BCIM Corridor a game changer for South Asian trade

Authors: Pravakar Sahoo and Abhirup Bhunia, Institute of Economic Growth

The Bangladesh–China–India–Myanmar (BCIM) Economic Corridor will increase socioeconomic development and trade in South Asia. The initiative seeks to improve connectivity and infrastructure, energy resources, agriculture, and trade and investment. It will connect India’s Northeast, Bangladesh, Myanmar, and the Chinese province of Yunnan through a network of roads, railways, waterways, and airways under a proper regulatory framework. The current focus of BCIM talks is on an inter-regional road network. This makes sense, as roads are the cheapest route of trade.

The BCIM Economic Corridor is a modern version of the Silk Road, and a revision of the 1999 Track II Kunming initiative between BCIM countries. It is planned to run from China’s Kunming province to Kolkata in India, and link Mandalay in Myanmar and Dhaka and Chittagong in Bangladesh. BCIM initiatives have gained momentum since Chinese Premier Li Keqiang’s visit to India and the conclusion of the first official meeting of the joint study group of the BCIM Economic Corridor on 19 December 2013.

In 2005, trade between Bangladesh, China, India, and Myanmar was 7.99 per cent of world trade. Since then, trade has grown both within the region and with outside countries, driven by China (and to a lesser degree, India).

Together, the BCIM countries account for 9 per cent of the global landmass and 40 per cent of the global population. The combined population of India’s Northeast, China’s Yunnan province, Bangladesh, and Myanmar is 440 million. Intra-regional trade among BCIM member states amounted to 5 per cent of total BCIM trade in 2012, as opposed to ASEAN, where 35 per cent of total trade is intra-regional. The BCIM Corridor will allow all four countries to exploit existing complementarities in trade — in terms of both sectors and products. Myanmar is a primary goods exporter and has abundant cheap labour. India has positioned itself as a leading services exporter. China is the largest manufacturing exporter in the world; and Bangladesh, like many other South Asian countries, engages in both services export and low-end manufactured goods.

Given the immense conventional and renewable energy resources in the region, one aspiration of the Corridor is collaboration in the power sector. BCIM sub-regional cooperation can capitalise on hydrocarbons in Bangladesh, hydro-electric and mineral resources in Northeast India, natural gas reserves in Myanmar, and coal reserves in East Indian states like Odisha, Chhattisgarh and Jharkhand and China’s Yunnan province. The potential for Northeast India to export energy to power-starved Bangladesh under the auspices of BCIM’s institutional structure is particularly strong. Energy cooperation among BCIM countries will have implications for China, the largest consumer of energy. India’s engagement with Myanmar will contribute to India’s energy security as India is currently heavily dependent on Gulf oil imports. Myanmar will also be able to engage in export diversification, as it is currently over-reliant on China and Thailand for energy exports.

The BCIM Corridor aims to promote trade and investment in the region through trade facilitation measures and greater participation of the public and private sectors. It is likely to encourage further interest by Chinese and Indian firms in Myanmar. An upgrade of the 312 kilometre stretch of Stilwell Road, which connects Northeast India with Yunnan through northern Myanmar, could lower transportation costs between India and China by 30 per cent and escalate already growing Sino–Indian trade through the BCIM Corridor. Yunnan and West Bengal can cooperate in sectors like agro-processing. The fact that the capitals of the two provinces, Kunming and Kolkata, are the two ends of the BCIM Corridor only adds to prospects for greater exchange.

Bangladesh, with which India shares its longest border, could connect the Northeast to the rest of India. Access to the large Indian and Chinese markets will make Bangladesh an attractive destination for foreign direct investment. Bangladesh can also benefit from connecting to China through Myanmar and becoming a commercial hub for South and Southeast Asia. Indian goods will also benefit from access to large markets in East Asia through Myanmar. The BCIM corridor, by creating trading opportunities for Myanmar, will help the country integrate into regional supply chains. In fact, the Dawei port in Myanmar, thanks to its strategic geographical position, could be a means to increase the country’s international integration.

Empirical studies suggest that improving transport infrastructure could have a direct bearing on the social and economic development of other sub-regions in Asia — for example, the Greater Mekong sub-region. Given the historical and cultural commonalities, as well as institutional overlaps, between the BCIM and the GMS, the same result is expected in the former as well.

The BCIM Corridor is a win-win arrangement. The linkages of transport, energy, and telecommunications networks will enable the region to emerge as a thriving economic belt that will promote social development of communities along the Corridor. To date, South Asia has not come close to enjoying the same economic success that East Asia has reaped. BCIM might well be the game changer that South Asia needs.

Pravakar Sahoo is Associate Professor at the Institute of Economic Growth.

Abhirup Bhunia is a researcher at the Institute of Economic Growth.

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