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BIMST-EC summit meeting : India-Thai free trade pact

	August 02, 2004

The two-day summit of the BIMST-EC in Bangkok has decided to rename this regional grouping to Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation. Attended by leaders of the member-countries from India, Bangladesh, Myanmar, Thailand, Nepal, Sri Lanka and Bhutan, the grouping agreed to set up a Joint Working Group on Counter-Terrorism. This is considered important because India has long been concerned about the safe haven afforded to extremist groups in such BIMST-EC member-States as Thailand, Myanmar and Bangladesh.

As a region so richly endowed with energy resources, it was agreed that these should be optimally utilized to meet the growing demands. India would host a ministerial conference in 2005 to provide an impetus to the joint efforts. To explore the vast potential for tourism, India would host a round table of Tourism Ministers and the Industry with the objective of doubling tourism within BIMST-EC in five years.

The summit was preceded by a one-day meeting of Foreign Ministers and senior officials on July 30.

The change of name of the grouping from BIMST-EC to Bay of Bengal Initiative is unlikely to be welcomed by Pakistan which was said to be keen to join it. Now it could never be able to join it because, as the Prime Minister, Dr. Manmohan Singh, who led the Indian delegation at the Bangkok meeting said, Pakistan “is not within the geographical definition of Bay of Bengal”. He denied that the move was aimed at isolating Pakistan, but Islamabad is likely to view the new nomenclature as aimed at preventing its entry into the grouping.

Leaders of BIMST-EC at their meeting on July 31 reminded themselves about their vast natural and human resources and how they must use them to raise their economic standards. The host of the meeting, Thai Prime Minister Thaksin Shinawatra reminded the other leaders of the grouping that aggregate economic performance of BIMST-EC has not been among the top ranks of the world and they had got used to life at the bottom. “We must look up to the top to find the track to reach there”, he said. He, however, warmly noted India’s economic growth and referred to the projection by Jeffrey Sachs in Fortune magazine that it would draw equal with the US economy by 2050.

Manmohan Singh said the member-nations needed to translate their inherent strengths to geographical contiguity into a community of prosperity and goodwill. Inter-connectivity – physical, economic and technological – was of prime importance, he said. While noting the progress made towards a framework agreement on free trade, he stressed the importance of the trilateral India-Myanmar-Thailand highway proposal and the Optical Fibre telecom link running alongside it. Dr. Singh said, “Our mutual confidence would be greatly enhanced if we were able to forge a common front against terrorism, gunrunning, narcotics trafficking which in varying degrees affect us all”.

The Sri Lankan President, Chandrika Kumaratunga, stressed that the BIMST-EC countries had the potential to do more and suggested the creation of an infrastructure development fund for the region to be managed by interested central banks on commercial terms. A facility to promote business travel was also required, she said.

It was the first summit of BIMST-EC, which was set up in 1997. The summit was actually due to take place in February, but was put off as former Prime Minister Vajpayee did not have dates for it. The BIMST-EC formula was evolved in Bangkok in December 1997 to bring member-countries on a common economic platform. It was actually set up in 1994 and known as BIST-EC. Its name was changed to BIMST when Myanmar joined it in 1997. Six BIMST-EC ministerial meetings have been held so far, including one in Delhi in July 2000 and trade ministers of member-countries have also met five times. During the ministerial meetings, six sectors had been identified for enhanced cooperation: Trade and investment, technology, transport and communication, energy, tourism and fisheries. A member-country was put in charge of each sector with India being declared as the “lead country” to oversee the cooperation in transport and communication ass well as tourism.

Trade within the region today is a small percentage of the countries’ overall trade. For instance, India’s trade with members of BIMST-EC in 2003 was $3.7 billion, barely four per cent of its overall trade. To push for an increase in the interaction, a ministerial meeting in February agreed to work towards a free trade agreement which would see countries lower tariffs on imports from allow members in a phased programme. In the case of an initial set of goods, India, Sri Lanka and Thailand would offer confessional tariffs to imports from the other four countries starting from April 2006, and to one another starting in April 2007.

