BCIM Economic Cooperation: Interplay of Geo-economics and Geo-politics 9781138570467, 9780429439773

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BCIM Economic Cooperation

This book examines the strategic and economic logic behind the Bangladesh–China–India–Myanmar (BCIM) Regional Cooperation. According to estimates, BCIM covers approximately 9 percent of the world’s mass and 40 percent of the world’s population spanning across four countries, constituting the confluence of East, Southeast and South Asia. It contributes about 13 percent to world trade but ironically only 5 percent to inter-regional trade. This volume compares the various approaches to cooperation – trade-led vs project-led, geo-political vs geo-strategic, Sino-centric vs India-led. The chapters explore the complex interplay of geo-economics and geo-politics associated with BCIM sub-regional cooperation in general, and the BCIM Economic Corridor (BCIM-EC) in particular. It points to the current challenges that impede globalisation and economic growth, and critically reviews implications for the stakeholders, institutional frameworks and the spatial impact of the Corridor, especially on the underdeveloped regions. The book discusses the geo-political, geo-economic and geo-strategic advantages that will accrue to the member countries once the sub-regional cooperation becomes fully functional. It advocates the adoption of best practices from similar sub-regional groupings across the globe. This book will be of great interest to scholars and researchers of politics and international relations, geo-politics, strategic studies, sub-regional cooperation, South Asian studies, India–China relations, foreign trade and economics, besides those dealing with foreign policy and development cooperation. It will especially benefit policymakers, development agencies and strategic think tanks. Gurudas Das is Professor of Economics, Department of Humanities and Social Sciences, National Institute of Technology Silchar, Assam, India. C. Joshua Thomas is Deputy Director, Indian Council of Social Science Research, North Eastern Regional Centre, NEHU Campus, Shillong, Meghalaya, India.

BCIM Economic Cooperation

Interplay of Geo-economics and Geo-politics

Edited by Gurudas Das and C. Joshua Thomas

First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 selection and editorial matter, Gurudas Das and C. Joshua Thomas; individual chapters, the contributors The right of Gurudas Das and C. Joshua Thomas to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-138-57046-7 (hbk) ISBN: 978-0-429-43977-3 (ebk) Typeset in Sabon by Apex CoVantage, LLC

Contents

ContentsContents

List of figuresix List of tablesx List of abbreviationsxii Notes on contributorsxvii Introduction

1

GURUDAS DAS AND C. JOSHUA THOMAS

PART I

BCIM sub-regional cooperation21 1 BCIM: what should be the basis for sub-regional cooperation?

23

GURUDAS DAS, TANUJ MATHUR, UJJWAL PAUL AND SUBODH CHANDRA DAS

2 Potential of BCIM growth area: its implication on India–China Trade

44

BISWAJIT NAG AND RAHUL NATH CHOUDHURY

3 The road ahead for the BCIM: leveraging on subregionalism and other experiences

63

LALDINKIMA SAILO

4 Institutional arrangements for BCIM: challenges, guiding principles, short- and long-term agenda M. SHAHIDUL ISLAM

76

vi Contents

  5 The BCIM Forum: tracing the historical basis

98

AMBUJ THAKUR

PART II

BCIM Economic Corridor123   6 Is BCIM-EC beneficial for India?

125

GURUDAS DAS AND UJJWAL PAUL

  7 BCIM Economic Corridor: a trade-led initiative

135

CHEN LIJUN

  8 Trade and investment along BCIM Economic Corridor: realising sustainable economic returns

146

MAHFUZ KABIR AND NAZMUL ARIFEEN

  9 The BCIM Economic Corridor: does it subsume the BCIM Regional Cooperation Forum?

169

PATRICIA UBEROI

10 BCIM Economic Corridor: opportunities, obstacles, options and the road ahead

209

C. JOSHUA THOMAS

PART III

BCIM and India’s Northeast219 11 Northeast India in BCIM Economic Corridor: rhetoric and reality

221

RAKHEE BHATTACHARYA

12 ‘Northeast’ in India’s ‘Act East’: a reality check

236

SUBIR BHAUMIK

13 BCIM Economic Corridor and Northeast India: need for inclusive development agenda PRABIR DE

256

Contents vii PART IV

Geo-economics of BCIM271 14 Can new Myanmar contribute to BCIM integration?

273

CHAW CHAW SEIN

15 BCIM sub-regional economic corridor: will it be a game changer?

284

ANASUA BASU RAY CHAUDHURY

16 The BCIM corridor: geo-economic prospects

305

ISHANI NASKAR

17 One more step from temporary to permanent: BCIM sub-regional cooperation and its institutional platform

322

LIU PENG

18 BCIM sustainability dialogue(s): a network approach to capacity building

342

NIMMI KURIAN

PART V

Geo-politics of BCIM355 19 The BCIM: understanding the geo-political dynamic

357

SANJAY PULIPAKA AND SARANYA SIRCAR

20 BCIM: the geo-economics, geo-politics and the new contexts of Asia’s regionalism

373

W. LAWRENCE S. PRABHAKAR

21 Evolving dynamics of India–China relations: implications for BCIM

393

RAHUL MISHRA

22 China’s two regional framework narratives: BCIM and CPEC – comparative viabilities HAANS J. FREDDY

407

viii Contents



Conclusion: OBOR architecture and BCIM-EC: an interplay of geo-economics and geo-politics

422

GURUDAS DAS

Index450

Figures

1.1 1.2 1.3 1.4 2.1 2.2 2.3 2.4 2.5 13.1

List of figuresList of figures

Intra-GMS Trade (US$ Billion) Trade-to-GDP Ratio (%) Trend in Country Share in Intra-BCIM Trade Country Share in Intra-BCIM Exports and Imports and Quantum of Trade Balance Characteristics of BCIM Economy Fragmentation of Production Network Indian Export to BCIM (US$000) Indian Import from China (US$000) Indian Import from Bangladesh and Myanmar (US$000) Urban Agglomeration and Industrial Outputs

27 29 33 35 49 52 57 57 58 264

Tables

List of tablesTables

1.1 Export and Import Trade among CAREC Countries (US$ Million). 26 1.2 FDI Inflows in GMS (US$ Million). 28 1.3 Trade Pattern within BCIM. 33 1.4 Country Share in Intra-BCIM Exports and Imports and Quantum of Trade Balance. 34 1.5 Energy Indicators of BCIM Countries for 2014. 37 1.6 Selective Energy Resources in BCIM Countries. 39 1.7 Selective Energy Resources in BCIM Region. 40 2.1 Indian Export to China in 2013 (Major Agricultural Products) (US$000). 59 2.2 Indian Import from China in 2013 (US$000’). 60 3.1 BCIM: Country-Specific Objectives, Opportunities and Challenges. 66 5.1 Data of All the Constituent Participants of the BCIM Forum. 112 6.1 Mutual Importance of India–China Bilateral Trade. 126 6.2 Major Items of Indian export to China in 2015–2016. 127 6.3 Major Import Items of India from China in 2015–2016.128 6.4 Cost of Transportation of India’s Export to China via BCIM-EC. 130 6.5 Cost of Transportation of India’s Export via 131 Maritime Route for the Coastal States. 6.6 Cost of Transportation of India’s Export to China via Maritime Route for the Landlocked States. 131 6.7 Comparison of Transport Cost between BCIM and CPEC. 133

Tables xi

7.1 Trade between China and Bangladesh (2000–2013) US$100 Million. 138 7.2 Trade between China and India (2000–2013) US$100 Million. 139 7.3 Trade between China and Myanmar (2002–2013) US$100 Million. 140 7.4 Trade between Yunnan and South Asia, 2013 US$10,000.141 8.1 Merchandised Trade between BCIM Countries (US$ million), 2015. 150 8.2 FDI Stock in Bangladesh (Million US$). 153 8.3 FDI Stock in Bangladesh by Sector, End-June 2016. 153 8.4 FDI Inflow in India by Country, April 2000 to March 2016 (Million US$). 154 8.5 China’s Outward Investment Stock (Million US$). 154 8.6 Bangladesh’s Ten Major Traded Items, 2015. 161 8.7 China’s Ten Major Traded Items, 2015. 164 8.8 India’s Ten Major Traded Items with Myanmar, 2015. 166 11.1 Northeast India: Market Indicators. 229 11.2 Industry, Employment and Investment Scenario in Northeast India: 2011–2012. 231 11.3 Rates of Poverty, Unemployment, Inflation and Outmigration in NER. 231 12.1 Distance Differential between Northeastern Towns/ State Capitals and Calcutta via Chicken’s Neck (Siliguri Corridor) vis-à-vis through Bangladesh. 248 13.1 Infrastructure Indicators of NER. 258 13.2 Major Urban Agglomeration in Northeast India. 263 17.1 Participation Situations of BCIM Four Countries in the International Organisations in 2012–2013. 332 21.1 Facts about Yunnan Province of China. 395

Abbreviations

AASU ADB AECEN AEP AIIB ANSAB APTA ARF ASEAN ATTF BBIN BBIN MVA BCIM BCIM-EC BFA BIG-B BIMP-EAGA BIMSTEC BIST-EC BLTF BRI BRICS BRO

AbbreviationsAbbreviations

All Assam Students’ Union Asian Development Bank Asian Environmental Compliance and Enforcement Network Act East Policy Asia Infrastructure Investment Bank Asian Network of Sustainable Agriculture and Bioresources Asia-Pacific Trade Agreement ASEAN Regional Forum Association of Southeast Asian Nations All Tripura Tiger Force Bangladesh, Bhutan, India, and Nepal Bangladesh–Bhutan–India–Nepal Motor Vehicle Agreement Bangladesh, China, India and Myanmar BCIM Economic Corridor Boao Forum for Asia Bay of Bengal Industrial Growth Belt Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Bangladesh–India–Sri Lanka–Thailand Economic Cooperation Bodoland Liberation Tigers Force Belt and Road Initiative Brazil, Russia, India, China, South Africa Border Roads Organisation

Abbreviations xiii

BTAC CAREC CASCF CEE CLMV CPC CPD CPEC CPMM CPR DFC DMIC DoNER DPR EAEU EAGA EAPN EAS EBRD EC ECF EIA EIB ERIA ESCAP EU EWEC FANSA FOCAC FTA GATT GCC GDP GMS GQ GSDP GTI HIMCAT

Bodoland Territorial Autonomous Council Central Asia Regional Economic Cooperation China-Arab States Cooperation Forum Central and Eastern Europe Cambodia, Laos, Myanmar, Vietnam Communist Party of China Centre for Policy Dialogue China–Pakistan Economic Corridor Corridor Performance Measurement and Monitoring Centre for Policy Research Dedicated Freight Corridor Delhi–Mumbai Industrial Corridor Ministry of Development of North Eastern Region Detailed Project Report Eurasian Economic Union East Asian Growth Area East Asian Production Network East Asia Summit European Bank for Reconstruction and Development Economic Corridor Economic Cooperation Forum Economic Integration Agreements European Investment Bank Economic Research Institute for ASEAN and East Asia Economic and Social Commission for Asian and the Pacific European Union East–West Economic Corridor Freshwater Action Network South Asia Forum on China–Africa Cooperation Free Trade Agreements General Agreement on Tariffs and Trade Gulf Cooperation Council Gross Domestic Product Greater Mekong Sub-region Golden Quadrilateral Gross State Domestic Product Greater Tumen Initiative Himalayan Conservation Approaches and Techno­ logies

xiv Abbreviations

ICSPLF India–China State/Provincial Leaders Forum ICT Information and Communication Technology IDSA Institute of Defence & Strategic Analysis IFR Institutes for Regionalism IMT India, Myanmar, Thailand IMT-GT Indonesia-Malaysia-Thailand Growth Triangle IOR Indian Ocean Region IWT Inland Water Transport JSG Joint Study Group K2K Kolkata to Kunming KMTT Kaladan Multi-Modal Transit Transport Project LAC Line of Actual Control LBA Land Boundary Agreement LCS Land Customs Station LDC Least Developed Countries LEP Look East Policy M&A Merger and Acquisitions MEA Ministry of External Affairs MFN Most Favoured Nation MGC Mekong Ganga Cooperation MIEC Mekong–India Economic Corridor MNC Multinational Corporations MoRTH Ministry of Road Transport and Highways MSR Maritime Silk Road MVA Motor Vehicles Agreement NAFTA North American Free Trade Agreement NBFI Non-Bank Financing Institutions NDA National Democratic Alliance NDB New Development Bank NE North-East NEA Northeast Asian NEC North Eastern Council NEDFi North Eastern Development Finance Corporation NEHHDC North Eastern Handlooms & Handicrafts Development Corporation NEI Northeast India NEIIPP Northeast Industrial and Investment Promotion Policy NEIP Northeast Industrial Policy NER Northeastern Region NERAMAC North Eastern Regional Agricultural Marketing Corporation

Abbreviations xv

NERCORMP North Eastern Region Community Resource Management Project NERLP Northeast Rural Livelihoods Project NES Northeast States NLCPR Non-Lapsable Central Pool of Resources NLFT National Liberation Front of Tripura NSCN National Socialist Council of Nagaland NSCN-K National Socialist Council of Nagaland-Khaplang NSEC North-South Economic Corridor NSG Nuclear Suppliers Group NTB Non-Tariff Barriers OBOR One Belt One Road ODFI Outbound Foreign Direct Investment PB Production Blocks PBG Pan Beibu Gulf PBNARDA Progress of Border Areas and National Races and Development Affairs PCA Permanent Court of Arbitration PDR People Democratic Republic PLA People’s Liberation Army PoK Pakistan Occupied Kashmir PPP Purchasing Power Parity PRC People’s Republic of China PWD Public Works Department RCA Revealed Comparative Advantage REDA Regional Economic Development Area RIF Regional Investment Framework RMB Renminbi ROK Republic of Korea RTA Regional Trade Arrangement SAARC South Asian Association for Regional Cooperation SANEL South Asian Network on Environmental Law SAP Strategic Action Plan SARDP-NE Special Accelerated Road Development Program in the North Eastern Region SASEC South Asia Subregional Economic Cooperation SCO Shanghai Cooperation Organization SeaBRnet South Asian Biosphere Reserve Network SEC Southern Economic Corridor SEZ Special Economic Zone SIGINT Signals Intelligence SIJORI Singapore, Johor, Riau

xvi Abbreviations

SL SLOC SME SOE SREB SREZ SWA TBGA TH ToR TPP TRF TSS TTE TTF TTIP UMEHL UNCLOS UNDP UNESCAP UNODC UNSC UWSA WDP WTO

Service Links Sea Lanes of Communications Small and Medium Enterprises State-Owned Enterprises Silk Road Economic Belt Sub-Regional Economic Zone Srepok Wilderness Area Trans-Border Growth Areas Trilateral Highway Terms of Reference Trans-Pacific Partnership Tiddim, Rih, Falam Transport Sector Strategy Trade, Transport and Energy Transport and Trade Facilitation Transatlantic Trade and Investment Partnership Union of Myanmar Economic Holdings Company United Nations Convention on Law of Sea United Nations Development Programme United Nations Economic and Social Commission for Asia and the Pacific United Nations Office on Drugs and Crime United Nations Security Council United Wa State Army Western Development Programme World Trade Organization

Contributors

ContributorsContributors

Nazmul Arifeen is Research Officer at the Bangladesh Institute of International and Strategic Studies (BIISS), Dhaka, Bangladesh. His areas of interest include security, governance and cooperation in South Asia. Rakhee Bhattacharya is Associate Professor at Northeast India Studies Programme, Jawaharlal Nehru University, New Delhi, India. Her research interests are development economics, interface of geo-economics and geo-politics, security issues, and Northeast India and its neighbourhood. She has authored Development Disparities in Northeast India (2011) and Northeastern India and Its Neighbours: Negotiating Security and Development (2014). She has widely published in both national and international journals and edited volumes. Her latest edited volume is Regional Development and Public Policy Challenges in India (2015). Subir Bhaumik is a veteran journalist. During 37 years in journalism, 17 with the BBC, Bhaumik broke some of the biggest stories from East and Northeast India and the neighbouring countries. He now works as a senior editor at bdnews24.com of Bangladesh and as a consulting editor in Myanmar’s Mizzima Newsgroup. He writes for top Indian and global media outlets. He is former Queen Elizabeth House Fellow at Oxford, a senior fellow at East West Centre Washington and a Eurasian Fellow at Frankfurt University. Anasua Basu Ray Chaudhury is Fellow and Coordinator of research programmes at the Observer Research Foundation, Kolkata, India. Previously, she has been a Research and Programme

xviii Contributors

Associate at Calcutta Research Group, and a Visiting Fellow at Sciences Po, Paris in 2012. She was an ICSSR Post-Doctoral Fellow (2004–2006) at the Centre for the Studies of Developing Societies (CSDS), Delhi. She specialises in South Asian affairs including regional and sub-regional cooperation, energy politics, migration and women in conflict situations. Chaudhury is the author of State of being Stateless: An Account on South Asia (co-authored with Paula Banerjee, Atig Ghosh, 2015), Women in Indian Borderlands (co-edited with Paula Banerjee, 2011), and SAARC at Crossroads: The Fate of Regional Cooperation in South Asia (2006). Rahul Nath Choudhury is Visiting Research Fellow, Institute of South Asian Studies, National University of Singapore. Earlier, he was associated with Planning Commission, IIFT, ISID and IGNOU in various capacities. His areas of research interest include: FDI, E-commerce and Regional Integration South Asian trade. He has widely published in edited volumes, national and international journals. Subodh Chandra Das is Assistant Professor of Economics, Diphu Government College, Assam, India. His areas of interest include democracy and development, along with trade and development. He has published in various national and international journals as well as edited volumes in the areas of Governance, International Trade and Sub-regional Cooperation. Gurudas Das is Professor of Economics, Department of Humanities and Social Sciences, National Institute of Technology Silchar, Assam, India. In the past, he has been associated with North Eastern Hill University (NEHU); OKD Institute of Social Change and Development, Guwahati and St. Anthony’s College, Shillong in various capacities. For the last 26 years, he has been intensely involved in research on the economy, society and polity of India’s Northeastern region. He specialises in the domains of security and development, cross-border trade and development cooperation, and geo-economics and geo-politics of regional growth and development. His publications include Security and Development in India’s North East (2012), Voices from the Border: Response to Chinese Claims over Arunachal Pradesh (co-edited with C. Joshua Thomas and Nani Bath, 2015), and Look East to Act East Policy: Implications for India’s Northeast (co-edited with C. Joshua Thomas, 2016). He has also contributed to

Contributors xix

several journals including Strategic Analysis, Journal of Global Marketing, Journal of Global Scholars of Marketing Science, South Asian Survey and Review of Market Integration. Prabir De is Professor at the Research and Information System for Developing Countries (RIS), New Delhi, India. He is also the Coordinator of ASEAN-India Centre (AIC). He was a Visiting Fellow of the Institute of Developing Economies (IDE-JETRO), Chiba; Asian Development Bank Institute (ADBI), Tokyo; and visiting Senior Fellow of United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), Bangkok. He works in the field of international economics and has research interests in international trade and development, and has contributed several research papers in international journals and written books on trade and development. His recent publication includes Myanmar’s Integration with the World: Challenges and Policy Options (2017). Haans J. Freddy is Assistant Professor at the Department of Political Science, Madras Christian College, Chennai, India. He specialises in the areas of international relations and political thought. M. Shahidul Islam is a doctoral scholar at Huazhong University of Science and Technology, China. He specialises in macroeconomics, economic governance, urbanisation and regionalism. He has written extensively on Belt and Road Initiative, BCIM Economic Corridor and other regional issues pertaining to China and South Asia. He provides consultancy services to several organisations, including World Bank, United Nations, JICA, DFID and ASEAN Secretariat. His academic papers have been published by the international peer-reviewed journals. He regularly contributes opinion articles to national and regional dailies. Mahfuz Kabir is Research Director at Bangladesh Institute of International and Strategic Studies (BIISS), Dhaka. He works on international trade and regional integration focused on BIMSTEC, SAARC, India and China. His other areas of interest include macroeconomic and climate modeling, system of environmental economic accounting, environmentally extended social accounting matrix, panel data econometrics, and partial and computable general equilibrium modeling. His works have been published from, inter alia, Routledge; World Bank, Washington, DC; Gale Publishing, New York; SANDEE; ILO; KIEP, Seoul; and Bangladesh Planning Commission, UNDP Bangladesh among other places.

xx Contributors

Nimmi Kurian is Associate Professor at the Centre for Policy Research, New Delhi, India and Faculty Advisor, India China Institute, The New School, New York, USA. Her research interests include Asian borderlands, India’s development diplomacy, comparative regionalisms, political economy of sub-regionalism and transboundary water governance regimes. She is one of the contributors to the India Country Report of the Joint Study Group on the Bangladesh–China–India–Myanmar Economic Corridor set up by the Ministry of External Affairs, Government of India. Her recent publications include India and China: Rethinking Borders and Security (co-authored with L.H.M. Ling, Adriana Erthal Abdenur, Payal Banerjee, Mahendra P Lama, Li Bo, 2016); The India China Borderlands: Conversations Beyond the Centre (2014). Chen Lijun is Professor and Director at the Institute for South Asian Studies, Yunnan Academy of Social Sciences, China. His academic interests are on South Asian economy and regional cooperation. He has completed several research projects and published more than 30 books including South Asian Report (Annual), China-India Energy Cooperation: Strategy and Road Map, and Open-Up for Cooperation with Indian Ocean Region. He has also published widely in Academy journals. He has significant contribution in promoting BCIM Sub-regional cooperation initiative. Tanuj Mathur is Assistant Professor of Marketing at the Amity Business School, Amity University, Lucknow. His teaching and research interests are concentrated in the areas of global economic issues, health insurance marketing and consumer behavior. Rahul Mishra is Senior Lecturer at Asia-Europe Institute, University of Malaya, Kuala Lumpur, Malaysia. Earlier, he worked with the Indian Council of World Affairs (ICWA), New Delhi, East–West Center in Washington, Institute for Defence Studies & Analyses (IDSA), New Delhi, S. Rajaratnam School of International Studies, Nanyang Technological University (Singapore), and National University of Singapore in various capacities. He has more than 150 national and international publications including edited volumes such as BCIM-Economic Corridor: The Road Ahead (2015), The Peacock and the Garuda: An Overview of India-Indonesia Relations (2015), and Integrating Northeast in India’s Act East Policy (2015).

Contributors xxi

Biswajit Nag is Associate Professor at the Indian Institute of Foreign Trade (IIFT), New Delhi, India. Earlier, he was associated with the Poverty and Development Division of UNESCAP, Bangkok. His current research interests include international production networks, global value chain, trade and technology interface and FDI flows. He is the author of My World with Rafiki: An Economic Travelogue and Miscellany (2014). Ishani Naskar is Professor at the Department of Political Science, Rabindra Bharati University, Kolkata, India. Her areas of interest include Indian foreign policy especially dealing with the Southeast Asian neighbourhood, maritime strategic issues of the Indo-Pacific realm and the Asia Pacific Maritime Realm. She is associated with the Track II processes involving BIMSTEC, BBIN and the MGC. She is also a member of the civilian dialogue forum, the Kolkata-Kunming Dialogue Forum. She has published extensively in books, international and national journals. Ujjwal Paul is Assistant Professor of Marketing Management, National Institute of Industrial Engineering, Mumbai, India. His areas of interest include horticultural marketing, food security, India’s Look East policy and border trade. His works have been published in leading journals such as Organic Agriculture, International Journal of Fruit Science, South Asian Survey, Review of Market Integration. He has also contributed chapters in several books as well as co-edited a recent volume: ASEAN Calling: Development of India’s Northeast through Sub-regional Cooperation (2017). Currently, he is working on a project under ASEAN Studies Centre (ASC) Shillong. Liu Peng is Associate Professor and a master supervisor in Research Institute for Indian Ocean Economies (RIIO), Yunnan University of Finance & Economics, China. He has also been associated with Washington University in St. Louis. His research interests include Sino-India relations, Indian Ocean region and Oversea Chinese Studies. W. Lawrence S. Prabhakar is Associate Professor, International Relations and Strategic Studies, Department of Political Science Madras Christian College, Chennai, India. His specialisations include nuclear missile issues in Southern Asia; maritime security issues in the Indian Ocean and the Asia-Pacific Region; grand strategy of China; research in India–United States strategic relations; and grand strategy of India.

xxii Contributors

Sanjay Pulipaka is coordinating the East Asia Research Programme at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India. Previously, he was a Pavate Visiting Fellow at the University of Cambridge and a former Fulbright Fellow in the Conflict Transformation Programme, in the United States. His areas of interest include India’s foreign policy, Indian politics, East Asian security issues, India–US Relations, regionalism and other related domains. Laldinkima Sailo is Research Associate based at the Institute of South Asian Studies (ISAS), National University of Singapore, and was earlier Research Fellow with Protimos Foundation, an organisation that looks at the innovative use of the law to bring development to marginalised communities. He works in the areas of policy research, political risk analysis, evaluation, monitoring and impacts, business development and strategic advisory. Chaw Chaw Sein is Professor of the International Relations, University of Yangon, Myanmar. Her research interests include China– Myanmar relations, BCIM integration, Myanmar police reform and decentralisation for current Myanmar reform process. Saranya Sircar works as Consultant for the East Asia Research Programme at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India. Ambuj Thakur is Assistant Professor in UGC Centre for Studies on Bangladesh and Myanmar, Dibrugarh University, Assam, India. His research interests include borderland studies, sub-regionalism and globalisation. He has published his research in journals and newspapers such as the Tamkang Journal of International Affairs, China Report, India Quarterly, China Information, South Asia Economic Journal, World Focus, Open Democracy, India Writes, Assam Tribune and The Sentinel among others. C. Joshua Thomas is Deputy Director, Indian Council of Social Science Research, North Eastern Regional Centre (ICSSR-NERC), Shillong, Meghalaya, India. He is also Coordinator, ASEAN Studies Centre, Ministry of External Affairs, Government of India. Previously, he has been associated with the Department of Political Science & Public Administration at Madras Christian College, Chennai; Wankhao College, Mon, Nagaland; and Union Christian College, Shillong in different positions. For

Contributors xxiii

last 25 years, Thomas has undertaken extensive research on the society and polity of India’s Northeast. His research interests are ethnicity, insurgency, peace process, cross-border trade and India’s relations with neighbouring countries, particularly Bangladesh, China and Myanmar. His publications include India– China: Trade and Strategy for Frontier Development (co-edited with Gurudas Das, 2010), Voices from the Border: Response to Chinese Claims over Arunachal Pradesh (co-edited with Gurudas Das and Nani Bath, 2015), Look East to Act East Policy: Implications for India’s Northeast (co-edited with Gurudas Das, 2016), and Act East and India’s North-East (co-edited with Konthoujam Sarda, 2017). He has several publications in journals and he is the Managing Editor of Man and Society: A Journal of North-East Studies. Patricia Uberoi is Honorary Fellow and Chairperson of the Institute of Chinese Studies, Delhi, India. She headed the liaison office for the Track II Bangladesh–China–India–Myanmar (BCIM) Forum for Regional Cooperation for more than a decade. Earlier she was associated with the Institute of Economic Growth, Delhi. She has published a number of reports and papers on the BCIM process, and co-authored India’s North East States, the BCIM Forum and Regional Integration (2012). She is presently engaged in a number of comparative projects focused on trends in family, kinship and marriage across the Asian region.

Introduction

Gurudas Das and C. Joshua ThomasIntroduction

Gurudas Das and C. Joshua Thomas

Economic Regionalism is often viewed in liberal international political economy (IPE) discourse as a step towards strengthening the forces of globalisation. As the nation states relax their guards against the borders of neighbouring countries, they move away from protectionist walls and lend themselves to the rules of the game that transcend their political boundary. Regionalism is, thus, a means through which national economies participate in the process of globalisation. As the forces of globalisation gathered momentum, a variety of regional economic associations grew across the continents like NAFTA (North American Free Trade Agreement) in North America, Mercosur (Spanish: Mercado Común del Sur) in Africa, UNASUR (The Union of South American Nations; Spanish: Unión de Naciones Suramericanas) in South America, ASEAN (Association of South East Asian Nations) in South East Asia, SAARC (South Asian Association for Regional Cooperation) in South Asia, and CAREC (Central Asia Regional Economic Cooperation) in Central Asia to mention a few. It is expected that geopolitical concerns of nations would give way to geo-economic goals as the forces of globalisation will bind them inextricably in a global economic system. Growth of liberal democracy along with market economy will unleash economic competition among nations rather than flexing military muscles. And hence unlike the old regionalism that has developed in Europe following WWII out of geo-political compulsion, economic regionalism, the new regionalism – as it is often called – is the product of the geo-economic perception of the nation states who constitute the building blocks of the international system. Although countries simultaneously cooperate and compete at different levels – regional or global – in order to shape up the institutions and arrangements and then derive the dividend out of

2  Gurudas Das and C. Joshua Thomas

them, geo-economic synergies are better mobilised under the former compared to the latter. Besides the flurry of growth of new regionalism, a series of sub-regional cooperation fora also sprang up particularly in Asia involving cross-border areas of neighbouring countries where economic growth has become a hostage to geographic peripherality. Unlike the European model of integrationist regionalism, many of the sub-regional cooperation initiatives like GMS (Greater Mekong Subregion), CAREC and GTI (Greater Tumen Initiative) are built on common economic interests of the constituent members loosely governed by principles of cooperation and benefit sharing under the supervision of international agencies like ADB, UNDP and World Bank. While the construction of transport corridors and then their subsequent transformation into economic corridors have generated gains in trade due to the reduction in transport and transaction costs on the one hand, mobilisation of cross-border resources and establishment of regional value chain have resulted into gains in production in them on the other. The success of these sub-regional initiatives has caught in the imagination of the businesses, think tanks and policymakers in Asia who visualised them as tools for the development of underdeveloped areas. With the adoption of “Western Development Programme” by China and “Look East Policy” as well as “New Initiative for Northeast Programme” by India in the early 1990s, an idea to develop the contiguous areas including Bangladesh, (Southwestern part of) China, (Northeastern part of) India and Myanmar (BCIM) through sub-regional cooperation started crystalising among the academics and think tanks in these countries. The Yunnan Academy of Social Sciences in Kunming, the Centre for Policy Dialogue (CPD) in Bangladesh and the Institute of Chinese Studies (ICS) and the Centre for Policy Research (CPR) in India took active initiative to form a civil society (Track II) platform in 1999 through a conference held in Kunming, Yunnan, which was popularly known as “Kunming Initiative”. Later this initiative evolved into BCIM Regional Cooperation Forum and, after 14 years of civil society dialogue, has dramatically transformed into an intergovernmental initiative (Track I) through a joint statement issued on 20 May 2013, on the occasion of the visit by Chinese Premier Li Keqiang to India under the rubric of BCIM Economic Corridor (BCIM-EC). Based on the intergovernmental agreement, a Joint Study Group (JSG) was formed and the first meeting was quickly held in Kunming

Introduction 3

during 18–19 December 2013. The first JSG meeting has developed consensus on both the principles and areas of cooperation as well as mapped the BCIM-EC. It has also agreed on a framework of study and set a six-month deadline for the completion of the countrylevel report to be presented in the 2nd JSG meeting to be held in Bangladesh by June 2014 and thereafter the complete synthesis report to be presented by another six months in the 3rd JSG meeting to be held in India by December 2014, where the final report would be adopted and signed by the representatives of the partner countries. The Chinese push for the creation of the BCIM-EC was indirectly felt as the Government of Bangladesh took special interest in holding the 2nd JSG meeting during 17–18 December 2014, in Cox’s Bazar, Bangladesh, following the China visit of Prime Minis­ ter Begum Hasina in June of that year. Besides, the presentation of the country-level reports, the meeting of the 2nd JSG also resolved to produce combined thematic reports with actionable agenda on connectivity, energy, investment and financing, trade in goods and services and trade facilitation, social and human development and poverty alleviation, sustainable development and people-to people contact for the third meeting of JSG to be held during the second half of 2015. However, with the change of government in India in 2014, there has been some rethinking of the perspective that saw BCIM-EC being the synergetic to India’s Look East Policy under the previous Congress (I)-led coalition government in New Delhi. In retrospect, it appears that China might have perceived such an eventuality and that is why wanted to rush past BCIM-EC by the end of 2014 (as stated in the minutes of the 1st JSG meeting). Be that as it may, widening geo-political differences between India and China seems to outpace the perceived geo-economic gains for India from BCIMEC. As a result, progress on BCIM-EC has suddenly lost momentum and Indian strategic community appears to have gone into the mode of geo-strategic calculation. Following the adoption of Chinese One Belt One Road (OBOR) project, the deeper geo-political intention behind the inclusion of BCIM-EC at inter-governmental joint declaration became clear. Indian strategic community is not comfortable to promote an overland pathway to Maritime Silk Road (MSR) that intends to strengthen Chinese influence in Indian Ocean – the traditional Indian strategic space. It is in this context that a two-day international seminar on “BCIM: Sub-Regional Cooperation for the Development of the

4  Gurudas Das and C. Joshua Thomas

Peripheral Areas” was organised by the Indian Council of Social Science Research, North Eastern Regional Centre (ICSSR-NERC), Shillong, during 27–28 November 2014, in order to facilitate a dialogue among the selected academics and think tank members from all the four countries. The present volume is largely the compilation of the presentations made in that seminar. Of course, a few chapters were invited later to fill the gaps in order to make the volume comprehensive. Although, after a lapse of about two years, the third meeting of JSG was finally held in Kolkata, India, during 25–26 April 2017, the initiative could not make any headway as the strategic concerns of the stakeholder countries are yet to converge. Some of these concerns are flagged off in this volume. Contributions in this volume are organised into five parts. In Part I, Chapters 1–5 deal with the aspects of form and content of BCIM sub-regional cooperation. In Part II, Chapters 6–10 bring focus on the economic viability, opportunity and challenges of BCIM Economic Corridor. In Part III, Chapters 11–13 introspect about the impact of BCIM on India’s Northeastern region. While Part IV, Chapters 14–18, delves into the geo-economic consequences, Part V, Chapters 19–22, captures the geo-political dynamics associated with BCIM sub-regional cooperation. Finally, the concluding chapter analyses the interplay of forces of geo-economics and geopolitics in OBOR architecture and the consequences of BCIM-EC for India. Gurudas Das, Tanuj Mathur, Ujjwal Paul and Subodh Chandra Das, in Chapter 1, entitled “BCIM: What Should Be the Basis for Sub-regional Cooperation?” have examined the geo-economics of BCIM. The authors argued that the key to the success of sub-regional cooperation lies in the unlocking of economic forces, trapped hitherto by the political boundaries of nation states, and mobilising the synergies across the border. As Bangladesh, China’s Southwest, India’s Northeast and Myanmar have remained relatively underdeveloped, a sub-regional cooperation among these regions will only help in converging the cross-border synergies for development of all the stakeholders. The authors have observed that China has successfully used the strategy of sub-regional cooperation as a tool for the development of her peripheral regions which are far away from the main centres of national development. The economic conditions of the China-led sub-regional groupings like GMS, GTI and CAREC have registered improvement due to growth in transport infrastructure and trade facilitation measures which have led to

Introduction 5

increased volume of trade and investment across the borders of countries joining the sub-regional cooperation forums. The proposed BCIM sub-regional cooperation will help in mobilising the cross-border synergies which in turn will promote economic growth in the region à la CAREC, GMS and GTI. But what should be the basis of cooperation? Will it be a trade-led cooperation as hinted in the Track I proposal for BCIM Economic Corridor? Or will it be a sub-regional cooperation as viewed in the Track II deliberations? The authors further argued that while a trade-led cooperation will benefit only China, a project-led cooperation would be beneficial for all the stakeholder regions. Biswajit Nag and Rahul Nath Choudhury, in Chapter 2, entitled “Potential of BCIM Growth Area: Its Implication on India– China Trade”, have made an attempt to analyse the significance of the BCIM with special reference to the Northeastern states of India. Keeping the resource availability and production structure of Northeast in mind, the authors have identified major products where India should focus and encourage trade with China and develop a value chain across the region considering other members of the group. The major areas in which value chain can be developed are: processed food and horticulture; petrochemical products including man-made fibres for textile; paints, plastic products and fertiliser, etc.; machineries, especially hand tools and basic electrical goods such as switches, wires, small pumps, etc.; and electronics goods which do not require sophisticated technology such as electronic toys, televisions, telephones, batteries, etc. Industries like food processing, jute mill, textile mill, etc., can be developed in NE region as these all have high export potential in the Chinese market. Products like yarn can be imported from China and exported back in the form of finished clothes. NE region produces a variety of fruits. Food processing or juice factories can be developed in the region and export to nearby countries. Handicraft industries can also be developed in the region. NE region has traditionally been rich with skilled artisans. The demands for handicraft goods have surged in the international market in recent times. China can be a ready market for all these products. The large gas reserve in the Northeastern region can be used by developing the fertiliser industry in the region. Indian companies can be encouraged to invest in Bangladesh and produce fertiliser using the Bangladeshi gas reserve as well. The fertiliser can be exported to India and other South Asian countries. The gas reserve

6  Gurudas Das and C. Joshua Thomas

in the region can also be utilised in gas-based power generation. As cost of production in China is increasing, BCIM region can develop itself as an outsourcing region supplying components and finished goods to Chinese OEMs. Laldinkima Sailo, in Chapter 3, entitled “The Road Ahead for the BCIM: Leveraging on Sub-regionalism and Other Experiences”, has made an attempt to highlight the lessons that can be learnt from the GMS experience and applied to BCIM sub-regional cooperation. The BCIM sub-region has several critical and strategic advantages that emanate from geographical proximity, socio-cultural cohesiveness, economic complementarities, similar consumption tastes and scope for further integration with the dynamic Southeast Asian region. Being the latecomer in sub-regional cooperation movement, BCIM can share the experiences of earlier initiatives like GMS and try to find a way out of the underdeveloped situation it finds itself in. The author has pointed out that the success of GMS was possible due to harmonisation of interests, policies and programmes of ASEAN and China under the leadership of ADB. A similar leadership role player needs to be identified if BCIM is to succeed. If the leadership role is assumed by either China or India, the preponderance of larger countries in the grouping might be a cause of concern for the smaller countries like Bangladesh and Myanmar. M. Shahidul Islam, in Chapter 4, entitled “Institutional Arrangements for BCIM: Challenges, Guiding Principles, Short- and Long-Term Agenda”, has listed a number of challenges that are standing in the way of forging BCIM sub-regional cooperation. As the major challenges arise out of hostile bilateral relations among some of the partner countries, the author has advocated for separating issues relating to regional economic cooperation with that of national security. He has argued in favour of a policy of open regionalism and seamless connectivity as the guiding principles for BCIM. A dual track approach consisting of both institutionguided as well as market-guided regional integration has been suggested for BCIM. In the short run, it can focus on developing some local level supplementary institutions to expedite cooperation in border areas. In the medium to long run, BCIM would need formal platforms to enhance cooperation on priority sectors such as trade facilitation, multi-modal connectivity, energy cooperation, and sustainable development, among others. These offices can be hosted in various member countries based on their comparative advantages.

Introduction 7

Ambuj Thakur, in Chapter 5, entitled “The BCIM Forum: Tracing the Historical Basis”, has traced the spread of Southern Silk Route in order to establish the historical basis for formation of BCIM. He has described different branches of the Southern Silk Route (SSR) that connected China, Myanmar, Northeast India and Bangladesh even before the Christian era. Using ancient Chinese evidences and writings of the European administrators during the colonial period, he has tried to figure out the routes and nature of trade that existed during ancient and colonial periods along the SSR. Because trade used to flow even in the ancient past along the SSR, which roughly corroborates BCIM-EC, there is no reason as to why such a sub-regional cooperation cannot be feasible now. The age-old connections among the people of this sub-region can be revived through the re-opening of the borders by the BCIM countries. The SSR throughout the past two millennia has acted as a gel to connect Yunnan with South and Southeast Asia. This entire region had no single empire as a controlling power and authority was divided amongst not only individual states and statelets, but also among individual tribes. Local elites and merchants regulated this long-distance trade in various transit points. People of this frontier had never been under the overt cultural and political domination of any of the major valley-based imperial states, and their autonomous existences have strong roots in their collective psyche. Uprooting or assimilating them with majoritarian values will not help. Integration is the best possible way wherein the bigger partner has to concede more to the lesser partner to maintain equilibrium. After all, the people look up to the state for the guarantee of the protection of their life, property, rights and privileges; the insurgencies are representations of collective frustrations over the inefficiency or failure of the state to address such issues. The BCIM-EC follows dot on the footsteps of the SSR. It should not be a missed opportunity to connect the myriad cultures of vibrant ethnic groups through a seamless web of environment-friendly and sustainable mechanisms of economic growth and development. This is why the national governments need to promote the proposed BCIM-EC route to harness such linkages and create a cohesive geo-economic sub-region where the ethnic groups remain the main recipients of development, and shun guns to turn this region from ‘battlefields into marketplaces’. Gurudas Das and Ujjwal Paul, in Chapter 6, entitled “Is BCIMEC Beneficial for India?”, argue that BCIM-EC would not be of

8  Gurudas Das and C. Joshua Thomas

much benefit to India as far as India’s China trade is concerned. Currently, all India–China trade flows through sea routes. As the cost of trade through maritime route is cheaper than the continental BCIM-EC route, India’s trade cost is not going to be lessened anyway. As a result, there is no compelling economic argument for India to promote BCIM-EC. However, there is no doubt that this continental route will pass through India’s Northeast which is relatively backward compared to other regions in the country. BCIM-EC will enable this region to play a role of transit corridor as the production base of the region has remained extremely weak. Although India’s Northeast and China’s Southwest are physically connected, both regions are ‘trade poor’ and contribute insignificant share in Sino-Indian bilateral trade. Moreover, as both the regions have similar resource bases, not much trade potential exists between them. Chen Lijun, in Chapter 7, entitled “BCIM Economic Corridor: A Trade-led Initiative”, has pointed out that BCIM-EC will play a very important role for China in accessing the markets in South Asia. Moreover, all the participating countries will benefit from the corridor as it will be the carrier of growth from China to South Asia and Myanmar where lack of infrastructure has undermined the potential for economic development. While China’s development cannot leave Asia and the world behind, prosperity and stability of Asia and the world also needs China. As the BCIM countries are worlds’ key emerging markets, their strategic status is also important for China. However, their poor infrastructure and low level of connectivity have become the essential obstacles for regional cooperation. Construction of BCIM-EC could give full play to the region’s geographical advantages, speed up the construction of regional international passageways and improve regional traffic conditions. This will be helpful to shorten the distance among the four countries and reduce the trade and logistics cost. The author feels that speeding up the construction of the economic corridor will not only be beneficial to connect the markets in the BCIM countries effectively but will also promote economic communication and upgrade the level of regional cooperation. It will help in attracting foreign capital and technology in the BCIM region to explore the rich natural resources and create a huge investment and consumption demand and promote regional economic development. He has advocated for a trade-led sub-regional cooperation among the BCIM countries.

