Economy should be first and only consideration

M S Siddiqui
Published : 10 May 2016, 09:59 AM
Updated : 10 May 2016, 09:59 AM

Regionalism and sub-regionalism in contemporary international relations are recent concepts in development economics. The enduring pursuit of regionalism and sub-regionalism has an underpinning thrust on peace, security and development through exploration, identification and gradual intensification of trade, economic and cultural ties among the geographically contiguous areas.

The idea of such regional and sub-regional co-operation developed in Development Economics with the success of existing growth zones – Mekong Sub-region (GMS) Growth Triangle, Southern China Growth Triangle and the Southern growth triangle (SIJORI) comprising the Johor State of Malaysia, Singapore and the Riau Islands of Indonesia strongly inspired the non-government section of these countries to lodge a debate to form a growth zone comprising these four countries.

The Southern Growth Triangle (SIJORI) was established in 1989 comprising Singapore, Johor state in Malaysia and the Indonesian island of Batam in the province of Riau. This growth triangle drew on the mutual complementarities of the three economies involved. Indeed, the factor that these three economies were at different stages of development helped them to gain from closer cooperation by enabling them to make best use of their complementarities. The growth zone allowed the three stakeholders involved to combine the competitive strengths of the three areas to make the sub-region an attractive destination for regional and international investors. Singapore provided an advanced infrastructure, financial resources and management expertise while Indonesia and Malaysia contributed natural resources and the necessary work force.

The member states took the initiatives for integration of the regions. Many manufacturing enterprises of Singapore relocated their plants in the neighboring areas of Indonesia and Malaysia including in the industrial parks which were developed by property developers from Singapore in order to take advantage particularly of the cheap labour wages. Cross-border movement was facilitated to allow a large number of workers from Malaysia to move easily to Singapore to sell their labour services. Singapore companies also opened up different types of non-manufacturing businesses in two other locations. Other examples of integration include import by Singapore of a large volume of water from Johor and natural gas from both Malaysia and Indonesia through pipelines.

The Southern growth triangle (SIJORI) growth triangle has been recognised as one of the most successful models of sub-regional cooperation for promoting trade and generating investment in the region. During its first five years it attracted $10 billion in private sector investments. Conducive investment incentives provided by the participating governments along with supportive measures for industrial establishments contributed to the large flow of investment into the economies of the participating countries in the areas of manufacturing, trade and services, agribusiness, and tourism.

The Greater Mekong Sub-region (GMS) is a sub-regional development programme that was established under the initiative of the Asian Development Bank (ADB) embracing Yunnan province of China, the three Indo-Chinese States of Vietnam, the Lao People's Democratic Republic and Cambodia, along with Thailand and Myanmar. This initiative was designed to harness the economic complementarities of the entire Mekong delta region. The unifying feature of this project was the Mekong River which either borders or flows through the member countries. The entity covers considerable natural resources in the form of arable land, extensive forest and fisheries resources, and vast energy resources in the form of hydroelectric power, coal, oil and gas reserves.

GMS provides a unique opportunity to blend cooperation in trade, investment, transport and communication in a comprehensive manner, in a planned way. Major growth zones in this region are the South China Growth Triangle; Growth Triangle comprising the Johor state of Malaysia, Singapore and the Riau islands of Indonesia; the Greater Mekong Sub-region Growth Triangle, and the South Asian Growth Quadrangle.

The Kunming Initiative, which is currently known as "BCIM –EC (Bangladesh-China-India-Myanmar), a sub- regional idea came up to address the cost of doing business between the BCIM countries increases when trade happens through the land borders. The sub-region has the prospects of cooperation by clustering parts or the whole of Bangladesh, China, India and Myanmar, specifically the land-locked frontier areas. This area has unique combination since China and India have comparatively better technology, more efficient labor force, and improved physical and commercial infrastructure. On the other hand Bangladesh and Myanmar have unskilled and semi-skilled labor force, basic, and intermediate technology.

BCIM Economic Connectivity Forum for Regional Cooperation began its journey in August 1999 in Kunming, capital of China's southwestern province of Yunnan province. After 14 years of intense dialogue and cooperation, today BCIM Forum has become an important sub-regional cooperation mechanism in the region, aimed at greater integration of trade and investment between the four countries. The BCIM is for introducing a multimodal transport system and fast visa processing to enhance intra-regional trade.