The agreement was not limited to goods but would cover services and investment as well, said an official spokesman in New Delhi on July 28, ahead of Singh’s visit to Thailand. He said, the region had enormous hydropower and hydrocarbon resources that could be exploited for the common benefit. Myanmar and Bangladesh were both rich in natural gas. To provide better connectivity, discussions are under way on a trilateral highway project that would connect Thailand and India through Myanmar.



Indo-Thailand FTA

The Bangkok meeting marked the first foreign tour of Manmohan Singh after becoming Prime Minister, during which he also had separate talks with the leaders of the member-countries including the host, Thailand Prime Minister Thaksin Shinawatra. The two leaders also used the occasion to sign a Free Trade Agreement between the two countries.

In a major leap in bilateral economic relations, they finalized on July 30 the modalities for implementing the first phase of the Free Trade Agreement between the two countries from September this year. They will start tariff reduction under the pact on 82 agreed items in three years. Manmohan Singh and Shinawatra sorted out the thorny issues and worked out procedure about Rules of Origin, paving the way for the FTA’s implementation. Under the first phase of the FTA agreement, called the Early Harvest Scheme, tariffs would be reduced by 50 per cent of the existing rates on the 82 items in the first year. In the second year, it will reach 75 per cent. From 1 September, 2006, both countries will have duty-free regime on all these items. The second phase of the FTA will begin from then onwards and the two countries will have free trade regime by 2010. The FTA will facilitate cheaper imports of cordless phones, colour TVs, refrigerators and air conditioners besides automotive parts.

Manmohan Singh reached the agreement with Shinawatra less than 24 hours after startling observers by expressing the Government’s intention to take another look at the Free Trade Agreement with Thailand. The Commerce Minister, Kamal Nath announced ahead of the meeting between the two Prime Ministers that all apprehensions had been addressed. Manmohan Singh had said in Bangkok on July 29 soon after arrival that his Government would re-examine all the free trade and bilateral trade agreements entered into by the previous regime. The primary source of worry for India had been that Thailand should not become the staging point for exports from third countries. It had sprung from the fact that Thailand already has free trade agreements with China and Australia which might have enabled producers in either country to run their products through India at a confessional duty. With reduced duties, Japanese auto majors like Suzuki, Toyota and Honda with manufacturing hubs in Thailand, will put those with manufacturing bases in India under severe pressure. They could simply export the cars in knocked-down conditions to India and sell them cheap. Thailand has, however, assured India that it would not happen as it would endorse the rules of origin which means that only those goods which see a 40 per cent value addition in Thailand are eligible to use this route.



PM’s call for inclusion in ASEAN-plus-three

Manmohan Singh told newsmen on his arrival in Bangkok on July 29 that pushing forward regional cooperation with South East Asia was a continuation of the Congress Government’s “Look East” policy initiated in 1990-91. He said Thailand was part of ASEAN and India part of SAARC. Thailand can become a bridge between the ASEAN and SAARC countries.

Manmohan Singh, who suggested the creation of an Asian community, also demanded that India should be included in the ongoing dialogue ASEAN has been holding with some of the leading nations in Asia. Singh made the demand in an interview with a leading Thai daily, The Nation. ASEAN has been having summit-level meetings with China, Japan and South Korea, called the Asean-plus-three process since 1997 and India wants to be part of this process. India held summit meetings with the ASEAN leaders in 2002 and 2003. The Prime Minister said, an ASEAN-plus-four formula that included India would be the first building block for the creation of an Asian community. He said, there is always the possibility of having a broader cooperation framework that incorporates all Asia and this is reflected in the spirit behind the Asian cooperation dialogue which has been initiated by Thailand.

The Prime Minister also announced that his UPA Government would prepare an open sky policy that would usher in greater air connectivity between India and the ASEAN nations. The policy will soon be placed before the Cabinet, he said. Singh’s announcement is being seen as a step forward towards allowing private domestic carriers like Jet Airways and Air Sahara to start operating flights to Thailand, Singapore, Malaysia, Indonesia, Philippines and Brunei. The announcement also comes within a fortnight of the PMO giving the go-ahead for carrying forward former Prime Minister Vajpayee’s initiative of establishing greater air links with ASEAN.