Introduction 9

Mahfuz Kabir and Nazmul Arifeen, in Chapter 8, entitled “Trade and Investment along BCIM Economic Corridor: Realising Sustainable Economic Returns”, have observed that as far as intra-BCIM trade is concerned, China is the net exporter. Although, except Myanmar, Chinese FDI in other BCIM countries is not yet significant, but with BCIM-EC getting momentum, investible fund is expected to move to the member countries. Given the trade and investment potential within the BCIM Economic Corridor, only FTA in the BCIM region will negatively impact the economies of the countries other than China; but FTA and 10 percent reduction of transport cost would bring benefit to all members. Therefore, the foremost priority of the BCIM region should be taking up projects to ensure better physical connectivity primarily through land borders. To realise the optimum potential of the economic corridor, respective countries ought to focus on establishing special industrial zones along the corridor with processing facilities, manufacturing, providing other logistic industrial support and taking up projects on infrastructure development in the sub-region. Establishing SEZs or EPZs along the proposed corridor would speed up trade between and among the sub-regional countries. This would bring multiple benefits for the members, since the regions along proposed corridor are lagging and peripheral compared to the economic centres of the respective countries. Physical connectivity would be at the heart of closer economic ties within BCIM, which would foster development of the lagging regions like Northeastern states of India and parts of Myanmar and Yunnan province of China. Bangladesh would also derive considerable benefit through higher trade in the existing value chain due to her comparative advantage particularly in labour-intensive manufacturing. Patricia Uberoi, in Chapter 9, entitled “The BCIM Economic Corridor: Does It Subsume the BCIM Regional Cooperation Forum?”, has traced the transformation of the BCIM movement from Track II to Track I and explained the role of Yunnan Province in sustaining campaign for cementing this sub-regional cooperation as part of China’s “South West Development Programme”. While China allowed Yunnan, the bordering province, to take the lead role in forging cross-border sub-regional cooperation programmes, India’s Northeastern states, having 98 percent international borders with the neighbouring countries and only 2 percent with the mainland India, have not even consulted in framing the neighbourhood

10  Gurudas Das and C. Joshua Thomas

policy. Not only has the Look East Policy, being mainly maritime trade driven, bypassed Northeastern region, the inordinate delay in making the continental route has made the region only a passive onlooker. Moreover, Uberoi noted that even the region was excluded from India–China State/Provincial Leaders’ Forum (ICSPL), a vehicle for cross-border development cooperation, ostensibly owing to unresolved inter-state boundary that passes through this region. Uberoi advocates for a greater say of the Indian states in the conduct of national foreign policy as ‘responsible stakeholders’, especially on issues that affect them directly, without undermining larger national interests. As far as the Indian participation in BCIM Economic Corridor is concerned, Uberoi is of the view that India should show active interest in this sub-regional development programme as it will help in opening up India’s Northeastern region. She also advocated that in spite of the fact that the movement has transformed from Track II to Track I dialogue, both the initiatives should continue to work as they reinforce each other. C. Joshua Thomas, in Chapter 10, entitled “BCIM Economic Corridor: Opportunities, Obstacles, Options and the Road Ahead”, has focused on the opportunities and obstacles of forging the BCIM cooperation. The author argues that BCIM sub-regional cooperation has the potential to promote growth in Southwest China, Bangladesh, Myanmar and Northeast India by way of utilising the complementarities of these regions. China can provide the manufacturing inputs, India can provide the services, Bangladesh can provide cheap labour and Myanmar and Northeast India can provide natural resources. The mobilisation of these cross-border synergies is destined to make the BCIM as one of the economically vibrant zones that can transform the landlocked NER and Southwest China into landlinked areas through the development of cross-border connectivity. It can also harmonise the resources and markets across the borders and strengthen the forces of industrialisation in Myanmar and Bangladesh. The seamless connectivity across the border within BCIM will not only break the isolation of India’s Northeastern region and Southwest China but also facilitate them to grow according to their comparative advantage in all four countries of the BCIM forum. However, India perceives it would be the least gainer given the present state of economic preparedness of the Northeast region vis-à-vis the other members of BCIM, especially China. As a result, India is not showing much interest to take

Introduction 11

the initiative forward. The author has also outlined the alternative options before India which might be pondered for foreign policy making. Of the three alternatives, full-scale participation, not participating at all, and guarded participation – the author suggests for the third alternative. Rakhee Bhattacharya, in Chapter 11, entitled “Northeast India in BCIM Economic Corridor: Rhetoric and Reality”, argues that India could benefit from BCIM Economic Corridor if Northeastern Region can act as an equal partner of the sub-regional cooperation. To make Northeast an equal partner, its economy has to be revamped and its market has to be made competitive and efficient rather than making use of it as a transit route and dumping ground for goods produced in the mainland. Presently, unlike other hill states like Uttarakhand and Himachal Pradesh, the levels of industry, employment and investment within Northeast do not reflect competitiveness. In spite of being strategically important, the region has remained economically underdeveloped. The author argues that BCIM sub-regional cooperation would not only trigger development of Northeast but also help in alleviating regional tensions as it would make conflict too costly. As a result, the traditional market structures of Northeast need to be connected and revamped in terms of size, productivity and linkage. Once infrastructure, market, congenial industry and other public utilities are ensured, the region would gain in relation with the neighbours. Mercantile trade, cross-border projects and FDI inflow would also grow over time triggering the process of development which is not possible within the framework of national economy. Subir Bhaumik, in Chapter 12, entitled “ ‘Northeast’ in India’s ‘Act East’: A Reality Check”, has focused on the considerable hurdles encountered in carrying forward India’s “Look East” through Northeast. Difficult physical terrain, the history of violent conflicts in the region and its immediate neighbourhood which remains volatile and the poor state of transport infrastructure and local industries in Northeast India and Myanmar, through which India has to access other ASEAN countries by land – all these have made cross-border trade and economic cooperation difficult. In view of these, it will never be easy for India to ‘look east’ through its Northeast which opens into the conflict-ridden, poorly developed areas of Myanmar, mostly located on difficult physical terrain. Therefore it is argued that in spite of Northeast being the land bridge to Southeast Asia, India and its economy will largely have to ‘look east’

12  Gurudas Das and C. Joshua Thomas

through the sea into Southeast Asia for trade and human movement for a wide variety of reasons. However, it makes definite logistic and economic sense to try using the Northeast to open out to Southwest China, which, unlike Southeast Asia, is landlocked, either through the Stillwell Road or proposed BCIM Economic Corridor. Security concerns, especially related to Chinese military presence and China’s growing influence in Myanmar, tend to hold back India in precisely going ahead with the initiatives that are needed for the “Look East” policy to deliver the desired results for India’s Northeast. If India’s “Look East” through land does not connect to China, which is the leading economy of Asia, it is destined to fail to serve the interest of India’s Northeast. India’s manufacturing sector, which has been averse to invest in Northeast, may only move into the region if the proposed BCIM Economic Corridor opens up and gives it easy physical connectivity to the huge Chinese market. From its current production bases, it makes much more sense for Indian manufacturers to connect to Southeast Asian markets by sea. Only if they want to access the Chinese market does a production base in Northeast India and export through the land route become important because the sea route to China’s eastern ports is long and uneconomic. Unless this reality is taken note of, limiting India’s “Look East” through Northeast to Southeast Asia will be self-defeating. Prabir De, in Chapter 13, entitled “BCIM Economic Corridor and Northeast India: Need for Inclusive Development Agenda”, has argued that weak connectivity of India’s Northeast with rest of India on the one hand and neighbouring countries on the other has remained as a serious deterrent to India’s engagement with East and Southeast Asia. Re-engaging with East by way of building logistics and infrastructure has, therefore, become the primary objective of India’s Act East Policy (AEP). The author has noted that connectivity is important, but converting the connectivity corridor into an economic corridor is the main challenge. The newly launched AEP outlines an ambitious plan for building economic corridors, linking India with Southeast Asia and China. The Government of India has been working with ASEAN to enhance physical connectivity via India’s Northeast and the eastern seaboard. The India-Myanmar-Thailand Trilateral Highway, which is under implementation would dramatically reduce travel time across borders and would open up numerous cross-border opportunities for trade and investment. Industrial clusters located along the connectivity corridor could emerge as economic nodes. In the same way, a BCIM-EC that

Introduction 13

envisages linking Kolkata with Kunming would facilitate investments in the sub-region, more importantly in India’s most recent ‘Make-in-India’ initiatives. The author suggested that ASEAN-India as well as BCIM-EC countries should negotiate and finalise a regional transit transport agreement for Trilateral Highway and BCIM-EC respectively. These proposed agreements will allow vehicles to move seamlessly for regional and international trade transportation purposes. This is the ‘software’ that is needed in order to operate the ‘hardware’ – the Trilateral Highway and BCIM-EC. Through this agreement, we could identify modalities of transportation, introduce operating procedures for vehicles to travel on the highway, and set up the rule book for public utilities. The author has pointed out that the success of any regional connectivity projects will depend on how strong the backend integration is. At present the backend integration in most physical connectivity is relatively weak in India. Backend integration with national connectivity projects is therefore essential in order to reap the benefits of growing economic linkages between India and Southeast and East Asia. Chaw Chaw Sein, in Chapter 14, entitled “Can New Myanmar Contribute to BCIM Integration?”, observed that Myanmar, being the geo-strategic link between South Asia, Southeast Asia and China, would play a unique role in BCIM. Her geo-strategic importance arising out of sharing borders with Bangladesh, China, India, Laos and Thailand enable her to participate in a wide array of subregional cooperation. Although much of the existing cross-border connectivity and logistic infrastructure grew with the Yunnan Province of China and Thailand, the development of physical connectivity is being pursued at a faster pace with both Bangladesh and India. Myanmar hopes to spin around her geo-strategic importance by embracing investment from all the neighbouring countries including Japan. Given the shift in the global focus from Trans-Atlantic to Asia-Pacific, caught between two huge economic powers – China and India and being the meeting point of China’s Outward Policy on the one hand and India’s Look East Policy on the other – with winds of political change blowing, Myanmar is poised for growth. Anasua Basu Ray Chaudhury, in Chapter 15, entitled “BCIM Sub-regional Economic Corridor: Will It Be a Game Changer?”, suggested that BCIM-EC should follow the footprints of GMS – one of the most successful forums for sub-regional cooperation. She mapped out the detail nodes of physical connectivity from Kolkata

14  Gurudas Das and C. Joshua Thomas

to Kunming and has noted the sluggish progress in cross-border connectivity. She feels that competitive geo-political goals between the two large partners – India and China – is undermining the geoeconomic opportunities likely to arise from sub-regional cooperation among the BCIM countries. From India’s perspective, two reasons are pointed out in regard to her Sino-phobia. One, the concerns that opening up of the Northeast would flood the Indian markets with Chinese goods and two, that the same prospect would make the Northeastern border security vulnerable. Many believe that it is part of Chinese policy to keep the border issues unresolved, wean away Nepal, Bangladesh and Myanmar and arm Pakistan, thereby limiting India’s influence in the subcontinent. Unlike China, geo-political and geo-economic goals of Myanmar and Bangladesh do converge with India. With the political and constitutional changes that have taken place, Myanmar is keen to balance its position with other countries and reduce its reliance on Beijing. There are in fact several areas of convergence between India and Myanmar with regard to energy investments, geo-strategic and maritime security. Indian policy with respect to Bangladesh is vital as India shares the longest border with the latter and also because it is often acknowledged that “India’s northeast is Bangladeshlocked”. Against this backdrop utilisation of Chittagong, Kolkata and Haldia ports for enabling the exchange of both trade and passenger movement is of paramount importance. It is also important that India gets access to Bangladesh corridor for moving goods to the Northeastern region. However, neither India nor China could reach the growth climax without the help of each other. As a result, India and China need not fear each other, as it is not ‘India or China’ but ‘India and China’ which would redefine the global economy. As the BCIM is still in its formative stage the potential for developing the border into a transnational form of cross-border governance may be kept in mind without in any way affecting the territorial foundation of states and existing state boundaries. Here the experiences of the GMS can help the BCIM states to understand the dynamics of geographical proximity over historical disputes. Ishani Naskar, in Chapter 16, entitled “The BCIM Corridor: Geoeconomic Prospects”, has observed that the idea of economic corridor has become extremely crucial for the promotion of regional trade. To start with, transport corridors form the backbone of

Introduction 15

regional connectivity and later, they mature into economic corridors by harnessing the economic potential of the region. Economic corridors are then expected to facilitate integration of the region. As the BCIM Economic Corridor is proposed to cover India’s landlocked Northeastern states and China’s landlocked Southwestern province of Yunnan along with two Bay of Bengal littoral countries of Bangladesh and Mynamar, the latter two can act as the gateway of the former two and thereby can enhance the aggregate welfare of the entire grouping. The author has suggested that like China’s Yunnan Province, which is being developed as a bridgehead for trade and commerce with the neighbouring countries, India’s Northeast also needs to be developed. The author then singles out three major benefits of BCIM: First it will boost this geographical region that is also home to another sub-regional arrangement – the Bay of Bengal Initiative for Multi-sectoral Economic Cooperation (BIMSTEC). In a way it will provide a platform for bridging South Asia with Southeast Asia. Second, the fructification of the BCIM Economic Corridor will help provide a fillip to India’s enthusiastic Act East Policy – an indispensable element of which is connectivity across borders. Third, it is expected to open up the economies of the states of the Northeast and their integration with the neighbouring regions. Liu Peng, in Chapter 17, entitled “One More Step from Temporary to Permanent: BCIM Sub-regional Cooperation and Its Institutional Platform”, has portrayed the position of the four countries in relation to the creation of BCIM-EC. While China is pressing the project forward and Bangladesh is providing full support, the new government in Myanmar is not sure about its implementation given the role of the ethno-national groups in northern part of the country and India is found to suffer from ambiguity and not much interested. While the initiative at the level of sub-regional cooperation enjoyed flexibility and openness as the members of think tanks in all the countries could exchange their views freely, once it is upgraded to Track I, a lot of anxieties have also crept in. The idea of a corridor has remained to be defined besides clear-cut articulation as to how the connectivity projects will be financed. The author argues in favour of a step-by-step approach on the part of China to institutionalise the BCIM-EC. First, cementing Sino-Myanmar cooperation; second, creation of Sino–Myanmar–Bangladesh cooperation; and then finally go for Sino–Myanmar–Bangladesh–India sub-regional cooperation.

16  Gurudas Das and C. Joshua Thomas

Nimmi Kurian, in Chapter 18, entitled “BCIM Sustainability Dialogue(s): A Network Approach to Capacity Building”, has brought the concerns regarding ecological sustainability onto the sub-regional agenda. The BCIM region is richly endowed with an immense wealth of biodiversity, which emanates from and thrives upon traditional ecological knowledge and has economic, social, cultural and ethical dimensions. Conservation of ecological balance will present common challenges and opportunities that the BCIM region will need to collectively address. Resource degradation has become a common feature afflicting the region and interventions that do not respect the supply potential of mountain ecologies are creating and reinforcing interlocking webs of environmental and socio-economic vulnerability. While an economic narrative is valuable as a driver of sub-regional integration, can the heady vision of prosperity lead to a transformation of environmental geographies? The author has observed that although there has been a growing recognition of the need for sub-regional cooperation within the BCIM region, there have been limited collective learning opportunities to share information, experiences and lessons on sustainable development. She has advocated for issue-based convergence in the sub-regional neighbourhood on a range of regional public goods. The author felt that strengthening capacity building within the BCIM sub-region needs to be prioritised as a strategic requirement with a focus on the direct involvement of border communities as stakeholders in the cross-border resource governance. Sanjay Pulipaka and Saranya Sircar, in Chapter 19, entitled “The BCIM: Understanding the Geo-political Dynamic”, have noted twin dynamics in Asian regionalism. First, the density of regional frameworks in Asia is increasing. Along with regional organisations such as the Association of Southeast Asian Nations (ASEAN), South Asian Association for Regional Cooperation (SAARC), Shanghai Cooperation Organization (SCO), new sub-regional frameworks such as the Bangladesh, Bhutan, India and Nepal (BBIN) have been initiated. The emergence of multiple regional frameworks indicates that countries in Asia are conceptualising new regional initiatives for economic cooperation as well as security considerations. Second, continentalism seems to be the new regional dynamic. The SCO, the Conference on Interaction and Confidence-Building Measures in Asia (CICA), and the Belt and Road initiative suggest that regional cooperative frameworks are increasingly becoming continental. The authors locate the emergence

Introduction 17

of Bangladesh–China–India–Myanmar Forum for Regional Cooperation (BCIM) in this shift from maritime to continental frameworks of regionalism. They focus on the geo-politics of the emergence and successful functioning of the BCIM. While studying big-power politics, the authors have also factored into small powers, other regional frameworks such as the Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation (BIMSTEC), proposed Chinese idea of the Trans-Himalayan Development Forum and Japan’s initiative of the Bay of Bengal Industrial Growth Belt (BIG-B). The study captures the geo-political context impacting the BCIM by way of understanding the shifting regional frameworks, analysing the interactions of rising powers, assessing the needs of small powers and making comparative assessment of the related regional frameworks. W. Lawrence S. Prabhakar, in Chapter 20, entitled “BCIM: The Geo-economics, Geo-politics and the New Contexts of Asia’s Regionalism”, has viewed proposed BCIM as part of Asia’s new regionalism under the leadership of China. Contextualising the BCIM in the Sino-Indian competition for regional power in Asia, he has discussed Chinese motives behind this BCIM-EC initiative. Besides geo-economic ambitions to capture South Asian markets by way of extending connectivity and accessing the natural resources of the region by way of undertaking infrastructural projects, geopolitical goals of making China a two-ocean nation, á la USA, by way of accessing the ports of Myanmar, Bangladesh and India in the Bay of Bengal, encircling India by way of cultivating and alluring its small neighbours, and bringing India’s Northeast under Chinese influence in order to strengthen her claim over Arunachal Pradesh also form the bedrock of China’s BCIM-EC strategy. The author feels that the new regional frameworks like BCIM and One Belt and One Road and their derivatives of the Maritime Silk Road, Silk Road Economic Belt and the China–Pakistan Economic Corridor has essentially been economic-strategic compellance strategies of an ambitious emerging hegemon which is optimising its leverage of economic power, infrastructure and cheque book diplomacy. Rahul Mishra, in Chapter 21, entitled “Evolving Dynamics of India–China Relations: Implications for BCIM”, has argued that while both China and India are rising fast which often put them into a competitive frame, their cooperation is vital for the development of national peripheries. BCIM cooperation is pregnant with immense possibilities for the growth of the laggard regions in both

18  Gurudas Das and C. Joshua Thomas

countries like China’s Southwest and India’s Northeast. The author felt that irritants in India–China bilateral relations like border disputes, Chinese territorial claim over Arunachal Pradesh, etc., might make it difficult for materialising BCIM cooperation. However, the author advocated that both China and India need to look beyond their strained bilateral political relations and focus on the economic synergies in order to promote development of the respective national economies in general and trigger growth in their respective peripheral areas in particular. Haans J. Freddy, in Chapter 22, entitled “China’s Two Regional Framework Narratives: BCIM and CPEC – Comparative Viabilities” has observed that the China–Pakistan Economic Corridor (CPEC) which connects the Pakistani port in Gwadar with Kashgar in Xinjiang, China, has tremendous potential to supply China with energy. It is set to become an important economic corridor which would connect China with the Central Asian region. The port of Gwadar which is not far from the Strait of Hormutz near the Persian Gulf allows the Chinese to monitor the sea lanes of communication through which 60 percent of its crude supply from west Asia is transported to China. This will also help in the reduction of dependence of China on the Straits of Malacca. Moreover, CPEC would enable China to have direct access to the Indian Ocean and beyond, which also would mark a major advance in the influence it has in Central and South Asia. As the world’s largest importer of oil, China’s key concern is its energy security which it seeks to overcome through these overland initiatives which again connect the Gulf and China through a pipeline carrying energy and also cut thousands of kilometres of ocean transportation through Southeast Asia. While there is much gain through the completion of CPEC, there remains a host of issues which pose significant challenges towards this US$46 billion project in the form of insurgency and violence contestations over territory in China, India and Pakistan. While the Uyghur insurgency poses significant threats in the Southwestern province of Xinjiang, the violent activities of Balochistan rebels pose serious challenges to the smooth functioning of the Gwadar port as well as the development of the CPEC. On the Indian front, the Kashmir issue has been a thorn in the flesh where both India and Pakistan have been in recent times engaged in attacking each other. These security threats towards CPEC perhaps led China to propose the BCIM-EC as an alternative land route. It might be a

Introduction 19

win-win situation for both China and India, if India participates in BCIM-EC in return for China’s backing for a land connectivity access to Afghanistan and Middle East. Gurudas Das, in the concluding chapter, entitled “OBOR Architecture and BCIM-EC: An Interplay of Geoeconomics and Geopolitics”, has made an attempt to situate the BCIM-EC within the overall OBOR framework so that India and other South Asian stakeholders can arrive at an informed choice before framing their respective national response to it. He felt that the BCIM-EC sub-regional connectivity project acquires an altogether different dimension once its implications are judged from a holistic perspective rather than the two-decade long legacy of Track II diplomacy for sub-regional cooperation under BCIM Forum would lead us to believe. Although the idea of sub-regional cooperation among these four countries was nurtured and justified on economic grounds by the BCIM Forum since 1999, the proposed BCIM-EC as one of the overland pathways to Chinese Maritime Silk Road (MSR), except drawing a cue from the legacy, has nothing to do with the spirit of the discourse. In fact, the “BCIM” brand popularised by the Forum has conveniently been used to label the overland pathway to MSR as BCIM-EC having more geo-political significance rather than geoeconomic gains from sub-regional cooperation. The author reveals as to how China is utilising its economic strength to widen its sphere of influence across Central Asia, Middle East and Europe by way of investing in Silk Road Economic Belt (SREB) and transforming itself into a Eurasian power. Similarly, he exhibits as to how China is fast becoming a maritime power by way of investing in Maritime Silk Road (MSR) that passes through South China Sea, Indian Ocean, Red Sea and Mediterranean Sea facilitating enhanced control over the Sea Lanes of Communication (SLOC). These twin projects of SREB and MSR, subsumed under OBOR, will not only enable China to derive huge geo-economic gains required for the sustenance of its economic growth but also vastly enlarge her geo-political reach in Asia, Africa and Europe making her the dominant power in the emerging multi-polar world. The author argues that BCIM-EC and CPEC, viewed as the overland pathways to MSR, will provide China the necessary land connectivity to Indian Ocean making her a two-ocean nation. In the event of realisation of BCIM-EC, China will have the strategic advantage vis-à-vis India as it will bring an end to the idea of centrality of India in Indian Ocean and eliminate the traditional

20  Gurudas Das and C. Joshua Thomas

domination of the Indian Navy there. Viewed from geo-political perspective, BCIM-EC, if it materialises, will be the final nail in Chinese policy towards strategic encirclement of India. We are grateful to the Ministry of External Affairs (MEA), Government of India and the Indian Council of Social Science Research (ICSSR), New Delhi, for the financial assistance to hold this event in Shillong, Meghalaya. We are thankful to Ambassador Rajiv Bhatia for delivering the keynote address and the delegates who participated from China, Bangladesh, Myanmar and India. The staff at the ICSSR Northeastern Regional Centre deserves special thanks for their cooperation and assistance in making the event a grand success.

Part I

BCIM sub-regional cooperation

Chapter 1

BCIM

Gurudas Das et al.BCIM

What should be the basis for sub-regional cooperation? Gurudas Das, Tanuj Mathur, Ujjwal Paul and Subodh Chandra Das

Sub-regional cooperation as a strategy for the development of underdeveloped areas is a well-established fact. This type of cooperation may aptly be called mini-multilateralism. However, unlike multilateral cooperation, sub-regional cooperation primarily takes place among the countries having spatial contiguity. The key to success of sub-regional cooperation lies in the unlocking of economic forces, trapped hitherto by the political boundaries of nation states, and mobilising the synergies across the border. As the state-centric security perception of the nation states has deprived the bordering areas of investment in infrastructure, market forces emanating from the process of national growth have bypassed these areas keeping them perpetually underdeveloped. This has made the frontier areas peripheral to the heartlands. As the structure of peripheral economy is ordered by the needs of the heartland, the frontier areas exhibit a kind of dependent development syndrome. Since the mainland productive bases and marketplaces (as in India and China) are far away from the frontier regions, high transportation costs cut into their competitiveness. Peripheral regions, thus, remain out of the orbit of the national programme of industrialisation and hence industrialisation-based development.1 As the market-driven process of growth adds to the spatial imbalance, by way of strengthening the market forces in areas already developed and bypassing the areas which are depressed, globalisation induced national growth in many countries has only widened the development gap between the heartlands and peripheries. This growing disparity has, in turn, led to the birth of regional ideology which at times stands at variance with the national ideology and coached in ethnic sub-nationalism where peripheries are inhabited by minority groups like India’s Northeast, China’s Southwest and

24  Gurudas Das et al.

Myanmar’s Northwest. The failure of the market is often interpreted as the deliberate policy of the majority dominated national governments leading to intensification of tensions between the core and periphery of nations.2 While the state-sponsored-peripheral-growth-efforts in India based on subsidies and additional funding3 has resulted in frustrating growth experience due to widespread cronyism and rent seeking, the Chinese model based on converting the peripheries into core through the development of multi-modal connectivity through sub-regional development and harnessing the cross-border synergies has been a great success. As Bangladesh, China’s Southwest, India’s Northeast and Myanmar (BCIM) have remained relatively underdeveloped, a subregional cooperation among these regions will only help in converging the cross-border synergies for development of all the stakeholders. Before we look into the form and focus of such cooperation, a synoptic view of a few China-led sub-regional cooperation are in order.

Central Asia Regional Economic Cooperation (CAREC) CAREC has emerged as a regional forum by the initiatives of Asian Development Bank (ADB) in the late 1990s to promote economic cooperation among the countries of Central Asia. This forum has brought together ten member countries (Afghanistan, Azerbaijan, People’s Republic of China, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Turkmenistan, Tajikistan and Uzbekistan) and six multilateral institutions (ADB, European Bank for Reconstruction and Development, International Monetary Fund, Islamic Development Bank, United Nations Development Programme and World Bank) in order to achieve the principal goal of development through cooperation as embodied in its motto – Good neighbours, good partners, good prospects. In the last 10 years, CAREC has attracted substantial regional investments and technical assistances primarily from several multilateral funding agencies in the areas of transport, trade facilitation and energy. Since 2001, CAREC has mobilised $27.7 billion of investments and 166 projects to which a sizable share has gone to transport (79 percent) and the rest on the energy (19 percent) and trade facilitation (2 percent). It is evident that CAREC’s strongest area of engagement has been in building transport corridors. CAREC has identified six priority transport corridors spanning

BCIM 25

across Central Asia east to west and north to south with an aim to reduce cross-border bottlenecks and to improve transit and logistical arrangements. The consistent investment and procedural improvement has brought considerable reduction in cost and time of movement of goods. The Corridor Performance Measurement and Monitoring (CPMM) Report (2015) has demonstrated marginal reduction in the border crossing time (9.3 hours) which is a 6 percent improvement year-on-year. The overall average border crossing cost (i.e. fees) has come down from US$186 in 2010 to US$161 in 2015. Moreover, the cost incurred to travel a corridor section per 500 km per 20 tonnes has fallen from US$1,467 in 2013 to US$1,323 in 2015 and the road speed has increased by 1.3 percent and the train speed by 20 percent. This infrastructural improvement has favourably impacted the trade and commerce among the member countries. There has been phenomenal increase in the trade within the group from US$6,341.94 million in 2000 to US$1,17,209.55 million in 2014. Among all the member countries, China occupied the major share in total trade, followed by Kazakhstan and Pakistan (Table 1.1). China has been the biggest exporter of durables, capital equipment and machinery, while Kazakhstan, Mongolia and Kyrgyz Republic have been prime exporters of agricultural goods, minerals and animal products. Thus, CAREC, by and large, has remained as an action-oriented alliance. Its success has resulted from the mutual understanding and consensus build up through works of its technical and senior official committees. Moreover, participation of countries’ technical ministries (transport, energy, finance, etc.), engagement of multilateral funding agencies for resource mobilisation and adoption of priority sector approach have helped in strengthening the Central Asian market.

Greater Mekong Sub-region (GMS) In 1992, six countries viz., Cambodia, the People’s Republic of China (PRC) (Yunnan Province), the Lao’s People Democratic Republic (PDR), Myanmar, Thailand and Vietnam came together to form the Greater Mekong Sub-regional (GMS) cooperation, an activity-based forum that enables the landlocked regions to integrate with the external markets in order to facilitate development of regional infrastructure and reduce the cross-border obstacles to reap the social and economic benefits to the fullest.

26  Gurudas Das et al. Table 1.1  E xport and Import Trade among CAREC Countries (US$ Million) Year Country

2000 Total Exports to C AREC Countries

Afghanistan NA Azerbaijan 44.52 China 1,570.18 Kazakhstan 1,039.47 Kyrgyz 188.06 Republic Mongolia 268.02 a Pakistan NA Tajikistan 111.24 Turkmenistan 146.82 Uzbekistan NA

2014

Total Imports from C AREC Countries

Total Exports to C AREC Countries

Total Imports from C AREC Countries

NA 95.94 1,765.74 311.38 191.99 b

203.87 c 474.50 d 40,557.21 13,074.89 NA

2366.12 f 959.48 27,689.79 9,094.78 1,788.63

5,076.40e 4,185.90 NA NA NA

1,736.37 g 10,001.61 NA NA NA

118.37 NA 367.53 122.68 NA

Source: Compiled from http://wits.worldbank.org, 4 NA = Not available Note: a: Export figures to Afghanistan, Azerbaijan, Kyrgyz Republic, Tajikistan and Turkmenistan not available; b: Import figures from Mongolia not available; c: Export figures to only China and Pakistan are available; d: Import figures from Afghanistan not available; e: Export figures to Afghanistan, Azerbaijan, Tajikistan, Turkmenistan not available; f: Import figures from Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan and Turkmenistan not available; g: Import figures from Afghanistan, Tajikistan and Turkmenistan not available.

To achieve its agenda of growth and development of the subregions, the GMS programme has adopted a three-pronged strategy (3Cs): (1) increasing connectivity through transformation of transit corridors and development of physical infrastructure, (2) improving competitiveness by efficient trade facilitation mechanism and, (3) building a greater sense of community through a programme that addresses social and environmental concerns.5 Over the past two decades, substantial progress has been made by the GMS countries in areas of transport, energy, telecommunications, environment, human resource development, tourism, trade, private sector investment and agriculture. The trade between the GMS member countries has grown substantially from US$5 billion in 1992 to US$413 billion in 2014 (Figure 1.1). Moreover, the cumulative foreign direct investment (FDI) inflows have also seen threefold rise from US$8,491 million for the period 2000–2006 to US$23,490 million for 2007–2012. In fact, among all the GMS

BCIM 27

Figure 1.1  Intra-GMS Trade (US$ Billion) Source: Report on Greater Mekong Sub-region Statistics on Growth, Infrastructure and Trade (2016). Asian Development Bank (ADB) (2016) Greater Mekong Subregion Statistics on Growth, Infrastructure and Trade (Second Edition). Greater Mekong Subregion Eight Economic Corridors Forum, Cambodia. Accessed from https://goo.gl/yElvvm accessed on 12 October 2016

partners China has been the lead investor followed by Thailand and Vietnam within the economic cooperation (Table 1.2). The GMS programme has contributed significantly in enhancing the per capita GDP for all member countries post its formation which on the average rose from US$1,714 in 1992 to US$8,314 in 2014. Further, considerable drop in the procedural delay to export and import of goods has been noticed among the partner countries. For instance, minimum time required to export to Lao PDR was about 55 days in 2005 which has come down to 23 days in 2014 due to improved trade facilitation measures. More evidently three countries under the GMS grouping were ranked among the top 50 countries in the world in logistic performance indices showcasing remarkable improvement in their trade facilitation process. The trade-to-GDP ratio, an indicator of a country’s integration into the world economy, has increased for all GMS countries in the last two decades (Figure 1.2). Besides trade, substantial progress has been made by GMS programmes in the energy sector. Integration of large-scale high-volume grid systems, expansion of power generation capacity, alternative means of power generation and exercise control of energy consumption have been the prime focus of the GMS energy sector programme. Several projects have been undertaken by China to increase Cambodia’s hydropower installed capacity from 20 MW in 2010 to

7 93 0 0 0 0

22 68 10 0 0 0

318

2002

22 76 0 2 0 0

301

2003

40 58 1 1 0 0

429

2004

2 98 0 0 0 0

6379

2005

58 42 0 0 0 0

835

2006

46 39 15 0 0 0

797

2007

71 21 7 0 0 1

1553

2008

50 31 17 1 0 0

543

2009

Source: Report on Greater Mekong Sub-region Statistics on Growth, Infrastructure and Trade (2016) 6

PRC Thailand Vietnam Cambodia Lao PDR Myanmar

229

GMS

% Share

2001

Year

Table 1.2  FDI Inflows in GMS (US$ Million)

79 19 2 0 0 0

12012

2010

90 7 3 0 0 0

5879

2011

67 12 21 0 0 0

2706

2012

Source: Data collected from http://wits.worldbank.org 7

Figure 1.2  Trade-to-GDP Ratio (%)

30  Gurudas Das et al.

3,045 MW by 20242. Similarly, substantial investments have been made by Chinese and Thai firms in Myanmar which holds a potential 40,000 MW of hydropower on its Northeast and Southeast borders.8 In addition, Thailand is expected to supply 3,800 MW of electricity to Lao PDR, 400 MW to Myanmar and 1,900 MW to Cambodia in the coming years.9 Thus, opening of transit corridor, improvement in the regional connectivity and policy and institutional reforms have complemented well in enhancing the trade and commerce among the GMS member countries. The increase in trade has raised the GDP of all GMS member countries which has resulted in ensuring better living standards for their citizens. Increase in government revenues and higher spending on social sector over the last decade precisely reflect the benefits the member countries have reaped from this cooperation.

Greater Tumen Initiative (GTI) With the support of United Nations Development Programme (UNDP), Greater Tumen programme was initiated in 1991 to strengthen the regional cooperation among the four provinces of China: Heilongjiang, Inner Mongolia, Jilin and Liaoning; three provinces of Mongolia: Hentii, Dornod and Sukhbaatar; Eastern port cities of Republic of Korea (ROK): Busan, Ulsan, Gangwon-do and Gyeongsangbuk-do; and Russian eastern territory of Primorsky. Although GTI programme took some time to sort out functional, institutional and spatial challenges, it has become functional since 2005. China was first to realise the importance of this cooperation in boosting the growth of its Northeastern provinces which otherwise lagged behind on several economic and social indicators in comparison to other regional provinces. Similarly, both Mongolia and ROK showed great interest in becoming members, as the former’s economy is largely underdeveloped and was expecting to reap economic benefits with utilisation of their abundant untapped natural resources, while the latter faces huge industrial and energy resource constraints that can be addressed through this mutual cooperation. Russia on the other hand has shown its eagerness by looking at the prospect of resolving its oldest problem related with financing and building of infrastructure and technology in order to access Siberia’s vast mineral base.

BCIM 31

A Strategic Action Plan (SAP, 2006–2015) was envisaged in 2005 that identified five priority sectors: transport, energy, environment, trade and investment and tourism for cooperation among the local governments of the Northeast Asian (NEA) region. The intra-regional trade in the NEA countries has risen threefold from US$470.18 billion in 2003 to US$1,388.94 billion in 2012.10 During 2003–2012, the exports have grown at an annual average rate of 14.4 percent and imports have grown annually at an average rate of 13.4 percent11 within the NEA region. This boost in trade has been an outcome of several initiatives taken up by the GTI members with a purpose of improving the transport corridors. In fact, GTI SAP (2006–2015) has aimed to achieve 10 to 15 percent increase in the cross-border trade through lowering the transportation costs and improving the infrastructure. A number of transport sector projects like Mongolia-China Railway Construction, Modernisation of Zarubino Port, Resuming Hunchun-Makhalino Railway, NEA Ferry Route Infrastructure Framework and Harbor Project in the border between China and North Korea12 were taken up since 2007 in order to facilitate trade within the group. Besides trade and transport sector, in 2007 an energy board was set up to develop energy-related infrastructure and facilitate energy trade among the GTI member countries. To supply stable and secure to the Tumen region, ‘Small Ring’ initiative was taken up in Energy Action Plan 2010–2011, to connect the electric power systems of China, North Korea and Russia. Moreover, China, in order to meet its future energy demand, initiated a project in Mongolia to generate power through uranium, while Republic of Korea has also signed an intergovernmental agreement in 2011 to set up a thermal power station. Tourism has been identified as another area for sub-regional cooperation under GTI. A project for sustainable development of Mt. Baekdu in the Changbai Mountains has been undertaken. Tourism development in Eastern Mongolia regions has also been brought into focus. GTI has emerged as the only multilateral cooperation forum that aims at integrating the regions of NEA. So far GTI has achieved substantial growth in terms of trade and transport. In fact, a study by Tochkov (2015)13 exhibited that provinces under each member country have converged at a decent pace over the past decade. Although its deliverables through energy, tourism and environment

32  Gurudas Das et al.

sectors are yet to offer tangible benefits, GTI’s success has mainly been attributed to the initiatives undertaken in transport and trade facilitation sectors. All three previously cited sub-regional cooperation forums were created to instill the dynamics of growth in hitherto underdeveloped frontier regions. China has successfully used the strategy of sub-regional cooperation as a tool for the development of her peripheral regions which are far away from the main centres of national development. Considerable progress has been made by the partners of sub-regional cooperation during the past two decades. The per capita GDP of all the Chinese provinces participating in GMS, GTI and CAREC forums have exhibited notable increase signifying improvement in living standards. Improvement in transport infrastructure and trade facilitation measures have led to increased volume of trade and investment across the borders of countries joining the sub-regional cooperation forums. This has enabled growth in tourism. Leveraging from the cross-border cooperation, China has also been able to cater, to a large extent, to the mounting energy demands of the bordering regions through integration of a cross-border grid system to enhance power production and supply. The outcomes of these initiatives have immensely benefitted China in reducing the wide economic disparity between the prosperous coastal provinces and less developed Northwestern, Northeastern and Southwestern regions. The proposed BCIM sub-regional cooperation forum is expected to include Yunnan Province of China, Bangladesh, Northeastern Region (NER) of India and Myanmar. All four regions are contiguous and together form one of the most underdeveloped areas in the world. Sub-regional cooperation in them will help in mobilising the cross-border synergies which in turn will promote economic growth in the region á la CAREC, GMS and GTI. But what should be the basis of cooperation? Will it be a trade-led cooperation as hinted in the Track I proposal for BCIM-EC? Or will it be a subregional cooperation as viewed in theTrack II deliberations?

