Economists focus on regional value chain, connectivity

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| Update:
09, 2021, 11:15:09


Experts on Friday focused on establishing increased connectivity and a regional value chain by solving high tariff issues between countries to navigate a changing global economic order resulting from some mega-events of the day.

They believe that these two mechanisms can help deepen cooperation in the Bay of Bengal with increased trade relations, especially between BIMSTEC member countries.

To underpin their recommendations to look east to increase intra-regional trade and communications, they cited incidents like Brexit, the US-China trade war and the covid-19 pandemic that are fueling the latest geopolitical and economic changes.

They observed that the pandemic generated the need to deepen regional connectivity as it disrupted all kinds of cross-border activities – trade, transport, tourism, investment, as well as people-to-people connectivity.

Such disturbances disrupt the normal world order and leave an extremely negative impact on life and business in the Bay of Bengal region.

The comments came at a roundtable titled “Global Trends and Integration of the Bay of Bengal” held as part of the “Bay of Bengal Regional Trade and Connectivity Capacity Building Program” which took place. is held in Dhaka.

The South Asian Economic Modeling Network (SANEM), through the Cross-Border Infrastructure and Connectivity Project funded by USAID and the US State Department, hosted the online panel discussion. Government and non-government representatives from Bangladesh, Bhutan, India, Nepal, Sri Lanka and Thailand, who work on trade and connectivity issues, participated in the discussions.

SANEM Executive Director Dr Selim Raihan moderated the two-day session while Dr Sanjay Kathuria, Principal Visiting Fellow of the Center for Policy Research (CPR-India), Dr Nihal Pitigala, Director of the Pathfinder Foundation (Center for Indo-Lanka Initiatives) Sumith Nakandala, Principal Investigator, Pathfinder Foundation Dr Indrajit Coomaraswamy, Distinguished Fellow of the Center for Policy Dialogue (CPD) Dr Mustafizur Rahman, Chief Economic Advisor, UNDP Regional Office for Asia and the Pacific ( RBAP) Swarnim Waglé and Executive Director of the ASEAN Studies Center at Chulalongkorn University in Thailand, Dr Suthiphand Chirathivat spoke as a panelist at the event.

Dr Arvind Panagariya, professor of economics at Columbia University, was the keynote speaker on the inaugural day.

In a presentation titled “Regional cooperation in the BIMSTEC region: Covid-19 and beyond”, Dr Kathiria stressed the need for deeper economic cooperation in the region for the economic context, not strategic, expressing the conviction that hard and soft measures can unleash significant potentials in member countries, especially landlocked Nepal, Bhutan and northeast India.

“Deeper economic exchanges in the region make sense for every country involved,” he said.

Intra-regional trade between BIMSTE countries increased sharply to reach around US $ 45.9 billion in 2019, compared to US $ 4.8 billion in 2000.

“This trend shows how high the trade potential between BIMSTEC countries is and the global trade changes triggered by Brexit, the US-China trade war, the trade war between Australia and China, the covid pandemic. 19 and the attempt to decoupling India from China, etc. allow BIMSTEC countries to cooperate regionally, ”he told his audience.

Referring to an initiative to sign a free trade agreement (FTA) among the BIMSTEC countries, he said that since BIMSTEC is not a strategic agreement but rather an economic agreement, the FTA is not necessarily crucial to improve the regional value chain, but better connectivity can greatly boost trade in the region.

The CPR Indian fellow also suggested removing tariff barriers in the South Asia region and improving road connectivity between the eastern part of BIMSTEC and its western part.

He also noted that sectors like pharmaceuticals, automobiles, plastics, clothing, rubber and digital services like health and education can be areas for regional cooperation.

The Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC) was established in 1997 and consists of seven countries: Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand.

Eminent CPD member Mr. Rahman said that trade connectivity is the most important condition for value chain development, but at the same time, connectivity of investments, connectivity of transport, connectivity logistics and interpersonal connectivity are also required.

Noting that many of these connectivity links have been disrupted by the pandemic, he said merchandise imports into the BIMSTEC region fell 19% from $ 79 billion in 2019 to $ 64 billion in 2020. , while exports also fell by around 12% over the same period.

In terms of services, exports fell by 13% while imports fell by 21%, while in terms of tourist arrivals, they fell to 13.7 million in 2020 against 60.9 million in 2019, a decrease of 77.5%.

However, expressing slight disagreement with the previous speaker, Mr Rahman said it should be considered whether a much closer integrated FTA or a comprehensive economic partnership in the Bay of Bengal region can further accelerate trade connectivity or not.

“From my perspective, the issue of FTA becomes very important if regional trade connectivity is discussed from a pandemic perspective,” he said, adding: Massive disruption has been observed in the chain. of global value during the pandemic, which taught the importance of more inclusive regional trade connectivity to avoid this kind of shock in the future.

Dr Arvind Panagariya, in his keynote address on the inaugural day, emphasized trade opening from the perspective of competitive advantage, as many developed countries in Asia have successfully opened the market.

He argued that openness or liberalization develops the country’s ability to be globally competitive by shifting labor-intensive industries to capital-intensive ones, thus helping to maintain the economy. stable product price level in the domestic market.

Citing examples from China, Hong Kong, South Korea and Vietnam, the keynote speaker also considered that the bilateral trade deficit between the two countries in the region was not a problem when the overall trade balance was surplus.

He also stressed the need for convergence between trade policy and industrial policy as well as social safety net programs to ensure social security.

The Indian economist said openness creates opportunities for trade to a “much larger export market” shifting from a labor-intensive industry or services to one that is intensive. of capital.

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