It has been mandated for construction of Silk Road Economic Belt and the 21st Century Maritime Silk Road. It has many proposed project of linking the fast-growing economies of East Asia, South East Asia and South Asia through mutual cooperation in the BCIM sub- region has finally garnered the required traction. The idea came from the ancient Silk Route, a trade channel that connected China with the outside world via the Southern (South and Central) Asian route. In the recent years interest has emerged for exploring the historic links between the countries and people of South Asia and the people of China.

The Forum agreed and guided by UN-ESCAP and joined by experts from the relevant countries, to suggest plans for the Asian economic corridors transport facility which can act as the basis for making financing products through bilateral research.

Apart from the economic factors, the strong cultural affinity, the closer geographical proximity and presence of a huge informal border trade among the countries also provide a strong optimism for forming a regional trading bloc comprising BCIM. Again, BCIM cooperation is expected to help to revive the centuries-old Silk Road running from Chittagong to Yunnan through Myanmar.

The first step was with setting up an organization named "China Kunming International Logistics & Finance Association (ILFA)" with head office in Kunming at the support of the Chinese Government. ILFA has been established to facilitate and consolidate the process of regional economic cooperation and create cross border trade and investment opportunities both at public and private sector level. ILFA is working for the connectivity and cooperation issues covering Southeast Asia, South Asia and Indian ocean regions and also working towards infrastructure construction including roads, land and deep sea ports, significant projects, construction of industrial parks, free trade zones etc. Among other objectives, ILFA is also exploring the possibilities of creating platforms for international Exchanges, researching on financial instruments, formation of international logistics organizations and regional financial organization for ensuring financial interconnectivity of the region.

BICM-EC goes further with signing the Letter of Intent for "BCIM Economic Corridor interconnection and Interworking Formation Forum"  on 10th November 2013 and MOU signed with the South Asian Federation of Exchanges (SAFE) in Dhaka on 25th January 2014 respectively, the forum had reached the consensus to create a mechanism for financial cooperation for the BCIM economic corridor and enhance Asia-wide financial cooperation for operations at non-governmental level and formed the "BCIM Exchanges Forum", a sub-forum of the BCIM main forum to design and introduce innovative financial products under Chinese currency the RMB settlement, clearing and similar issues. On final discourses, the SAFE, ILFA and other participating stock exchanges / institutions decided to organize the BCIM Exchanges Forum as the key platform for China-South Asia International Financial Opening Cooperation.

The Forum has agreed to support the suggested a Pan Asia Stock Exchange, based in Kunming, China. It decided to organize the Joint Committee to investigate as to how to develop the stocks, bonds, futures , gold and other financial derivative instruments to be used for the construction for the BCIM and other Asian Economic Corridors for the regional nations (like railway, highway, river, and others) , the industrial gardens construction (like Sonadia Port, Chittagong Port, Kyaukpyu Port and others), the energy development (like electric power, natural gas and others) and other infrastructural fields. All of these to be supported through international financing mechanism for infrastructure connectivity constructions possibly through cross border investments between Chinese investors and other enterprises / entities.

The Forum agreed that establishing the non-governmental financing mechanism would promote financial market and support commercialized services for the RMB Settlement and RMB Clearance program cooperation, advance the mutual participations by banks, insurance and stock exchanges, build join transactional credit assessment system, build risk monitoring and controlling platform, a common regulatory framework which shall cover all kinds of financial markets, financial organizations, financial products, financial instruments and settlements of transactions. It also agreed to put up joint efforts and working together to provide suggestions to all relevant governments to harmonize and improve legal policies, communications, codifications and cooperation between China and Asian countries to support and facilities services for cross-border investment and financing.

But the bottle neck of this initiative are politics – domestic and regional and mutual suspicion of neighbors – differential perception on security, state formation based on religion, ethnicity and language, unsettled boundary issues, trans-border migration. These issues will continue to influence the pace and scale of the BCIM Forum. Despite the suspicion and confusion, the forum is moving with promising ideas and about to initiate the implementation.