Can BCIM be a trade-led cooperation? If the focus of the cooperation lies in the creation of an economic corridor as it is implicitly suggested by the 2013 declaration, what will be the likely impact on the economies of the partner countries? A trade-oriented BCIM cooperation appears to be beneficial mainly

BCIM 33

for China as her share in intra-BCIM total trade currently exceeds 46 percent (Table 1.3 and Figure 1.3) and Chinese exports constitute about 77.44 percent of intra-BCIM total exports (Table 1.4). While the overall trend during the period 2000–2015 exhibits a consistent rise in China’s intra-BCIM export, her import trend is found to be declining indicating the competitive character of the Chinese economy vis-à-vis other BCIM countries. This is evident from the fact that China is the only country within BCIM which is having positive balance of trade in all these years (2000–2015). Table 1.3  Trade Pattern within BCIM Country’s share in intra-BCIM total trade Year

2000

2005

2010

2015

Bangladesh China India Myanmar

18.48 41.98 31.09 8.45

10.28 45.60 40.29 3.82

9.16 46.62 40.38 3.84

9.60 46.39 36.35 7.64

Source: Compiled from http://wits.worldbank.org, 14 www.dhakachamber.com, 15 www.bb.org.bd 16

Figure 1.3  Trend in Country Share in Intra-BCIM Trade Source: Compiled from http://wits.worldbank.org, 17 www.dhakachamber.com, 18 www.bb.org.bd 19

2005

2010

2015

2000

2005

2010

Trade Balance (US$ Million) 2015

Source: Compiled from http://wits.worldbank.org, 20 www.dhakachamber.com, 21 www.bb.org.bd 22

Bangladesh 2.17 0.83 0.85 1.40 32.87 18.15 16.71 15.98 −1744.18 −4679.17 −13122.30 −17,968.2 China 59.43 55.03 68.41 77.44 26.57 37.76 26.82 16.03 1,459.63 2,152.65 29,097.30 62,095.28 India 31.23 40.45 27.71 15.15 30.97 40.15 51.90 52.00 −190.99 −1,739.09 −22,000.00 −47,302.31 Myanmar 7.17 3.69 3.03 6.01 9.59 3.94 4.56 9.17 −183.77 −232.55 −1,489.01 −3,986.39

2015

2000

2010

2000

2005

Intra-BCIM Import (%)

Intra-BCIM Export (%)

Table 1.4  Country Share in Intra-BCIM Exports and Imports and Quantum of Trade Balance

BCIM 35

Although India shares about 36 percent of intra-BCIM trade, much of it constitutes her imports from the partner countries, particularly from China. Unlike China, while India’s share in intra-BCIM total export is declining since 2005, her import share continues to surge since 2000. In fact, India alone shares more than 50 percent of the intra-BCIM import. Except Bangladesh, India is having deficit balance of trade with both China and Myanmar. The magnitude of India’s deficit trade balance in intra-BCIM trade stands at a hooping sum of US$47,302.60 million in 2015. In fact, India’s deficit balance of trade vis-à-vis China in 2015– 2016 stood at US$52,696.48 million which surpasses her intraBCIM trade deficit. The latter has come down as India enjoyed positive balance of trade with both Bangladesh (US$5,307.79 million) and Myanmar (US$86.38 million). It may be pointed out that while the India–Bangladesh bilateral trade generally runs in India’s favour, India-Myanmar trade usually runs in favour of Myanmar. It is exceptional that India had positive trade balance in the reporting year (2015–2016). However, one might keep in mind that IndiaMyanmar bilateral trade is not as robust as India–Bangladesh bilateral trade. While China and India remain the economic powerhouses (Figure 1.4), in what way would the smaller countries like Bangladesh and Myanmar be benefited from trade-led BCIM? Let us consider the case of Bangladesh first which experiences deficit balance of trade with all three other partners in BCIM except marginal positive trade balance vis-à-vis Myanmar during 2014 and 2015. As a net importer within BCIM, Bangladesh currently

Figure 1.4  Country Share in Intra-BCIM Exports and Imports Source: Compiled from http://wits.worldbank.org, 23 www.dhakachamber.com, 24 www.bb.org.bd 25

36  Gurudas Das et al.

imports more from China than India. Her deficit trade balance with China is 2.68 times more than that of India. In fact Chinese market is increasingly becoming a cheaper substitute than India for the importers of Bangladesh. Since 2004, imports from China in Bangladesh started surpassing imports from India and the gap continues to widen over time. Unlike Bangladesh, Myanmar usually enjoys positive balance of trade with both India and Bangladesh. It might be noted that Myanmar’s trade within BCIM is China-centric. Her trade with China in 2015 was 7.85 times higher than that of India. In spite of being neighbours, bilateral trade between Myanmar and Bangladesh has perpetually remained very low. In fact, Mynamar’s trade with China is more than 300 times that of Bangladesh. Except 2014, during the reporting period 2000–2015, Myanmar all along experienced deficit balance of trade vis-à-vis China. Thus, all three partners of BCIM, Bangladesh, India and Myanmar have a deficit balance of trade with China. This indicates that China has the competitive edge in production and hence Chinese firms are more efficient compared to the national firms in three partner countries. A trade-led BCIM cooperation might encourage the forces of market to de-industrialise in the partner countries at the cost of concentration of manufacturing in China. Although from consumers’ welfare point of view, goods should be produced by those who are efficient and hence competitive, but this maxim based on economic rationality may not, in all cases, serve the nationalistic interest well where self-reliance and self-sufficiency in certain sectors are considered to be politically and strategically desirable. Income and employment of the citizens are other concerns for which national governments support firms operating even at sub-optimal level. A trade-led framework would have been beneficial for all the partner countries in BCIM had there been a strong global value chain link among the firms in these countries in general and between the firms in China on the one hand and firms in India, Bangladesh and Myanmar on the other. This global value chain linkage would have created some sort of regional specialisation in the partner countries which would have been beneficial for all. Be that as it may, given the present circumstances, a trade-led BCIM appears to benefit only China while others would have hardly anything to gain.

BCIM 37

Can BCIM be a project-led cooperation? Instead of trade-led cooperation, a project-led cooperation based on the proportional sharing principle might prove to be a win-win situation for all the partners of BCIM. Because China’s Southwest, India’s Northeast and Myanmar are rich in natural resources including hydro-carbons and surface water, generation and marketing of power, which requires huge investment and cutting-edge technology and has a huge demand in most of the partner countries, might be considered to be a point of convergence. In fact, meeting the growing energy requirement in a cost-effective, sustainable and environment-friendly manner is one of the primary concerns of all the BCIM nations. Except for Myanmar, no other country in this grouping is in a position to meet its energy requirement from domestic sources, yet there are very little energy resources that are traded within the region leaving much of it untapped or underdeveloped. Regional energy cooperation especially for coal, natural gas and hydropower could go a long way in cementing the grouping by way of ensuring energy security of the importing countries while adding to economic development of the energy exporting countries – offering a win-win condition for all. It is evident from Table 1.5 that while the energy demand of the BCIM countries will almost double by another 20 years, the requirement of Bangladesh will rise by 2.63-fold, for China by 1.63 fold, for India 2.66 fold, and for Myanmar 1.18 fold. Thus, given the demand, production and trade in energy in the BCIM region will be of immense benefit to all the parties. Table 1.5  Energy Indicators of BCIM Countries for 2014 Country

Population GDP Energy prod. Net Energy (million) (billion (GW) imports Forecast for 2010 US$) (GW) 2035 (GW)

Bangladesh China India Myanmar

159.08 1,364.27 1,295.29 53.44

147.00 8,230.12 2,195.65 66.24

39.11 3,442.68 719.32 34.09

8.10 674.35 384.64 −9.64

103.02 5,600.05 1,913.90 40.22

Total

2,794.89

6,026.40

4,141.57

941.34

7,657.21

Source: Compiled from www.iea.org/publications/freepublications/publication/ KeyWorld_Statistics_2015.pdf 26 www.adb.org/sites/default/files/publication/30429/energy-outlook.pdf 27

38  Gurudas Das et al.

A mapping of energy resources reveals a huge potential for both thermal and hydropower in the BCIM region. The amount of confirmed reserve of coal in the BCIM countries stands at 179,154 million tons and about 43.64 percent of it lies in the BCIM region (Tables 1.6–1.7). Within the BCIM region, the maximum reserves (92 percent) are lying with Yunnan Province. While China, the world’s second largest emitter of CO2, is gradually moving away from coal-burn thermal energy, Bangladesh could make use of this coal as she is expanding her thermal power generation capacity based on imports of coal. Moreover, as China’s national policy to install coal-based thermal power plants elsewhere and then draw the electricity through transmission grids fits well with Bangladesh’s power generation plan, considerable Chinese investments may find their way to Bangladesh in coal-fired energy generation activities. Similarly, about 13.92 percent of the total crude oil reserves of the BCIM countries is located in the BCIM region (Tables 1.6–1.7). About 98 percent of the regional reserve is located in Northeastern Region of India (Table 1.6). In the case of natural gas, the BCIM region shares about 14.63 percent of total reserve available in the BCIM countries (Tables 1.6–1.7). The maximum reserve occurs in Myanmar followed by Northeastern Region of India and Bangladesh. In fact, Yunnan province of China does not have any significant reserves of oil and natural gas (Table 1.7). What is most important is that about half of the hydropower potential of the BCIM countries lies with the BCIM region. To be precise, about 42.20 percent of the total hydropower potential of these four countries is concentrated in the BCIM region with Myanmar having the highest potential followed by Yunnan Province of China and Northeast Region of India (Table 1.7). Bangladesh, being the lower riparian country, does not have much hydropower potential. While all these four conventional energy resources are converted into units of power, it is evident that the BCIM region shares 37.87 percent of total power potential of the four countries taken together, indicating a huge opportunity for subregional cooperation for its harnessing. As the rivers flow across the countries, construction of hydroelectric dams by the upstream countries will affect the water flow to the downstream countries leading to generation of regional tensions. When the same dams are erected taking all the parties on board through regional/sub-regional cooperation, the feeling of deprivation disappears. Moreover, energy is the primary critical input for industrial activities. Once the BCIM region becomes a surplus energy producer, other economic initiatives

3,565 1,14,500 60,600 489

179,154 (1,66,494.5)

Bangladesh China India Myanmar

Total 28

3,916.64 (10,260.2)

158 (209.76) 2,545.26 (8,439.49) 969.38 (1,286.97) 244 (323.94)

Natural Gas (Mtoe)

3,664 (4,860.41)

3 (2.78) 2,856 (3791.69) 798 (1,059.44) 7 (6.50)

Crude Oil (million ton)

572.92

1.8 282.42 188.7 100

Hydro power (GW)

31

182,188

3,527.34 118,922.8 58,852.99 884.88

Total (GW)

30

Notes: Figure within parentheses represent Giga watts of power. Various conversion formulae used for compiling the table are: 1 million barrels of oil equivalent = 0.14 Mtoe, 1 bcm = 0.84 Mtoe, 1 Mtoe = 11,630 GWh, 1 ton of coal equivalent = 0.0081 Giga watt hours (GWh), 1 GW = 1 GWh/8,760

29

Source: World Energy Council, World energy council. Alam and Islam (2015), World Energy Council, Zhenming (2011), Hennig et al. (2013), 32 Ministry of coal, Govt. of India, 33 FICCI, 34 ADB (2014), 35 OXFAM (2015). 36

(3,313) (1,06,409.19) (1,556,317.88) (454.44)

Coal (million ton)

Country

Table 1.6  Selective Energy Resources in BCIM Countries

3,565 67,000 1,597 489

72,651 (67,517.32)

Bangladesh China (Yunnan) India (NER) Myanmar

Total

573 (760.72)

158 (209.76) – 171 (227.02) 244 (323.94)

Natural Gas (Mtoe)

510 (473.96)

3 (2.78) – 500 (464.66) 7 (6.50)

Crude Oil (million ton)

68,993.8

3,527.34 62,355.63 2,225.83 884.88

  1.8  90  50 100 241.8

Total (GW)

Hydro power (GW)

Notes: Figure within parentheses represent Giga watt of power. Various conversion formulae: used for compiling the table are: 1 million barrels of oil equivalent = 0.14 Mtoe, 1 bcm = 0.84 Mtoe, 1 Mtoe = 11,630 GWh, 1 ton of coal equivalent = 0.0081 gigawatt hours (GWh), 1 GW = 1 GWh/8,760

Source: World energy council 2013 accessed from www.worldenergy.org/wp-content/uploads/2013/09/Complete_WER_2013_Survey. pdf. 37 Alam and Islam (2015), 38 World Energy Council, 39 Zhenming (2011), 40 Hennig et al. (2013), 41 Ministry of coal, 42 Govt. of India, FICCI, 43 ADB (2014), 44 OXFAM (2015). 45

(3,313) (62,265.63) (1,484.15) (454.44)

Coal (million ton)

Country

Table 1.7  Selective Energy Resources in BCIM Region

BCIM 41

will find a favourable environment for their sustenance and growth which will then trigger the process of regional development.

Conclusion Regional/sub-regional cooperation can have many forms. Economic corridor approach is one of them which has been conceptualised by the Asian Development Bank in the context of regional cooperation programme under GMS during the 1990s. In this approach, two or more urban centres are connected through multi-modal transport links and necessary logistics are created along the route. Transportation links reduce transport cost and help in promoting trade facilitation resulting in higher volume of trade between the two nodes. Areas through which the transport corridor passes are also integrated and reap benefits from new investment in physical infrastructure and tertiary services required to serve the transport corridor. As the impact of the economic corridor is limited to the adjoining areas through which it passes and major gains come from reduced cost of doing trade between nodes, it can be a part of the larger regional/sub-regional cooperation like GMS. If the regional/ sub-regional cooperation under BCIM is to use the cross-border synergies for harnessing energy and other resources, it has to be projectled cooperation. Instead of BCIM Economic Corridor, one should look for BCIM Economic Cooperation á la CAREC, GMS and GTI.

Notes 1 Das, G. and Singh, G. K. (2010). “Development of National Peripheries through Mobilizing Cross-Border Synergies: A Case of Sino-Indian Cooperation for the Development of India’s Northeast and China’s Southwest”. In Das, G. and Thomas, C. J. (eds), India-China: Trade and Strategy for Frontier Development. New Delhi: Bookwell. 2 Ibid. 3 Ibid. 4 World Bank. (Undated). http://wits.worldbank.org/analyticaldata (accessed on 16 September 2016). 5 Asian development Bank (ADB). (2014). “Country Operations Business Plan Myanmar”. https://goo.gl/eh32j4 (accessed on 17 September 2016). 6 Asian development Bank (ADB). (2016). “Greater Mekong Subregion Statistics on Growth, Infrastructure, and Trade (Second Edition): Greater Mekong Subregion Eighth Economic Corridors Forum”, Cambodia. https://goo.gl/yEIvvm (accessed on 12 October 2016).

42  Gurudas Das et al. 7 Asian development Bank (ADB). (Undated). http://wits.worldbank.org/ analyticaldata (accessed on 16 September 2016). 8 Urban, F., Nordensvärd, J., Khatri, D. and Wang, Y. (2013). “An Analysis of China’s Investment in the Hydropower Sector in the Greater Mekong Sub-Region”. Environment, Development and Sustainability, 15(2): 301–324. 9 Ibid. 10 Adhikari, R. (2015). Greater Tumen Region Trade Facilitation Study. Beijing, China: United Nations Development Program. https://goo.gl/ wdLaAy (accessed on 22 August 2016). 11 Ibid. 12 Koo, C. M., Lee, H. H. and Yoo, D. (2011). “Northeast Asian Economic Cooperation: Assessment and Prospects of the Greater Tumen Initiative”. https://goo.gl/wVbirl (accessed on 12 June 2016). 13 Tochkov, K. (2015). “Regional Integration and Economic Convergence in Northeast Asia: Evidence from the Greater Tumen Initiative”. Journal of Northeast Asia Development, 17: 85–108. 14 World Bank. (Undated). http://databank.worldbank.org/data/reports. aspx (accessed on 19 September 2016). 15 Dhaka Chamber of Commerce and Industry. www.dhakachamber. com/home/Bilateral_Trade (accessed on 22 September 2016). 16 Bangladesh Bank. www.bb.org.bd (accessed on 27 September 2016). 17 Bangladesh Bank. (Undated). http://wits.worldbank.org/analyticaldata (accessed on 16 September 2016). 18 Dhaka Chamber of Commerce and Industry. www.dhakachamber. com/home/Bilateral_Trade (accessed on 22 September 2016) 19 Bangladesh Bank. www.bb.org.bd (accessed on 27 September 2016). 20 Bangladesh Bank. (Undated). http://wits.worldbank.org/analyticaldata (accessed on 16 September 2016). 21 Dhaka Chamber of Commerce and Industry. www.dhakachamber. com/home/Bilateral_Trade (accessed on 22 September 2016). 22 Bangladesh Bank. www.bb.org.bd (accessed on 27 September 2016). 23 Bangladesh Bank. (Undated). http://wits.worldbank.org/analyticaldata (accessed on 16 September 2016). 24 Dhaka Chamber of Commerce and Industry. www.dhakachamber. com/home/Bilateral_Trade (accessed on 22 September 2016). 25 Bangladesh Bank. www.bb.org.bd (accessed on 27 September 2016). 26 International Energy Agency (IEA). “Key World Energy Statistics”. www. iea.org/publications/freepublications/publication/KeyWorld_Statistics_ 2015.pdf 27 Asia Pacific Energy Research Centre (APERC). “Energy Outlook for Asia and the Pacific”. www.adb.org/sites/default/files/publication/30429/ energy-outlook.pdf 28 World energy council 2013. www.worldenergy.org/wp-content/ uploads/2013/09/Complete_WER_2013_Survey.pdf 29 Alam, T. and Islam, R. (2015). “A Paradigm Shift in Bangladesh Energy Sector Towards SDG-7: A Few Insights of Energy Statistics in Bangladesh”. https://goo.gl/wpia3T (accessed on 7 September 2016).

BCIM 43 30 World Energy Council. (2013). “World Energy Resources: 2013 Survey”. http://goo.gl/VVxkZw (accessed on 18 August 2016). 31 Zhenming, Zhu. (2011). “Yunnan Industrial Development Policy and Intermediate Goods Trade with MRBCS”. In Kagami, M. (eds), Intermediate Goods Trade in East Asia: Economic Deeping Through FTAs/ EPAs. https://goo.gl/OECM (accessed on 23 August 2016). 32 Hennig, T., Wang, W., Feng, Y., Ou, X. and He, D. (2013). “Review of Yunnan’s Hydropower Development: Comparing Small and Large Hydropower Projects Regarding Their Environmental Implications and Socio-Economic Consequences”. Renewable and Sustainable Energy Resources, 27: 585–595. 33 Ministry of Coal, Government of India. (2014). “Coal Reserve”. http:// coal.nic.in/content/coal-reserves (accessed on 8 September 2016). 34 Federation of Indian Chambers of Commerce and Industry (FICCI). (Uundated). “Regional Profile”. https://goo.gl/7HdxRn (accessed on 11 August 2016). 35 Asian development Bank (ADB). (2014). “Country Operations Business Plan Myanmar”. https://goo.gl/eh32j4 (accessed on 17 September 2016). 36 Oxfam. (2015). “Gender and Hydropower National Policy Assessment”. https://goo.gl/zUlPkO (accessed on 2 October 2016). 37 World energy council 2013. www.worldenergy.org/wp-content/uploads/ 2013/09/Complete_WER_2013_Survey.pdf 38 Alam, T. and Islam, R. (2015). “A Paradigm Shift in Bangladesh Energy Sector Towards SDG-7: A Few Insights of Energy Statistics in Bangladesh”. https://goo.gl/wpia3T (accessed on 7 September 2016). 39 World Energy Council. (2013). “World Energy Resources: 2013 Survey”. https://goo.gl/VVxkZw (accessed on 18 August 2016). 40 Zhenming, Zhu. (2011). “Yunnan Industrial Development Policy and Intermediate Goods Trade with MRBCS”. In Kagami, M. (eds), Intermediate Goods Trade in East Asia: Economic Deepening Through FTAs/EPAs. https://goo.gl/OECMso (accessed on 23 August 2016). 41 Hennig, T., Wang, W., Feng, Y., Ou, X. and He, D. (2013). “Review of Yunnan’s Hydropower Development: Comparing Small and Large Hydropower Projects Regarding Their Environmental Implications and Socio-Economic Consequences”. Renewable and Sustainable Energy Resources, 27: 585–595. 42 Ministry of Coal, Government of India. (2014). “Coal Reserve”. http:// coal.nic.in/content/coal-reserves (accessed on 8 September 2016). 43 Federation of Indian Chambers of Commerce and Industry (FICCI). (Undated). “Regional Profile”. https://goo.gl/7HdxRn (accessed on 11 August 2016). 44 Asian development Bank (ADB). (2014). “Country Operations Business Plan Myanmar”. https://goo.gl/eh32j4 (accessed on 17 September  2016). 45 Oxfam. (2015). “Gender and Hydropower National Policy Assessment”. https://goo.gl/zUlPkO (accessed on 2 October 2016).

Chapter 2

Potential of BCIM growth area Biswajit Nag and Rahul Nath ChoudhuryPotential of BCIM growth area

Its implication on India–China Trade Biswajit Nag and Rahul Nath Choudhury The significance of regional specialisation has increased with the intense globalisation process and functional economic integration.1 The emergence of regional trading agreements (RTAs) and international fragmentation of production network have given a new dimension to international trading system by removing the international boundaries (through eliminating the tariffs) among the partner countries. Following this path, a new concept of trans-border growth area has evolved during late 1980’s mainly among the East Asian and Southeast Asian countries. Countries having geographical proximities and common factor endowments have come together to form such growth areas. One of such arrangements was initiated in 1999 by Bangladesh, China, India and Myanmar (BCIM). Initially, this forum was referred as Kunming Initiative, and later evolved as BCIM Forum for regional cooperation. It was a ‘Track II’ initiative2 with the aim of enhancing cooperation in the areas of transport, trade, tourism, culture and other sector. The BCIM Forum proposed opening up of Kunming-Kolkata and Kunming-Dhaka roadways for easier and faster movements of goods among the member countries. The forum also proposed removal of various trade barriers and promote trade facilitation among the member countries. Greater participation of private and public sectors to enhance trade ties were also sought by the forum. Various steps were also proposed to develop and enhance cultural ties among the participating nations. In this context it is noteworthy of several investments by India and China in Myanmar to improve the connectivity in the region. As of now, 10 meetings of the BCIM Forum have been concluded since 2006. The BCIM initiatives have gained momentum after the recent visit of Chinese Premier Li Keqiang to India and the conclusion of the first official meeting of the joint study group of the

Potential of BCIM growth area 45

BCIM Economic Corridor on 19 December 2013. The BCIM initiative to develop infrastructural facilities in the region will connect India’s Northeastern (NE) states, Bangladesh, Myanmar and the Chinese province of Yunnan through a long network of roadways, railways, waterways and airways under a proper regulatory framework. However, the first focus of BCIM Forum is to develop an inter-regional road network. It is also claimed to be the cheapest route of trade. It is expected that India will gain considerable market access in the South East Asian countries through Myanmar and China. The economically isolated Northeastern states of India will be integrated with the global trade map. As the Northeastern States of India are demographically and geographically more aligned with Bangladesh, Myanmar and China than its own mainland, close cultural ties are also expected to develop among them. Yunnan Province in Southwest China has a particular interest in establishing links with Assam in India, as this could provide direct access to Indian and western markets, which otherwise would involve a 7,000 km detour via Hong Kong and Singapore. Thus, it is expected that execution of BCIM will be beneficial for all the member nations. As far as India is concerned, the major benefit of this growth area will be enjoyed by Northeastern states. The India-Myanmar-Thailand trilateral highway corridor is expected to be ready by end of 2016 which will dramatically reduce travel time between many points in Northeast India and Upper Myanmar. Various transport corridors connecting India and Myanmar (Tamu-Kalay-Kalewa (with a connectivity upto Imphal), Zokhawthar in Mizoram and Rhi in Chin State of Myanmar, Kaladan Multi-modal Transit Transport Project, etc.) will open up a new gateway to the Northeast as goods can be transported easily to/from ports in Myanmar and Thailand. Various such efforts in BCIM promises to convert transport corridors to economic corridor. Both India and China will be able to have an economic confluence through their joint effort in BCIM area. In this context, the current chapter makes an attempt to analyse the potential of BCIM growth area with special reference to Northeastern states of India. In addition, the chapter also tries to analyse the implications of this growth area on the India–China trade.

Concept of the growth areas The concept of Trans-Border Growth Areas (TBGA) emerged in the studies of international trade in the late 1980s. The trans-border growth areas are also referred as growth triangles or growth

46  Biswajit Nag and Rahul Nath Choudhury

quadrilaterals depending on the shape of the areas involved. Sometimes these areas are also called transnational economic zones. Kumar and Yuan3 defined the growth triangle as a structure to link three areas with different factor endowments and different comparative advantages to form a larger region with greater potential for economic growth. The model involves linking of adjacent areas of different countries with different factors endowments like land; labour and capital with different sources of comparative advantage. These are transnational investment zones that encompass geographically contiguous two or more countries or sub-regions. They exploit the advantages of geographical proximity and economic complementarities. As geographical proximity is often linked with cultural and linguistic affinities, they help the encompassed countries to reduce economic distance and transaction costs.4 This process of integration removes the barriers or bottlenecks involved in the political as well as in the economic system. Governments of various countries come together to remove the policy barriers and provide infrastructural facilities like transportation and telecommunication to the investors. Various incentives to invest in these areas are also offered in this process. The principal objective of the growth areas is to gain competitive advantage in export production. This is basically achieved through a combination of market-oriented public-sector policy and greater private sector investments. This special arrangement is made by the governments of participating countries in the integration process to boost trade among them. Growth areas, however, do not equate to common markets or free trade zones.5 Since its evolution, a large number of growth areas have been developed, especially among the East Asian countries. Some of the major examples of these growth areas are Singapore-Johor-Riau (SIJORI) triangle; the Indonesia-Malaysia-Thailand Growth Triangle (IMT); the East Asian Growth Area (EAGA) involving Sabah, Sarawak and Labuan in Malaysia, North Sulawesi, East Kalimantan and West Kalimantan in Indonesia, the Mindanao region of the Philippines and Brunei; and finally, the Growth Quadrangle of Mainland Southeast Asia, consisting of China’s Yunnan Province, Laos, Thailand and Myanmar.6 Apart from these growth areas, Asian Development Bank (ADB) in 1992 initiated another programme called Greater Mekong Subregion (GMS) economic cooperation programme. It covers six

Potential of BCIM growth area 47

countries situated on the bank of the Mekong River, namely Cambodia, the People’s Republic of China, Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand and Vietnam. Under GMS there are five different growth triangles. First is Cambodia-Laos-Vietnam triangle area, second is Emerald triangle covering Cambodia, Laos and Thailand. Third, the Golden triangle covers Laos, Myanmar and Thailand. Fourth, the Green triangle covers China, Laos and Myanmar. The Golden triangle and the Green triangle together form Golden quadrant. Finally, an unnamed triangle connects China, Laos and Vietnam. This triangle area has not been named as it has not come into focus yet. It is very important to mention that, even though all these growth areas are located in the same region (Mekong Sub-region) the economic implications of these growth areas vary among different countries. The sectors affected by this initiative also vary from country to country. Considerable debate also exists about the policy implications of the growth areas in different regions. Vast literature is available where researchers have investigated the status of the existing growth areas. In these literature suggestions have been forwarded to formulate strategies for the successful operation of the growth areas. Recommendations have also been forwarded about the necessary conditions for the success of the growth area. On the basis of the experience gained from existing growth areas like IMT, BIMP, and SIJORI four factors have been identified as crucial for the successful operation of a growth area. These factors are:7 (a) Economic Complementarities: Fundamentally, the economic complementarities originate from various participating member regions with different phases of development as well as asymmetric distribution of factor endowments. Economic complementarity may also take place due to asymmetry in terms of technology and the quality of human capital endowments available to each participating member in the growth zone. (b) Geographic Proximity: With respect to geographic proximity, many researchers have argued and empirically demonstrated that it plays dominant role for countries to engage in international trade.8 The fact that countries or regions are far apart from each other may entail higher cost of transportation and communication which could otherwise be minimised if they are located at close proximity.

48  Biswajit Nag and Rahul Nath Choudhury

(c) Infrastructure Development: The role of infrastructural development for the success of growth zones cannot be overemphasised. Along with cheap labour cost and international mobility of capital it is also important to establish adequate physical infrastructural facilities like power, roads, ports and harbours. (d) Political Commitment and Policy Coordination: While growth zones may offer more flexibility compared to some of the formal rigid requirements of regional trading blocs, the role of political government and policy coordination is, nevertheless, quit pivotal in the success of growth zones. Various macroeconomic, trade and labour policy directives and initiatives need to be supported and coordinated among the various levels of governments. Implementation of such policies will obligate strong political commitments and, at times may require foregoing some measure of sovereignty.9

Significance of Northeast India in BCIM Only a few studies have been conducted on the economic and policy implications of BCIM initiative as it is still in the nascent stage and yet to be operationalised. The major studies which have made attempts to analyse the prospect of BCIM initiative are Rahman et al.,10 Islam,11 Rahman and Amin,12 De and Bhattacharya.13 These studies have tried to estimate the possible impact of BCIM initiative on India’s trade with other BCIM partners. However, in the current study we will focus on the trade potential of India with China for the products produced in Northeastern states of India. Potential of the Northeastern states of India can be assessed from the available factors which are crucial for the success of a growth area. Figure 2.1 depicts the factors available with all the partners of the BCIM growth area. The countries can gain by concentrating on their own strong areas and exchanging with other partners. Given the ethnic diversity of the Northeastern region, ecological richness and cultural proximity with all the BCIM partners the region will play the vital role in the initiative, once NE borders are opened up for trade under BCIM. It is also argued that the economic backwardness of the landlocked NE states can be addressed only through such strategic initiatives involving the other nearby regions. Along with all these factors it is the geographical location of the region which makes it the centre point of the BCIM.

Potential of BCIM growth area 49 Bangladesh Unskilled Labour Low tech manufacturing Agriculture

BCIM

China Advance technology Strong manufacturing sector Access to world market

India Skilled labour Abandoned natural resources Huge horculture sector Strong service sector Myanmar Port connecvity Natural resources Unskilled labour

Figure 2.1  Characteristics of BCIM Economy Source: Prepared by the author.

Myanmar is the only country in Southeast Asian region with which India’s Northeast shares a land border. This increases the significance of the NE region in India’s Look East Policy as well as in the BCIM. The success of such policy will largely depend on the political and economic relationship between India-Myanmar. The NE region no longer is considered as a remote and backward zone; rather, it has been termed as “gateways of opportunities of international trade and commerce”.14 Some have gone to the extent of maintaining that this new ‘strategic vision’ could be a ‘game-changer’ for Asia, especially because it has the potential to bring together China, India and Southeast Asia.15 Realising the potential and significance, Government of India has undertaken several measures and policy variables for the development of the region.

Potential areas of Northeast (a) Petroleum products Oil and natural gas, coal and limestone stock are some of the major minerals of NE region. Crude oil reserve of Assam is estimated at over 1.3 billion tons and natural gas is estimated at 156 billion cu metres. Assam accounts for about 15 percent of crude oil output and about 50 percent of natural gas of India’s total onshore

50  Biswajit Nag and Rahul Nath Choudhury

production. The total coal reserve in Northeast India was more than 1,500 metres in 2014. (b) Forest resources NE region has huge forest cover. The forests are reserve of commercially useful produces like timber, bamboo, stone, etc., which are used in a variety of industrial units producing wood-based products. The Northeastern region holds about 65 percent of the country’s total estimated stock, which is around 90 million tons. (c) Food processing and agro-based industries Assam produces around 80 percent of the total tea production of India. Assam is also the second largest jute producer of India. The region produces large quantity of pineapple, banana, coconut, jackfruits, litchi, orange, lemon, ginger, turmeric, chillies, pepper, etc. Assam produces three types of silk which includes Eri, Muga and Pat (Mulberry). The Muga Silk which is unique to the state of Assam has very recently obtained Geographical Indication (GI) Certification. (d) Other sectors Each of the NE states have some skill in manufacturing products with low technology which includes basic hand tools, common auto parts, electrical appliances, etc. These sectors can be up-skilled with investment and creating an external market beyond NE states.

Development of possible production network International Production Network is a set of inter-firm relationships that bind a group of firms into a larger economic unit based on supply chains that procure parts/components from a large number of firms located in different countries for final assembly in a separate location as an export base. In a production network or production fragmentation process the production of the same product is disintegrated into different locations from downstream to upstream. By fragmenting production processes into several production units and locating them in appropriate locations with various locational advantages, producers may save a large amount on the total production cost. Fragmentation of the production process

Potential of BCIM growth area 51

also provides the producer with the advantage of producing a product with highly skilled labour and technicians scattered in different locations. It also helps to take advantage of the tax and other incentives given by various governments to attract investments. This process also helps to stimulate the FDI and export of intermediate goods and enhance the inter-industry trade. Theoretically, production fragmentation has also been defined by various economists. Deardorff16 defines fragmentation as the splitting of a production process into two or more steps that can be undertaken in different locations but that lead to the same final product. Fragmentation becomes economical when the cost of service links (SL) connecting production blocks (PB) is low enough. The SL cost includes transport costs, telecommunication costs, and various coordination costs between PBs. SL cost heavily depends on the nature of technology in each industry. The second line of thought is the agglomeration theory. This is an extension of international trade theory with external economies of scale while introducing the concept of ‘space’ from city planning and other academic fields. The third line of thought is the internalisation theory of corporate firms. A firm typically does not conduct everything from upstream to downstream. It sets its upstream-side boundary by purchasing materials or parts from other firms and determines its downstreamside boundary by selling their products to other firms or consumers. Such a boundary-setting decision is here called an internalisation decision. In addition, a firm cuts its internalised activities into thin slices and places these slices at appropriate places. This is called a ‘location decision’. There are three elements that make fragmentation possible. First, there must be production cost saving in fragmented production blocks – the firm must take advantage of differences in location advantages between the original location and a new location. Second, the cost of service links that connect remotely located production blocks, like the costs of transportation, must not be too high. Third, the cost of network set-ups must be small. When the additional cost for setting up a new plant is relatively small, the production process fragments easily. The feasibility of fragmentation, therefore, depends heavily on the nature of technologies in the industry and economic environment. New economic geography and the fragmentation theory provide insights to important factors that determine the location of economic activities in the globalising era. The fragmentation process can further be understood from Figure 2.2.

52  Biswajit Nag and Rahul Nath Choudhury

Before Fragmentation

PB

PB

PB

PB

PB After Fragmentation SL

SL PB

SL PB

PB

PB PB

SL

SL PB: Producon Blocks SL: Service Links

Figure 2.2  Fragmentation of Production Network Source: Adopted from Kimura, F 17

Small and Medium Enterprises (SME) sector Among all the potential sectors discussed above, food processing and agro-based industries has got highest significance for the economic growth of NE region under BCIM initiative. This potential can be tapped building cross-border production links with nearby countries. Globalisation has facilitated the development of crossborder production networks, where a thick network of trade in parts and components forms the superstructure. Large multinational corporations (MNCs) have spearheaded the process of production fragmentation.18 Here, China can emerge as a viable option. Due to the abundance of natural resources and common taste and preference for various products the development of the SME sector in NE region can play a vital role in expanding inter-border production network. Development of a strong SME sector is very much necessary to take advantage of the international fragmentation of the production process. It is important to identify a few industries under SME sector where government needs to focus and develop a favourable policy in this regard. Policymakers can draw policies to develop following industries and export them to China as well as to other South East Asian countries. The region can also be developed

Potential of BCIM growth area 53

as an assembling hub for various manufacturing products which are imported especially from South and East Asian countries. Industries like food processing, jute mill, textile mill, etc., can be developed in NE region as all these have got high export potential in Chinese market. Products like yarn can be imported from China and exported back in the form of finished clothes. NE region produces a variety of fruits. Food processing or juice factories can be developed in the region and export them to the nearby countries. Handicraft industries can also be developed in the region. NE region has traditionally been rich with skilled artisans. The demands for handicraft goods have surged in the international market in the recent time. China can be a ready market for all these products.

Petroleum and petrochemical sector Another important area of possible cooperation is oil and gas exploration. The state of Tripura in Northeastern region and Sylhet region of Bangladesh has large reserves of oil and natural gas. Indian companies can help Bangladesh in exploring and refining activities where China can supply its advance technological knowhow. Indian companies can invest in Bangladesh in producing petroleum products and export it to the South East Asian countries. The large gas reserve can be used by developing the fertiliser industry in the region. Indian companies can be encouraged to invest in Bangladesh and produce fertiliser using the Bangladeshi gas reserve. The fertiliser can be exported to India and other South Asian countries. The gas reserve in the region can also be utilised in gas-based power generation. These developments can follow the pattern of Chinese investment in Vietnam and Singapore investment in Johor. BCIM policy makers can also take lessons in investment from Indonesia which has developed itself as a big investment hub. Around 40 percent of the private investment in Indonesia is sourced from foreign countries.19 Intra-regional FDI may promote industrial growth in BCIM region. Special treatment to FDI with some performance requirements can play a vital role in this regard. Lessons can be learnt from the success story of Indonesia where it offered preferential conditions to FDI in Batam with a provision for 100 percent offshore ownership with 5 percent divestiture after five years. Similarly, Malaysian government has relaxed foreign investment rules and regulations to encourage investment in Johor.

54  Biswajit Nag and Rahul Nath Choudhury

Along with these major sectors, the BCIM region can also focus on the development of production network for products like manmade fibres for textile, paints and plastic products, etc. With the increase in the cost of labour in China and reaching in the higher technological set up, India can tap the opportunity to produce low technological products. Plastic products like buckets, mugs, bottles, furniture and other similar domestic as well as industrial appliances can be produced in Northeast and Bangladesh. These products can further be exported to China and other South East Asian countries via China and Myanmar. With the increase in the construction activities in the NE region as well as in the other BCIM countries the demand for paints, varnish and other similar chemicals are increasing. Indian investors can grab the opportunity and start manufacturing set up in the NE region, while the raw materials can be supplied by Bangladesh. The machinery for the production units can be imported from China. Production chain can also be developed for the machineries, especially hand tools and basic electrical goods such as switches, wires, small pumps, etc., and electronics goods which do not require sophisticated technology such as electronic toys, televisions, telephones, batteries etc. Production of these goods in the NE region can also help to reduce informal trade that takes place through different borders in the region.

Central government’s efforts in developmental activities Rapid development of the NE region is among the foremost priorities of the Central Government. The States of the region have been identified as the Special Category States. The Central Government has been trying to devise concerted ways to fast-track economic growth in the region considering several developmental schemes and programmes. The Central Ministries have been mandated to allocate 10 percent of their plan funds for the development of the NE region. To use the fund effectively government created the Non-Lapsable Central Pool of Resources (NLCPR) in 1997– 1998 (operationalised in 1998–1999) which in another way is the accrual of the unspent balance of the mandatory 10 percent budgetary allocation of the Ministries/Department. The broad objectives of the NLCPR Scheme has been to ensure speedy development of infrastructure by way of filling the existing infrastructural gaps

Potential of BCIM growth area 55

(economic and social) in the region by making funds available from the pool. A special ministry (Ministry of Development of North Eastern Region (DoNER)) was set up for this purpose in 2001 to coordinate and give impetus to the Centre’s development efforts pertaining to socio-economic development of the region. NLCPR, which was initially handled by the Planning Commission, was transferred to DoNER after its creation. DoNER plans and monitors the execution of development schemes/projects of the Northeast Region including roads, power, irrigation and communication. There are several regional organisations with which DoNER has continuous dialogue in developing programmes, financing options and capacity development. North Eastern Council (NEC), North Eastern Development Finance Corporation (NEDFi), North Eastern Regional Agricultural Marketing Corporation (NERAMAC), North Eastern Handlooms & Handicrafts Development Corporation (NEHHDC), etc., are such leading organisations. Apart from this respective state governments are also taking proactive steps towards creating an enabling environment for private investment in productive sectors. There are also several external agencies (such as World Bank, ADB, IFAD) sponsored projects to improve infrastructure facility, productive capacity, management of environment and natural resources, livelihood and agricultural productivity and extension services. All these developmental efforts are reflected in the Planning Commission’s paper on growth strategy for NE region. Government is now not only looking for all round development in the region but also giving importance on fast catching up with the rest of the country. Infrastructure, education, health, productive capacity development, improvement in the governance system are identified as priority sectors. Participation of different regional groups is also included in developing the projects. To assist private sector participation, government introduced a separate industrial policy and identified several priority sectors.

Northeast Industrial and Investment Promotion Policy (NEIIPP) As indicated before, despite several incentives and grants from various sources the economies from the Northeast have not been able to develop a sustainable development model. In this backdrop, central government introduced the Northeast Industrial and Investment

56  Biswajit Nag and Rahul Nath Choudhury

Promotion Policy (NEIIPP), 2007 to attract private sectors in the region so that it increases the degree of economic activity. Central and state governments will concentrate mainly on infrastructure, health and education while it is expected that the private sector will invest in manufacturing and services sectors. NEIIPP 2007 replaced the earlier Northeast Industrial Policy (NEIP) 1997. Several schemes and incentives have been identified for private sector which include excise and income tax exemption, subsidy for capital investment, interest payments, etc. Investment in service sectors also attract several incentives as given in the policy. Some of the priority service sectors are hotels, hospitals, vocational training institutes, etc. Biotechnology and power generation are also identified as important sectors in this context. Transport subsidy schemes are also there. However, DoNER would like to monitor all these schemes to handle moral hazard and adverse selection issues as it is presumed that there may be a significant information gap among the DoNER, state governments and private sectors about the business reality in the region. NEDFi has the responsibility to disburse the subsidy.

India–China trade Both China and India were repeatedly referenced as an example of the world’s most successful story of superior economic growth performance in the recent time period.20 Interestingly, studies have often noted the divergent path of development strategy followed by both countries over the years. India’s growth performance was largely attributed to the human capital-intensive service sector growth; the Chinese growth was largely attributed to the increased rate of savings and investment, higher physical capital deepening in the manufacturing sector and better infrastructure facilities.21 For China, the manufacturing sector has acted as a catalyst of higher economic growth. In the case of Bangladesh low technology manufacturing industries like textiles, jute and a few agricultural products like rice and tea have boosted their economic growth in the recent time. For Myanmar it was raw rubber, fishery products, rice, beans and pulses, etc., which helped it to achieve higher economic growth. All these three nations, especially China, have been big trading partners of India for long time. There has been constant increase in the trade value of India with these countries. In the year 2013, the total trade between India and China was more than US$68 billion, while

Potential of BCIM growth area 57

it was about US$6 billion with Bangladesh and only US$2 billion with Myanmar. Figures 2.3, 2.4 and 2.5 show the trend of Indian export and import with all the BCIM member nations. India has a huge trade deficit with intra-BCIM trade. Trade deficit is positive with Myanmar and Bangladesh while negative with China.

