While India has stated that it hopes to insulate itself from future shocks, most of the members of the BIMSTEC have become aware of an over-reliance on specific sectors.
This article is part of the series — Post-Pandemic Development Priorities.
Sustainable Development Goals (SDG) 16 aims to “promote peaceful and inclusive societies for sustainable development.” Increasing interaction — whether between communities or states — generally serves to enhance cooperation and generate goodwill rather than enmity. Prior to the COVID-19 pandemic, the countries around the Bay of Bengal, both bilaterally and under the auspices of the BIMSTEC (the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), had been on a path — admittedly from a low base — towards greater regional engagement.
The pandemic, however, halted this trend. In countries with significant outbreaks, lockdowns have attempted to limit external engagement whilst many countries have tightened or closed their borders and halted international flights. While the health impacts (thus far) have varied across the countries, the economic impacts have been substantial, with growth slowing dramatically everywhere and with several countries falling into recession — this, in countries which to some degree require strong economic growth to generate employment.
Decades of progress in poverty reduction are threatening to unravel as the precarious economic circumstances of many towards the bottom of the pyramid have become apparent.
Some of the economic challenges have been shared, certainly amongst the South Asian littorals on the Bay of Bengal. Lockdowns elsewhere, notably in the Gulf, have harmed remittances. Textile exports from Sri Lanka and Bangladesh have suffered badly; the decimation of tourism has affected the entire region, with Bhutan, Myanmar, Sri Lanka and Thailand notably badly hit. Decades of progress in poverty reduction are threatening to unravel as the precarious economic circumstances of many towards the bottom of the pyramid have become apparent.
Meanwhile, as Western economies shrink, development assistance is likely to be reduced, though this may be countered by rising Chinese grants and aid to several Bay of Bengal littorals. Regardless, support for NGOs and civil society organisations was already under pressure in several Bay of Bengal littorals. But at the same time, the economic slowdown resulting from the Covid response is already reducing tax revenue: India’s tax revenue fell by more than 27 percent year on year in the first half of 2020/21. The only positive economic news is that the cost of borrowing is at historic lows.
The trend towards self-reliance is understandable. While India has openly stated that it hopes to insulate itself from future shocks, most of the members of the BIMSTEC have become aware of an over-reliance on specific sectors. And while the shock of COVID-19 may pass, other shocks are already under-way, or imminently forthcoming: Re-shoring, for instance, stands to threaten FDI flows into BIMSTEC member states. COVID-19 itself has demonstrated the vulnerability of several supply chains, potentially shifting production patterns. These come on top of on-going vulnerability to natural disasters, such as cyclones, and in the longer-term many BIMSTEC members are particularly vulnerable to the impact of climate change.
As Western economies shrink, development assistance is likely to be reduced, though this may be countered by rising Chinese grants and aid to several Bay of Bengal littorals.
Could the pandemic serve to foster greater engagement among the countries of the Bay of Bengal when the initial response has been to close, rather than open, borders? In relation to the pandemic itself, India would seem likely to be a significant producer of vaccines, for which there will obviously be widespread demand. China is already signing deals with various countries allowing access to vaccines, and were India to prioritise its BIMSTEC neighbours, this would provide a significant tangible benefit likely to bolster BIMSTEC’s trajectory more broadly.
One of the challenges India has faced in gaining traction with its Southeast Asian neighbours is that physical connectivity with the region through Myanmar was long-delayed. Pharmaceuticals, in contrast, is a field much better suited to demonstrate India’s comparative advantage.
One possible outcome of the pandemic will be reduced demand for long-haul flights — both out of fear of COVID-19 as well as fall-out from the economic consequences. Tourism may well continue to suffer. Promoting regional tourism within BIMSTEC may be one way of balancing this. For this to work, progress would need to be made on easing visa access, something under discussion for several years. Were BIMSTEC to introduce visa-free or visa-on-arrival to its members, regional tourism would get a fillip.
Tourism may well continue to suffer. Promoting regional tourism within BIMSTEC may be one way of balancing this.
Alternatively, or in addition, BIMSTEC could take a leaf out of the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy grouping (ACMECS, which includes Thailand, Cambodia, Laos, Myanmar, Thailand and Vietnam). In 2013, to encourage tourism, Thailand and Cambodia introduced the ACMECS visa, which allowed in-coming visitors to visit both countries. The remaining three ACMECS countries are considering whether to join the scheme. With long-haul travelers likely to be at a premium, facilitating their travel across BIMSTEC states would likely be highly appealing.
Post-COVID, there is plenty of scope to build on pre-existing connectivity initiatives. Northeast India is central, geographically, to BIMSTEC yet historically has seen itself as peripheral (to India) rather than central to connectivity between South and Southeast Asia. The region’s economy suffered post-Partition. Before Independence, the largely agricultural region could export its produce, by rail, to markets such as (then) Calcutta. Post-Independence, this route became closed; goods rotted as they circumvented (then) East Pakistan taking days rather than hours. In parallel, high transport costs affected goods destined for Northeast India.
Gradually, India has secured access through Bangladesh for “imports” and “exports” from Northeast India. Most recently, in September this year, a cargo of cement was the first to reach the state of Tripura by river, via Bangladesh. The move should be mutually beneficial, and can serve as a broader template, facilitating the construction of infrastructure within Bangladesh. The move is estimated to halve transport costs.
Although currently closed because of the pandemic, the border markets between India and Bangladesh have proved successful, both in economic terms and in facilitating people-to-people contacts.
Similarly, although currently closed because of the pandemic, the border markets between India and Bangladesh have proved successful, both in economic terms and in facilitating people-to-people contacts. Four border markets exist at Bangladesh’s border with Meghalaya and Tripura, and in enabling licit trade, the drivers for illicit trade are under-mined. These, too, could serve as a model for other BIMSTEC countries — the India-Myanmar border, in particular — offers scope for replication.
The immediate impact of the pandemic has been almost universally negative — in health terms, in economic terms and even in geo-political terms. Yet, all shocks present opportunities to build back better and, if it is a political priority, could be used to bolster better relations around the Bay of Bengal.
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Gareth Price is a Senior Research Fellow at Chatham House leading research on South Asia. He was previously an analyst at the Economist Intelligence Unit ...
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