i.e. India, Bangladesh and Myanmar occupy primary importance in the efforts to integrate the region. Therefore, it is important to throw some light on India-Bangladesh and Bangladesh-Myanmar bilateral relations and their changing dynamics in order to understand which way sub-regional cooperation in South Asia is headed.

The Myanmar-Bangladesh-India gas pipeline project proposed after the discovery of the Shwe gas fields in Myanmar’s Rakhine state failed to take off. This was because Bangladesh wanted India to reduce the huge bilateral trade deficit, allow transit to Nepal and Bhutan, and facilitate the sale of electricity from these countries to Bangladesh through Indian territory in exchange for providing transit for the pipeline. Domestic compulsions in both India and Bangladesh with regard to the settlement of the Teesta Water Sharing Agreement and Land Boundary Agreement (LBA) have further delayed their economic integration.

However, with a strong leadership at the helm in India and its resolve to reenergise the ‘Look East’ policy, things are starting to look up. PM Modi assured his Bangladeshi counterpart of a speedy resolution to LBA and Teesta waters dispute on the sidelines of the SAARC Summit. In fact, the bill to give effect to the India-Bangladesh Land Boundary Agreement (LBA) was approved by a parliamentary panel in December 2014, not even a month after the Summit. Among other things, the positive reception of the India-Bangladesh Maritime Arbitration Award announced in July 2014 on both sides also signals a reinvigorated push in the right direction.

In the case of the Bangladesh-Myanmar bilateral relationship, the Rohingya issue has been a significant challenge in the context of assuaging domestic political sentiments and has a direct bearing on foreign policy decisions. Yet, it would not be unwise to suggest that given the growing importance of the Bay of Bengal and the Indo-Pacific, both countries are well poised to intensify their cooperation. In fact, delinking the Rohingya issue and IBM-SRC to allow progress to be made on the latter could act as an incentive to resolve the former.  

There are also several economic and technical factors that have impeded sub-regional economic integration. Apart from tariffs, non-tariff barriers to trade such as export subsidies, prohibitions, quotas, import licensing, and custom procedures act as obstacles to intra-regional trade. Intra-regional trade in South Asia is a mere 5 per cent as compared to 58 per cent in the EU, 52 per cent in the NAFTA region, and 26 per cent in the ASEAN zone. The silver lining, however, is that India is playing a proactive role in revising its tariff and non-tariff regime vis-à-visits neighbours, especially Bangladesh, which should inspire some optimism.

Inadequate infrastructure and lack of border trade facilities on the ground are other major impediments that affect all countries in the region. The importance of these can be gauged by the fact that if the existing border infrastructure between Bangladesh and India’s Northeast is upgraded, trade volume can potentially go up by five to six times the current level.

Needless to say, there are serious roadblocks to enhanced cooperation, both political as well as economic. But it is worth considering some recent developments apart from those mentioned above. A total of 73 projects, including five in 2014, have been commissioned by the ADB, amounting to US$ 6.56 billion under SASEC.  There have already been meetings between Power and Transport Secretaries of Bangladesh, Bhutan, India and Nepal (BBIN) on Hydropower and Regional Road Transport Connectivity this year. A series of similar dialogues will be set in motion through the course of the year. There is good reason to be hopeful. Sub-regional cooperation may finally have gotten a new lease of life, and we will be witness to its promise.