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2009

2010 Bangladesh

2011 China

2012

2013

Myanmar

Figure 2.3  Indian Export to BCIM (US$000) Source: Based on UN Comtrade data

60000 50000 40000 30000 20000 10000 0 2009

2010

2011

Figure 2.4  Indian Import from China (US$000) Source: Based on UN Comtrade data

2012

2013

58  Biswajit Nag and Rahul Nath Choudhury

1600.00 1400.00 1200.00 1000.00 800.00 600.00 400.00 200.00 0.00 2009

2010 Bangladesh

2011

2012

2013

Myanmar

Figure 2.5  Indian Import from Bangladesh and Myanmar (US$000) Source: Based on UN Comtrade data

It is evident from Figure 2.3 that India’s export to China increased substantially in recent times. Exports to Bangladesh are also growing. However, export to Myanmar is yet to pick up despite having a lot of potential. The data shows that between 2009 and 2010 there was a sharp increase in exports from India to China. But, during 2010 to 2012 the value sharply reduced and again increased in 2013. Iron ores, cathodes, cotton, petroleum oils, etc., were the major exporting item of India to China in 2013. In the case of imports India also relied highly upon China during the selected time period between 2009 and 2013. The total import value of India from China has steadily increased from 2009 to 2011. The import value which was only US$30 billion in 2009 has increased to more than US$54 billion in 2011. However, after 2011 a sharp decline is witnessed in the import value. The value reduced to US$51 billion in 2013. India imported only a small amount of products from Bangladesh and Myanmar. In the year 2013 the total import value from Bangladesh was US$0.5 billion and US$1.4 billion from Myanmar. As our current study is focused in NE region, we will try to analyse those products which are produced in the region and have got potential to export in the Chinese market. Table 2.1 points out some of those products which are produced in the NE region and also exported from India to a large extent.

Potential of BCIM growth area 59

Table 2.1 Indian Export to China in 2013 (Major Agricultural Products) (US$000) HS Code

Product Description

Export Value

151530 140420 090420 130219 121190 170199

Castor oil & fractions Cotton linters Fruits of the genera capsicum Vegetable saps & extracts Plants & parts of plants Cane/beet sugar

332,507.4 32,978.4 25,430.7 21,449.2 5,784.8 4,460.7

Source: UN Comtrade

Table 2.1 shows India’s exports to China for some agricultural products which are of some interest to Northeast India. The main product exported in this category from India to China in 2013 was castor oil, followed by cotton linters and fruits and vegetables. Because a huge amount of castor oil and fruits and vegetables are grown in NE region, India can focus on exporting these produce from this region to China arranging free transit from Bangladesh and Myanmar. Investment from China can be encouraged to establish plant to process castor oils into bio-diesel and other products. It will help India to reduce its export cost and China to import them at a cheaper rate. This will also make India more competitive in the Chinese market. This initiative will create a win-win situation for both countries. Therefore, it can be suggested that policymakers in India should concentrate on increasing production of the previously listed products in the NE region and facilitate them to export in Chinese market.22 The data in Table 2.2 reveal that telephones for cellular networks were the most imported products from China in 2013 (among the products highly consumed in NE region). It was followed by other products like antibiotics, television cameras, etc. India can gain by importing these products from China via Bangladesh, which will in turn help to save foreign exchange to a large extent. The Northeast region can also be developed as a manufacturing zone for various low technology electronic products. Instead of exporting the whole products, China can produce some parts and accessories in India. Both Indian and Chinese investors can come forward and form joint ventures in the area.

60  Biswajit Nag and Rahul Nath Choudhury Table 2.2  Indian Import from China in 2013 (US$000’) HS Code

Product Description

Import Value

851712 294190 852580 841510 841480 392690 590390 380893

Telephones for cellular networks Antibiotics & their derivatives Television cameras, digital cameras Window/wall type air-conditioning Air pumps, air/other gas compressor Articles of plastics Textile fabrics impregnated/coated Herbicides, anti-sprouting product

4528,044.30 356,939.32 259,519.89 189,266.40 178,158.85 167,511.09 126,010.87 27,962.69

Source: UN Comtrade

Border trade would help to achieve economic development and also the route between production points of India to the southern district of China via Northeast region is economically viable as it is much shorter than the sea route. Border trade has special significance for the economies of the Northeastern States, as the region shares a large segment of international border on their boundaries. Agro-based industries can be promoted in the NE region to tap the strong agricultural sector. Special arrangements of the tariff rates can also be helpful in enhancing the trade between these two nations. More initiatives like signing a memorandum on expanding Indo-China border trade through Nathula Pass should be encouraged. It is obvious that both India and China will gain from the BCIM initiative. However, India’s gain will be larger in case of import as it imports a very large and diverse quantity of products from China. The NE region will benefit from the initiative by focusing on the products which are in high demand in Chinese market.

Conclusion The study analysed the potential for India–China trade under the BCIM initiative. Various factors which are crucial for the success of the growth area have also been discussed with special reference to the Northeastern region of India. The current study also discussed various steps undertaken by government for the development of the NE region. The study identified various products which can be beneficial for both India and China if they trade them via Bangladesh and Myanmar arranging free transit facility. Development of a

Potential of BCIM growth area 61

possible production network in the region has also been suggested in the study. In BCIM Forum India focuses on regional connectivity and China pushes for infrastructure to develop Southern Silk route linking landlocked Yunnan Province with the corridor. All four countries are now engaged in the initiative, as articulated during the second JSG meeting in Cox’s Bazar in Dhaka. The 2,800 kmlong proposed corridor (Kunming-Ruili-Bhamo-Lashio-Mandalay-Tamu-Imphal-Sylhet-Dhaka-Kolkata) will be the backbone of BCIM and both India and China can connect themselves through Bangladesh and Myanmar. Though this will be the best road connectivity between the two most populous countries in the world, Bangladesh and Myanmar will receive the economic rent/benefit due to enhanced economic activities in the region. As mentioned in the chapter, eventually, value chain will spread through the corridor and its hinterland and SMEs, service sector and trading will receive the maximum benefits. All countries need to invest in skill development, IT infrastructure, hospitals and educational institutions, etc., so that population in the region are capable and well equipped to reap the benefits. The study highlighted the urgent need to frame such policy to tap the potential of the NE region and develop the region as an export hub for the BCIM member countries.

Notes 1 Storper, M. (1995). “The Resurgence of Regional Economies, Ten Years Later: The Region as a Nexus of Untraded Interdependencies”. European Urban and Regional Studies, 191–221. 2 Initiatives undertaken by the government sector are referred as ‘Track I’ initiatives, whereas initiatives taken by private sector are referred as Track II initiatives 3 Kumar, S. and Yuan, L. T. (1991). “Growth Triangle: A Singapore Perspective”. In Growth Triangle: The Insights No. 36. Institute of South Asian Studies. National University of Singapore. 4 Chia, Siow Yue. (1997). “Regionalism and Sub Regionalism in ASEAN: The Free Trade Area and Growth Triangle Models”. In Ito, T. and Krueger, A. O. (eds), Regionalism Versus Multilateral Trade Arrangements, NBER-EASE. University of Chicago Press, Volume 6, USA 5 Smith, S. L. D. (1997). “The Indonesia-Malaysia-Singapore Growth Triangle: A Political and Economic Equation”. Australian Journal of International Affairs, 51(3): 369–382. 6 Amitav, A. (1995). “Transnational Production and Security: Southeast Asia’s Growth Triangles”. Contemporary Southeast Asia, 17(2): 173–185.

62  Biswajit Nag and Rahul Nath Choudhury 7 This section is largely drawn from Hasan, A. (1999). “Conceptual Framework for Growth Triangles”. The Pakistan Development Review, 38 (4 Part II (Winter 1999)): 805–822. 8 Frankel, Jeffrey and Romer, David. (1999). “Does Trade Cause Growth?” American Economic Review, 89: 379–399. 9 Thant, Myo, Tang, Ming and Kakazu, Hiroshi. (1998). Growth Triangles in Asia, New York: Oxford University Press. 10 Rahman, Mustafizur, Rahman, Habibur and Shadat, Wasel Bin. (2007). “BCIM Economic Cooperation: Prospects and Challenges”. Centre for Policy Dialogue, Dhaka, Bangladesh. 11 Islam, M. S. (2008). “Bangladesh-China-Northeast India: Opportunities and Anxieties”. In Yuan, L. T. (ed.), ISAS Johor-Singapore-Riau Experience, Singapore: ISEAS, pp. 1–36. 12 Md. Rahman, Tariqur and Al Amin, Muhammad. (2009). “Prospects of Economic Cooperation in the Bangladesh, China, India and Myanmar Region: A Quantitative Assessment”. ARTNET Working Paper Series, No. 73. 13 De, P. and Bhattacharya, B. N. (2007). “Deepening India-Bangladesh Economic Cooperation: Challenges and Opportunities”. RIS-DP#130. Research and Information System for Developing Countries, New Delhi. 14 Verghese, B. G. (2004). “Borders Matter More Than Boundaries from the North East Looking Out”. Man and Society: A Journal of North East Studies, 1(Spring). 15 Baruah, Sanjib. (2004). “Between South and Southeast Asia: Northeast India and the Look East Policy”. CENISEAS Papers No.4. Guwahati: Centre for Northeast India, South and Southeast Asian Studies. 16 Deardorff, A. V. (2001). “Fragmentation in Simple Trade Models”. The North American Journal of Economics and Finance, 12(2): 121–137. 17 Kimura, F. (2006). “International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications”. Asian Economic Policy Review, 1(2): 326–344. 18 De, P. and Majumdar, Manab. (2014). “Developing Cross-Border Production Networks Between North Eastern Region of India, Bangladesh and Myanmar: A Preliminary Assessment”. RIS, New Delhi. 19 Wadley, D. and Parasati, H. (2000). “Inside South East Asia’s Growth Triangles”. Geography, 85(4): 323–334. 20 Kan, K. and Wang, Y. (2013). “Comparing China and India: A factor Accumulation Perspective”. Journal of Comparative Economics, 41(3): 879–894. 21 Ibid. 22 Similar argument has also been lauded by Prof. M. P. Bezbaruah, Member North Eastern Council.

Chapter 3

The road ahead for the BCIM Laldinkima SailoThe road ahead for the BCIM

Leveraging on sub-regionalism and other experiences Laldinkima Sailo The BCIM sub-region The Bangladesh–China–India–Myanmar Forum for Regional Economic Cooperation (BCIM), earlier known as the ‘Kunming Initiative’, as the name suggests, is an initiative of the provincial government of Yunnan. It was an initiative supported by the Chinese central government in line with its strategy to develop its landlocked south and western regions as well as to develop better relations with neighbours.1 Earlier, China had embraced sub-regional cooperation as a mechanism to engage with the Southeast Asian countries of Vietnam, Cambodia, Laos, Myanmar and Thailand by linking them with its Yunnan and Guanxi provinces through the Asian Development Bank (ADB) supported Greater Mekong Sub-region (GMS).2 The GMS had a head start in comparison with the BCIM in that it was initiated in 1992 and over time achieved a measure of success. It has since been able to develop a Strategic Framework, identifying priority flagship projects that emphasises on linking countries to promote cross-border trade and investment. Some of these projects have been completed and reached advanced stages of development. Like the GMS and other sub-regional organisations, the main focus of discussions of the BCIM have centred around ‘connectivity’ with an aim to enhance transportation connectivity, engendering trade and developing a tourist circuit to facilitate greater people to people contact and economic development. In playing catch up, the BCIM, since its inaugural meeting in 1999, has also come a long way. From a largely Track II level process involving scholars and experts, it straddled between the Track I and Track II process until it received official recognition in May 2013 in

64  Laldinkima Sailo

a paragraph included in the joint statement issued after the visit of Chinese Premier Li Keqiang to India. In turn, the joint statements issued at the conclusion of Prime Minister Manmohan Singh’s visit to China in 2013 and the visit of President Xi Jinping to India in September also made references to it.3 In the meanwhile, the initiative also received concurrence of the governments of Bangladesh and Myanmar. Yet, in terms of on-the-ground achievements, the BCIM has achieved modest results. The idea of sub-regional cooperation involving parts of the country is a new enterprise for India and Bangladesh and Myanmar. And, despite their enthusiasm, member countries continue to have other pressing problems of national priority that take away attention from the initiative. In the search for a way forward, the measures of success achieved by the GMS and sub-regional cooperation in Southeast Asia stand as examples. This chapter assesses sub-regionalism in the context of the BCIM areas and attempts to highlight lessons that can be learnt from the GMS experience.

Why sub-regionalism The BCIM sub-region has several critical and strategic advantages in jointly participating in the development process. The sharing of development resources and experiences pose an opportunity for the region to develop in unison and find a way out of the underdeveloped situation it finds itself in. These advantages emanate from geographical proximity, socio-cultural cohesiveness, economic complementarities, similar consumption tastes, and scope for further integration with the dynamic Southeast Asian region. It needs to be remembered that economic complementarity is the result of various factors, including nature based and also largely evolutionary in nature. While the natural resources are given there is an opportunity to work on developing complementarity based on shared or coordinated mapping and development of competitive advantages. The advantages of a sub-region are also presented by the fact that political risks are localised and traditional constraints are minimised. Failures can be localised too and it skips the need for large-scale macro policy, strategic or ideological reorientation at the national level that accompanies regional initiatives.

The road ahead for the BCIM 65

The formation of sub-regional cooperation initiatives like the BCIM are taking place in the context of the development of what has been argued by scholars4 as new regionalism taking place in a multipolar world rather than the bipolar cold war context. It is characterised by a spontaneous process ‘from below’ type of approach and increasingly takes into account actors other than the government, making it much more multidimensional – trade and economic integration, environment, health, social policy, security, human rights, democracy, etc. The manifestation of risks and challenges in a region that are increasingly interrelated, complex and varied encompass both that is economic in nature as well as concerns of security, including natural disaster, health and environment. It has been argued that the outbreak of one or more of the risks, for instance civil war or contagious disease, can be distinctively regional, and if managed successfully, transformed into a regional public good such as a regional security common.5 In the said context, the argument is that the regionalism that is taking place in a new context is increasingly better poised to meet regional challenges and harnessing opportunities. Hette and Soderbaum (2006) have classified the ‘new regionalism’ with the following characteristics: Influenced by post-cold war logic, developing from within the regions Extroverted, linked with globalisation Comprehensive and multi-dimensional objectives (economics, politics, security, culture) Inclusive and open membership Worldwide and heterogeneous phenomenon Involves state, market and civil society actors in many institutional forms. In the BCIM context, the characteristics of this new regionalism framework provides both solutions as well as directions towards which the reigning issues can be analysed and addressed. However, along with the similarity of development levels and the continuous geographies, there are also different drivers. These need to be understood to enable forward movement. This is represented in Table 3.1.

To find new markets and shorter trade routes Access South Asian Markets and the Indian Ocean sea routes Promote inclusive growth strategies with neighbours Develop Southwest region of China for more balanced development and internal security To promote Look East Policy To increase trade with East and Southeast Asia To attain greater involvement in regional economic and political spheres To develop and build infrastructure in the Northeast To promote democratisation and economic liberalisation To integrate with regional and global economy To widen its economic engagement within the region

China

Transit and port services hubs Attract FDI Infrastructure and socioeconomic development Utilisation of natural resources

Access to East and Southeast Asia Development of Northeast India Increasing influence in the region

Access to the SA market and sea routes Development of Southwest provinces

Transit and port services hub Attract FDI Infrastructure development Socio-economic development

Opportunities

Resolution of ethnic issues Management of emerging religious tension Management of old and new partners

Balancing security concerns with economic objectives Insurgency in the Northeast Coordinating state and Central government initiatives

Growing criticism of Chinese investors in Myanmar Overcoming ‘trust deficit’ with India Competing with Indian influence in Bangladesh

Resolution of bilateral disputes with India (river water and land transit issues) and Myanmar (Rohingya issue)

Challenges

Source: Hussain, Zaara Zain (2014), ‘Initiative for ‘Southern Silk Route’ Linking Bangladesh, China India, and Myanmar’, ISAS Working Paper. No 192, 17 June 2014.

Myanmar

India

To promote national economic development Become regional hub of transit trade Collaborate for economic and energy security Attract FDI

Bangladesh

Objectives

Table 3.1  BCIM: Country-Specific Objectives, Opportunities and Challenges.

The road ahead for the BCIM 67

Based on Table 3.1, it emerges that while there are shared objectives and opportunities that cut across the region, there are also challenges that are unique to each of the countries as well as between two specific countries. These need to be addressed and the evolving institutional framework will need to take these objectives, opportunities and challenges into account. Sub-regionalism in Southeast Asia As with the evolving idea of the BCIM sub-region, sub-regionalism in Southeast Asia is underpinned by a thrust on peace, greater peopleto-people interaction, security and development through exploration, identification and gradual intensification of trade, economic and cultural ties among the geographically contiguous regions. Here too, the development of connectivity infrastructure dominates planning and discussions. The focus has been on building hard infrastructure (meaning physical infrastructure like transportation – roads, railways, airports, ports; telecommunication – telephone and internet; and energy – (gas and electricity pipelines, electrical grids) and soft infrastructure (policy, regulatory, institutional framework, governance, etc.).6 The basis for the promotion of developing infrastructure is underpinned by the following arguments:7 • It promotes movements of goods and services locally and regionally; • It facilitates greater access to key inputs to growth in terms of resources, technology and knowledge; and • It improves socio-economic and environmental conditions by providing basic needs and utilities such as sanitation, hospitals and schools. The Southeast Asian region as a whole is marked by huge disparity in their level of development of hard and soft infrastructure and there is a recognised need to rectify this to realise a common socioeconomic community in the region. Some of the widest gaps are represented in the Cambodia, Laos, Myanmar, Vietnam (CLMV) region. Given that in the long run, these imbalances pose dangers for the countries concerned, such as the possibility that deeper economic integration can lead to huge social costs manifested in these countries due to structural adjustments and risks of falling into a

68  Laldinkima Sailo

low-cost labour trap,8 efforts are being made to bring them on par with the rest. Initiatives to bridge this development gap has been made and the Greater Mekong Sub-region (GMS) grouping is one of them. These in turn feed into the larger ASEAN wide commitments and plans in creating a Socio-Cultural and Economic Community. To provide a better understanding of the kind of lessons that can be learnt, the chapter will consider the case of the GMS process in the following section. In the process of my narration of the evolution, impact and challenges that the sub-regions face, I will point out areas where particular attention needs to be paid if any attempt to draw lessons is made. In a comparison of the two sub-regions – the GMS and the BCIM – there is a common player in China, and members of the GMS are countries whose participating regions are marked by underdevelopment not dissimilar to the indicators seen in the BCIM sub-region. Overview of the Greater Mekong Sub-region The Greater Mekong Sub-region (GMS) is a natural economic area bound together by the Mekong River, covering 2.6 million square kilometres and a combined population of around 326 million. The GMS countries are Cambodia, the People’s Republic of China (PRC, specifically Yunnan Province and Guangxi Zhuang Autonomous Region), Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand and Viet Nam. In 1992, with assistance from Asian Development Bank (ADB), the six countries entered into a programme of sub-regional economic cooperation, designed to enhance economic relations among the countries. With support from ADB and other donors, the GMS programme helps the implementation of high-priority sub-regional projects in transport, energy, telecommunications, environment, human resource development, tourism, trade, private sector investment and agriculture. One can see the development of the sub-region in three phases.9 The First Stage (1992–1996) was a period that involved the creation of the GMS-Economic Cooperation Principles and the fact finding and project identification/formation.

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A significant development was the agreement of the ‘two plus’ principle wherein projects of the GMS-ECP need to meet any of the two conditions that: Each project involves at least two countries (if it’s a purely subregional project such as a bridge on the border); and A national project that will benefit the region as a whole (meaning national project with a sub-regional dimension, such as construction of a new airport). The Second Stage10 (1994–2001) is the implementation stage. These proceeded with feasibility studies, engineering design and conduct of social and environmental impact assessment. Not all projects were funded with the ADB’s help and some, like national projects, were funded by the country’s budget. The establishment of how such national projects will benefit the country and the sub-region gave an impetus to complete the projects. The Third Stage11 (2001–present) While many of the projects are not completed, projects have been categorised into flagship programmes where they would be prioritised on the basis of several factors. These were listed as: North-South Economic Corridor East–West Economic Corridor Southern Economic Corridor Telecommunication Backbone and ICT Regional Power Interconnection and Power Trade Agreements Facilitating Cross-Border Trade and Investment Enhancing Private Sector Participation and Skill Competencies Developing Human resources and Skill Competencies Strategic Environment Framework Flood Control and Water Resources Management GMS Tourism Development According to a report12 of a working group constituted to study the effectiveness of the investments in the GMS, the area that has seen the most advancement is in the improvement of transport infrastructure. A master plan was created in 1995. While work progressed

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well in the first two, the development of the Southern Economic Corridor linking Bangkok, Phnom Penh and Ho Chi Minh is lagging but expected to be eventually completed. This is not to say the completion of the first two were done in staggered, timely manner. There were delays and set backs there, too. Initiatives in the electrical power sector within the GMS program – this is an area where some discussion around the development of interconnected grids to export excess electricity capacity to neighbouring countries have also been discussed at several forums and in the literature in the case of the BCIM – have helped to promote opportunities for each country’s economic cooperation in the sector, facilitate implementation of major electrical power projects, and clarify technical, economic, financial and institutional issues regarding the development of electric power in the region. However, these have mainly been generalised efforts focusing on principles and systems. Although they are just getting under way in multiple concerned nations (China–Vietnam, Laos–Cambodia, Laos–Thailand, Thailand–Cambodia, Vietnam–Cambodia, Vietnam–Laos), these power flows at present are almost all one-way. Because they mainly comprise of buying and selling from fixed power plants, they are considered power lines from specific projects rather than interconnected grids.13 The GMS countries have an MoU setting forth institutional and other arrangements for power trading, including the perspectives of transaction and operations related to international interconnection and flow. However, the fact that the GMS countries had no clear schedule for evaluating “promotion of power development programs”, “coordination in power trade development related to the goals of intergovernmental agreements” and so on became an issue.14 This schedule is being established now. In 2008, through the support of the ADB, a master plan on power trade was created and some issues such as institutional issues to facilitate power import/export, grid connection, etc., were still being negotiated.15

China’s role in the GMS With a population of 1.3 billion, a GDP of US$9.2 trillion in 2013,16 and an economy growing at roughly over 9 percent annually for the past three decades, China is seen as an entity with the potential to provide the economic capacity and resources to generate

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growth in the Greater Mekong Sub-region (GMS). However, promoting this process has challenges relating to historical differences between China and the GMS countries as well as the difference in size between China and the GMS countries.17 The southern provinces of China share the Mekong/Lancang River and a common border with the GMS countries where the border areas are dotted with a high density of ethnic minorities as in the case of the border regions of the BCIM. High levels of crossborder trade and migration take place in the border areas. There are however historical differences including territorial disputes such as in the Tonkin/Beibu Gul between China and Vietnam which serve as impediments. The size of China and its pace of growth coupled with the volume of its investment in the region can also intimidate the GMS countries giving rise to anti-Chinese sentiments. Besides these, there are also environmental and social concerns like infrastructure project-induced displacement that are often raised about the GMS Economic Corridor projects. Since hosting the 2nd GMS Summit in 2006, China has set up a US$20 million poverty reduction fund in ADB and spent around US$4 billion building highways connecting Kunming with different parts of the GMS. In 2006, Beijing also unilaterally removed tariffs for more than 200 items from Cambodia, Laos and Myanmar in an effort to boost bilateral trade with the GMS countries and increase their competitiveness. Further, Beijing has also promoted the participation of private and state-owned Chinese companies in the GMS countries and has reportedly been providing ‘no-strings attached’ loans mostly for the construction of transportation infrastructure.18 China was particularly involved in the development of the NorthSouth Corridor’s Route 3,19 which was completed in 2008 at the cost of about US$97 million with China, Thailand and the ADB each contributing US$30 million while the remaining sum was provided by the Laotian government. This route serves as the final link of the network of roads that links Beijing to Singapore via mainland Southeast Asia. As such, Chinese investments in the GMS countries are mostly in the energy and transport sectors as well as agribusiness and tourism industries20 and the sectors and projects that have been prioritised also feed into the larger ASEAN Master Plan on Connectivity as well as those prioritised under the ambit of China-ASEAN cooperation mechanisms.

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Stages of development in regional cooperation, GMS Moving forward, it is important to understand the literature which proposes the frameworks and structures through which the development of infrastructure or ‘regional corridors’ need to take place to ensure the success of a regional cooperation. Discussions of corridor development characterised by fairly general formulations have had limited use and therefore need to evolve towards one that talks in terms of specifics and timeline. The premise that corridors are expected to evolve into various stages through improvements in trade facilitation and provision of logistical services serves as an inadequate framework for the development of the initiative. One of the proposed approaches21 in the development of regional corridors is to envisage them as a five-stage process: Stage 1: Transport Corridor, Stage 2: Transport and Trade Facilitation Corridor, Stage 3: Logistics Corridor, Stage 4: Urban Development Corridor and Stage 5: Economic Corridor. This taxonomy is a useful initial step but needs to be explained in detail, further developed and adapted as necessary over time. The differences between some stages may not be clear-cut, in part because the stages in themselves are not all well-defined and how the transition from one stage to the other will take place not always easily answered.22 Lessons from studies such as the one by the ADB23 on the development of regional corridors in the context of regional cooperation suggest useful frameworks, some of which can be adapted for the BCIM context. For instance, the proposed framework suggests the development of mid-term and long-term master plans as well as a monitoring mechanism for the development of the progress of the same. It envisages change and focus of the initiative and suggests that over time regional projects will need to be defined differently since the national/regional dichotomy is less relevant. And beginning with the development of national highways that are built to link to a planned regional highway, there is a need to move to transition to broadening highways as well as connecting horizontal highways to vertical linkage highways and the identification of investment projects to complement the road infrastructure. The contextualisation of proposed frameworks such as the previously mentioned and how it has worked in the case of GMS can serve as a useful tool in the acceleration of the BCIM initiative.

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The road ahead One of the core assumptions in the stages of the development of the regional corridor in the context of a sub-regional cooperation process envisages changes in the structural basis of the economy. As a general take on the challenges that will arise in the face of structural changes in the economy in the Northeast and indeed in the BCIM sub-region, when, with the development of transport infrastructure, the expected move from subsistence economy to the next level of economy based either on manufacturing or services such as tourism occurs there is need to focus on human resource development to leverage on that change.24 The development of human capital is a long but worthwhile process. This investment needs to take place as an integral even as the discussions around connectivity projects take a momentum of their own. There is no doubt that substantial progress has been achieved in the implementation of GMS projects since 1992. Priority infrastructure projects worth around US$11 billion have either been completed or are being implemented. Among these are the upgrading of the Phnom Penh (Cambodia)-Ho Chi Minh City (Viet Nam) highway and the East–West Economic Corridor that will eventually extend from the Andaman Sea to Da Nang. Increasingly, modernisation and industrialisation are emerging from a process of transition and transformation. The Mekong countries are gradually shifting from subsistence farming to more diversified economies, and to more open, market based systems. In parallel with this are the growing commercial relations among the six Mekong countries, notably in terms of cross-border trade, investment and labour mobility. Moreover, natural resources, particularly hydropower, are beginning to be developed and utilised on a subregional basis – though with some teething issues as discussed earlier. Yet, overall, the painting of the success of the sub-regional experience in Southeast Asia needs to be moderated and given the differing and unique expectations of the BCIM countries, which as a collective are also different from the expectations and motivations of the Southeast Asian sub-regional experience, a way forward is rather to learn from the specifics of some successful and not so successful bits of GMS or other growth triangles/quadrilaterals for BCIM to largely develop a path of its own. It is important to remember that ASEAN, China and the ADB supported the GMS sub-region and worked out plans that in turn

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feed into larger regional projects such as the ASEAN Master Plan on Connectivity or the China-ASEAN cooperation agreements. This enables prioritisation of projects and prevention of duplication of plans. Then there is also the issue of leadership where the ADB is the main driver of the GMS and China expended considerable resources towards the completion of some of the projects. The issue of environmental concerns and social costs remain at large and efforts to address them have produced mixed results. Who would take the lead in the BCIM and would someone taking a lead work for this sub group? Would the preponderance of China and/or India in such a grouping cause concerns to the two smaller members – Bangladesh and Myanmar? The addressal of these and other issues will be important for the success of the BCIM sub-regional project. While there is an opportunity to look for examples from the experiences from different parts of the world, there are some that will have to be thought through ingeniously and collaboratively.

Notes 1 Rana, Kishan S. and Uberoi, Patricia. (2012). “The Yunnan Perspective and the Kunming Initiative”. In India’s Northeast States: The BCIM Forum and Regional integration, Institute of Chinese Studies Monograph, No. 1, December 2012. 2 Lim, Tin Seng. “China’s Active Role in the Greater Mekong SubRegion: Challenges to Construct a ‘win-win’ relationship’. East Asia Policy, 1(1). www.eai.nus.edu.sg/Vol1No1_LimTinSeng.pdf. 3 Keynote Address by Ambassador Bhatia, Rajiv K. (2014). “International Seminar on BCIM: Sub-Regional Cooperation for Development of Peripheral Areas”. Shillong, Meghalaya. 2014. http://icwa.in/pdfs/ stmtdg/2014/keynoteaddress27112014.pdf. 4 Hette, Bjorn and Soderbaum, Fredrik. (2006). “Regional Cooperation: A Tool for Addressing Regional Global Challenges”. In International Task Force on Global Public Goods, Achieving Global Public Goods, Foreign Ministry, Stockholm, pp. 170–244. 5 Ibid. 6 Basu Das, Sanchita. (2013). “Enhancing Regional and Sub-Regional Co-operation and Connectivity in ASEAN”. ISEAS Working Paper #3. 7 Bhattacharyay, B. (2008). “Infrastructure and Regional Cooperation Concept Paper for ADB/ADBI Flagship Study”. www.adbi.org/ research.infrastructure.regional.cooperation/. 8 Vo, T. T. (2005). “ASEAN Economic Community: Perspective from ASEAN’s Transitional Economies”. In Hew, D. (ed.), Roadmap to an ASEAN Economic Community, Singapore: Institute of Southeast Asian Studies.

The road ahead for the BCIM 75 9 Ishida, M. (2008). “GMS Economic Cooperation and its Impact on CLMV Development”. In Sotharith, C. (ed.), Development Strategy for CLMV in the Age of Economic Integration, ERIA Research Project Report 2007–4, Chiba: IDE, JETRO, pp. 115–140. 10 Ibid, p. 120. 11 Ibid, p. 121. 12 Working Group for the “Study on Effective Investment of Power Infrastructure in East Asia through Power Grid Interconnection” (2013), “Existing Initiative and its Challenges”. In Kutani, I. (ed.), Study on Effective Investment of Power Infrastructure in East Asia Through Power Grid Interconnection. ERIA Research Project Report 2012– 2023, p. 58. 13 Ibid, p. 59. 14 Ibid, p. 62. 15 Ibid, p. 65. 16 World Bank Country Data- China. http://data.worldbank.org/country/ china 17 Lim, Tin Seng. “China’s Active Role in the Greater Mekong Sub Region: Challenge to construct a ‘win-win’ Relationship”. East Asian Policy, 1(1). 18 Ibid, p. 41. 19 Ibid. 20 Ibid, p. 44. 21 Srivastava, P. (2011). “Regional Corridors Development in Regional Cooperation”. ADB Economic Working Paper Series, No 258. 22 Ibid. 23 Ibid. 24 Sailo, Laldinkima. (2013). “Northeast India: Trade and Development Prospects”. ISAS Insights No. 171.

Chapter 4

Institutional arrangements for BCIM M. Shahidul IslamInstitutional arrangements for BCIM

Challenges, guiding principles, short- and long-term agenda M. Shahidul Islam The process of regional economic integration generally follows a five-stage path: a free trade area, a customs union, a single market, a common currency and a political union (Balassa 1961).1 The BCIM Economic Corridor (henceforth, BCIM) consisting Bangladesh, India, China and Myanmar is still in its nascent stage of development. It aims at inter alia, advancing multi-modal connectivity, harnessing economic complementarities, promoting trade and investment, exploring energy cooperation, facilitating human resource development, alleviating poverty and increasing people-topeople contact. In pursuit of all these goals, the BCIM has graduated from a Track II initiative to a Track I level dialogue. However, it can be termed as a de facto Track 1.5 level forum as both government officials and academic scholars are currently involved with the sub-regional cooperation. While there have been 12 dialogues of BCIM Forum in major cities of BCIM countries and two meetings of the Joint Study Group (JSG) held in Kunming, China in December 2013 and in Cox’s Bazar, Bangladesh in December 2014 respectively, the entity has not made much progress as far as its institutional development is concerned. If BCIM intends to see some measureable outcomes, it needs to have a host of facilitating institutions, at least more frequent and higher level inter-governmental cooperation, capable of executing some early harvest projects, if not greater economic integration in the immediate future. While bilateral trade, investment and other economic and noneconomic cooperation among BCIM member countries are on the rise, experts and policymakers are of the view that economic potential of these countries is far higher than their current level. During the Indian Prime Minister’s state visit to China in summer of 2015, his Chinese counterpart, for instance, felt that the trade volume

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between China and India is not large and there is room for much higher level of trade growth between these two giants (Xinhuanet 2015).2 Similarly, China has become one of the largest sources of outbound FDI. However, Chinese investment in India and Bangladesh, in particular, could be much higher than the existing volume. China is now one of the largest sources of tourists, but numbers of Chinese visitors in most South Asian countries remain very low. Similar opportunities, in the form of economic complementarities, are available in India, Myanmar and Bangladesh. Many opportunities are lost largely due to BCIM countries’ inability to develop the required institutions to facilitate trade and investment, and forge greater cooperation in terms of people-to-people connection easing visa regimes, among other measures. Many complementarities in the region cannot be exploited due to lack of supporting institutions or the limited action of market forces (in the form of crossborder trade liberalisation, investment facilitation, inter alia) in the region. This leads us to think of a host of issues involving institutions of BCIM. Has the BCIM progressed enough to make it an effective organisation capable of facilitating trade and investment, enhancing energy cooperation and so on? Thus, one should identify its strengths as well as weaknesses from economic, political and security perspectives, assessing the preconditions of its institutional development. Alternatively, what is the role market forces play that could be substituted for hard-core institutions to some extent to foster regional cooperation in BCIM? This chapter discusses some of the critical issues pertaining to BCIM’s institutional development. The main objective of this chapter is to see as to what extent the forum has progressed to develop some of the institutions that could facilitate trade, investment and other economic and non-economic cooperation. The organisation of the chapter is as follows. In the next section the author discusses the imperatives of institutions to foster regionalism. In this connection, the chapter revisits some of the successful regional and subregional groups, notably the European Union (EU) and Association of Southeast Asian Nations (ASEAN). It then assesses some critical issues such as the existing constraints of BCIM as well as its guiding principles (openness philosophy). In the following two sections the author suggests some short-term and medium to long-term proposals for the stakeholders of BCIM in terms of its institutional development as well as the potential role of market forces in fostering regionalism. The final section concludes.

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Imperatives of institutions in fostering regionalism Do institutions matter for regional integration? While there is a substantial discussion on this in the literature on institutions, given the focus of the chapter, we highlight some salient features on the nexus between institutions and growth as well as their role in promoting regionalism. There is no consensus on the definition of institution. Institutions are narrowly referred to as formal bureaucratic organisations with a legal charter. They are also seen as formal rules and procedures for collective governance. Moreover, institutions include informal norms, expectations and patterns of behaviour under the definition of the term (Henning 2004).3 In short, institutions are defined as durable rules that shape expectations, interests and behaviour. The mainstream literature on institutions, popularised by Nobel laureate economist Douglas North, suggests that institutions provide the basic structure by which human beings create order and attempt to reduce uncertainty in exchange. Together with technology employed, they determine transaction and transformation costs and hence the profitability and feasibility in engaging in economic activity. Institutions can be both formal (property rights, legal system, rule of law, constitution, inter alia) and informal (linked to religion, history, social acceptability, among others). According to North and Thomas (1973),4 institutions affect economic outcomes but society will choose those institutions that maximise social surplus. Acemoglu et al. (2001) view economic institutions as determining the incentives of and the constraints on economic actors, and shape economic outcomes.5 As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favour of groups with greater political power. In this chapter, by institutions we mean rules, laws, charters, regulation, best practices and constitutions, among others, that facilitate regional integration. Regional institutions can be divided into several groups: Overarching, Functional, Facilitating and Security. According to Eichengreen (2010) and ADB (2010), overarching institutions (for instance, Asia Pacific Economic Cooperation, ASEAN+3) are umbrella arrangements that convene summits for heads of government or state the normative and declaratory

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frameworks that legitimise and support regional cooperation and integration. Functional institutions (for example, ASEAN+3 Macroeconomic Research Office) are specialised institutions with a narrower, often technical agenda that focus on a specific area of cooperation, often with a limited geographical area. Facilitating institutions (for example, the Economic and Social Commission for Asia and the Pacific, Asian Development Bank) provide advisory, administrative, technical and financial support for regional integration initiatives. Security Institutions (for instance, ASEAN Regional Forum, Six Party Talks) work to maintain regional peace and security. Given the less-than-expected progress in multilateral trade, environment and other cross-border issues, regional integration is seen as the second-best solution. However, some experts see trade integration through overarching institutions such as EU, ASEAN, the North American Free Trade Agreement (NAFTA), among others, or bilateral Free Trade Agreements as World Trade Organization (WTO)-plus, as they reduce tariff, non-tariff and other trade barriers. Thus, if constructed carefully, regionalism can complement rather than undermine aspects of the multilateral regime that function effectively. The experience suggests that regional integration has played an important role in promoting growth, stability and a peaceful coexistence around the world (ECB 2004).6 It is also obvious that there is no single best way of achieving regional integration. However, there are many distinct ways that successful integration needs to take into account the characteristics and peculiarities of each region. Some regions banked on institutions for integration, others relied on market forces. The EU, for example, has paved the way for the greater role of institutions. The South Asian Association for Regional Cooperation’s (SAARC) experience reminds us that despite forming a network-based formal institution South Asia remains one of the least integrated regions in the world. This leads us to discuss the issues pertaining to demand and supply side of regionalism. The demand (market-driven) and supply (institution-driven) side of regionalism Factors that drive regionalism vary widely from region to region. Some successful regional bodies followed market-based (demandled) integration, whereas some relied on institutions (supply led).

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The EU, ASEAN and NAFTA are some of the examples of highly integrated regional entities. The ASEAN economic integration has largely been driven by market forces. On the other hand, institutions have been major catalysts as far as European integration is concerned. In the case of EU, member states have delegated some of their decision-making power to its institutions, involving primarily European Parliament, Council of the European Union and European Commission. Known as ‘institutional triangle’, these institutions are responsible for producing the policies and laws that apply throughout the EU (Sakakibara and Yamakawa 2004).7 In Asia, on the contrary, regional institutions have been slow to develop. While many regions, notably Europe, have moved away from the Westphalia system (that exercised comprehensive, supreme and exclusive control over designated territory), in Asia states have historical preference for maintaining national control and sovereignty. Thus, the region has not witnessed European style integration entrusting some institutions delegating decision-making power for regional integration. The other reasons include (1) the heterogeneity of many political, economic and social aspects of the region, (2) political tensions between certain countries, (3) the desire to protect national interests and specific industries and (4) Asia’s historical openness in trade and FDI and its long-standing relationships with the United States and the EU (Sakakibara and Yamakawa 2004).8 However, the global experience suggests that overall linkage between institutionalisation and the regional orientation of trade seems tenuous, given the fact that Asia fares better than North America despite lacking the regional equivalent of NAFTA (Henning 2004).9 Asia’s, notably East Asia’s, trade and investment are fostered by multinational corporations (MNCs). MNCs are attributed with initiating the phenomenon of cross-border production networks through their establishment of subsidiaries in other countries to handle certain stages of production. Started by Japanese MNCs in 1980s, East Asian Production Network (EAPN), is driven by two hubs (Japan and China) and several spokes (most Southeast Asian countries and South Korea). However, this is not to say that institutions have little role to play in market-based integration. It is not the case that regional governments and their policies played no role at all in the integration process. The East Asian governments and regional institutions set the stage for market-driven integration in East Asia by proving policy support. For example, the reduction of restrictions on trade and

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foreign direct investment was one of the reasons that production networks have developed so well in East Asia (Henning 2004).10 Nevertheless, experts believe that despite its endogenous nature, a market-led process may well converge towards an institutionalised integration framework operating under rule-based mechanisms such as the Stability and Growth Pact or the Exchange Rate Mechanism of EU (ECB 2004).11 BCIM and institution building: some critical issues Before we discuss institutional development in BCIM, it is imperative to examine some of the critical issues involving the challenges it faces as well as its guiding principles. Unless one understands the challenges that BCIM encounters and what are its guiding principles, it might be difficult to develop an institutional agenda for the entity.

Addressing political challenges Challenges to develop institutions in BCIM Institution building is a long-term process and along the way there are many challenges. The BCIM is no exception. Political differences among major member countries of BCIM on territorial disputes, power rivalry, and above all trust deficit are some of the challenges to develop institutions in BCIM. It is no denying that history weighs heavily in South Asian regionalism (chiefly the India-Pakistan rivalry) that virtually stalled the progress of SAARC. However, South Asia can learn from Southeast Asia and East Asia in this regard. China, which is one of the key pillars of BCIM, for instance, has territorial disputes with a number of Southeast Asian countries but this has not stalled their trade, investment and people-to-people contact. East Asia has successfully isolated its security issues from economic integration. It can be noted here that it was not the economic motivation that encouraged the EU and ASEAN, two successful cases of regional integration, to forge greater cooperation at their initial stage of development. In Europe, economic interdependence was thought to be the most effective means to promote the political cooperation that was highly desired in the region after World War II. In East

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Asia, on the other hand, political cooperation was also a motivating factor in early regional integration efforts. Following the formation of ASEAN in 1967, Southeast Asian nations recognised the changing political environment in the region, and as a response they moved to align themselves in a unified manner protecting their respective national interests (Sakakibara and Yamakawa 2004).12 In the case of BCIM, the two major powers, China and India, have in principle agreed on regional cooperation involving two other countries namely Bangladesh and Myanmar. However, the overall political commitment to develop BCIM as a robust institution is not very strong from the Indian side. Similarly, the bilateral issues of Bangladesh and Myanmar are also partly responsible for the limited cooperation between these two countries, eventually affecting connectivity, trade and other cross-border cooperation within BCIM. Thus, there is a need for more frequent bilateral exchanges, particularly between New Delhi and Beijing, as well as quadrilateral exchanges among BCIM countries. Lessons from elsewhere show that desire for political integration is not a necessary precondition for regional institution building and integration. However, political agreement on such institutions and the substance of cooperation is essential. But political support for economic cooperation is very different from aspirations for political integration or unification (Henning 2004).13

The internal and centre-periphery (local) differences on regionalism As observed by some experts, there are inter-departmental or interministerial rivalries related to perceptions of national interests in each country. People in Northeast India, for instance, want to see regional integration proceed faster than its current pace as it is not the mainland of India but the area bordering Myanmar and Bangladesh (perhaps China as well) that could drive its growth. Policymakers in New Delhi, however, take a more cautious approach to open up the region, chiefly on security grounds. There are also inter-governmental differences such as between the central government and provincial government(s) or between provincial governments. In other words, there is a problem of incentivising the BCIM process for a larger group of actors, i.e., creating more stakeholders (Jacob 2012).14

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Uneven development across BCIM and incentives for laggards There is a marked gap in terms of income and social sector indicators among BCIM countries. It is no denying that there is a fear of China that it could flood the region with its goods as the country has comparative advantage in producing diverse products. There are some domestic lobbies that do not desire, if not resist, faster opening up of trade and investment to protect domestic manufacturers from Chinese competition. To address this problem, BCIM can set a different timeline for its well-developed and least-developed members to meet some condition in terms of tariff concession and market access relaxation (in the form of rules of origin), among others. This could give confidence to relatively lagging countries to integrate their trade and investment regimes with China and India. BCIM can learn from ASEAN in this regard that the latter offered a host of concessions and set different deadlines to its laggards (known as CLMV Countries comprising Cambodia, Laos, Myanmar and Vietnam) to meet numerous conditions and targets with regard to their integration.

Isolating economic issues from security concerns Security issues are some of the major hurdles in forging greater cooperation among BCIM countries. The rivalry between India and China on border issues, and security concerns in Northeast India and some parts of Myanmar often take centre stage limiting connectivity and other cross-border cooperation in the region. BCIM can learn from the experiences of East Asia and ASEAN in this regard. In the case of Asia, as captured by ADB (2010), economics and security issues follow separate tracks, neither hindering nor reinforcing one another. Political conflict and militarised disputes are seldom allowed to affect mutual economic interests. Regional economic institutions reflect this separation, with few links between institutions that deal with economic issues and those, such as the ASEAN Regional Forum (ARF), that addresses security concerns. Particularly in Northeast Asia, this separation has permitted the growth of trade,

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investment and economic cooperation even in the presence of persistent territorial and political disputes.15 Learning from ASEAN and Northeast Asia’s experience, BCIM can consider separating its economic institutions from security ones. Guiding principles of regionalism Until and unless BCIM members arrive at some broad consensus on its guiding principles, notably on the nature of regionalism and connectivity, it may not have the right policies to guide its regional integration, critical to develop its institutions.

Open regionalism Championed by East Asia, open regionalism asserts that a region can forge economic integration not exclusively for its members. It can keep options open for extra-regional countries to cooperate on trade, investment and other economic issues. The features of open regionalism include low external barriers to trade, nonrestrictive rules of origin, liberalised service markets, and a strong focus on reducing transaction costs at the borders. Asia, especially East Asia, is the paradigmatic open region, and its approach to cooperation is one of “open regionalism” (Garnaut 1994).16 Asia’s open regionalism underscores the importance of strengthening trade, investment and capital flows within the region while maintaining strong ties with and remaining open to the rest of the world. Economic indicators confirm that regional integration within Asia has proceeded in parallel with its global integration (Kharas, Aldaz-Carrol and Rahardja 2008).17 As BCIM aspires to integrate East Asia and Southeast Asia with South Asia, the forum should follow open regionalism as a key principle to guide its regionalism. Such strategies have been proven successful in East Asian integration despite the region lacking institutional depth akin to EU and NAFTA. Adoption of ‘open regionalism’ as a principle could help BCIM draw a greater number of MNCs from East Asia as well as rest of the world. More importantly, this could help expand the existing East Asian production network to South Asia. In the global production network South Asia’s share is meagre. ASEAN has been very successful

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in attracting regional production networks primarily due to differences in wage and labour productivity across countries, regional trade and investment liberalisation through ASEAN Free Trade Area, ASEAN Comprehensive Investment Agreement and formation of ASEAN Economic Community – all resulting in lower production and logistics cost. Southeast Asia holds an 8 percent share of global production network exports, whereas South Asia’s share is less than 1 percent (Islam 2014).18 Another emerging sub-regional block, the Greater Mekong Sub-region (GMS), is also connecting East Asian production networks. However, the South Asia Subregional Economic Cooperation (SASEC), on the other hand, lacks adequate production networks and scale economies, and suffers agglomeration and information coordination failures and is only partially integrated into the world trading system (ADB 2013).19 Thus, the difference between South Asia and East Asia in this regard can be narrowed provided open regionalism principle is adopted as one of the key guiding principles of BCIM.

Seamless connectivity BCIM’s other guiding principle should be promoting seamless connectivity in the region. Again the idea is borrowed from East Asia, whose trade competitiveness, particularly in its increasingly sophisticated production networks, depends to a large extent on efficient, fast, reliable and seamless infrastructure connections. While BCIM currently focuses on the development of the Kolkata to Kunming route (K2K), it should be committed to the region-wide seamless (multimodal) connectivity linking cross-border roads, railway, waterways and airways. At this stage, apart from the K2K connectivity, there should be some bilateral and trilateral efforts to develop multi-modal connectivity linking Bangladesh’s coastal city Chittagong not only with Northeast India, but also with Southwest China through Myanmar. This could also help develop multiple cross-border economic zones exploiting the respective border cities and towns’ complementarities. These two guiding principles are also important from the perspectives of Pan Asian regionalism. As Eichengreen (2010) observed, regionalism in Asia has tended to follow a bottom-up approach that supports sub-regional cooperation efforts as building blocks for an eventual broader and more unified regional architecture.20

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Institutions for BCIM: short-term and medium to longterm agenda The discussion in preceding sections indicates that institution building is a daunting task and a pragmatic approach needed to design institutions for BCIM. Being a latecomer, it has an advantage to learn the best practices that its predecessors have pursued. As institution building is a long-term process, BCIM can seek a dual track approach in this regard. First, in the short run it can design some projects, if not hard-core institutions, for its early harvest programmes. Second, in the medium to long run it should work on developing some concrete institutions. In addition to the guiding principles discussed previously, BCIM’s institutional development mechanism can learn from other Asian institutions, if not from Europe and North America, that facilitate regionalism, known as institutes for regionalism (IFRs). Asian regional bodies have taken a middle path in terms of institution building. According to Eichengreen (2010), most Asia’s IFRs are intergovernmental, member governments delegate relatively few powers to independent supranational secretariats, decisions are generally taken by consensus. At the same time, governments are open to revisit this standard approach when the advantages of doing so are great. Some IFRs, notably ASEAN, are building stronger secretariats to which member governments are prepared to delegate more authority. However, other IFRs such as ASEAN+3’s Chiang Mai Initiative Multilateralisation, are moving towards making decisions through qualified majority-voting.21 However, BCIM has to decide which type of regional entity it intends to form, critical to choosing the path of institutional mechanism. As far as regional integration is concerned, experience in Asia and elsewhere in the world offers two sets of regional cooperation and integration arrangements: first, project- and programmedriven initiatives such as GMS and Central Asia Regional Economic Cooperation (CAREC). These are a kind of loose regional arrangement that work on specific issues or projects. Secondly, Network or dialogue-based organisations such as ASEAN, NAFTA, EU and SAARC focus on region-wide frameworks. Some of them, notably EU, even developed a political union, the highest form of regional integration. As far as BCIM’s institutional mechanism is concerned, from its inception in 1999 to 2003, it was exclusively a Track I initiative.

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Since 2004, the governments started to show their interest in the initiative and it was only in 2008 the Forum transformed into a multi-track approach involving both Track I and Track II actors. From 2013 it started to witness greater role of governments but think tanks have also been involved with the process. Thus, it is a de facto Track 1.5 initiative. Nonetheless, transforming an initiative from Track II to more towards Track I should be recognised as the early phase of organisational development, if not institution building. The formation of JSG and its meetings in China and Bangladesh in 2013 and 2014 respectively should be seen as the formation phase of BCIM. The JSG aims to arrive at a consensus report on the way forward for the proposed BCIM Economic Corridor. Its report with recommendations on inter-governmental cooperation on a host of issues, including principles and modalities of cooperation, has been presented to the respective governments for their consideration and collective decision.

Institutions for early harvest projects: confidence-building measures Since political commitment towards greater integration in BCIM is fairly weak (at best varies widely among member countries), it is important that the entity designs some early harvest projects that are politically not sensitive but economically feasible. In this regard the successful completion of the K2K project deserves a mention. The completion of BCIM car rally is an example of early harvest project of BCIM. The rally has not only helped raise awareness among BCIM countries on the importance of regional cooperation, it also gave much needed confidence to the concerned stakeholders implying that coordinated efforts could result in a win-win outcome for the region. To follow up the development of K2K route, a team consisting of BCIM countries conducted a field survey in 2013 to assess the state of connectivity along the route. There is a scope for taking up many more similar projects. Such projects should be seen simultaneously as development of confidence-building measures, a very critical preliminary institution that could facilitate further institutional development in BCIM. However, BCIM needs a common platform. A permanent consultative mechanism could give the government officials and other relevant stakeholders (businessmen, academics, inter alia) of the respective countries a platform to meet on a regular interval.

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Currently, BCIM has a JSG and a BCIM Forum. The JSG meets bi-annually and the Forum gathers every two years. A permanent platform empowering the JSG could help identifying some crossborder projects using existing infrastructure and institutions in border cities and towns of BCIM. In this connection, the China– Myanmar cross-border opening up programme is worth exploring. In this pilot project a number of local government institutions are involved. The Ruili (China)–Muse (Myanmar) border cooperation has drawn significant amount of investment and has increased trade flows markedly. More importantly, it has also been a catalyst to increase people-to-people contact and cultural exchanges. All these developments have been supported by some local level initiatives and institutions (see Box 4.1).

Box 4.1  The Ruili-Muse Border Opening Up: Lessons for Institutional Development China and Myanmar share about a 2,000 km border. In the China–Myanmar border, Ruili, a city of Dehong Dai and Jingpo Autonomous Prefecture, is the biggest land port of Yunnan, China. It is about 750 km away by land from Yunnan’s capital Kunming. Ruili is linked with Muse, a border town and port in Myanmar’s northern Shan state, which is connected to Myanmar’s second largest city Mandalay via Lashio. The historic Burma Road (Ledo Road) reaches Yunnan through Mandalay, Lashio and Muse. Cross-border trade was banned in Muse following the assumption of military rule in erstwhile Burma in 1962. Muse has been allowed to trade with neighbouring China since 1988. Ruili and Muse became sister cities in 2012. As part of China’s western development strategy Beijing has expedited opening up process through Yunnan with Southeast Asia, South Asia, the Pacific and the Indian Ocean. Ruili Experimental Zone is located in intersection of Southeast Asia and South Asia. The China–Myanmar oil and gas pipeline (793 km gas pipeline and 771 km oil pipeline) project also passes through Dehong prefecture.

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Both China and Myanmar mobilised their institutions and resources to develop cross-border trade, investment and tourism. The Ruili Key Development and Experimental Zone is a pilot project approved by China’s highest authorities and delegated power to the provincial government to develop the zone. To boost trade with China and address the increasing demand for transport and infrastructure, Myanmar is implementing a Central Economic Zone in the border town of Muse. A regulatory entity, the Central Body for the Myanmar Special Economic Zone (SEZ), was established in 2011. To draw investment tax holiday, easy acquisition of land, utility services and other incentives have been offered in the border. A number of financial institutes, notably by China, have been mobilised in the border. As a result, the Ruili-Muse border, which was once one of the key drug and other illicit trade points, has become a major border trade hub accounting for 60 percent of Yunnan’s trade (and 30 percent of China’s total trade) with Myanmar. It is fast becoming transportation, trade logistics, process manufacturing, financial services, business exhibition and tourism hubs in the China–Myanmar border. The border is also turning into a centre for cultural exchanges. To support the Ruili Experimental zone, some new institutions have emerged in Ruili city. The available data show that through the Jiegao gateway of Ruili Port about 36,000 people cross the border (entry and exit) every day, and about 30,000 of them are Burmese (as of March 2014). However, during the interview the authority informed that the crossborder flow of people exceeded 40,000 per day in early 2015. To draw human resources for Ruili’s labour intensive manufacturing, logistics and other services, particularly from the other side of the border, as well as investors, a new institution called the Foreigners’ Service and Administrative Centre of Ruili City was established in June 2013. It provides employment and residence permits to foreign workers to work and stay in Ruili. A host of supporting institutions, namely the Ruili Municipal Health Bureau, Entry-Exit Administration of Ruili Public Security Bureau, Shanghai Municipal Human

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Resources, Social Security Bureau and translation companies, inter alia provide detailed guidelines and services related to residence, business, medical care, employment, education, and cross-border marriage, among others, to foreigners in Ruili. The concerned authorities on the Myanmar side were also consulted by the institution on various issues involving China–Myanmar cross-border people movement. The Ruili-Muse border opening up offers a number of lessons, particularly on institutional development, for BCIM. The central governments of China and Myanmar have involved the local governments along the border to develop the area. Other border checkpoints, notably in Bangladesh– India, Myanmar–India and Bangladesh–Myanmar, can also be transformed into trade, investment and tourism centres learning from the Ruili Key Development and Experimental Zone. Such initiatives could boost confidence in border regions and could act as catalysts for further liberalisation leading to greater trade, investment and people-to-people contact. BCIM thus needs a platform (a permanent consultative mechanism) to assess all these developments and design some early harvest projects in its various border sites using each other’s complementarities. Such initiatives can be termed as confidence-building measures, the preliminary but very critical institutional breakthrough for further development of BCIM’s institutions. The Ruili-Muse border opening up is also a good example of the effectiveness of local government actors and institutions that can derive win-win results for both sides of the border; not merely in terms of trade and investment, it has helped significantly to develop people-topeople contact and cultural exchanges. Source: Based on field trip in the Ruili-Muse Border, Yunnan, China and secondary data.

Similarly, taking advantage of the integrated border checkpoints in the India-Bangladesh border, private sectors of BCIM countries can pour investment in export and import processing plants, logistics, and tourism, among others. Currently, two integrated border check points are operational in the India-Bangladesh border, and

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more integrated border checkposts involving the two neighours are in the pipeline. Similar projects could be implemented in the Northeast India-Myanmar border. A permanent consultative mechanism, if not a secretariat, can help border institutions in terms of development of their capacity. More importantly, it can assist the border regions of BCIM to devise their respective opening up strategies learning from each other’s experiences. Thus, empowering the existing border institutions could be some of the initial institutional building steps in BCIM. In the short run, BCIM member countries can also work on the development of regional public goods. This is an area where all the stakeholders could find their convergence of interest, and a consultative forum involving all the stakeholders could help in designing some projects on public health issues such limiting the spread of cross-border diseases such as flu, AIDS, among others. In the short run, BCIM should also engage with some facilitating institutions that have experience in project-based institutional design for regional economic integration. ADB, for instance, helped GMS and SASEC, among others, forging project-based regionalism. Apart from ADB and UNESCAP, it should develop relations with emerging financial and development institutions like the Asian Infrastructure Investment Bank (AIIB) and New Development Bank of BRICS.

Institutional development: medium to long-term agenda As BCIM is yet to be transformed into a de facto Track I level entity, a formal institutional structure akin to SAARC or ASEAN is a far cry. However, it should have a road map in medium to long term to develop some supporting institutions, including instituting a permanent secretariat. However, BCIM’s long-term institution building might largely depend on how the concerned stakeholders narrow down the differences on their existing bilateral issues, security concerns, among others. The success could also be determined by to what extent the entity reaps benefits from its early harvest programmes. Thus, the initial progress of its early harvest programmes and liberalisation of trade and investment, among others, would be critical to develop BCIM’s long-term institutions. As the domino theory of regionalism suggests, accession to preferential arrangements works as a magnet that triggers wider liberalisation

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(Baldwin 2001).22 Moreover, Haas (1964) outlined three specific mechanisms by which modest levels of integration have led to greater regional cooperation in Europe: functional spillover, political spillover, and cross-issue bargains mediated by autonomous institutions. Functional spillover states that cooperation in some areas (such as coal and steel) led to cooperation in others (such as the Common Market) owing to interdependence among the sectors of advanced economies.23 Functional spillover was complemented by political spillover, through which societal groups interests coalesced supranationally around expanding cooperation and institutions created to implement cooperative agreements become active (Kahler 1995, Moravcsik 1998 and Mattli 1999).24 In developing long-term institutions BCIM should learn from regional and global best practices. As advocated by Eichengreen (2010), most global institutions and conventions provide a basis for liberalising and harmonising arrangements – both at and behind the border – where there is no strong presumption that regional ones should differ from those in the rest of the world.25 As the JSG of BCIM has identified a number of issues – trade, investment and financing, connectivity, social and human development and poverty alleviation, sustainable development and people-to-people contact, for result-oriented outcome, it needs modalities of cooperation in these areas. There can be some project-based high-level working groups involving the representatives from respective countries. To meet frequently there should be some small-scale offices concentrating on trade, investment and other priority areas. These offices, if not secretariats, can be hosted in all the member countries based on their comparative advantages (in terms of human and financial resources), interest and bureaucratic capacity. For instance, India can host trade facilitation office in Northeast India or Kolkata. Similarly, Bangladesh can be a meeting point for social and human development and poverty alleviation of BCIM. China and Myanmar can lead other priority sectors. It is in this stage of institutional development BCIM might need some functional institutes (with a narrower, often technical agenda focusing on specific area of cooperation) akin to ASEAN+3 Macroeconomic Research Office, provided BCIM has consensus in eventually becoming a full-fledged overarching institute. However, no matter whether BCIM intends to develop as a project-based loose sort of cooperation or network-based arrangement, experience elsewhere strongly suggests that success

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of regionalism hinges on the extent the respective governments delegate their power to the working groups or secretariats. As discussed, in the case of Europe, delegation of power to the concerned institutions has been proven to be very effective in forging deep integration. There is also need for a mechanism to isolate security issues from economic ones, as done by ASEAN. To make some progress in this regard, BCIM needs to form a high-powered inter-governmental committee. Experience in Southeast Asia indicates that ASEAN has developed a separate institution named ASEAN Regional Forum to maintain peace and stability in the region. BCIM might also consider adopting a similar approach.

The extension of East Asian production network to South Asia Institutions are not the panacea: allowing market forces to work The discussion in preceding sections indicates that while institutions are necessary for regional integration they are not the panacea. Moreover, institution building is a slow process. This is more so when one looks at Asia’s experience in terms of development of IFRs. Historically, Asia’s record in terms of institutional building is not very encouraging. However, as discussed, despite experiencing lower level of institutional development, East Asia has done better than many other regional entities in terms of trade and investment growth. In Asia, market forces are given more credit for the region’s economic integration. Owing to political constraints, building of hard-core institutions is a long-term process, therefore BCIM should take a dual track approach in this regard. In addition to its existing efforts to develop numerous institutions, it should also allow the market forces to play a greater role by facilitating supporting policies such as removal of tariff and non-tariff barriers, ease of doing business, investment-friendly regimes for MNCs, among others. As discussed earlier, BCIM’s guiding principles (open regionalism and seamless connectivity) become very critical in this regard. If the member countries, notably India and Bangladesh, intend to see the EAPN which was developed mainly by MNCs expand in South Asia, there is a need for policy support paving the way for the entry of MNCs with finance and technology. Moreover,

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China, being one of the key hubs of EAPN, can also help the region by joining the production network channelling its industrial knowhow to South Asia.

The way forward BCIM is still in its nascent stage of development as far as its institutional development is concerned. It has yet to be transformed from Track II to a full-fledged Track I initiative. However, being a late comer, it can learn from other regional entities in terms of its institution building. As discussed in this chapter, the experience of ASEAN and East Asia as well as Europe (to some extent) offers a number of lessons for BCIM in terms of regionalism. Based on Asian experience and political constraints, BCIM should adopt a dual track approach as far its regional integration is concerned. Its development of institutions also depends on the type of regional entity it intends to form. If BCIM aspires to be a comprehensive regional body like ASEAN, as opposed to GMS-type loose forms of intergovernmental regional cooperation, it needs both short and long-term plans to develop a host of supporting institutions. In pursuit of its institutional development goals it faces a number of problems such as lack of political trust, uneven development and security concerns. However, we have offered some suggestions to address the concerns. BCIM might consider isolating its security concerns from economic issues forming a highpowered committee focusing on security issues in line with ARF. To address the concerns of laggards, economic integration could follow a step-by-step approach allowing countries like Bangladesh and Myanmar more time to meet numerous conditions and targets in terms of tariff concession and relaxation of market access, among others. More importantly, there is a need for a consensus on BCIM’s guiding principles. In this chapter, we recommend that it follows ‘open regionalism’ and ‘seamless connectivity’ as its key regionalism principles. These two principles have been key catalysts of East Asia’s successful regionalism. Moreover, if adopted, these principles could act as building blocks for pan-Asian regionalism. In the short run, BCIM should focus on confidence-building measures, an initial institution but could proven to be very critical for institution building in BCIM in the medium to long-term. Its

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early harvest programmes should be the starting points of BCIM’s organisational development. In the short run, along the K2K route, it can focus on developing some local level (local government) supplementary institutions to expedite cooperation in border areas. We highlighted in the chapter that the Ruili-Muse border opening up and other reforms could be a model for other border regions to accelerate cross-border trade, investment and tourism. To document all these development, BCIM needs a common platform where government-level officials can meet frequently and devising policies for border institutions. BCIM needs to work with some facilitating institutions that have experience in project-based regional cooperation. Facilitating institutions are important source to finance infrastructure and develop economic corridors, among others. In the medium to long run, BCIM would need formal platforms, if not secretariats, to enhance cooperation on priority sectors such as trade facilitation, multi-modal connectivity, energy cooperation, and sustainable development, among others. These offices can be hosted in various member countries based on their comparative advantages. However, as we have seen in the case of SAARC, a mere formation of secretariats or working groups are proven to be not very effective unless they are delegated the required power. Finally, institutions are not the panacea. Based on Asia’s experience and weak political will of some members of BCIM we suggest that the entity adopt a two-pronged approach. In addition to institutional development, it should allow market forces playing a greater role helping South Asia joining the East Asian Production Network. Nevertheless, such strategy by no means could diminish the role of institutions as experience elsewhere indicates that marketled processes may well converge towards an institutionalised integration framework operating under rule-based mechanisms.

Notes 1 Balassa, Bela. (1961). The Theory of Economic Integration, Homewood: Richard Irwin. 2 Xinhuanet. “Chinese Premier Says Talks with India’s Modi ‘meet expectations’ 24 Deals Signed”. http://news.xinhuanet.com/english/201505/16/c_134243197.htm (accessed on 22 January 2016). 3 Henning, Randall. (2004). “Regional Economic Integration and Institutional Building”. Proceedings of the G20 Workshop. Beijing, 22–23 September 2004.

96  M. Shahidul Islam 4 North, Douglas and Thomas, R. P. (1973). The Rise of the Western World: A New Economic History, New York: Cambridge University Press. 5 Acemoglu, Daron, Simon, Johnson and James, Robinson. (2001). “The Colonial Origins of Comparative Development: An Empirical Investigation”. American Economic Review, 91(5): 1369–1401. 6 ECB. (2004). “Regional Economic Integration in a Global Framework”. Proceedings of the G20 Workshop. Beijing, 22–23 September 2004, Frankfurt am Main: European Central Bank. 7 Sakakibara, Eisuke and Yamakawa, Sharon. “Market Driven Regional Integration in East Asia”. Proceedings of the G20 Workshop. Beijing, 22–23 September 2004. 8 Ibid. 9 Henning, “Regional Economic Integration and Institutional Building”. 10 Ibid. 11 ECB, “Regional Economic Integration in a Global Framework”. 12 Sakakibara and Yamakawa, ‘Market driven regional integration in East Asia. 13 Henning, “Regional Economic Integration and Institutional Building”. 14 Jabin T. Jacob. “Institutionalizing the BCIM: The Next Steps”. presentation made at the 10th Bangladesh, China, India and Myanmar (BCIM) Regional Cooperation Forum, Kolkata, 19 February 2012. 15 ADB. (2010). Institutions for Regional Integration: Towards an Asian Economic Community, Manila: Asian Development Bank. 16 Garnaut, Ross. (1994). “Open Regionalism: Its Analytic Basis and Its Relevance to the International System”. Journal of Asian Economics, 5(2): 273–290. 17 Kharas, Homi, Aldaz-Carroll, Enrique and Rahardja, Sjamsu. (2008). “East Asia: Regional Integration Among Open Economies”. In Fujita, Masahisa (eds), Economic Integration in Asia and India. UK: Palgrave Macmillan, pp. 13–53. 18 Shahidul Islam, M. (2014). “Revival of Silk Routes and Development of Economic Corridors: Connecting South Asia to the Global Value Chains”. Presentation made at the ‘2nd China-South Asia Think Tank Forum’, Yunnan Academy of Social Science, Kunming, 6–7 June 2014. 19 ADB. Aid for Trade – An Investment-Benefit Road Map from South Asia, 2013, Manila: Asian Development Bank. 20 Eichengreen, Barry. (2010). Institutions for Regional Integration: Toward an Asian Economic Community, Manila: Asian Development Bank. 21 Ibid. 22 Baldwin, Robert. (2001). “The Implications of Increasing Fragmentation and Globalisation for the World Trade Organization”. In Cheng, Leonard K. and Kierzkowski, Henryk (eds), Global Production and Trade in East Asia, Boston: Kluwer Academic Publishers, pp. 249–271. 23 Haas, Ernst. (1964). Beyond the Nation State, Stanford: Stanford University Press.

Institutional arrangements for BCIM 97 24 Kahler, Miles. (1995). International Institutions and the Political Economy of Integration, Washington, DC: Brookings Institution. Moravcsik, Andrew. (1998). The Choice for Europe: Social Purpose and State Power from Messina to Maastricht, Ithaca, NY: Cornell University Press. 25 Eichengreen, Institutions for Regional Integration.

Chapter 5

The BCIM Forum

Ambuj ThakurThe BCIM Forum

Tracing the historical basis Ambuj Thakur

The Bangladesh–China–India–Myanmar (BCIM) Regional Cooperation Forum is into its twentieth year, since its humble beginnings as the Kunming Initiative way back in 1999. Mooted as a process for sub-regional cooperation involving China’s Southwest, northern Myanmar, India’s Northeast and Bangladesh, it has progressed, albeit at a snail’s pace, into the BCIM Economic Corridor (BCIM-EC) with their official Joint Study Group (JSG) still working on the issues involved in institutionalising it into a viable mechanism. Comprising some of the most underdeveloped but resourcerich areas and inhabited by a multitude of ethnic minority groups across national boundaries, this sub-region has immense potential for emerging as an economic powerhouse. It was connected in the past through the Southern Silk Route (Nanfeng Sichou Zhilu), which with its many branches combined this area into a close economic unit fostering social and cultural ties among the people. One thing that should be kept in mind is that this sub-region represents a frontier area which lay far-off from the main centres of power and population for millennia, and has maintained unique identities without being subsumed by the ‘national’ majorities. The localised power bases of elites in this area have ranged from big kingdoms to spaces as small as individual villages, albeit connected at times by a loose alliance on the lines of kinship and clans. All these entities have been, however, relatively independent or autonomous politically from their closest national core areas, although maintaining economic interactions and allowing the latter’s cultural influences to seep through their own systems. Thus, they represented a paradox. Resisting state-making projects was as important as pursuing economic ties with the core through carefully selected border areas where the ‘outsiders’ would not be allowed ‘in’ to the local spaces.

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This element of exclusivity involving the treatment of valley people as ‘outsiders’ by the hill people has been a recurring historical feature of the sub-region. Similarly, the hill people were looked down upon by those from the plains as barbarians who needed to be brought under the finer influences of their own ‘civilisations’ – a trend even seen, albeit in a more stringent and somewhat different way, during the period of European colonisation in the 19th and much of the 20th centuries. Brilliantly pointed out by James C. Scott,1 the distinction between the rice-cultivating majorities of the valleys versus the hilly minorities practising swidden or slashand-burn cultivation is a stark affair to behold. Most of the latter had opted for a life of movement where the limitation of staying within the confines of the fiscal state was not an attractive proposition. The main objective of the pre-colonial and the colonial state had been on rent-maximisation through the spread of agriculture (mostly mono-cropping, but also involving cash-cropping), and thereby using it as an incentive to further extend domination over pristine territories for resource exploitation. The industrial economy, from the 19th century onwards, has strongly created a market for increased consumption by raising demand for commodities and services, thereby also contributing to a population explosion. This is a mutually complementary cycle which, when unchecked for long, creates severe socio-economic and ecological problems, and therein paves the way for the exploitation of virgin areas for maintaining the momentum of economic growth. This is the flip side of the development debate. However, there is a more compelling reason to review the debate on the need to develop hinterland and peripheral areas economically. Most of these frontier areas of yore are administratively part of nation states now, forged through a blend of ancient civilisational norms and the Westphalian state-making model. Therefore, all such ethnic groups are now part of huge multinational states in South and Southeast Asia and need to conform to the state-making projects of the respective power-centres. An important point to be remembered here is that the earlier loosely administered frontiers have been mostly replaced by manned international boundaries through the use of armed forces of the state. And, they are prone to state-resisting attempts even now, sometimes having spillover effects on neighbouring areas of a contiguous country. The topics of opposition, overt and covert, include outright independence, greater autonomy in political and economic affairs, threats

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to socio-cultural traditions of the ethnic minorities by the majorities, demands for economic development of the periphery without the fear of exploitation by ‘outsiders’, etc., to name a few major ones. While the People’s Republic of China (PRC) has managed to keep Yunnan relatively peaceful after the 1970s on the surface, Myanmar, Bangladesh and India have been facing violent insurgencies covering all these topics in the last sixty years. Increased state-control through militarisation has not helped matters in these countries. Even in Yunnan, China faces acute non-traditional security threats in the form of smuggling of narcotics, people and arms. Only its One Party System led by the Communist Party of China (CPC) has ensured a uniformity of administration throughout the country, stifling the emergence of any serious pressure group to seriously threaten the Party. However, in the three other countries of the BCIM, such a situation does not exist owing to the peculiar historical evolution of their administrative machineries and political systems. But given the nature of the globalised flow of information today two issues have to be remembered – first, the tendency to secede from a state by one or a collection of ethnic groups will not solve any development problems; and second, the keeping of these far-off areas underdeveloped by the core areas under the garb of security issues or the so-called lack of capacity to absorb investments have to be discarded firmly. The age-old connections between the people of this sub-region have to be revived through the re-opening of the borders by the BCIM countries. After all, the moot point remains that this area remains at the crossroads of East, Southeast and South Asia respectively, and belongs to none individually. It is this very diversity that gives character to its rich socio-cultural traditions nurtured over time through linkages along the Southern Silk Route. This is why the national governments need to promote the proposed BCIM Economic Corridor (BCIM-EC) route to harness such linkages and create a cohesive geo-economic sub-region where the ethnic groups remain the main recipients of development, and shun guns to turn this region, echoing the words of former Thai Prime Minister Chatichai Choonhavan with respect to Southeast Asia, from ‘battlefields into marketplaces’.2 A nation/state does not stay in isolation for long and movement of people across geographical barriers has been a historical process for political, economic, social and cultural reasons, with a primary emphasis on the word survival. The ancient trade routes from the

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heart of China to the western world through which exotic Chinese commodities like silk, gold, iron, and steel, among others, were exchanged for food products, glass, gems, etc., gave rise to the first multinational economic cooperation initiatives of China with the rest of the known world on a grand scale. All along the Southern Silk Route, one could witness the movement of goods and people across frontiers. Even cowries from Bengal coast found their way into Yunnan in the ancient times as did copper and silver from Yunnan into these areas. Unlike the kind of economic globalisation that one situates in the 1970s, such routes, in fact, are reminders of the fact that globalisation has been a continuing process of linking people, regions and cultures through both economic and political motives of the rulers and the ruled since the beginning of time. Globalisation has been “taking place for centuries whenever improvements in transportation and communications have brought formerly separated peoples into contact with one another”.3

Southern silk route – origins and evolution It is necessary to delve deeper into history to have an idea of the processes involved in the evolution of polities, economies and cultures of various social groups along the BCIM-EC. After all, as E.H. Carr4 has rightly pointed out, history is an unending dialogue between the past and the present. Linkages are important indicators of human development in the sense that they speak about connectivity, i.e. movement of people, goods, ideas, etc., over distances and shaping and re-shaping the destinies of people beyond regions. Parag Khanna coins a new adage – Connectivity is destiny5 – arguing that infrastructure is akin to a nervous system connecting all parts of this planet. Chinese sources Now, as the story goes, the Han Emperor Wudi (140–87 bc) was in a serious conflict with the Xiongnu (Huns) in the western borders of his empire and sent his representative Zhang Qian with a hundred men to forge an alliance with the Dayuezhi (Yuezhi) in 138 bc. Zhang Qian travelled through parts of modern day Uzbekistan, northern Afghanistan, Iran, Kazakhstan and India, and returned with only one man to Chang’an after facing immense hardship (including imprisonment by the Huns) after thirteen years. As it has been stated

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in the previous chapter, Zhang reported the presence of bamboo sticks (qiongzhu) from Qionglai (in Shu/Sichuan) and Sichuan fabric (shubu) in the markets of Daxia (northern Afghanistan).6 This was a startling discovery for the imperial court since it referred to the presence of a third route connecting the southern regions of China with the west, and that which needed to be discovered. In 122 bc, another mission was sent by Wudi to find out more about this southern passage to India and the west. His envoys could proceed no further than the kingdom of Dian (present-day Yunnan). The king, Changqiang, treated them well but forbade them from proceeding further on various pretexts. One major issue was that the lands further west were inhabited by a people called Kunming who allowed no one to reach India. As it has been gathered from the records of the historian Sima Qian7 that a thousand li8 to the west lay the kingdom of Dianyue, where the people rode elephants and the merchants from Shu went there with their goods secretly for trade.9 It has been surmised that these envoys had been stopped since the King of Dian wanted to keep his monopoly over a highly lucrative trade to himself. The remarkable discovery of the Bashu Civilisation relics at Sanxingdui (Sichuan) in July–August 1986, by some local construction workers gave a new perspective on this route.10 The name Bashu originates from the fact that the present-day Sichuan province had been occupied by the ancient states of Baand Shu.11 Whereas the traditional Chinese civilisation was centred around the Yellow River basin, more than a thousand kilometres to the east, the Bashu Civilisation is considered as a separate or parallel source of Chinese antiquity and socio-cultural development.12 Basically, the Bashu area was connected to South and Southeast Asia through two routes – (a) the Wuchi Road (called since it was five chi or 166 cm wide) from Yibin to Yunnan, and (b) the Lingguan Road from Xichang to Yunnan. These two routes were connected with Chengdu and formed the main initial trunk-lines of the SSR. Yang Bin, however, contends that, even now, no accurate information exists about the actual nature of trade along this route through the centuries or even its time of origin and name.13 The various names used are: (a) Xi’nan Sichou Zhilu (Southwest Silk Road), (b) Nanfang Sichou Zhilu (Southern Silk Road), (c) Nanfang Lushang Zhilu (Southern Overland Route), (d) Dianmianyin Gudao (ancient road connecting Yunnan, Myanmar and India), (e) Shuyandu Dao

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(road between Sichuan and India; original name), and (f) Shubu Zhilu (the road of Shu cloth). He suggests that this route extended beyond Southwest China, Tibet, Southeast Asia, and South Asia, including four main branches and many sub-branches.14 The first branch was from Sichuan to India through Yunnan and Myanmar, called the Chuan-Dian-Mian-Yin (Sichuan-Yunnan-Myanmar-India) or Shu-Yandu (Sichuan-India) road. Yang states that the Lingguan Road was the northern route which passed through the following cities – Chengdu – Linqiong (Qionglai) – Lingguan (Lushan) – Zuodu (Hanyuan) – Qiongdu (Xichang) – Qingling (Dayao, entering Yunnan) – Dabonong (Xiangyun) – Yeyu (Dali). It was named so since it passed through the Ling Pass (Lingguan). The Wuchi Road was the southern route that crossed the following cities – Chengdu – Yibin – Zhuti (Zhaotong) – Wei County (Qujing) – Dian (Kunming) – Anning – Chuxiong – Yeyu (Dali). From Dali the road crossed the Bonan Mountain (and called Bonan Dao), passing through Yongchang before dividing into two – (a) the main branch or the Yongchang Road, passing through Yongping, Baoshan and Dehong, before entering Myanmar and India, and (b) the Ancient Tea and Horse Road moving Northwest through Heqing, Lijiang, Zhongdian (now called Shangri-la) and Tibet, before entering India through many branches in the Chumbi valley. The Yongchang Road has been regarded as the main section of the SSR by scholars today. The Yongchang Road after entering Myanmar again branched off into three parts. One moved towards the north through the Hukhwang Valley to enter Assam’s Brahmaputra Valley through the Patkai Range (of the Eastern Himalayas) and enter Bengal. The second route transversed through the cities of Lashio, Mandalay and the Kubaw Valley to enter India through Imole Pass into Manipur, and then, passing through Assam’s Barak Valley, before entering Bengal.15 The third route passed through Mandalay to two subbranches – one moving westwards up the Arakan area to the Bengal coast, and the other moving south towards Yangon. According to Yang Bin, the second and the third routes had been mentioned by the Tang dynasty scholar, Jia Dan, in his writings.16 He termed them the western and the southern routes with each measuring 3,200 li and 5,600 li respectively. Though longer, the southern route was favoured by the merchants because it also connected with the Maritime Silk Route.17 From Assam, there were two overland and one

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riverine route to Bengal.18 The river route went along the course of the Brahmaputra River. The first land route went from Tezpur through the districts of Kamrup and Goalpara into Lakhnauti (Bengal) along the northern side of the Brahmaputra. Another route started from Sibsagar and passed through Nagaon district along the southern bank of the Brahmaputra to join the first route at Tezpur and Barpeta after crossing the river. The second route joined Sibsagar and Sonargaon (Dhaka) through the Jaintia Hills, Sylhet and Mymensingh, and it was favoured by the merchants interested with oceanic trade due to easy connectivity with the river ports of Bengal. Moreover, there were 35 passes connecting Kamrup with Tibet. There was also a passage from Kashmir to Yunnan, via the Kumaon Hills, Patkai Hills, and the upper districts of Myanmar (probably the Kachin and the Shan Hills) and a road from Lakhnauti joined this route. “It is also possible that some portions of the three routes (LakhnautiTezpur, Lakhnauti-Tibet and Lakhnauti-China) were common”.19 Early European accounts A contemporary European account is The Eastern Frontier of India written in 1835 ad by the British officer, Robert Boileau Pemberton. Armed with a missionary zeal to explore the Northeast frontier of the Indian subcontinent, he has left a comprehensive account of the trade and commercial exchanges between China, Myanmar and India’s Northeast and Bengal. First, he mentions the trade relations between the Assam Valley and China through Bhutan, conducted by the merchants of Bhutan and Tibet. He talks of the “Khumpa Bhooteas or Lassa merchants”20 bringing down gold worth seventy thousand rupees to Assam just before the Burmese invasions of 1817–1826 ad.21 The Lhasa merchants brought the gold specifically to purchase the golden muga silk of Assam. The Bhutanese merchants imported woollen cloths, golddust, salt, musk, horses, Tibet cowries and Chinese silks to Assam. They took in return lac, madder, muga silk, endi silk, and dried fish with them. Pemberton says that, in fact, in 1809 ad this two way trade amounted to two hundred thousand rupees per annum, something also attested to by another official Francis Hamilton22 in his work An Account of Assam written almost twenty years earlier between 1807 and 1814 ad. This was quite a figure for those days. Although we have no mention of the SSR proper, some

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details can be gathered from the previously mentioned data. The trade in horses and Chinese silks obviously refers to the Tea-Horse Road because this route passed though Tibet into India, where part of the sub-branches connecting Assam Valley with Tibet passed through Bhutan. Horses have always been sourced from Sichuan by everyone; one of the most important reasons for the survival of the Southern Song dynasty in China and the subsequent Mongol invasion of Sichuan and Yunnan in 1253 ad.23 Moreover, the involvement of the Lhasa and Khampa merchants further attests to the thriving trade since both came from the western and the eastern regions of Tibet through which the major section of the road passed. Therefore, this route was very much in operation during the 19th century. The British officer, Francis Jenkins, in his survey report to the EEIC Government, at Calcutta, during the early 1830’s, pointed out to the trade relations between Yunnan and Ava (capital of the Burmese Empire) and urged the authorities to consider taking measures to divert a part of this trade into Assam, and that direct exchange of merchandise with Sichuan and eastern Tibet (Kham area) be encouraged.24 In his footnotes, Jenkins mentions that Yunnan and Sichuan had a population of about 11 million, and their principal products were tea, rubber, silk, musk, amber, benzoin/lac, precious stones, gold, copper (common and white), iron, tin and lead; and, a significant portion of their population comprised of muslims who were the traders to Ava.25 He mentions that silver could have been possibly brought into Assam from Ava or the Borkhampti area (between the eastern extremity of Assam and the Irrawaddy valley), a fact also mentioned by Pemberton in his annals.26 It should be borne in mind that the silver coinage prevalent in Bengal in the medieval times had originated in the silver mining areas of Northeastern Myanmar (Shan Hills) and Yunnan. Jenkins mentioned, as Barpujari attests in his introduction to the former’s work, besides rock salt and opium, there had been a rising demand for European piece-goods, beads, tobacco, grain, betel-nut and silks of Assam in the region. “With the opening of the Khamtis and Borkhamti country, there were possibilities of Assam-China trade through the waters of Irrawady, Salwin, Yang-tse-kiang”.27 Barpujari’s summation of Jenkin’s observations hold true even today and as we shall see later, much of the talk of promoting sub-regional cooperation through the BCIM Forum rests on such assertions in the past by others.

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Another major account, the Topography of Assam was written by John M’Cosh as a report to the Medical Board in Calcutta in 1837, in his capacity as the Assistant Surgeon of Assam. He mentions that the route from Upper Assam to Burma (Myanmar) passes through the Hukhwang valley into the town of Mogaung, thence to Ava (capital of Konbaung Burma) navigating the Irrawaddy, before entering Yunnan through the Shan Hills on pack animals like mules. “an overland communication by means of a good road would be mutually beneficial to the three great nations whose territories there meet; and would open a direct importation of all the valuable productions of Northern Central Asia”.28 Obviously, one of the major motives of the British was the opening up of the trade route to Yunnan and the rest of China. Another motive was to have a clear road to have an easy access to China and take punitive measures whenever the need arises. Yunnan, he mentions, was one of the richest provinces of the Qing Empire. This assertion should be looked into with the perspective of the Anglo-Chinese rivalry over the Opium trade, culminating finally in the Chinese defeat in the First Opium War (1842) at the hands of the British, and the existence of a copper mining industry and the trade in Chinese silk, porcelain-ware, lead and, most importantly, silver, which whetted the British appetite for trade and commerce. An idea about the distances between Ava and Calcutta has given by Pemberton. His analysis was based mainly on military reasons since the First Anglo-Burmese War had been still fresh in the minds of the British and now they had the added responsibility of guarding the newly conquered Northeastern frontier from imperial Burma. He identified four routes through which a British army could proceed to invade Ava from Calcutta – (a) the first line through Assam measuring 1433 miles; (b) the second through Manipur, 1052 miles; (c) the third through Arakan (present-day Rakhine state of Myanmar), 835 miles; and (d) the fourth through Rangoon (Yangon), 1446 miles.29 Through the actual observations of one Major Snodgrass, any such army could proceed at the average speed of nine kilometres a day and therefore would reach Ava from Calcutta in 170, 107, 39 and 82 days respectively according to each of the four routes. It shows that these routes had been well-known, based on which the British were chalking out their military strategies. Subsequent British officials and explorers in the latter half of the 19th century and first half of the 20th century have strived to explore these routes and all have focussed on the need to develop

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communications through the rough terrain to give a proper institutional character to the age-old trade contacts.30 Coryton, quoting from the Parliamentary Papers published by the House of Commons (Great Britain) in 1869, about the trading merchandise observed by an official Dr. Richardson in Zimmay (Chiang Mai, Thailand) in 1829, notes that Chinese caravans, consisting of around 200 mules and horses, were on their way to Moulmein (Myanmar) from Yunnan and they were carrying with them copper and iron vessels, silk (raw and manufactured), stains, gold and silver thread, lace, musks, walnuts, carpets and vermillion.31 In return, they purchased cotton, ivory, skins and horns from this Shan region. This journey from Zimmay to Moulmein took twelve days to complete. J. P. Mills and Francis Kingdon Ward provide an interesting study of the topography and the social structure of the people living in the border region of Assam, Myanmar and Tibet (China) and would fit more into the roles of geographers cum ethnographers. The writings of Fitzgerald, Christian, Rosinger and Lattimore can be placed under the broader ambit of the Japanese attempts to invade China through Myanmar during the Second World War and the resultant construction of the Ledo-Burma (Stilwell) Road to act as the main supply line for the Allied Forces from India to China. Indian perspectives Indian historians like S.K. Bhuyan and Haraprasad Ray shed significant light on the trade and commercial linkages through the SSR between SW China, Myanmar, NE India and Bengal, which would be a valuable addition for this research for looking into the debates on the feasibility of the BCIM Forum as a viable sub-regional grouping for the future. Bhuyan mentions the visit of the Christian missionary, Father Troyand Laynez, to Rangamati in Bengal (i.e. in Southeast Bangladesh today) in 1714 ad, and the account written by the latter’s companion, Father Claudius Anthony Barbier. Barbier noted that Yunnan was only at a distance of fifteen days from Rangamati.32 This does not elaborate whether it was by the land route only, or a combination of land, river and sea routes. What it makes clear given the geography, is that this route corresponds to the one through Arakan in Myanmar, which was also described later by Pemberton as the shortest of all the four branches, a century later. Bhuyan states that Assamese merchants went to Yunnan through Sadiya, the Patkai range, Hukhwang Valley to the town of

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Munkong (Mogaung) and from there up the Irrawaddy to a town called Catmow. The goods were disembarked at Catmow and taken to Yunnan through the Shan Hills on pack animals. Corresponding to the information of M’Cosh and Pemberton earlier, he says that Assam procured its supply of silver from Yunnan, Tibet and the Borkhampti area. In the trade with Tibet through Bhutan, the Assamese merchants acquired Chinese silk and smoking pipes of Chinese origins (mostly for use in smoking opium, which was widespread in the province). The Kariapar Duar33 acted as the channel of trade between Assam and Tibet.34 As mentioned earlier, even Bhuyan states that Bengal was connected with Assam through four routes – three overland and one riverine. He describes the river route in detail in the following paragraph: The river route from Goalpara was down the Brahmaputra, and via the Jennai from Jamalpore, and then after some distance along the Pabna river, a navigable branch of the Ganges. After proceeding up the Pabna river for two or three days the boats came to the Ganges which they ascended for three or four days more till they came to the mouth of Matabanga or the Jellingi down either of which they proceeded to Calcutta. As these two rivers became almost dry during winter the boats follow the route through the Sunderbans. The boats took 25 to 35 days to complete the voyage from Goalpara to Calcutta, and from 33 to 43 days from Calcutta to Goalpara.35 The most popular routes from Bengal to Assam were this river route and the overland one through Murshidabad, Maldah (Malda), Dinajpore (Dinajpur), Rungpore (Rangpur), Bagwa and Goalpara. Bhuyan concludes that one of the reasons aimed at by the EEIC in establishing commercial relations with Assam in the period 1771– 1826 ad was to participate in the trade with the frontier tribes and possibly with China. Haraprasad Ray through his research brings forth how the Chinese have been mentioned as Cina in ancient Indian works like the Ramayana, Mahabharata, Manusmriti, Puranas, Brihatsamhita, etc., and notes that while the word pat means cloth made of flax or jute in the whole of eastern India (even today), in Assamese language it refers to silk.36 He argues that silk was known as Cinangsuka in India after the 1st century bc. Given the extreme popularity

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of silk in Assam, the word pat must have originated from Cinapatta, and got transferred into the Assamese language as the term for this product before the 1st century bc. Ray surmises that silk must have been introduced from China as early as the 5th century bc. This means that Sichuan being regarded as the birthplace of silk,37 the only way that silk could have come to Assam was through the SSR. Ray’s assertion should be read in conjunction with that of the Chinese scholar Ji Xianlin, who affirms that by “the Fourth century bc, Chinese silk had certainly been introduced in India”.38 Yang Bin mentions that although most scholars agree that the SSR had come into existence before the 3rd century bc, yet given the nature of the inhospitable terrain, the scale of trade should not be exaggerated.39 What can be safely said is that while the SSR could have come into existence in the previously mentioned period, the kind of regular exchanges discussed so far might have emerged over time and picked up steam from the Ming dynasty period (1368–1644 ad) onwards. Ray mentions Yongchang (Baoshan) as the gateway for Yunnan to the outside world, which served as the meeting point for merchants both from home and abroad. As per Chinese historical records, he says, this prefecture had eight counties and 60 thousand households in the reign of the Han emperor, Ming Di (58–75 ad), and was situated at a distance of 6,900 li (about 3,400 km) from Luoyang (in present-day Henan province), the imperial capital.40 Today, this distance is about 2,239 km. Given the nature of the terrain and condition of roads in those days, the route could have been more circuitous and longer than today’s distance. There lived people from Shendu/Zhuandu (India) and other nationalities like Jiaoluo/Gelo (the Garo tribe from the Indian state of Meghalaya). The other important trading centres along the route were Tengcheng (Yunnan), Bhamo and Myitkina (both in Myanmar) before entering India. He places the Dianyue state mentioned in Sima Qian’s account as the area encompassing the Tengcheng, Lianghe, Yingjiang and Ruili counties of Yunnan, inhabited mainly by the Dai ethnic minority group.41 During the Tang dynasty period in China, Ray says, detailed records of the roads and distances from Dali to Myanmar and India were available in the Xin Tangshu (The New History of the Tang Dynasty). The distance from Dali to Taguang (Mandalay region, Myanmar) was 700 km, and thence to Pyus (Bagan, Myanmar) was 500 km, from where Kamarupa, at the lower and the middle course

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of the Brahmaputra, was 800 km to the west. Pundravardhana (northern Bengal) lay 200 km from Kamarupa and from there the distance to Magadha (Bihar state, India) was about 300 km on the southern course of the Ganges. Another route from Zhuge Liang (Yunnan) passed through Myitkina and Mogaung to Manipur [Daqin Bolomen, Dakshin (or South) Brahmadesha (Burma/Myanmar)] covering a distance of 850 km and thence to Pundravardhana at 750 km.42 Even Xuanzang described the distance between Magadha and Kamarupa as 1,200 km, from which the distance to Southwestern Sichuan was a hazardous two-monthjourney. This chapter would remain incomplete without taking into account the vivid description of the physical connectivity, sociocultural interactions, economic linkages and political structures prevalent across India’s Northeast, Myanmar and Yunnan enumerated in Purnakanta Buragohain’s Patkair Sipare Na-Basar (Nine Years Beyond the Patkai). Written in 1943, this book recounts the time Buragohain spent in Myanmar from 1933 to 1942. Hailing from a small village in Upper Assam, he ventured forth towards Myanmar in 1933 to pursue his business ventures, and starting off with his “Assam Silk and Utensil Stores” in Myitkina that very year.43 He travelled the length and breadth of the country, trailing the old routes through the Hukwang Valley through which the Tai-Ahoms proceeded to set up their kingdom in the Brahmaputra valley of Assam in the 13th century ad. His account is not merely a travelogue, but also a historical document encompassing every aspect of life in British Burma, and Republican China (Ruili region of Yunnan specifically). He was a prime witness to the Japanese bombing of Burma and joined the refugees along the old routes to make his escape to Assam.44 Such volumes of first-hand field experience add richness to the narrative of historical research. Before concluding this section, two more aspects of the nature of the globalised trade networks in the BCIM sub-region should be considered. They are the trade in horses and cowries. Horses from the Yunnan-Sichuan region had been sent to the imperial court in China since the Han dynasty times. Yang argues that they were especially suited for the sub-tropical climate of the Huai and Yangzi river regions, and were in great demand.45 It was the main supplier of horses that helped prop up the military machine of the Southern Song dynasty (1127–1279 ad), and the exact reason why Kublai Khan chose to cut off this line by occupying Yunnan in 1253 ad. Marco Polo, visiting Yunnan at the same time, noted that the province produced a sturdy breed of horses which were exported to

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India for sale when young.46 Ranabir Chakravarti too cites Marco Polo and the medieval Indian historian Minhaj-us-Siraj in his arguments around the Yunnan-Bengal horse trade,47 something that is corroborated by Yang in his writings. He suggests that the war economy in India required good horses, as they provided the backbone of the army. While the western part received its supplies from Central Asia and West Asia, the states in the eastern part procured a large share from Yunnan, in which Bengal acted both as a customer as well as a conduit. He surmises that both the Tea-Horse Road and the one through Bagan-Mizoram-Tripura from Yunnan served as the supply lines for this trade. Associated with this was the cowry trade between Yunnan, Bengal and SE Asia. In the Sanxingdui excavations, near Chengdu, several hundred cowries have been found dating back to 1100 bc. Cowry was used as money in Yunnan until the second half of the 17th century ad when it was outlawed by the Ming dynasty and replaced by copper coins. This was “aimed at replacing cowry money with a type of money that symbolised the imposition of Chinese culture, and, not least, the legitimacy of Chinese rule over frontier regions”.48 The cowry shells were brought from Maldives to Myanmar and Siam (Thailand) by sea and then overland to Yunnan. Given the fact that by the mid-7th century ad, the functioning commercial routes from Myanmar to Yunnan (and extending to India) were in place, there was a possibility of the cowry trade been conducted through the SSR, although there is very little documentary evidence to support it.49 But Yang suggests that the cowry shells unearthed in Sanxingdui, like those in Yunnan tombs earlier, belonged to the Cypraeetitris, Monetaria annulus, and Monetaria moneta species, and it was likely that they had been transported through the SSR overland. The Chinese term kaoli to denote the cowry was invented in the Yuan-Ming period (1279–1368, 1368– 1644 ad) and this could have originated in the Bengali equivalent kauri. The word kaoli was first mentioned by the Chinese travellers (in the voyages of Admiral Zheng He) Ma Huan and Gong Zhen in their respective accounts in the mid-15th century ad.50 The SSR throughout the past two millennia has acted as a gel to connect Yunnan with South and Southeast Asia. This entire region had no single empire as a controlling power and authority was divided amongst not only individual states and statelets, but also among individual tribes. Local elites and merchants regulated this long-distance trade in various transit points. Yet, this very absence of singular authority and currency was also a “sign

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of interdependence and dynamics of the local economies”.51 Cutting across time, commercial goods traded in the SSR included shell, jade, precious stones, elephant tusks, horses, lumber, cloth, herbs, spices, salt, tea, gold, silver, copper, tin, lead, cotton, silk and opium, among others.52 “The traditional trade route came into being first as a track, then as a road and developed into an overland trade route with the expansion of commercial activities. It also brought about socio-economic development in the entire region”.53

The BCIM Economic Corridor The preceding section provides one with a solid historical basis for the promotion of the BCIM-EC by the four countries involved, thereby strengthening the BCIM mechanism as a viable process for sub-regional cooperation. The route envisaged for this corridor follows the middle section of the Yongchang Road that has been popularised by the BCIM Car Rally held in 2013, coinciding with the forum’s Eleventh Meeting in Dhaka. A look into Table 5.1 would Table 5.1  Data of All the Constituent Participants of the BCIM Forum. Name

Geographical Population Nominal GDP per Area (in square (in millions) GDP (in capita kilometres) billion US$) (in US$)

Yunnan (PRC) 394,000 Bangladesh 130,170 Myanmar 653,290 Arunachal Pradesh 83,743 (India) Assam (India) 78,438 Manipur (India) 22,327 Meghalaya (India) 22,429 Mizoram (India) 21,081 Nagaland (India) 16,579 Sikkim (India) 7,096 Tripura (India) 10,486 West Bengal 88,752 (India)

46.6 154.69 52.79 1.38 31.16 2.72 2.96 1.09 1.98 0.607 3.67 91.34

165.48 122.98 55.76 1.75

3,551.73 795 103.53 1,387.48

21.62 1.91 2.98 1.13 2.27 1.57 3.7 101.46

697.87 615.72 1,003.1 1,024.59 1,057.78 2,275.16 940.02 1,036.45

Source: Knoema (no date), Unidow (no date); the GDP (nominal and per capita) figures of Yunnan and the Indian states have been calculated as per the prevalent US$-Renminbi-Indian Rupee foreign exchange rates in 2012 from the original statistics. The population figures for Indian states correspond to 2011, while the ones for Yunnan, Bangladesh and Myanmar are from 2012.

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highlight the gap in development levels among the constituent units of the BCIM Forum. In terms of GDP figures (both in nominal and per capita terms) Yunnan scores better than the others. Most of the states in India’s Northeast score better in per capita GDP figures due to lesser population, but poor in actual GDP earnings. Myanmar’s record, despite being a resource-rich country, is abysmal due to a crippled economy marked by political instability in the northern areas and long years of military rule. In India’s case West Bengal alone is the prime mover of economic growth, despite the stagnation of industrial production in recent years owing to a host of issues, including haphazard political approaches to development. India’s Northeast Region’s (NER) GDP figures combined are less than even that of Myanmar, and most of the industries have been concentrated in Assam’s Brahmaputra valley. But there are no major manufacturing bases located in the region. Bangladesh’s economy is mainly driven by its textiles industry, and yet stymied by adverse geo-climatic conditions and a huge population. Yunnan’s economy has been sustained by the Five Pillar Industries (tobacco, mining, power, bio-industry, tourism) since the 1990’s with active support by the Yunnan Provincial Government.54 But closer analyses reveal that most of the benefits of development remain concentrated in certain urban clusters and seldom reach the remote interior areas. India and China remain the major players in the BCIM and the nature of their bilateral relationship has a strong bearing on the functioning of this forum. The total BCIM area comprises of 1.528 million square kilometres, and home to about 400 million people, along with huge amounts of natural resources. And it comprises only a part of both these countries, which are mostly border states/provinces. There remains a clear distinction with another sub-regional initiative where Yunnan is involved – the Greater Mekong Sub-region (GMS). The GMS is led by the PRC and involves China’s interactions with five continental Southeast Asian countries – Cambodia, Laos, Myanmar, Vietnam and Thailand. In case of the BCIM, it is the Yunnan province of the PRC which has been leading the process and concentrating mainly on the border areas of the four countries involved.55 Economically, Bangladesh and Myanmar need the help of their bigger neighbours to build their economies. China’s vast foreign exchange reserves and its strong economy place it well above the other three to lead the process.

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Geography plays a major part in the process of integration or differentiation associated with people across regions. The BCIM subregion is basically a remote hinterland bound by mountains, forests and river valleys, albeit nurturing huge deposits of valuable mineral and natural resources within them. Kaplan notes that mountains are a conservative force, which often has protected indigenous cultures against fierce modernising ideologies infecting the flatlands, and also providing refuge for Marxist guerrillas and drug cartels therein.56 Myanmar’s new government desperately needs investment to develop its infrastructure and in the last two decades China has been generous with money. However, the fiercely nationalistic Burmese armed forces resent any form of external domination by China in its internal affairs and have not favourably viewed China’s maintaining relations with its insurgent groups in the Kachin, Shan and Karen Hills. The heavy presence of Chinese people in the Mandalay region is looked upon as unwelcome from the point of view of national security. From China’s viewpoint, any trouble in its external periphery would have serious repercussions in its internal affairs. Already, a huge amount of illegal drugs, especially methamphetamine, are seized regularly by authorities along the Yunnan-Myanmar border. In 2011, 13.5 tons of drugs were seized and 17,000 suspects were arrested.57 In 2012, the figures for heroin and methamphetamine reached 5.1 tons and 7.9 tons, accounting for 72 percent and 55 percent of nationwide seizures respectively.58 A Yunnan official involved in anti-narcotics operations, Chen Xinmin, stated that the border towns serve as a key channel for the movement of drugs in and out of the province.59 Further arrests of such gangs were made in early 2013 from the Dali Bai Autonomous Prefecture, which had been trying to forge a narcotics corridor upto Xichang and Chengdu in Sichuan province.60 Such issues scare Indian security officials since Manipur, Nagaland and Assam have emerged as major centres of drug addicts and the prevalence of HIV-related cases is rising. According to a United Nations Office on Drugs and Crime (UNODC) report, the number of HIV-infected people in the NER stands around 100,000 currently, with Manipur and Nagaland scoring well above the national average rate of 0.34 percent at 1.57 percent and 1.2 percent respectively.61 Similarly, as of 2013, more than 79,800 people in Yunnan were suffering from this scourge.62 For Myanmar and Bangladesh, the corresponding figures are 190,000 and 9,500 respectively for

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the year 2013.63 The infamous Golden Triangle continues to play a significant role in the proliferation of such problems. Most of the drug trade is controlled by local armed militia groups, fighting against their national governments, for it generates easy money to buy weapons. Mostly, the state responses have been heavy-handed, further alienating the local population from the national mainstream and pushing into a reluctant and morbid coexistence with such groups. They are caught in the cross-fire with none to listen to or care for them. Even in Bangladesh as of 2013, more than 90,000 people remain internally displaced in the Chittagong Hill Tracts since the 1997 Peace Accord.64 The building of dams in Arunachal Pradesh for power generation has led to severe protests in the adjoining districts of Assam owing to reports of excessive flooding caused downstream by storm waters upstream. The minority areas of Upper Myanmar have seen protests against dam-building and mining projects undertaken by Chinese companies. There is absolutely no attempt here to demonise every government initiative to develop an area economically. To give them the benefit of doubt, most projects are aimed at improving the living standards of the people in the long-term. However, what cannot be ignored is that most of these governments subsume the local interests to national interests by using the rubric of nationalism, which can itself be very narrow in definition and represent only the interests of the majority. It would probably be correct to say that the BCIM discourse has so far been rather narrowly ‘economistic’ and ‘top-down’ in its orientation. Focussed on promoting trans-national economic cooperation, it has not been particularly concerned with addressing the present and likely impacts of regional trade, transport and tourism infrastructure development on the livelihoods of the people most directly concerned, except where routine‘impact assessment’ has been mandated by major sponsors (such as the ADB, ESCAP, etc.).65 This is a well thought out observation by Prof. Uberoi. The BCIMEC is a welcome proposition, and given the complexities involved in the whole sub-region, the safer routes should be developed first. But in doing so, the people living along the corridor, to start with, need to be appraised of the benefits accruing from such an initiative and skill development programmes should be vigorously promoted

116  Ambuj Thakur

by the governments themselves and also taking the help of civil society groups and non-governmental organisations (NGOs). The essential point to be noted here is that while China’s economy is showing signs of a slowdown, its spending power in terms of accumulated foreign exchange reserves is way ahead of India, Bangladesh and Myanmar respectively. It has made massive investments in sprucing up physical infrastructure in the border regions like Yunnan, while remaining the world’s factory in manufactured goods. In the 30th Five-Year Plan period (2016–2020), China plans to invest about US$83.45 billion in the construction of highways and waterways alone in Yunnan66 (XFA, 2016). It has also pumped in capital in mining, power and hydrocarbon sectors in Myanmar to meet its domestic needs, albeit drawing popular criticism in the host country for unwarranted resource exploitation and environmental degradation. Going the Chinese standards, even the three other constituents of the BCIM do not have the wherewithal to push in funds of such magnitude to develop connectivity in their borders. Fears, moreover, of cheap products from China swamping the markets and putting local businesses out of action in their border areas generate scepticism about the BCIM project among these countries, especially India. To begin with, internal capacity building should be the prime concern in Bangladesh, India and Myanmar respectively. As argued earlier, development of physical infrastructure would provide seamless connectivity and ease of access of the metropolitan areas to the remotest villages and vice versa. Community participation is a must in these mostly tribal regions in policy implementation to ensure support for government projects. One of the biggest revenue earners is the tourism sector. A chain of employment generation schemes can be created through this sector catering to hospitality, handicrafts, entertainment, education, etc., among others. Tapping the age-old knowledge of local people in eco-friendly methods of farming and also harnessing their skills in living on a nutritious and healthy diet can help promote both an alternative happy lifestyle and sustainable livelihoods. Another important factor in integrating the periphery with the core is by promoting the traditions and cultural mores of tribal people in both the local languages and in the major national language, besides English. This would help nurture the oral methods of knowledge preservation in a written format, and also develop a mutual sense of belonging to a common national identity, yet enjoying the fruits of diversity. Winning

The BCIM Forum 117

the hearts and minds of the people is a first step for addressing a nation-state’s multiple strategies involved in promoting its national interests in the realms of geo-politics and geo-economics. Althoughlocal prejudices can hamper good initiatives, they cannot be dealt with an iron fist by the governments concerned, using the old psychological and cultural rubric of ‘civilised’ versus ‘barbarians’. These terms are definitely not used today owing to political correctness; yet, deep within such cultural prejudices remain entrenched, and get reflected when majorities try to make and implement policies for minority regions. The argument here is not for challenging the authority of the nation-state in exercising its hold over peripheral areas. Any form of instability can never be helpful for any stakeholder. The attempt is to sensitise the bigger players to have a more holistic approach towards the concept of development, where popular traditions, histories, social structures and concerns are respected as essential elements of the larger discourse on economic progress which is sustainable in the long-term.

Conclusion Some problems of cross-border character have been discussed in this chapter. These very points have been used by national governments to either interfere in the border areas of neighbouring countries in enlightened self-interest or to keep them sealed with a ‘bamboo curtain’ with a false hope of preventing them from adversely influencing their domestic socio-political and economic milieu. The panacea lies in taking a softer approach towards developing these remote areas by each BCIM country, where local people can earn their livelihoods with dignity. Native obduracy to essentially promising and beneficial central policies needs to be removed with patience through information dissemination at the widest possible extent. Extremist elements should be dealt with a firm hand by governments. But such tools should not be used under the garb of broad generalisations, as has been done till date, by authorities to sweep popular issues under the carpet of a civilising mission. State forces have inflicted much misery on the native people when dealing with armed insurgencies throughout the BCIM sub-region in the last six decades. People of this frontier, I repeat, had never been under the overt cultural and political domination any of the major valley-based imperial states, and their autonomous existences have strong roots

118  Ambuj Thakur

in their collective psyche. Nimmi Kurian argues that the expansive and fluid frontier was replaced by a more precise and rigid definition of the territorial border, thereby generating the binaries of the domestic and the international spaces for the hapless people of the border areas.67 Uprooting or assimilating them with majoritarian values will not help. Integration is the best possible way wherein the bigger partner has to concede more to the lesser partner to maintain equilibrium. After all, the people look up to the state for the guarantee of the protection of their life, property, rights and privileges; the insurgencies are representations of collective frustrations over the inefficiency or failure of the state to address such issues. The BCIM-EC follows dot on the footsteps of the Southern Silk Route. It should not be a missed opportunity to connect the myriad cultures of vibrant ethnic groups through a seamless web of environment-friendly and sustainable mechanism of economic growth and development.

Notes 1 Scott, James C. (1998). Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, New Haven and London: Yale University Press; and Scott, James C. (2009). The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia, New Haven and London: Yale University Press. 2 Erlanger, Steven. (1989). “Thailand Seeks to Shape a “Golden Peninsula’ ”. The New York Times. www.nytimes.com/1989/04/30/world/ thailand-seeks-to-shape-a-golden-peninsula.html (accessed on 18 October 2014). 3 Gilpin, Robert. (2003). Global Political Economy: Understanding the International Economic Order, Hyderabad: Orient Longman Pvt. Ltd., p. 364. 4 Carr, E. H. (1961). What Is History? New York: Vintage Books. 5 Khanna, Parag. (2016). Connectography: Mapping the Global Network Revolution, London: Weidenfeld & Nicolson, p. 5. 6 Ray, Haraprasad. (2003). Trade and Trade Routes Between India and China: c. 140 B.C.–A.D. 1500, Kolkata: Progressive Publishers, p. 65; see also Bin, Yang. (2008). Between the Winds and Clouds: The Making of Yunnan (Second Century BCE to Twentieth Century CE), Columbia University Press. www.gutenberg-e.org/yang (accessed on 15 May 2013), and Myint-U. Thant. (2011). Where China Meets India: Burma and the New Crossroads of Asia, London: Faber and Faber. 7 His annals are called the Shi Ji (Records of the Historian: The ethnic groups in Southwest China). 8 A li is a unit of measurement for distances in China, corresponding to roughly half a kilometre.

The BCIM Forum 119 9 Myint-U. Where China Meets India, p. 2. 10 Zhongmin, Lu. (2002). China’s Southwestern Silk Road. Translated by Yu Ling, Gu Wentong and Chen Ping, Beijing: Foreign Languages Press, p. 7, and Myint-U., Where China Meets India, p. 188. 11 Lu, China’s Southwestern Silk Road, pp. 6–7. 12 Ibid, p. 7. 13 Yang, Between the Winds and Clouds. 14 Ibid. 15 Before 1947 ad, the Indian state of West Bengal and the Republic of Bangladesh formed a single geographical cum administrative entity called Bengal. Here, the usage of the term Bengal alludes to this entity. 16 Yang, Between the Winds and Clouds. 17 Stargardt, Janice. (1971). “Burma’s Economic and Diplomatic Relations with India and China from Early Medieval Sources”. Journal of the Economic and Social History of the Orient, 14(1): 43. 18 Ahmad, Nisar. (1990). “Assam-Bengal Trade in the Medieval Period: A Numismatic Perspective”. Journal of the Economic and Social History of the Orient, 33(2): 176, and Bin, Yang. (2004). “Horses, Silver, and Cowries: Yunnan in Global Perspective”. Journal of World History, 15(3): 290. 19 Ahmad, ‘Assam-Bengal Trade in the Medieval Period: A Numismatic Perspective’, p. 177. 20 ‘Khumpa’ means the Khampas or the Tibetan people living in the Kham area of historical Tibet. Today, Kham is divided among the Tibetan Autonomous Region, Sichuan and Yunnan provinces of the PRC. ‘Lassa’ refers to Lhasa. ‘Bhootea’ refers to the Bhutanese people as they are locally called in Assam. These are British pronunciations of local names and hence, the anomalies in spellings. 21 Pemberton, Robert B. (2012). The Eastern Frontier of India, New Delhi: Mittal Publications, p. 81. 22 Hamilton, Francis. (1987). An Account of Assam, Guwahati, Assam: Department of Historical and Antiquarian Studies, p. 76. 23 Yang, Between the Winds and Clouds. 24 Barpujari, H. K. (1995). Francis Jenkins: Report on the North-East Frontier of India, Guwahati: Spectrum Publications, p. 20. 25 Ibid, pp. 19–21. 26 Pemberton, The Eastern Frontier of India, p. 70. 27 Barpujari, Francis Jenkins, p. xvii. 28 M’Cosh, John. (1837). Topography of Assam, New Delhi: Logos Press (reprint 2000), p. 12. 29 Pemberton, The Eastern Frontier of India, pp. 147–148. 30 For a broad idea about these routes in the colonial cartography, please refer to Coryton, J. (1875). “Trade Routes Between British Burmah and Western China”. Journal of the Royal Geographical Society of London, 45: 229–249; Mills, J. P. (1926). “The Assam-Burma Frontier”. The Geographical Journal, 67(4): 289–299; Kingdon Ward, Francis et al. (1932). “Explorations on the Burma-Tibet Frontier”. The Geographical Journal, 80(6): 465–480; Fitzgerald, Patrick. “The Yunnan – Burma Road”. The Geographical Journal, 95(3): 161–171; Christian,

120  Ambuj Thakur John L. (1940). “Trans-Burma Trade Routes to China”. Pacific Affairs, 13(2): 173–191; Rosinger, Lawrence K. (1942). “Yunnan: Province of the Burma Road”. Far Eastern Survey, 11(2): 19–23; and Lattimore, Owen. (1943). “Yunnan: Pivot of Southeast Asia”. Foreign Affairs, 21(3): 476–493. 31 Coryton, ‘Trade Routes Between British Burmah and Western China’, pp. 238–239. 32 Bhuyan, S. K. (1949). Anglo-Assamese Relations: 1771–1826, Guwahati: LBS Publications (Third Lawyers Edition 1990), p. 51. 33 The Duars were the traditional passages connecting the Hill tribes of the Eastern Himalayas with the people of the Assam Valley and Cooch Behar through Bhutan. 34 Bhuyan, S. K. (1965). Studies in the History of Assam, New Delhi: Omsons Publications (Second Edition 1985), p. 51. 35 Bhuyan, Anglo-Assamese Relations: 1771–1826, p. 55. 36 Ray, Trade and Trade Routes Between India and China, pp. 70–73. 37 Lu, China’s Southwestern Silk Road, p. 8. 38 Ji, Xianlin. (2017). “History of Sino-Indian Relations”. Translated by Debasish Chaudhary. In Chung, Tan et al. (eds), Across the Himalayan Gap: A Chinese Quest for Understanding India, New Delhi: Konark Publishers, p. 97. 39 Yang, Between the Winds and Clouds. 40 Ray, Trade and Trade Routes Between India and China, p. 75. 41 Ibid, p. 77. 42 Ray, Haraprasad. (1995). “The Southern Silk Route from China to India – An Approach from India”. China Report, 31(2): 196. 43 Buragohain, Purnakanta. (2013). Nine Years Beyond the Patkai. Translated by Madan M. Sarma and Sanjib Sahoo, Guwahati: Bhabani Books, p. 48. 44 Ibid, pp. 168–187. 45 Yang, “Horses, Silver, and Cowries: Yunnan in Global Perspective”, p. 294. 46 Polo, Marco. (2005). Travels in the Land of Kubilai Khan. Translated by Ronald Lantham, London: Penguin, p. 95. 47 Chakravarti, Ranabir. (1999). “Early Medieval Bengal and Trade in Horses: A Note”. Journal of the Economic and Social History of the Orient, 42(2): 194–211. 48 Ulrich Vogel, Hans and Hieronymous, Sabine. (1993). “Cowry Trade and Its Role in the Economy of Yunnan: From the Ninth to the MidSeventeenth Century. Part II”. Journal of the Economic and Social History of the Orient, 36(4): 335. 49 Ulrich Vogel, Hans and Hieronymous, Sabine. (1993). “Cowry Trade and Its Role in the Economy of Yunnan: From the Ninth to the MidSeventeenth Century. Part I”. Journal of the Economic and Social History of the Orient, 36(3): 238. 50 Bin, Yang. (2012). “The Bengal Connections in Yunnan”. China Report, 48(1 & 2): 134. 51 Yang, Between the Winds and Clouds.

The BCIM Forum 121 52 Yang, “Horses, Silver and Cowries: Yunnanin Global Perspective”, p. 293. 53 Ray, Trade and Trade Routes between India and China, p. 96. 54 Zhenming, Zhu. (2011). “Yunnan’s Industrial Development Policy and Intermediate Goods Trade with MRBCs”. In Kagami, Mitsuhiro (ed.), Intermediate Goods Trade in East Asia: Economic Deepening Through FTAs/EPAs, Bangkok: Bangkok Research Centre, IDEJETRO, p. 263. 55 Thakur, Ambuj. (2015). “Yunnan’s Opening Up and the BCIM Economic Corridor”. World Focus, 426: 69–78. 56 Kaplan, Robert D. (2013). The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate? New York: Random House Trade Paperbacks, p. xiv. 57 BBC Monitoring Library. (2012). “China Border Province Makes Record Drug Seizure in 2011”. http://bbcmonitoringlibrary.com. ezproxy.jnu.ac.in/bbcm/a/fulltext/1264439 (accessed on 15 June 2014). 58 BBC Monitoring Library. (2012). “Chinese Authorities Destroy Chemicals Used to Make Narcotics”. http://bbcmonitoringlibrary.com. ezproxy.jnu.ac.in/bbcm/a/fulltext/1301588 (accessed on 15 June 2014). 59 Ibid. 60 BBC Monitoring Library. (2013). “Thirteen Arrested for Drug Trafficking in Southwest China”. http://bbcmonitoringlibrary.com.ezproxy. jnu.ac.in/bbcm/a/fulltext/1401870 (accessed on 15 June 2014). 61 Albertin, Christina. (2014). “The North East of India: Drugs and HIV: Trails of Tears and Hope in a Hidden Jewellery”. United Nations Office on Drugs and Crime. www.unodc.org/southasia/en/frontpage/2009/ September/drugs-and-hiv_-trails-of-tears-and-hope-in-a-hidden-jewelry. html (accessed on 24 November 2014). 62 Hu, Yongqi and Anfei, Guo. (2014). “Yunnan Takes Action to Stem Spread of HIV/AIDS”. China Daily. http://usa.chinadaily. com.cn/epaper/2014-02/21/content_17297789.htm (accessed on 24 November 2014). 63 UNAIDS. “Bangladesh”. www.unaids.org/en/regionscountries/countries/ bangladesh/ (accessed on 24 November 2014); and UNAIDS. “Myanmar”. www.unaids.org/en/regionscountries/countries/myanmar/ (accessed on 24 November 2014). 64 Amnesty International. (2013). “Bangladesh: Indigenous Peoples Engulfed in Chittagong Hill Tracts Land Conflict”. www.amnesty. org/en/news/bangladesh-indigenous-peoples-engulfed-chittagong-hilltracts-land-conflict-2013-06-12 (accessed on 24 November 2014). 65 Uberoi, Patricia. (2010). “Development Issues in India’s North East: Gender Dimensions”. Southeast Asian and South Asian Studies, 7: 76. 66 Xinhua Finance Agency. (2016). “Yunnan to Invest RMB 130 bln in Comprehensive Transportation System in 2016”. http://en.xfafinance. com/html/13th_Five-year_Plan/Regional_Prospective/2016/186602. shtml (accessed on 31 October 2016). 67 Kurian, Nimmi. (2014). India-China Borderlands: Conversations beyond the Centre, New Delhi: Sage Publications, p. 6.

Part II

BCIM Economic Corridor

Chapter 6

Is BCIM-EC beneficial for India? Gurudas Das and Ujjwal PaulIs BCIM-EC beneficial for India?

Gurudas Das and Ujjwal Paul

This chapter intends to make a rough assessment as to whether the proposed Bangladesh–China–India–Myanmar-Economic Corridor (BCIM-EC) will be beneficial for India or not. Based on the directions of talks that have taken place in past meetings of the BCIM Forum and the meetings of the BCIM-EC study groups, we presume that BCIM sub-regional cooperation, the first specified area of cooperation among the four member countries would consist of Southwest China (Yunnan Province), Myanmar, Bangladesh and Eastern and North Eastern Region (NER) of India centering the BCIM Corridor which will connect two growth poles: Kunming (Yunnan), in the north, and Kolkata (West Bengal) in the south, thus, materialising the K2K movement, via Dhaka and Mandalay.1 In spite of continental connectivity, the trade between India and China, except some border trade points in the Himalayas like Gunji in Uttaranchal, Shipki La in Himachal Pradesh and Nathu La in Sikkim, mainly flows through maritime route. In fact, BCIM-EC, if it materialises, will be the first super highway that will connect all the four countries and create an alternative to maritime route for trade, commerce and connectivity. It is believed that, once operational, this corridor will boost trade investment, resource utilisation and industrialisation in all the member countries.2 Even after acknowledging the intrinsic value of the corridor in connecting the neighbourhood, we intend to assess how it is going to benefit India’s China trade.

India–China trade: trends, composition and spatial structure Before we embark on our task, as a prelude, it is important to highlight the quantum and character of the present India–China trade in

126  Gurudas Das and Ujjwal Paul

goods. China has become India’s biggest trade partner since 2008. Bilateral trade has increased by about 26 times from $2.7 billion in 2001 to $71 billion in 2017. While India’s export to China has increased about 10 times, from $0.91 billion in 2001 to $9 billion in 2017, her import has leaped by 34 times over this period, from $1.8 billion to $61.7 billion, leading to a huge negative bilateral trade balance of $52.7 billion in 2017 which is often felt as unsustainable.3 The emerging trends in India–China bilateral trade (Table 6.1) for last one and half decades are: (i) share of India in China’s total export is rising. In fact, India absorbs about two and half percent of China’s global export. (ii) Share of India in China’s total import is declining over time. In fact, currently less than 1 percent of total Chinese import comes from India. (iii) Share of China in India’s total export is falling over time. Within a short span of time, it declined from 5.55 percent in 2011 to 3.62 percent in 2015 perhaps indicating lesser competitiveness of the Indian manufacturers compared to their Chinese counterparts. And finally (iv) share of China in India’s total import is rising fast (Table 6.1). What is more important to note is the structure of the India– China bilateral trade. While India mainly exports primary products particularly raw materials like ore, slag or ash, iron and steel, tin, raw hides, leather, plastics and cotton to China (Table 6.2), she imports manufacturing goods, especially high-tech products like telecom instruments, computer hardware and peripherals, electronic component, project goods, and machineries (Table 6.3). The structure of Indian exports and imports suggests that while India mainly Table 6.1  Mutual Importance of India–China Bilateral Trade Year

Share of India in China’s total export (in percent)

Share of India in China’s total import (in percent)

Share of China in India’s total export (in percent)

Share of China in India’s total import (in percent)

2015 2014 2013 2012 2011 2000–2010

2.55 2.31 2.19 2.33 2.66 1.44

0.80 0.84 0.87 1.03 1.34 1.22

3.62 4.23 4.88 5.09 5.55 5.10

15.77 12.68 11.08 11.07 12.00 7.51

Source: WITS 4

Is BCIM-EC beneficial for India? 127 Table 6.2  Major Items of Indian Export to China in 2015–2016 Sl No. Item names

(US$ Million)

Leading producing states in India

1

2

3

4

 1

Grey cotton yarn

1,418.66

 2

Cathods and sections 1,128.47 of cathods of refined copper Granite crude or roughly 324.66 trimmed

Gujarat, Maharashtra, Karnataka Jharkhand, Gujarat, Tamil Nadu, Dadra and Nagar Haveli Andhra Pradesh, Karnataka, Kerala, Rajasthan Gujarat, Rajasthan, Andhra Pradesh

 3  4  5  6

 7  8  9 10

Castor oil and its fractions other than edble grade Bauxite (natural) not calcined Indian cotton of staple length 28.5 mm (1.4/32″) and above but below 34.5 mm kg Polypropylene

276.61

Alumina calcined Human hair dressed or otherwise worked P-xylene Total of top ten items Total of all products Share of top 10 commodities to total (in %)

149.92 135.29

272.32 184.82

160.69

131.37 4,182.81 9,010.35 46.42

Odisha, Jharkhand, Gujarat Gujarat, Maharashtra, Karnataka, Haryana Gujarat, Rajasthan, Haryana, West Bengal Odisha Tamil Nadu Maharashtra

Source: Government of India, Export Import databank, http://commerce.nic.in/ eidb/default.asp (accessed on 24 May 2017)

exports low value raw materials to China, she mainly imports high value manufactured goods indicating some sort of bilateral trade structure that, by and large, resembles core-periphery relationship. The export-import structure of India’s China trade reveals the fact that unprecedented growth of the manufacturing sector in China that has made her the factory of the world has facilitated the integration of Indian market into the emerging Sino-centric world

128  Gurudas Das and Ujjwal Paul Table 6.3  Major Import Items of India from China in 2015–2016 Sl No.

Item names

(in US$ Million)

Leading producing provinces

1

2

3

4

 1

Other parts of telephonic/ telegraphic parts

2,497.21

 2

Personal computer (laptop, palmtop, etc.) Solar cells/photovoltaic cells whether or not assembled in module/panel Diamonmium hydrogen phosphate Urea whether or not in aqueous solution Videophone Power project

2,117.78

 3  4  5  6  7

1,960.26 1,720.33 1,394.10 923.57 711.81

 8  9

Bulk drugs Other reception apparatus for TV etc. colour

563.87 447.96

10

Other apparatus, for carrier/ digital line system Total of top ten items Total of all products Share of top ten commodities to total

403.55 12,740.44 61,706.83 20.65

Guangdong, Shanghai, Jiangsu, Zhejiang Guangdong, Jiangsu Jiangsu Yunnan, Guizhou, Anhui, Shandong Shandong, Shanxi Henan, Sichuan Guangdong Sichuan, Shanghai Heilongjiang  Jiangsu  Guangdong, Jiangsu Fujian, Shandong Guangdong, Zhejiang

Source: Government of India, Export Import databank, http://commerce.nic.in/ eidb/default.asp (accessed on 24 May 2017).

economic order as a supplier of raw materials and consumer of manufactured goods. Another important highlight is that most of the raw materials which are exported to China originate in the western and southern states of India (Table 6.2). In fact, India’s developed states like Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, and Haryana play the dominant role. As the trade flows through maritime route, the contribution of the coastal states of India is more than the landlocked states. In spite of the fact that states in northern and northeastern India are physically closer to China, no significant trade flows across the international land border

Is BCIM-EC beneficial for India? 129

between the two countries. All the three – northern, eastern and northeastern – regions of India having physical proximity to China are ‘Trade Poor’. Similarly, major items of import originate mostly from ‘trade affluent’ eastern and southern regions of China (Table 6.3). In fact, while the eastern region consisting of Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi and Shandong had contributed 50.67 percent of the total Chinese export and accounted for 40.31 percent of total Chinese import in 2012, the same for the southern region, consisting of Guandong, Guanxi and Hainan, accounted to 28.93 percent and 23.92 percent respectively.5 Thus, these two regions together contributed to about 80 percent of China’s global export and absorbed about 64 percent of global import. However, China’s southwest region, consisting of Chongqing, Sichuan, Guizhou, Yunnan and Tibet – which has physical proximity to India – has remained relatively ‘trade poor’ and has shared only 4.65 percent of China’s global export and absorbed only 2.64 percent of global import in 2012.6

Continental vs maritime routes: transportation costs Given the existing spatial pattern of India–China bilateral trade, it is evident that trade mainly flows between the coastal regions in both the countries. As the spatial inter-regional trade structures, once developed, tend to perpetuate over time, it is our interest to see as to whether the BCIM-EC, if comes into play, would anyway benefit India or not. Considering Shanghai as the centre of India– China trade, a rough calculation of length of road distance from different major points of exports in India is shown in Table 6.4. Assuming the cost of overland transportation of per ton/per km to be US$0.02,7 a rough calculation is done for sending a ton of goods from the major exporting points in India to China (Shanghai) along the BCIM-EC. If the items listed in Table 6.2 are brought to Kolkata before embarking the 2,671 km-long BCIM-EC to reach Kunming and then another 2,371 km east to reach Shanghai, then the average cost of transportation for one ton of goods would be approximately US$128.71. However, the existing maritime route which is used for sending India’s export to China is much cheaper than the proposed continental BCIM-EC route. For the coastal states like Gujarat, Maharashtra,

130  Gurudas Das and Ujjwal Paul Table 6.4  Cost of Transportation of India’s Export to China via BCIM-EC Sl No.

1

From

Distance to Shanghai via Kolkata-KunmingShanghai (in km)

Cost (@US$0.02/ ton/km)

2

3

4

7,311 6,620 5,042 6,974 5,506 7,006 6,981 6,416 6,756 5,530 6,653

146.22 132.40 100.84 139.48 110.12 140.12 139.62 128.32 135.12 110.60 133.06 128.71

1 Gujarat 2 Maharashtra 3 West Bengal 4 Karnataka 5 Jharkhand 6 Tamil Nadu 7 Dadra and Nagar Haveli 8 Andhra Pradesh 9 Rajasthan 10 Odisha 11 Haryana Average cost

Source: Authors’ estimation. Notes: (1) Distance between Kolkata and Kunming is 2,671 km. (2) Distance between Kunming and Shanghai is 2,371 km. (3) Distances between various states and Kolkata are worked out using google distance calculator. (4) Factor for cost estimation is derived from Rebello. 8 (5) 1 INR = 0.015US$

Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal, the average transportation cost for sending a ton of goods to China (Shanghai) is estimated to be US$77.21 (Table 6.5). Thus, for them, maritime route is 1.67 times cheaper than the proposed BCIM-EC land route. Similarly, the landlocked states/union territories like Rajasthan, Haryana, Jharkhand and Dadra and Nagar Haveli and coastal states without facilities to export directly to China e.g., Odisha, the average cost of transportation of a ton of goods to China (Shanghai) via maritime route is estimated at US$90. 64 (Table 6.6). Even for them, the maritime trade would be 1.42 times cheaper than doing trade using the proposed BCIM-EC. Thus, as far as the spatial structure of India’s export to China is concerned, BCIM-EC would in no way reduce the cost of trade and help in further trade creation. Even if the continental route is made available, businesses will prefer to continue to trade along the maritime route until that time when sea-lane congestion would upset the maritime cost advantage vis-à-vis continental route.

Table 6.5 Cost of Transportation of India’s Export via Maritime Route for the Coastal States Sl No. From

Name of the port

Distance to Shanghai port (in km)

Cost (@US$0.01/ ton/km)

1

3

4

5

Kandla Nhava Sheva Panambur Chennai Vizag Haldia

9,205 8,522 7,803 6,932 6,928 6,939

92.05 85.22 78.03 69.32 69.28 69.39 77.21

2

1 Gujarat 2 Maharashtra 3 Karnataka 4 Tamil Nadu 5 Andhra Pradesh 6 West Bengal Average cost Source: Authors’ estimation.

Notes: (1) Distances between two ports have been obtained from www.searates.com (2) Factor for cost estimation is derived from Rebello.9 (3) 1 INR = 0.015US$

Table 6.6 Cost of Transportation of India’s Export to China via Maritime Route for the Landlocked States Sl From No.

Name of the nearest port

Distance to nearest port (in km)

Cost of road transport to the nearest port (@ US$0.02/ ton/km)

Distance between nearest port and Shanghai port (in km)

Cost of Total shipment cost of (@US$0. transport 01/ton/ km)

1

3

4

5

6

7

8 (5 + 7)

9.4 11.32 5.18 20.04 3.04

6,939 9,008 6,939 9,008 8,528

69.39 90.08 69.39 90.08 85.28

78.79 101.40 74.57 110.12 88.32

1 2 3 4 5

2

Jharkhand Rajasthan Odisha Haryana Dadra and Nagar Haveli Average cost

Haldia 470 Ahmedabad 566 Haldia 259 Ahmedabad 1,002 Mumbai 152

90.64

Source: Authors’ estimation Notes: (1) Names of the nearest ports and their distances from Shanghai port have been obtained from www.searates.com (2) Factor for cost estimation is derived from Rebello. 10 (3) 1 INR = 0.015US$

132  Gurudas Das and Ujjwal Paul

Like exports, India’s import from China, if carried out through BCIM-EC, will also not be cost-effective compared to the maritime route. A comparison of transport costs in these two routes between Shanghai (China) and Kolkata (India) reveals that maritime route is 1.45 times cheaper than the continental route (Tables 6.4 and 6.5). In the light of the aforesaid calculation, one can safely conjecture that BCIM-EC is unlikely to yield any dividend to existing structure of India–China trade. As far as the impact of BCIM-EC on the trade and commerce of the northeastern region of India and southwestern region of China are concerned, one cannot conjecture for certain as to what will be the outcome if these two regions are connected. Neither the southwestern region of China makes any significant contribution to country’s total export to India, nor does the northeastern region play any noteworthy role in India’s total export to China. In fact, trade between these two regions across the border is almost nonexistent. Moreover, as both the regions are rich in forest, hydro and mineral resources – their resource base is rather competitive rather than complementary. Hence, not much potential for trade exists between these two regions. Even looking from China’s point of view, a cursory comparison of transport cost along BCIM-EC and CPEC shows that BCIM-EC does not entail any cost advantage. While the existing maritime route is much cheaper than both the overland pathways, CPEC has advantage over the BCIM-EC (Table 6.7). For importing a ton of oil from Saudi Arabia (Ras Tanura), China has to incur 1.48 times higher cost if it is brought to Shanghai via BCIM-EC and 1.41 times more cost in case CPEC is used instead of existing maritime route. Thus, except geo-strategic importance, these overland pathways hardly have any cost-effective rational.

Conclusion Considering the prima facie economic logic, it does not appear that BCIM-EC will be of any benefit either to India or to China. The question, then, arises as to why does China evince such a great interest in clinching this cross country connectivity project? The answer must lie elsewhere rather than the realm of current bilateral India–China trade. There might be several objectives: first, BCIMEC will add to wings to Chinese attempt to develop southwestern region particularly Yunnan Province as a regional connectivity hub.

Is BCIM-EC beneficial for India? 133 Table 6.7  Comparison of Transport Cost between BCIM and CPEC From

To

Mode

Factor

BCIM Ras Tanura Kolkata Total Cost

Kolkata Shanghai

Marine Road

Existing route (Maritime) Ras Tanura Shanghai Total Cost CPEC Ras Tanura Gwadar Kashgarh Total Cost

Gwadar Kashgarh Sanghai

Distance (in km)

Cost (in US$)

0.01 0.02

6,256 5,042

62.56 100.84 163.4

Marine

0.01

10,997

109.97 109.97

Marine Road Road

0.01 0.02 0.02

1,331 2,000 5,115

13.31 40 102.3 155.61

Source: Authors’ estimation. Notes: (1) Names of the nearest ports and their distances from Shanghai port have been obtained from www.searates.com (2) Factor for cost estimation is derived from Rebello. 11 (3) 1 INR = 0.015US$

Second: it might be a pillar to the Chinese dream to make herself a two-ocean nation as BCIM-EC will provide access to Bay of Bengal and then to Indian ocean. Third, it might be used as an alternative corridor through which regional and global resources will be supplied to sustain high rate of growth of the Chinese economy. Fourth, it will facilitate Chinese access to South Asian markets. Fifth, along with China–Pakistan Economic Corridor (CPEC), BCIM-EC will provide geo-strategic advantage to China over India.

Notes 1 Jia, Ren. (2013). “The BCIM Economic Corridor Is the Next Pragmatic Step for BCIM Cooperation”. In BCIM Newsletter-Selected Material from the 11th Conference of BCIM, February, Dhaka. www.seasas.cn/article-1411-1.html (accessed on 14 August 2015). 2 Rehman, S. (1999). Transforming Eastern South Asia: Building Growth Zones for Economic Cooperation, Dhaka: University Press Limited. Mustafizur, Rahaman. (2015). “BCIM-Economic Corridor: An Emerging Opportunity”. https://goo.gl/x1uP2m (accessed on 12 June 2015). 3 Mehra, Puja. (2014). “India, China to Hold Strategic Economic Dialogue Today”. https://goo.gl/C4Zmk6 (accessed on 14 May 2017).

134  Gurudas Das and Ujjwal Paul 4 World Integrated Trade Solution (WITS). https://wits.worldbank.org/ (accessed on 11 May 2017). 5 Mohanty, S. K. (2014). “India-China Bilateral Trade Relationship”. https://goo.gl/x2TYy9, (accessed on 13 June 2017). 6 Ibid. 7 Rebello, Poroma Munshi. (2016). “Linking the Logistics Dots”. https:// goo.gl/LnepVZ (accessed on 16 June 2017). 8 Ibid. 9 Ibid. 10 Ibid. 11 Ibid.

Chapter 7

BCIM Economic Corridor

Chen LijunBCIM Economic Corridor

A trade-led initiative Chen Lijun

BCIM region locates the connecting area which links East Asia, Southeast Asia and South Asia with better regional geographic advantages, abundant natural resources and great potential. To promote BCIM regional economic cooperation, the scholars from four countries cosigned the Kunming Initiatives in the first BCIM economic cooperation conference forum. Up to now, 11 times the forum has been hosted in rotation by four countries, successively Dhaka Declaration, Yangon Declaration, Kolkata Joint Declaration have been cosigned. On 20 May 2013, Chinese Premier Li Keqiang visited India and issued “China and India Joint Statement”, which addressed that both sides appreciate the sub-regional cooperation under the framework of BCIM regional cooperation forum, and initiated the construction of BCIM-EC. In July 2014, Chinese President Xi Jinping held the meeting with India’s Prime Minister Modi when attending the BRICS Summit in Brazil. Xi Jinping said: “China and India speak with one voice, the world will listen”. Modi said that India’s new government is committed to economic development, we hope to learn from China’s successful experience, enhance the communication and cooperation on trade, people-to-people contacts, tourism, education and HR training, India welcome Chinese companies to invest in the Indian railway and other infrastructure construction, establish the industrial park in India, and India is actively thinking to join the Asian Infrastructure Investment Bank. When President Xi visited India in September 2014, he held talks with Indian Prime Minister Modi. The two leaders agreed to build a more close development partnership hand in hand. President Xi pointed out that China treated India as longterm strategic cooperation partners, looking forward to establishing a closer development partnership with India and deepen the

136  Chen Lijun

cooperation through the bilateral, regional and global level. Moreover, Xi Jinping pointed out that the two sides should accelerate the construction of BCIM-EC, carry out the cooperation under the framework of Silk Route Economic Belt, Maritime Silk Road in the 21st century and Asian Infrastructure Investment Bank, etc., and promote regional economic integration and connectivity. In the “Joint Statement of Building Closer Development Partnership between People’s Republic of China and the Republic of India”, the two leaders decided that both sides should explore the new areas of economic cooperation through China India Strategic Economic Dialogue, including the industrial investment, infrastructure construction, energy conservation and environmental protection, high technology, clean energy, sustainable urbanisation, etc. Both sides noted the progress achieved in the building of BCIM-EC. When recalling the first BCIM-EC Economic Corridor joint working group meeting, China and India agreed that both sides should continue to work hard and implement the agreement reached in the meeting.1 The launch and promotion of BCIM-EC will link China’s “Opening-up to the West” with India’s “Look East”, and combine the three important economic growth poles of the world together, which is East Asia, Southeast Asia and South Asia. The huge growth energy would be released and provide the new driving force for the regional economic growth.

Trade cooperation among BCIM With the world economy globalisation and regional economic integration accelerating, and the speeding-up of the pace of opening up to the outside world among BCIM, the trade cooperation among BCIM has achieved rapid development. Trade between China and Bangladesh In recent years, the bilateral trade between China and Bangladesh has greatly increased. At present, China has become one of the most important trading partners and foreign investment partners for Bangladesh. In 2000, the trade value between China and Bangladesh was $900 million, rose to $10.308 billion in 2013 with 10.45 times higher than that of 2000. China has become Bangladesh’s largest trading partner for many years. The major imported goods from China to Bangladesh are textiles, machinery, equipment, chemicals,

BCIM Economic Corridor 137

fertilisers, seeds and consumer goods. The major exported goods from Bangladesh to China are natural jute, jute products, raw hides and leather, shrimp, frozen food, PVC materials, etc. Despite the export from Bangladesh to China continuously increasing, its trade deficit continuously grows as well. Bangladesh’s trade deficit with China in 2000 was $881 million, rose to $9.104 billion in 2013. In order to expand the export from Bangladesh to China, since 2001 China has granted zero tariff treatment to the goods from 41 LDCs including Bangladesh in the world and the type of commodity expanded as well. In 2010 the State Council Tariff Commission made the decision, from July 1 of that year, zero tariff treatment was granted to 33 LDCs which completed the documents exchanged, the origin commodity of 4,762 tax items exported to China, which accounted for about 60 percent of the total tax items. The zero tariff products list further increased the actual exported volume or potential exported ability of some goods. In the list which enjoys zero tariff treatment, South Asian countries such as Afghanistan, Bangladesh and Nepal were included. For Myanmar and Maldives and another six countries which have not completed the procedure of exchange documents, China still uses the original preferential treatment to them and would enjoy the same treatment as zero tariff. In September 2010, Chinese Premier Wen Jiabao announced that the zero tariff treatment would be granted to 95 percent imported commodities from LDCs and increased the foreign aid to help them to improve the self-developmental capacity. Meanwhile, China exempted tariff of 84 items from Bangladesh under the guidelines of Asian-Pacific Trade Agreement.2 Apart from this, “Encouragement and Mutual Protection of Investment Agreement” was signed between the two governments. Trade between China and India China and India have enjoyed a long history of friendly exchanges. Since 1980s especially after the new century, the bilateral trade relations have developed faster. In 1984 China and India signed a trade agreement and granted the most favoured nation status to each other. The bilateral trade value in 1989 was $271 million, accounted for about 0.24 percent of China’s total foreign trade, accounting for 0.69 percent of India’s total foreign trade.3 Since the 1990s, with the Indian opening up process accelerating, China and Indian trade has developed rapidly. During 1990 to 2002,

138  Chen Lijun Table 7.1 Trade between China and Bangladesh (2000–2013) US$100 Million Year

Export

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

9.0 9.55 10.66 13.35 19.06 24.03 30.90 33.26 45.48 44.40 67.90 78.07 79.71 97.06

Growth rate

Import. Growth Rate

6.2 11.6 25.2 42.8 26.05 28.59 7.64 36.74 −2.37 52.93 14.98 2.10 21.77

0.18 0.17 0.33 0.33 0.57 0.79 0.99 1.14 1.32 1.40 2.70 4.49 4.80 6.02

Total Trade Value

9.18 −11.4 9.72 93.8 10.99 3.2 13.68 70.7 19.63 37.88 24.81 25.32 31.89 15.15 34.40 15.79 46.80 6.06 45.80 92.86 70.60 66.30 82.61 6.90 84.51 25.54 103.18

Growth Rate

ExportImport

5.8 13.1 24.5 43.5 26.39 28.54 7.87 36.05 36.04 54.80 17.01 2.30 21.98

8.81 9.38 10.33 13.02 18.48 23.24 29.91 32.12 44.16 43.00 65.20 73.58 74.91 91.04

Source: Calculated based on the website of Ministry of Commerce, China.

the average annual growth rate was as high as 27.18 percent, the total trade value between China and India was $24.859 billion in 2006 and more than $70 billion in 2011. In 2012, under the situation of the global economy slowing down, bilateral trade value was $66.47 billion with reducing 10.06 percent compared with last year. Trade value between China and India in 2013 reached $65.471 billion with reducing 1.51 percent compared with that of last year. At present, China is India’s largest trading partner, and India is the largest trading partner in South Asia for China. China’s major exported goods to India are mainly concentrated in the technological-intensive electrical machinery, precision instruments and chemical products, and the main imported goods from India are minerals goods and raw materials. On 20 May 2013, Chinese premier Li Keqiang visited India; in the Joint Statement signed once more addressed both sides should strive to achieve the targeted bilateral trade value of $100 billion by 2015, and take steps to deal with trade imbalance, including the cooperation on drug regulation (registration), strengthen the ties between Chinese enterprises and Indian information industries,

BCIM Economic Corridor 139 Table 7.2  Trade between China and India (2000–2013) US$100 Million Year

Export

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

15.61 18.96 26.72 33.44 59.27 89.34 145.81 240.11 315.85 296.56 409.15 505.37 476.70 484.43

Growth rate

21.5 40.9 25.2 77.3 50.50 63.21 64.67 31.54 −6.11 37.96 23.52 −5.67 1.62

Import

13.53 17.0 22.74 42.52 76.77 97.66 102.77 146.17 202.59 137.27 208.46 233.71 188.00 170.28

Growth Rate

25.6 33.8 87.0 79.1 27.19 5.23 42.23 38.60 −32.24 51.86 12.11 −19.56 −9.42

Total Trade Value

Growth Rate

Export– Import

29.14 35.96 49.46 75.95 136.04 187.00 248.59 386.29 518.44 433.83 617.61 739.08 664.70 654.71

2.07 23.4 1.96 37.6 3.98 53.6 −9.08 79.1 −17.51 37.36 −17.42 32.94 43.04 55.39 93.94 34.21 113.26 −16.32 159.29 42.36 200.69 19.67 271.66 −10.06 288.70 −1.51 314.15

Source: Department of Asia, Ministry of Commerce, China.

complete the consultation on agricultural products and plant quarantine, etc.4 Trade between China and Myanmar China and Myanmar are neighbours. Since the establishment of diplomatic ties in 1950, the trade relation has experienced great development. Trade value between China and Myanmar was $255 million in 1988 and $862 million in 2002, exceeding $1 billion in 2003 and $2 billion in 2007, $4.442 billion in 2010 and more than $10 billion in 2013, to $10.15 billion with the growth rate of 45.60 percent over the previous year. Among them, China’s exports were $7.34 billion, increasing 29.83 percent; imports were $2.81 billion, increasing 116.49 percent. China has become the largest trading partner for Myanmar. At present, China’s main exported products to Myanmar are boilers, mechanical equipment and parts; vehicles and auto parts; motors, electrical, audio and video equipment and parts; Steel and steel products, etc. China’s main imported goods from Myanmar are mineral products, agricultural products, aquatic products, wood products, jewellery, etc.

140  Chen Lijun Table 7.3  Trade between China and Myanmar (2002–2013) US$100 Million Year

Export

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4.96 4.97 7.25 9.07 9.39 9.35 12.07 17.00 19.78 22.54 34.76 48.20 56.70 73.40

Growth rate

Import. Growth Rate

0.2 45.70 25.10 3.42 −0.32 29.09 40.84 16.35 13.95 54.21 38.66 17.63 29.38

1.25 1.34 1.37 1.70 2.07 2.74 2.53 3.78 6.47 6.46 9.66 16.80 13.00 28.10

Total Trade Value

6.21 7.5 6.32 2.00 8.62 24.09 10.77 21.76 11.45 32.37 12.09 −7.66 14.60 49.41 20.78 71.16 26.25 −0.15 29.00 49.54 44.42 73.91 65.00 −22.62 69.70 116.49 101.50

Growth Rate

ExportImport

1.7 36.40 24.94 6.31 5.59 20.76 42.33 26.32 10.48 53.17 46.33 7.23 45.60

3.72 3.63 5.88 7.37 7.31 6.61 9.54 13.22 13.31 16.08 25.10 31.40 44.60 43.75

Source: Calculated based on the website of Ministry of Commerce, China.

Trade between Yunnan and Bangladesh, Myanmar and India Yunnan as the BCIM frontier area has always attached great importance to promote the economic and trade cooperation with Bangladesh, Myanmar and India, which makes the trade increase between Yunnan and Bangladesh, Myanmar and India. During 1999 to 2012, the trade value between Yunnan and Bangladesh rose from $1.95 million to $70.84 million, Yunnan-Indian trade value increased from $27.61 million to $460.92 million, YunnanMyanmar trade value increased from $300 million to $2.22 billion, growing 35.33 times, 15.69 times and 6.4 times respectively. The trade value in 2013 between Yunnan and these three countries dramatically increased compared with the previous year. Among them, Yunnan-Myanmar trade reached $4.17 billion with growth rate of 83.6 percent; Yunnan-Indian trade was $560 million with growth rate of 22.3 percent; Yunnan-Bangladesh trade was $140 million and increasing 93.5 percent. The total trade value in 2013 between Yunnan and South Asia was $780 million with the growth rate of 35.6 percent.

BCIM Economic Corridor 141 Table 7.4  Trade between Yunnan and South Asia, 2013 US$10,000 Growth (%) Country & Region

Export & Propor- Export Import Imbanlance Export & Export Import tion Import

South Asia 78,102 India 56,377 Bangladesh 1,3712 Sri Lanka 4,462 Pakistan 3,287 Maldives 129 Nepal 64 Bhutan 37 Afghanistan 35

100.0 72.2 17.6 5.7 4.2 0.2 0.1 0.0 0.0

73,551 4,551 69,000 52,293 4,084 48,209 1,3339 373 12,966 4,387 75 4,312 3,272 15 3,257 129 129 60 4 56 37 37 35 35

Import

35.6 37.6 10.7 22.3 22.7 17 93.5 94.9 53.5 35.7 33.5 3,650 359.6 377.7 −50 2,480 2,480 −81.6 650 −98.8 32.1 32.1 250 250

Source: Department of Commerce, Yunnan Province

Impact on trade by building of BCIM-EC Trade cooperation in BCIM has huge potential; speeding up the construction of BCIM-EC could produce a great impact on regional connectivity and economic cooperation, but also for China’s opening up to the west especially to South Asian countries produce the significant impact on its openness, cooperation and realisation of common development. It is conducive to improve people’s livelihood BCIM belong to developing countries; speeding up the development and improving people’s livelihood has become the ‘top priority’ for each one. Construction of BCIM-EC provides a stage for mutual influence, exchange and motivation, which is not only beneficial to strengthen the economic ties and deepen the trade cooperation, promote the common development of regional economy, but also beneficial to expand the common interests and the scale of trade, improve the employment, increase income and improve people’s livelihood. It is conducive to reduce the logistics cost China’s development cannot leave Asia and the world, similarly prosperity and stability in Asia and the world also needs China.

142  Chen Lijun

Although BCIM are the world’s key emerging markets, their strategic status is also important. However, due to their poor infrastructure for a long time, the low level of connectivity has become the essential obstacle of regional cooperation. It is conducive for building of BCIM-EC to give full play to the region’s geographical advantages, speed up the construction of regional international passageway, improve the regional traffic conditions, which is helpful to shorten the distance among four countries and reduce the trade and logistics cost. It is conducive to trade and common development Although there are a large population and abundant resources in BCIM region, the economy has not been developed for a long time. The foundation for opening up is weak and the trade development lags behind. Fortunately, four countries have the desire to further strengthen the cooperation, revive the economy and eradicate poverty. Speeding up its construction is not only beneficial to connect the markets in BCIM effectively, promote the economic communication and integration development, upgrade the level of regional cooperation, but also to attract the foreign capital and technology to explore the regional rich resources, create a huge investment and consumption demand and promote the regional economic prosperity. At the same time, it could make the region no longer become the marginal region of the national economic development. Once BCIM take their own respective advantage, it could not only optimise the allocation of resources, adjust the economic structure and promote economic development, but also greatly promote trade development and optimisation of the structure, which is helpful to realise the advantages complementary and common development in BCIM region. To sum up, BCIM-EC is the commercial corridor to realise the advantages of cross-border complementarity. It will result in a winwin situation for all the stakeholders and act as an engine for promoting the regional economic development.

Policy recommendations for promoting cooperation on trade At present, there exist a sound foundation and good conditions for promoting the building of BCIM-EC, with not only the

BCIM Economic Corridor 143

improvement of cooperative mechanism and connectivity, generally increasing trade scale and enhancing people-to-people contacts, but also the good advantages of geographic location and peopleto-people contacts. The following measures could be adopted for speeding up the building of BCIM-EC and further promoting the trade development. Cooperation mechanism on trade to be set up soon To accelerate the trade cooperation among BCIM, the different levels of cooperation mechanism should be set up. (1) Setting up a national high-level trade coordination mechanism, in order to identify and formulate the long-term planning of economic and trade cooperation, and effectively solve the relevant problems in the trade cooperation. (2) Setting up the trade cooperation mechanism between local governments along the economic corridor, in order to specifically carry out the projects and implement the agreements signed by BCIM governments. (3) Establishing and improving the cooperation mechanism between the chambers of commerce, to promote the cooperation among enterprises. (4) Establishing the people-to people contacts mechanism in order to close the personnel exchanges. Taking the transport sector as the priority for further connectivity It plays an important role for connectivity to improve the level of trade facilitation and free flow of production factors. At present, the connectivity among BCIM is still very weak; the four countries need to take the approach of mutual negotiation and ‘easy first then difficult’, with emphasis on the traffic infrastructure construction to form the international passageway linking by land and sea. At the same time, it needs to promote the “Cross-Border Transport Facilitation Framework Agreement” to be signed in order to enlarge the effect of economic corridor and be benefit to the well-beings of more countries and people. Building the political relations of deeper mutual trust It should actively expand the converging points of interest, establish and develop the different sectors and levels of community of

144  Chen Lijun

shared-interests to jointly share the developmental achievements. It should continuously strengthen the high-level exchanges and maintain the strategic communication among BCIM, promote the coordination of developmental strategy and policy, enhance the strategic mutual trust and improve the level of regional economic cooperation. It should coordinate the cooperation on the traditional and non-traditional security and jointly take responsibility for maintaining the regional security. Based on the common interests to expand cooperation sectors with innovation on cooperation model, the new type of strategic partnership should be developed with considering the reasonable concerns of other countries in the pursuit of their own interests, promoting the common development in pursuit of national development. Promoting the mutual benefit and win-win results It should adhere to the spirit of opening up, inclusive and win-win cooperation, the diversity and differences could be transformed into the motive force of regional economic cooperation and coordinately promote the comprehensive regional development. It should further improve the level of trade facilitation, and constantly expand the trade scale by transforming the advantages of geo-political adjacency and economic complementarity into pragmatic cooperation advantages. It should improve the policy coordination and communication, promote BCIM FTA to be realised and support to build a group of economic and trade cooperation zones and industrial parks, encourage the powerful enterprises to seek the greater development in these countries. Moreover, the financial cooperation should be expanded in order to increase the scale and scope of the currency exchanges among BCIM, promote the local currency settlement of cross-border trade and reduce the intra-regional trade and investment risk. Enhancing people-to-people contacts It is necessary to reciprocally set up the centres of tourism and culture for hosting diversified cultural exchange activities, enhance the cooperation on education and set up the bases of human resources development for increasing the number of students from BCIM countries, and speed up the regional tourism development to realise the “BCIM Tour Circle” as well. Moreover, we should encourage

BCIM Economic Corridor 145

the establishment of provincial and municipal-level sistership among BCIM and promote more academic exchanges between think tanks and scholars. At the same time, it is needed to enhance the exchanges among media for jointly creating the environment of friendly cooperation and common development.

Notes 1  “Joint Statement of Building Closer Development Partnership between People’s Republic of China and Republic of India” (full article). http:// news.xinhuanet.com/world/2014-09/19/c_1112555977.htm. 2 “Bilateral Economic-Commercial Relations, Bangladesh Embassy to China”. http://web68788.vhost056.cn/bengaltest/content.php?t_rid=4& rid=63&lang=en. 3 Jingrong, Tan. (2004). “Comparative Study on Merchandise Trade between China and India”. South Asia Research Quarterly, 3. 4  “Joint Statement Between China and India”. Ban Yue Tan, 21 May 2013. 1日, www.banyuetan.org/chcontent/jrkd/2013521/41317.html.

Chapter 8

Trade and investment along BCIM Economic Corridor Mahfuz Kabir and Nazmul ArifeenTrade and investment along BCIM corridor

Realising sustainable economic returns Mahfuz Kabir and Nazmul Arifeen

Bangladesh, China, India and Myanmar (BCIM) Forum has turned out to be a new hope for the sub-region, especially for its lagging areas, in the midst of slow progress of the SAARC and intangible results of the BIMSTEC in connecting the region with Southeast Asia. The promotion and development of an economic corridor which will physically connect the sub-region to promote trade and investment has now become a key interest for regional leaders. This provides a unique opportunity to establish connectivity among the backward Northeast India (NES) and China via Bangladesh and Myanmar through land and sea routes. The integration of strategically located sub-regional areas, viz. the NES of India, Bangladesh, Myanmar and Southwest China which constitute a natural economic zone, is widely believed to have significant potential to generate considerable economic benefits through trade, investment, energy, transport and tourism.1 The recent performance and dynamism of India and China as Asian economic powerhouses can provide a wide range of prospects for growth and development of the whole region through greater trade and investment, if tapped carefully through connectivity. In this context, De shows that while mere free trade area (FTA) among the BCIM countries generates positive welfare effect only for China but negative effect for other members (net US$2.6 million), an FTA along with 10 percent reduction in transport cost is likely to result in 6.3 times higher welfare effects and positive gains for all countries concerned.2 The BCIM Economic Corridor (BCIM-EC), popularly known as a modern version of the Silk Road, can allow these countries to reach many Asian markets due to its advantageous geo-political

Trade and investment along BCIM corridor 147

location. If established, this corridor would help the member countries utilise the advantages of each other to boost economic growth and open up for the wider global and regional markets, viz. Southeast and East Asia. Trade distance between China and, South and Southeast Asian countries would be significantly reduced through land connectivity. However, the economic corridor hinges on two critical pillars, viz. industrial zones and infrastructure construction and cooperation. Industries such as processing, manufacturing and commercial logistics would be expanded through the development of industrial zones along the corridor, thereby accelerating the growth of large and medium-sized cities along the way. Due to very high wage rate in China compared to that of the other members, many Chinese enterprises and foreign enterprises based in that country are likely to move to Bangladesh, Myanmar and parts of India once the corridor is established.3 Only a small percentage of reduction in transport cost along with a free trade area would lead to significant welfare gains for Bangladesh.4 However, currently there is no bilateral Most Favoured Nation (MFN) transit among these countries. Formal initiatives are yet to be taken to establish road and sea connectivity to facilitate the corridor.5 The BCIM countries experienced an increase in their share in world export and import. Trade in goods almost doubled during the period between 2003 and 2013. While global export, import and trade registered a single digit growth during this period, the BCIM countries individually and collectively achieved a doubledigit growth. Conversely, the BCIM’s share in Global Trade in service was lower than that in trade of goods, but it increased nearly twofold.6 The region is increasingly becoming a major destination for global FDI and potential sources of outward FDI. Inward flow has increased threefold, from US$45 to US$150 billion between 2000 and 2012, which is targeted at China and partly India. Most of these investments are market-seeking and targeting domestic and/or export markets. However, unrealised trade potential and possible development of value chain divulge that there is considerable investment opportunity in the sub-region.7 The corridor has the potential for unleashing considerable trade and investment opportunities along the region. More than a hundred million tons of cargo is likely to move along the corridor per annum. In addition, there would be many small cities along the corridor to facilitate trade and investment, which might create extensive burden on the environment and natural resources if not

148  Mahfuz Kabir and Nazmul Arifeen

minimised through prudent policies and interventions. Given this backdrop, the chapter is organised as follows. After this brief prelude, the next section discusses the trend in trade and investment scenario in the BCIM countries. This is followed by an analysis of the trade and investment potential along the corridor, especially in the areas yet to be economically evolved and the potential environmental costs. Towards securing unhindered gains by internalising environmental costs, the following section outlines some doable policy options. Finally, concluding remarks have been made.

Trade and investment scenario in the BCIM countries The BCIM countries are becoming gradually integrated through greater volume and share of trade among the members. The member countries are engaging more in intra-regional trade and investment in a range of areas. Trade Volume and share of trade Between 2004 and 2013 the merchandised exports of these countries to the world nearly doubled, from 7.5 to 14 percent of the total world exports. Imports also witnessed a similar trend, from 7.2 to 13.2 percent of world imports. Overall, total trade increased from 7.3 to 13.6 of the world trade during this time. This trade growth mostly resulted from overwhelming growth of world trade of China, followed by India and Bangladesh. Beside trade in goods, the member economies also witnessed significant growth in services trade. Service export of the BCIM countries became double from 3.8 percent of the global export of services in 2002 to 7.4 percent in 2011, while 4.5 percent from in 2002 services import became 9.1 percent in 2011. Overall, the global trade in service of the countries stood at 8.3 percent in 2011 from merely 4.2 percent in 2002. However, unlike the sharp difference of performance in goods trade, the shares of service trade in global service trade of China and India were 4.97 and 3.14 percent in 2011 respectively, which shows quite a narrow gap between the two. Intra-BCIM trade witnessed a significant change between 2004 and 2013. In this period, China’s share in intra-BCIM exports increased from 57 to 72 percent, while India’s share reduced

Trade and investment along BCIM corridor 149

from 38 to only 23 percent. However, the share of Myanmar and Bangladesh remained the same despite the fact that the volume of their exports increased. On the other hand, China’s share in intra-BCIM imports decreased from 42 to 21 percent, while it increased in the case of India from 35 to 55 percent in this period. Bangladesh witnessed a slight decrease from 17 to 15 percent but Myanmar experienced an increase from 6 to 9 percent of its imports from the BCIM during this period. On the whole, China’s trade share dropped slightly from 49 to 46 percent while India experienced the same proportion of increase from 36 to 39 percent during the same period. Bangladesh experienced a slight fall and Myanmar had a little increase in trade share with the BCIM countries. In 2015, the intra-BCIM trade crossed US$107 billion. Being the largest economy of the bloc, China emerged to be the biggest trade partner of the members with the total export of US$79.26 billion to the bloc, followed by India (US$20.08 billion) and Myanmar (US$6.35 billion). However, all the countries have become net importers from China with considerable trade deficit (Table 8.1). Type of traded products Bangladesh imports major items from two giant BCIM economies, China and India. Indeed, its export-oriented RMG is heavily dependent on these two countries due to cheap source of inputs such as raw materials, intermediate items and capital machineries. Bangladesh has a well-maintained value chain with the BCIM countries. It imports raw materials for EPZ and special bonded warehouse from India and China mainly for export processing. Bangladesh exports raw jute, jute yarn and leather and caters the need of the industries of India and China. According to Trade Map data, Bangladesh imported about US$4.26 billion, US$1.85 billion and US$22 thousand of textiles and textile articles items from China, India and Myanmar, respectively in 2015 from among the top ten import items. Machinery and mechanical appliances and electrical equipment were imported in a significant amount of US$3.12 billion and US$0.54 billion from China and India, respectively. In 2015, Bangladesh imported chemical or allied industries product; base metals and articles of base items; plastics and rubber articles items; vehicles, aircraft, vessels and transport equipment; vegetable products; miscellaneous manufactured articles; articles of stone, plaster, cement, asbestos, etc., from China valued

150  Mahfuz Kabir and Nazmul Arifeen Table 8.1 Merchandised Trade between BCIM Countries (US$ Million), 2015 From To Bangladesh China India Myanmar Total Exports to BCIM Trade balance with China

Bangladesh

China 8,224

804 640 26 1,470 Bangladesh −7,420

61,604 9,430 79,258 China

India

Myanmar

5,828 31 13,396 5,301 1,016 860 20,084 6,348 India Myanmar −48,208

Total Imports from BCIM 14,083 19,501 63,260 10,316 107,160

Bangladesh China India Myanmar

−4,129

Bangladesh’s data as of 2014–2015. Row sum indicates total imports of a country from BCIM and column sum stands for total exports of a country to BCIM.

*

Source: Trade Map database, Export Promotion Bureau of Bangladesh, and Bangladesh Bank (2016).

at US$1.8 billion, which was a significant amount compared to the other two countries. Bangladesh imported vegetable products; prepared foodstuffs; chemical or allied industries product; machinery and mechanical appliances and electrical equipment; vehicles, aircraft, vessels and transport equipment items from India valued at US$1.39 billion. Of the ten major items, Bangladesh imported wood and articles of wood; live animals and animal products; raw hides and skins, leather, furskins and articles valued at US$18 million from Myanmar in 2015. According to the data of Export Promotion Bureau of Bangladesh, the value of exports to China from Bangladesh for three major items (out of ten) was US$163, 142, and 141 million for articles of apparel, accessories, not knit or crochet; articles of apparel, accessories, knit or crochet; and articles of leather, animal gut, harness, travel goods and vegetable textile fibres, respectively in fiscal year 2015. The share of textiles and clothing items in Bangladesh’s export items are increasing significantly. The country’s four major exported items to India in 2015 were vegetable textile fibres nes, paper yarn, woven fabric; articles of apparel, accessories, not knit or crochet; other made textile articles, sets, worn clothing, etc.; and edible fruit, nuts, peel of citrus fruit, melons; and the value of these items was US$90, 82, 53 and 38 million, respectively. The value of

Trade and investment along BCIM corridor 151

export to Myanmar for pharmaceutical products was significant (US$12 million) in 2015 which was not in demand in the other two countries. Besides that, articles of apparel, accessories, knit or crochet; articles of iron or steel; plastics and articles; and iron and steel were also exported to Myanmar in 2015 and were valued at about US$3.9, 1.5 and 1.2 million, respectively (Annex Table 8.6). According to the latest Trade Map data, China’s two major exported items out of ten to India in 2015 were electrical, electronic equipment and machinery, nuclear reactors, boilers, etc., which were valued at US$13.4 and 10.2 billion, respectively. Besides that, China exported organic chemicals; fertilisers, plastics and articles; articles of iron or steel; optical, photo, technical, medical, etc.; apparatus; furniture, lighting, signs, prefabricated buildings; vehicles other than railway, tramway; iron and steel to India and the aggregate value of these items was about US$19.95 billion in 2015. China exported three major items to Myanmar in 2015, i.e., electrical, electronic equipment US$1.6 billion; machinery, nuclear reactors, boilers, etc., valued at US$1.02 billion, and ships, boats and floating structures worth US$1 billion. Other than that, China exported iron and steel; pearls, precious stones, metals, coins, etc.; man-made staple fibres; articles of iron or steel; mineral fuels, oils, distillation products, etc.; other made textile articles, sets, worn clothing, etc., to Myanmar and the aggregate value of these items was US$3.45 billion. China imported three major items from India, i.e., cotton US$2.3 billion; natural or cultured pearls, precious or semi-precious stones US$1.96 billion; and copper and articles thereof US$1.66 billion in 2015. Other than that, organic chemicals; salt; sulphur; earths and stone; plastering materials, lime and cement; ores, slag and ash; machinery, mechanical appliances; mineral fuels, mineral oils and products of their distillation; plastics and articles; and electrical machinery and equipment and parts were imported from India and the aggregate value of import of these items was US$4.28 billion. China imported two major items from Myanmar, i.e., pearls, precious stones, metals, coins, etc., US$2.27 billion; and mineral fuels, mineral oils and products US$1.64 million. In addition, ores, slag and ash; iron and steel; wood and articles of wood; wood charcoal; rubber and articles; oil seeds and oleaginous fruits; grains, seeds and fruit; articles of apparel and clothing accessories; and copper and articles, etc., were imported from Myanmar and the aggregate value of these items was US$1.2 billion (Annex Table 8.7).

152  Mahfuz Kabir and Nazmul Arifeen

India imported edible vegetables and certain roots and tubers worth US$854 million, wood and articles of wood, wood charcoal of US$120 million and edible fruit, nuts, peel of citrus fruit, melons valued at US$19 million from Myanmar mainly in 2015. In addition, coffee, tea, mate and spices; ores, slag and ash; products of animal origin, fish, crustaceans, molluscs, aquatic invertebrates; optical, photo, technical, medical, etc.; apparatus; oil seed, oleagic fruits, grain, seed, fruit, etc., and electrical, electronic equipment were imported from Myanmar and the aggregated value of these items was US$20 million. Indian imports from Myanmar were not very remarkable compared to the other BCIM countries. India exported sugars and sugar confectionery, pharmaceutical products, and electrical and electronic equipment to Myanmar (similarly, Bangladesh exported these items to Myanmar) which were valued at US$211 million, US$167 million and US$73 million, respectively in 2015. Moreover, India exported cotton; machinery and mechanical appliances; vehicles and parts; residues and waste from the food industries; prepared animal fodder; iron and steel; and prepared feathers and down and articles made of feathers or of down, etc., to Myanmar and the aggregate value of these items was US$231 million in 2015 (Annex Table 8.8). Investment Bangladesh’s inward stock and flow of FDI from the other BCIM countries has increased in the last ten years or so. However, while it increased by outstanding amount for giant India and China, the FDI inflow has remained quite meagre from Myanmar over the years, even though its growth was significant only in the last two years. The outward FDI is restricted and is subject to the approval of the Bangladesh Bank, the central bank of the country. Among the members, China and India jointly accounted for US$559.78 million of FDI stock in Bangladesh at the end of June 2016, which was 4.16 percent of total FDI stock of all countries and territories. Chinese direct investment became slightly higher than double between 2010 and 2014, while it was nearly double in the case of India during this period (Table 8.2). The main areas of Chinese direct investment in Bangladesh are textile and apparel, leather and leather products, agriculture and fishing, and power. The investment is rather concentrated in these few sectors. On the other hand, Indian direct investment is quite

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diversified and spread over banking, textile and apparel, pharmaceuticals and chemicals, trading, food, agriculture and fishing, non-bank financing institutions (NBFI), telecommunication, leather and leather items, etc. (Table 8.3). The emerging areas of national importance include power generation and transmission lines.8 Most Table 8.2  FDI Stock in Bangladesh (Million US$) Period

China

India

Myanmar

All Countries

End-June 2005 End-June 2006 End-June 2007 End-June 2008 End-June 2009 End-June 2010 End-June 2011 End-June 2012 End-June 2013 End-June 2014 End-June 2015 End-June 2016

10.45 9.57 10.08 14.08 20.14 53.54 76.35 80.92 123.16 111.22 186.41 231.00

18.72 23.20 27.25 41.26 47.37 114.46 160.37 176.24 201.51 254.02 311.68 328.78

0.03 0.03 0.03 0.03 0.04 0.04 0.04 0.04 0.07 0.90 0.46 0.08

3,365.61 3,774.85 4,368.41 4,804.43 5,139.19 5,969.46 6,219.06 6,250.86 8,363.06 9,340.23 12,501.13 13,446.14

Source: Bangladesh Bank (2016).

Table 8.3 FDI Stock in Bangladesh by Sector, End-June 2016 (Million US$) Sector

China

India

Textile and Apparel Banking Telecom Power Agriculture and Fishing Food Trading Pharmaceuticals & Chemicals Leather & Leather Products NBFI Others Total Position among All Countries/ Territories

96.02 .. .. −2.71 2.31 .. 3.90 0.30 23.74 .. 107.44 231.00 16th

67.17 102.10 0.52 12.42 9.42 17.91 6.71 17.37 0.60 4.98 89.58 328.78 11th

Source: Bangladesh Bank (2016). Note: Two dots (..) indicate zero.

154  Mahfuz Kabir and Nazmul Arifeen Table 8.4 F DI Inflow in India by Country, April 2000 to March 2016 (US$ Million)

Amount Position

China

Myanmar

Bangladesh

1,358.46 18th

8.97 79th

0.05 131st

Source: Department of Industrial Policy and Promotion, Govt. of India; http:// dipp.nic.in

Table 8.5  China’s Outward Investment Stock (US$ Million) 2009

Share (%)

2010

Share (%)

2011

Share (%)

2012

Share (%)

India 221 0.09 480 0.15 657 0.15 1,169 0.22 Bangladesh 60 0.02 68 0.02 77 0.02 117 0.02 Myanmar 930 0.38 1,947 0.61 2,182 0.51 3,094 0.58 World 245,755 100.00 317,211 100.00 424,781 100.00 531,941 100.00 Source: UNCTAD Bilateral FDI Statistics 2014.

of these FDIs are aimed at targeting domestic and external markets. Bangladesh can attract more investment through improving hard connectivity via road, rail and inland waterways, and developing soft infrastructure. The data on India’s inward FDI reveals that China has overwhelmingly high direct investment in India (Table 8.4), followed by Myanmar. Bangladesh has a quite meagre direct investment in India in the last one and a half decades as revealed from the data of Indian government, which is due mainly to restrictions of the Bangladesh Bank. The position of China in the stock of India’s FDI is on the top while Bangladesh’s position is at the bottom, even though much of the investment potential can be realised in joint power generation, food production and microfinance. In recent years, Chinese direct investment increased significantly in the BCIM countries. Its FDI stock in India and Myanmar became more than three times higher in three years, from 2009 to 2012 (Table 8.5). Chinese investment is quite prominent in Myanmar compared to the other BCIM countries. The share of its investment is still meagre in the grouping, totaling even less than 1 percent.

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2.  Trade and investment potential along the corridor This section analyses trade and investment potential along the corridor, especially of the areas yet to be economically developed and the potential environmental costs. In order to reap maximum benefits and ensure sustainable returns from the sub-regional cooperation under the umbrella of the BCIM, any cooperation must meet four criteria.9 It needs to support economic benefit of the nations concerned, cooperation must ensure equity between generations so that the resources are not depleted by one generation, but rather are preserved for future generations as well. And finally, it must preserve biodiversity and conserve natural resources. The peripheral regions in the BCIM Economic Corridor are rich in flora and fauna which has remained unexploited. Any cooperation and projects in the sub-region, therefore, must ensure the utilisation of these resources without diminishing their long-term usability. Bangladesh Bangladesh has huge potential in its traditional textile industry mainly due to the availability of cheap labour in the country and its favourable access to the western markets. The industry is also one of the fastest growing in the country. Nonetheless, there is a considerable demand and supply gap in the textile industry which is dependent on the imports of fabrics. With burgeoning growth of the industry, there are ample opportunities for both trade within the BCIM Economic Corridor and scope for further investments. By analysing revealed comparative advantage (RCA) index, Khan shows that Bangladesh has the highest RCA in jute and jute products, woven and knit garments as well as in other textile products including jute bags among the BCIM countries.10 These are also its main export items to BCIM members. The trade structure of Bangladesh matches with the RCA indices, and the country’s bilateral trade with the BCIM countries is likely to increase in the future. It can be made possible through improved connectivity as most of the road (5 out of 6), all (4) rail and only waterway of the proposed BCIM-EC routes would significantly lessen the transport cost up to 70 percent.11

156  Mahfuz Kabir and Nazmul Arifeen

Bangladesh exhibits good prospects for electronic goods such as semi-conductor and cell phone assembling. It is believed that there is a big market for cell phones and other electronic products in Bangladesh. Walton has already made a name as a national cell phone brand. Locally manufactured home appliance industry has also been growing. Given a large market for electronic products and increasing interest of investors, the BCIM countries can come forward to initiate projects in this sector. While both India and China have a very strong ICT industry, Bangladesh has a growing information technology sector, thanks to the government’s priority on the ‘Digital Bangladesh’ in line with its “Vision 2021” which has also become a cornerstone of the development policy of Bangladesh. China China’s western regions are comparatively lagging behind the eastern provinces. To bridge the gap, the Chinese government initiated the “the Western Development Strategy” in January 2000 to drive economic development. The aim was to lift up the western lagging regions from economic underdevelopment through deeper integration into more economically vibrant provinces.12 It has already created a momentum in the economies of those areas. However, due to geographical proximity it will be more viable to trade with the BCIM countries than with the eastern China. The BCIM corridor includes Yunnan Province of China located in the Southwestern part of the country. While the province is backward compared to the affluent eastern region, there is an enormous potential for investments. Yunnan is home to one of the largest untapped hydropower sources of China. One estimate puts the annual hydropower potential at more than 900 billion kWh (kilowatt hour) which is more than 15 percent of China’s total capacity.13 But more than half of the province’s capacity remains unutilised due to pricing and taxation issues and many of the hydropower dams in Yunnan remain idle.14 There are both investment and trade opportunities in hydropower of the province. To be able to utilise the potential, it would require large investment in the sector which the BCIM countries can jointly arrange. Once potential donors and funding arrangements are made, Yunnan can also benefit from selling hydropower to the member countries of BCIM.

Trade and investment along BCIM corridor 157

Mining is considered to be a traditional industry of Yunnan and also one of its economic pillars. In addition to fuel minerals and metallic and non-metallic minerals, the province is also rich in coal. Given the demands and market size in the member countries, this sector holds high prospects. Northeast India The locational advantage of the NES of India owing to its proximity to China, Myanmar and the ASEAN region, coupled with its abundance in natural resources, makes it a good place for investment. As a result of India’s Look East Policy and its FTA with ASEAN nations, the NES will unlock investment opportunities in the future.15 Unfortunately, the lack of infrastructural shortcomings hindered the growth of the region’s manufacturing sector and it has not developed the way its services sectors have. It was partly because of the fact that the mountainous terrain of the NES is not conducive for the type of lands demanded by manufacturing industries. Despite this, there are opportunities in the NES that include food processing and horticulture. The NES is generally considered road infrastructure deficient because of the nature of the terrain. In order to unlock the true potential of the region, its infrastructural weaknesses must be compensated by investing in connectivity related projects. The region is also very rich in natural resources and unexploited flora. Unlike much of South Asia, the land, water and forests of Northeastern India is virginal and is known for its flora and fauna and forest reserves such as Namdapha National Park in Arunachal Pradesh, Manas National Park in Assam, among others. Therefore, any infrastructural development must take into account the question of environmental preservation. The local communities are not willing to exploit the ‘virgin’ quality of the land, therefore, sustainable extraction must be ensured.16 Myanmar Myanmar’s key export items, at present, include petroleum gas, teak and wood, agro-based products, garment items, and rubber. This shows that the country’s export items are mostly natural resource based products, save garment items. Notwithstanding the fact that its oil and gas export accounts for approximately 40 percent of

158  Mahfuz Kabir and Nazmul Arifeen

total export, a vast amount of Myanmar’s oil and gas resources potential remains untapped. The recent reforms in the country will likely to create many opportunities to attract investment in this sector. Besides, despite the abundance of energy resources, there is a power shortage in Myanmar.17 This allows for a scope for a collective investment opportunity in the energy sector to meet its power demands. Once that potential is realised, energy can also be traded within the sub-region and beyond. By increasing energy trade within the BCIM Economic Corridor, Myanmar can also meet its power shortage by importing energy from Yunnan province of China or the NES to meet its short-term demand. Mining is another promising sector in Myanmar. The country accounts for more than 90 percent of the global rubies trade and is considered to be the largest source of jade. It is also rich in sapphires and limestone. The demand of precious stones within the peripheral regions of BCIM is likely be negligible, but there are investment opportunities. Myanmar’s precious stones are sold unprocessed resulting in loss of profit. This opens up a door for cooperation and joint investment in this processing sector. Apart from trade in goods, recent economic reforms taking place in Myanmar will also open up to investments for trade in services. To meet the demands of integration with global economy as more foreign investment pours in, Myanmar will need strong financial institutions and banking sectors. Although it has been argued that until regulatory frameworks become stronger, it may not be possible to allow foreign banks to set up operations in Myanmar,18 nevertheless, economic reforms in the country will attract investment in the financial sectors in the long-term.

Some doable policy options Given the trade and investment potential within the BCIM Economic Corridor, member countries of the sub-regional group need to consider the following policy options to reap maximum benefits from cooperation. As mentioned earlier, only FTA in the BCIM region will negatively impact the economies of the rest of the countries except for China; but FTA and 10 percent reduction of transport cost would bring benefit to all members. Therefore, the foremost priority of the BCIM region should be taking up projects to ensure better physical connectivity primarily through land borders.

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To realise the optimum potential of the economic corridor, respective countries ought to focus on establishing special industrial zones along the corridor with processing facilities, manufacturing, providing other logistic industrial support; and taking up projects on infrastructure development in the sub-region. Establishing SEZs or EPZs along the proposed corridor would speed up trade between and among the sub-regional countries. This would bring multiple benefits for the members, since the regions along proposed corridor are lagging and peripheral compared to the economic centres of the respective countries. This would also generate employments. Bangladesh currently provides tariff preferences to India under SAFTA and APTA and to China under APTA, while Myanmar provides similar concession to India and China under ASEAN Plus initiatives. However, Bangladesh and Myanmar do not have any arrangement to exchange tariff preferences. Therefore, the countries should provide this privilege to increase trade and investment. One of the major challenges for developing the BCIM Economic Corridor would be building the infrastructure required to facilitate trade. A number of issues are involved with the question of infrastructural development such as cost sharing and attracting donors for investment in infrastructure. This issue demands collective effort of the member. Despite enormous prospects in energy sector, the peripheral regions remain at a power deficit. To harness the hydropower potential of the member countries, the possibility for joint projects to develop hydropower resources should be discussed. Member countries need to work out modalities to trade hydropower in the region. To trade energy, a number of initiatives should be taken, e.g. increased private/public investment in the sector, a thorough assessment of national power demands of respective countries and of the sub-region, building infrastructural capacities to facilitate the process, and more importantly bring institutional changes within the BCIM to able to exchange energy resources. Private investment should be highly encouraged for cross-border investment. Constructions of roads and railway networks, connecting missing road/railway links and intersections remain the most visible obstacles to materialise physical connectivity. This demands concrete measures to be taken either collectively or by individual states to ensure physical connectivity. Any initiative to develop connectivity among the BCIM region should be geared up by developing well-functioning land customs stations (LCSs).

160  Mahfuz Kabir and Nazmul Arifeen

The question of environmental preservation should be given the utmost priority. The peripheral regions of the BCIM-EC include rich ecosystems that need to be preserved while infrastructural development takes place. Energy is one of the pillars of the BCIM Economic Corridor. But the question of environmental preservation cannot be overlooked while connecting energy grids.

Concluding remarks It has been more than a decade since the civil society organisations of the four countries floated the idea of the BCIM Economic Corridor. But it is yet to take an institutional shape. The governments of member countries are discussing and negotiating the modalities and scope of the BCIM Economic Corridor. The most important task ahead would be the identification of modalities of the BCIMEC and giving it a formal shape to pave the way for concrete steps towards the integration of the peripheral regions. While it is an ‘economic corridor’, but considering the realities of the region, we cannot deny the political realities as well. Therefore, there ought to be a political/formal mechanism to make the economic corridor functional. If the past experience of regional and sub-regional groupings in this area is any indication, hastening to a political grouping may not bring the desired results. There is an excellent potential for member countries to vibrate economically through greater trade and investment, which critically hinges on improved connectivity. Physical connectivity, thus, will be at the heart of closer economic ties, which would foster development of the lagging regions like Northeastern states of India, parts of Myanmar and Yunnan province of China. Bangladesh would also derive considerable benefit through higher trade in the existing value chain due to comparative advantage. However, the volume of trade, investment and more importantly transfer of goods through the corridor would put enormous pressure on environment, which needs to be minimised through prudent policies and measures to make the sub-regional grouping environmentally sustainable. An ex ante course of action should be adopted immediately by analysing the trade-offs between the possible threats emanating from augmented economic activities and potential threats to the environment. This would ensure that the lagging regions enjoy the fruits of the economic corridor with little apprehension.

IMPORTS Cotton Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television Man-made staple fibres Iron and steel Knitted or crocheted fabrics Man-made filaments; strip and the like of manmade textile materials

China

Cereals Man-made staple fibres Iron and steel

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television, etc.

4,87,617

Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof

1,442,816

8,97,102 6,97,430 6,16,425

Cotton Vehicles other than railway or tramway rolling stock, and parts and accessories thereof

India

2,256,960 1,679,663

’000’ US$

Table 8.6  Bangladesh’s Ten Major Traded Items, 2015

Annexure

180,301

3,32,579 2,63,907 1,91,729

3,58,918

1,590,545 5,44,862

’000’ US$

Chemical or allied products Live animals; animal products Furniture; bedding, mattresses, etc. Plastics & rubber articles thereof

Vessels & other

Wood & articles of wood Vegetable products

Myanmar

(Continued)

157

3,127 2,611 165

4,009

13,693 10,670

’000’ US$

EXPORTS Articles of apparel, accessories, not knit or crochet Articles of apparel, accessories, knit or crochet Articles of leather, animal gut, harness, travel goods Vegetable textile fibres nes, paper yarn, woven fabric

Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring Plastics and articles thereof

3,66,653

Vegetable textile fibres nes, paper yarn, woven fabric

Articles of apparel, accessories, not knit or crochet

Other made textile articles, sets, worn clothing etc.

Edible fruit, nuts, peel of citrus fruit, melons

1,63,145

1,41,796

1,40,899

1,12,140

3,44,414

Organic chemicals

4,00,811

Plastics and articles thereof Vehicles other than railway or tramway rolling stock, and parts and accessories thereof Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings

India

’000’ US$

China

Table 8.6 (Continued)

37,653

52,566

81,932

90,083

1,56,451

1,66,279

’000’ US$

72: Iron and steel

19: Cereal, flour, starch, milk preparations and products

61: Articles of apparel, accessories, knit or crochet

30: Pharmaceutical products

Raw hides & skins, leather, furskins & articles

Prepared foodstuff

Textiles & textile articles

Myanmar

1,177

1,485

3,891

11,506

10

14

22

’000’ US$

Articles of apparel, accessories, knit or crochet

Knitted or crocheted fabric

Cotton

Zinc and articles thereof

Raw hides and skins (other than furskins) and leather

Inorganic chemicals, precious metal compound, isotopes

68,422

31,044

27,370

24,702

23,063

12,224

14,073

14,469

15,577

19,271

20,093

22,321

41: Raw hides and skins (other than furskins) and leather

03: Fish, crustaceans, molluscs, aquatic invertebrates nes 63: Other made textile articles, sets, worn clothing, etc.

22: Beverages, spirits and vinegar 39: Plastics and articles thereof

27: Mineral fuels, oils, distillation products, etc.

Source: Bangladesh Bank (2016), Trade Map and Export Promotion Bureau of Bangladesh database.

Raw hides and skins (other than furskins) and leather Plastics and articles thereof Other made textile articles, sets, worn clothing, etc. Footwear, gaiters and the like, parts thereof Oil seed, oleagic fruits, grain, seed, fruit, etc., nes Fish, crustaceans, molluscs, aquatic invertebrates nes 446

528

685

724

877

939

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television

Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral Plastics and articles thereof

Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad Copper and articles thereof Organic chemicals Salt; Sulphur; earths and stone; plastering materials, lime and cement Ores, slag and ash Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof

IMPORTS Cotton

India

362,612

367,956

371,703

666,535 5,61,374

1,658,010 1,102,202 843,375

1,962,751

2,275,270

’000’ US$

Table 8.7  China’s Ten Major Traded Items, 2015

Articles of apparel and clothing accessories, not knitted or crocheted Copper and articles thereof

Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral Ores, slag and ash Iron and steel Wood and articles of wood; wood charcoal Rubber and articles thereof Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal Commodities not elsewhere specified

Myanmar

33,412

35,188

63,008

72,158 66,471

453,694 250,788 228,417

1,638,940

2,267,301

’000’ US$

1,413,736 1,157,633

1,537,598

2,260,925 2,129,782 1,965,879

5,948,956 3,538,428

10,204,015

13,387,790

Plastics and articles thereof Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral; etc.

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof Ships, boats and floating structures Vehicles other than railway or tramway rolling stock, and parts and accessories thereof Iron and steel Articles of iron or steel Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad Man-made staple fibres

Source: Bangladesh Bank (2016), Trade Map and Export Promotion Bureau of Bangladesh database.

Iron and steel Plastics and articles thereof Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical Articles of iron or steel Vehicles other than railway or tramway rolling stock, and parts and accessories thereof

EXPORTS Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof Organic chemicals Fertilisers

2,22,565 1,94,016

2,82,409

8,45,013 6,12,374 3,04,000

1,000,939 9,89,131

1,020,634

1,608,351

Table 8.8  India’s Ten Major Traded Items with Myanmar, 2015 IMPORTS

’000’ US$ EXPORTS

’000’ US$

Edible vegetables and certain roots and tubers Wood and articles of wood; wood charcoal Edible fruit and nuts; peel of citrus fruit or melons

854,584

Sugars and sugar confectionery

211,267

120,364

Pharmaceutical products

167,144

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television, etc. Cotton

73,062

5,430

Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof

42,891

2,670

Vehicles other than railway or tramway rolling stock, and parts and accessories thereof Residues and waste from the food industries; prepared animal fodder Iron and steel

42,085

Articles of iron or steel Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles; etc.

19,867

19,715

Coffee, tea, maté and spices Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal Fish and crustaceans, molluscs and other aquatic invertebrates

7,676

Products of animal origin, not elsewhere specified or included

2,186

Raw hides and skins (other than furskins) and leather Ores, slag and ash

756

Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof

496

560

49,254

39,037

21,198

16,441

Source: Bangladesh Bank (2016), Trade Map and Export Promotion Bureau of Bangladesh database.

Trade and investment along BCIM corridor 167

Notes 1 Rahman, Mustafizur, Rahman, Habibur and Bin Shadat, Wasel. (2007). “BCIM Economic Cooperation: Prospects and Challenges”. Paper no. 64, Dhaka: Centre for Policy Dialogue (CPD). 2 De, Prabir. (2013). “Cooperation in the Areas of Trade, Investment and Finance: Challenges, Prospects and the New Agenda”. Paper presented at the 11th BCIM Forum Meeting, Dhaka, 23−24 February 2013. 3 Shihong, Bi. (2013). “Trade Corridor Helps Rejuvenate Asia”. Global Times, 3 June 2013. www.globaltimes.cn/content/786402.shtml (accessed on 22 June 2014). 4 De, “Cooperation in the Areas of Trade, Investment and Finance”. 5 Kabir, Mahfuz and Afroze, Shaheen. (2013). “Realising the Potential of Bangladesh’s Location though Connectivity”. BIISS Journal, 34(4): 293–310. 6 Abid Khan, Mostafa. (2014). “Trade in Goods and Services, and Trade Facilitation”. BCIM EC Joint Study Report, Ministry of Foreign Affairs, Government of Bangladesh and Bangladesh Institute of International and Strategic Studies (BIISS), Dhaka (mimeo). 7 Moazzem, K. G., Basak, K. K. and Raz, S. (2014). “Investment and Financing in the BCIM EC: Opportunities, Challenges and Policies”. BCIM EC Joint Study Report. Ministry of Foreign Affairs, Government of Bangladesh and BIISS, Dhaka (mimeo). 8 Ibid. 9 Nishat, Ainun. (2014). “BCIM Economic Corridor: Towards Sustainable Development”. Paper presented at National Study on the BCIM Economic Corridor (BCIM EC) at BIISS, Dhaka, 16 September 2014. 10 Abid Khan, Mostafa. (2014). “Trade in Goods and Services, and Trade Facilitation”. Ministry of Foreign Affairs, Government of Bangladesh and BIISS, Dhaka (mimeo). 11 Yunus, Mohammad. (2014). “Gains for Bangladesh from BCIM Connectivity”. BCIM EC Joint Study Report, Ministry of Foreign Affairs, Government of Bangladesh and BIISS, Dhaka (mimeo). 12 Taube, Markus and Ögütçü, Mehmet. (2002). “Main Issues on Foreign Investment in China’s Regional Development: Prospects and Policy Challenges”. In The Organisation for Economic Co-operation and Development (OECD) (ed.), Foreign Direct Investment in China: Challenges and Prospects for Regional Development, Paris: OECD. 13 Magee, Darrin. “Powershed Politics: Yunnan Hydropower Under Great Western Development”. The China Quarterly, 185(March): 23–41. 14 Xuecui, Hu. (2013). “The Battle Over Yunnan’s Hydropower”. China Dialogue, 10 September 2013. www.chinadialogue.net/article/show/ single/en/6347-The-battle-over-Yunnan-s-hydropower (accessed on 15 November 2014). 15 Reasearch and Information System for Developing Countries (RIS). (2011). “Expansion of North East India’s Trade and Investment with Bangladesh and Myanmar: An Assessment of the Opportunities and Constraints”. New Delhi: RIS.

168  Mahfuz Kabir and Nazmul Arifeen 16 McDuie-Ra, Duncan. (2014). “Harnessing Economic Potential in India’s Northeast”. East Asia Forum, 24 May 2014. www.eastasiaforum. org/2014/05/24/harnessing-economic-potential-in-indias-northeast/ (accessed on 12 November 2014). 17 Asian Development Bank. (2014). “Myanmar: Unlocking the Potential Country Diagnostic Study”. August 2014. www.adb.org/sites/default/ files/publication/42870/myanmar-unlocking-potential.pdf (accessed on 10 November 2014). 18 Nehru, Vikram. (2014). “Banking on Myanmar: A Strategy for Financial Sector Reform”. Carnegie Endowment for International Peace, 5 June 2014. http://carnegieendowment.org/2014/06/05/banking-on-myanmar-strategyfor-financial-sector-reform (accessed on 15 November 2014).

Chapter 9

The BCIM Economic Corridor Patricia UberoiThe BCIM Economic Corridor

Does it subsume the BCIM Regional Cooperation Forum? Patricia Uberoi 1 From the BCIM Regional Cooperation Forum to the BCIM Economic Corridor In May 2013, the process initiated by the Bangladesh–China–India– Myanmar (BCIM) Forum for Regional Cooperation, founded in Kunming in 1999 and earlier known as the ‘Kunming Initiative’, entered a new phase. The Joint Statement issued at the end of the official visit of Chinese Premier Li Keqiang to India contained a momentous clause with implications for both India–China relations and for the architecture of Asian regionalism/sub-regionalism: The two sides [i.e. India and China] appreciated the progress made in promoting cooperation under the BCIM (Bangladesh, China, India, Myanmar) Regional Forum. Encouraged by the successful BCIM Car Rally of February 2013 between Kolkata and Kunming, the two sides agreed to consult the other parties [i.e. Bangladesh and Myanmar] with a view to establishing a Joint Study Group on strengthening connectivity in the BCIM region for closer economic, trade, and people-to-people linkages and to initiating the development of a BCIM Economic Corridor.2 It would not be an exaggeration to say that the constitution of an inter-governmental Joint Study Group to assess the feasibility of developing a BCIM Economic Corridor (BCIM-EC) came as something of a surprise even to those deeply engaged in the BCIM Forum process.3 Though terms such as ‘growth zone’, ‘growth polygon’, ‘cooperation zone’, etc., had routinely been used to describe the scope and objectives of the sub-regional BCIM Forum,4 the concept

170  Patricia Uberoi

of a BCIM ‘Economic Corridor’ had hardly been mentioned through the Forum’s fourteen-year history.5 Certainly, the ‘economic corridor’ idea was not prominent in Indian development planning at the time,6 though it would presumably have been high in Chinese consciousness, given that this thrust had been adopted in 1998 as the primary focus of the Asian Development Bank (ADB) funded Greater Mekong Subregion (GMS) project, of which Yunnan Province (the active driver of the BCIM Regional Forum), was a founding member in 1992. In some estimations, the May 2013 India–China Joint Statement unequivocally elevated the BCIM Regional Forum from Track II to Track I, from being a mere ‘talk shop’ of wishful thinkers to an inter-governmental collaboration. From the very beginning, the BCIM Regional Forum had been struggling to uniformly raise the level of quadrilateral engagement from Track II to Track I7 – that is, to back the nice ‘talk’ by official commitment. While China’s and Myanmar’s participation in the Forum had always been effectively (if not explicitly) Track I, once Bangladesh had accorded the Forum official recognition and raised its level of participation commensurately (2005/2010), India remained, conspicuously, a laggard outlier.8 But the long-planned Kolkata-to-Kunming (‘K2K’) Car Rally that passed through Dhaka in February 2013 to coincide with the 11th BCIM Regional Forum seemed to herald a new ball game, as the India–China Joint Statement a couple of months later indicates. All the same, the reality as of now [May 2016], is that only a BCIM-EC Joint Study Group (JSG) has been constituted at the inter-government level, tasked with the preparation of a feasibility report for the BCIM-EC for presentation to the respective governments for their consideration and, hopefully, their joint endorsement and implementation. The work of preparing the JSG Report (individual country reports and the consolidated JSG Report) is still in process – albeit slower than originally planned9 and certainly not at the pace desired by China, as one might deduce by contrast with the much more rapid institutionalisation of the bilateral China–Pakistan Economic Corridor (CPEC).10 Immediately following his May 2013 visit to India, Premier Li Keqiang had gone on to Pakistan where the two ‘all weather’ friends agreed “to jointly develop the Long-Term Plan for China–Pakistan Economic Corridor on the basis of thorough study, so as to promote greater connectivity and further development of investment, trade and economic cooperation between China and

The BCIM Economic Corridor 171

Pakistan”. The Joint Statement continued: “Both sides decided to establish a joint working group11 under the National Reform Development Commission12 of China and the Planning Commission of Pakistan which will study relevant connectivity ventures”.13 It must be said that China’s coordinated 2013 road map for China–South Asia connectivity in the east and in the west generated relatively little comment in India, even as the Indian security establishment continued to express deep concern with regard to China’s leading role in the construction of Gwadar Port, the designated beginning/ termination point for the CPEC, but also deemed by some to be another pearl in China’s so-called ‘string of pearls’ spanning the Indian Ocean/Bay of Bengal region. Events moved fast. In September 2013, within a few months of the twin South Asian economic corridor proposals, both the BCIMEC and the CPEC were yoked together in President Xi Jinping’s grand new vision of overland and maritime inter-Asian and Eurasian connectivity in what is now known as the ‘One Belt, One Road’ (OBOR) or latterly ‘Belt and Road Initiative’ (BRI).14 As outlined in detail elsewhere,15 India’s response to this development has been not merely tardy, but piquantly convoluted. As of the time of writing [May 2016], India has endorsed the BCIM-EC project; firmly rejected the CPEC, which traverses India-claimed territory in Kashmir; and maintained a more or less studied official silence on China’s BRI through some 18 months of Chinese fanfare, while latterly hinting darkly at the unacceptability of so-called ‘unilateral’ connectivity projects in India’s neighbourhood.16 Needless to say, this concatenation has impacted both the BCIM Regional Forum as well as the incipient BCIM-EC project, fundamentally destabilising the terms of discourse in India and China, and casting a shadow of uncertainty over the future of both BCIM activities. At the first meeting of the BCIM-EC Joint Study Group (Kunming, 18–19 December 2013), and with the 12th Forum meeting scheduled to be held in Myanmar in early 2014,17 the question of the future status or need for the continuation of the BCIM Regional Cooperation Forum was discussed informally among those participants present who had earlier been associated with the Forum process. The general feeling was that the BCIM Forum as a TII/‘dual track’ or ‘multi-track’ exercise still had an important role to play.18 But there was clearly another motivation at work. That is, with the elevation of the quadrilateral dialogue to Track I, the metonymical yoking of the BCIM-EC to the CPEC, and the encompassment

172  Patricia Uberoi

of both within the grand design of the BRI, the sub-regional rationale that had been the hallmark of the BCIM Forum as initially conceived was seriously undermined. Though some formal niceties were retained, it appeared that Yunnan Province was no longer firmly in the BCIM driver’s seat. The following section of this chapter describes the process of Yunnan’s loss and partial recovery of agency in the dual BCIM initiatives. In India, conversely, expectations were raised that the BCIM sub-region (India’s Northeast region [NER] in particular) was belatedly gaining leverage, in policy and in practice, as the fulcrum of overland connectivity between South, Southeast and East Asia. This latter development runs parallel to the ongoing re-examination by key players of the economic corridor strategy of sub-regional/regional integration; and potentially with new policy formulations of the NDA government under the rubric of ‘cooperative, competitive federalism’ (discussed in the penultimate section). Interestingly, with or without explicit central government imprimatur, stakeholder Indian states as well as civil society institutions have been ‘pushing the envelope’ of centralised foreign policy on behalf of cross-border sub-regional cooperation. The situation is obviously complex and evolving, with opportunities to be grasped – or equally, to be missed. The final section returns to the question embedded in the title of this chapter, namely: “Is there a role for the BCIM Regional Forum in parallel to the activities of the BCIM-EC?” Here we argue that there is indeed an important role for the BCIM Regional Cooperation Forum, but that its format and focus may need to be substantially revised to address changed circumstances including, of course, the parallel institution of the intergovernmental BCIM-EC agenda.

China: from decentralisation to recentralisation and back again? As is well-known, the BCIM Regional Cooperation Forum was conceived and initiated within the ambit of China’s successive ‘Western Development’ and ‘Going Out’ strategies19 as a sub-regional programme for the social and economic development of the relatively backward, peripheral and landlocked regions of China (specifically, the Southwestern provinces) and of India (the Northeast region), along with Bangladesh and Myanmar (both Least Developed Countries [LDCs]). Its lineal coordinates were parsimoniously defined in the acronym ‘K2K’ (‘Kunming-to-Kolkata’/‘Kolkata-to-Kunming’).

The BCIM Economic Corridor 173

The provincial government of Yunnan (in particular, its Foreign Affairs Office and its development planning division, now known as the Yunnan Provincial Development and Reform Commission) was the driving force behind the initiative, in partnership with the Yunnan Academy of Social Sciences and other academic institutions of China’s western region which had specialised in Southeast and South Asian studies. In its initial conceptualisation, the BCIM Forum process drew heavily upon Yunnan’s experience as a foundation member of the ADB-supported Greater Mekong Subregion (GMS) project, extending that model into South Asia.20 Soon after the announcement of the constitution of a Joint Study Group for the BCIM-EC, it became apparent that the BCIM-EC project, like the CPEC, would be operationalised by the National Development and Reform Commission (China’s powerful macroeconomic planning body functioning under the State Council), albeit with Yunnan expert participation and cooperation. Though the first BCIM-EC-JSG meeting was hosted in the Yunnan capital, Kunming, the leading role of former Yunnan participants in the BCIM Regional Forum appeared to have been taken over by NDRC functionaries.21 In private conversations, some Yunnanese delegates conveyed that they were eager to restore the BCIM’s original subregional development agenda and to re-position and expand on Yunnan’s role as a connectivity hub linking East, South and Southeast Asia. Effectively, this entailed emphasis on the advantages of geographical propinquity and the co-development of border zones, border infrastructure and trans-border value chains, in addition to the overarching drive to ‘go out’ and compete globally for investment opportunities and inbound FDI. President Xi’s BRI proposal took some 18 months to shape into a formal document, which was finally released to coincide with the Boao Forum for Asia (BFA) in Hainan at the end of March 2015.22 The intervening months were occupied by numerous visits by the top leadership to countries along the BRI trail; innumerable seminars and conferences, national and international, across the length and breadth of the country; the mobilisation of ‘think tank’ forums; and intense jockeying among China’s provinces and municipalities for a share in what promises to be an enormous pie.23 In the meantime, China announced the creation of the Asian Infrastructure Development Bank (a multilateral investment bank [MLB] to which near on 60 countries, including India, have signed up),24 and a dedicated Silk Road Fund of US$40 billion set up in December 2014

174  Patricia Uberoi

in support of the BRI.25 It must be said that the official Silk Road vision document contains many grey areas, anomalies, unanticipated additions (such as a South Pacific ‘spur’) and silences, lubricated by the rhetoric of “peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit” such as had supposedly brought about “the progress of human civilization” along the ancient Eurasian Silk Road.26 Perhaps as deliberate strategy, there is still no authorised map of the BRI identifying its component nodes and routes, the CPEC being a case in point. On the one hand, the CPEC appears to be merely a capacious umbrella encompassing connectivity and energy infrastructure projects that were already under way in Pakistan or under discussion bilaterally, while the supposed linear ‘route’ of the corridor (whether along the east or the west sides of the Indus) continues to be the object of bitter internal controversy and official obfuscation.27 In the 18-month period between the announcement of the BRI project and the release of the vision document, Chinese delegations and official spokespersons had identified six component economic corridors of the BRI: a China–Mongolia–Russia corridor; a China– Central Asia–West Asia corridor;28 a China–Indochina Peninsular corridor; the CPEC; the BCIM-EC; and finally, the Maritime Silk Road (MSR), the latter connecting major existing and planned sea ports across the ancient maritime trading routes. While this formulation remains current and is constantly reiterated, one may note that the authorised vision document is more cautious with regard to the status of the CPEC and the BCIM-EC, which are described as merely “closely related to the Belt and Road Initiative”, and therefore requiring “closer cooperation and greater progress”.29 We can only guess as to whether or not this subtle re-formulation may have been a gesture to Indian sensitivities, which were already apparent to informed Chinese observers.30 A more interesting aspect of the BRI vision statement, however, is the section entitled “China’s Regions in Pursuing Opening-Up” which seeks to “fully leverage the comparative advantages of its various regions” in the ongoing process of Opening Up. Encompassed within the overarching BRI framework, the cartographic dimensions of China’s strategy of regional development were tweaked, and ‘regions’ rebranded. For instance, we note that the former ‘western’ region of the Western Development programme was bifurcated into (i) a ‘northwestern region’, which was in turn yoked in an unlikely marriage of convenience with the rust-belt ‘northeastern region’;31

The BCIM Economic Corridor 175

and (ii) a ‘southwestern region’, comprising Yunnan Province and the Guangxi Zhuang Autonomous Region, the two together positioned as twin pivots for engagement with the ASEAN countries and South Asia.32 As the only ‘southwestern’ province with sea port connectivity (the Beibu/Tonkin Gulf), Guangxi was deemed to be “an important gateway connecting the Silk Road Economic Belt and the 21st Century Maritime Silk Road”, the Venice of the East, if you like.33 Moreover, as members of the sub-regional GMS, both Yunnan and Guangxi provinces had a potentially significant role in BRI coordination with existing multilateral sub-regional, regional and transregional cooperation mechanisms and trade promotion Expos, the latter including inter alia the annual China–South Asia Expo (Kunming, Yunnan) and the China–ASEAN Expo (Nanning, Guangxi). Altogether, some 18 of China’s 31 administrative units were assigned specific roles in the BRI project, with others mentioned by implication in the context of designated activities, such as port development, rail-road corridors, etc.34 The clear winners, denominated as BRI ‘core areas’, were the far western border province of Xinjiang and the coastal province of Fujian, the latter beating off stiff competition from other seaboard claimants (Hainan, Guangdong and Guangxi) and both of them successfully leveraging their supposed “historical roles in the ancient Silk Road and natural geographical advantages”.35 In the event, it would appear that Yunnan province has been able to resume in some measure its self-assumed responsibility in mediating and promoting China’s economic engagement with South, as well as Southeast, Asia. In addition to its assigned function in the BRI project through the BCIM-EC, Kunming continues to anchor the BCIM Regional Cooperation Forum, scheduled to be held in 2016, the China–South Asia Think Tank Forum, the GMS Economic Corridors Forum, the China–South Asia Expo (which, as mentioned, is also coopted as a designated BRI activity), and the Track II ‘K2K Forum’ (see below), among others. While the situation is obviously fluid, Yunnan province would seem to have regained (or managed to retain) a degree of agency, no doubt allied with a heavy responsibility to bring President Xi’s signature BRI initiative to fruition, while deflecting competition from other provinces, Sichuan in particular. From Yunnan’s perspective, the BCIMEC is key to this quest, and effective Indian cooperation the sine qua non for success. As early BCIM formulations put it, China and India are the twin ‘pillars’ on which the initiative rests: by implication, if one should falter, the edifice would collapse.

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India’s Northeast Region: still waiting for a place at the table? As is well-known, the development of India’s Northeast Region (NER)36 was ill-served by the Partition of India and the 1965 war with Pakistan which disrupted the sinews of road, rail and waterways connectivity that had operated under the colonial regime, rendering the region effectively isolated, physically as well as socioculturally, from the so-called Indian ‘mainland’. To this was added the securitisation of India’s Northeastern borders as a ‘buffer’ zone following the debacle of the 1962 border war with China, a move in sync with the existing constitutional provisions for the protection of the lands, livelihoods and distinctive cultures of Indian tribal peoples, many of whom inhabit India’s Northeast frontier regions. From being among the more prosperous regions of India in 1947, most states of the NER are now below the Indian average in terms of standard economic indices. Worse still, the economic differential continues to increase, belying the region’s impressive endowment of natural and human resources. The reasons for this failure of governance are many and complex, rooted in the colonial and pre-colonial history of the region and in the development planning processes and priorities of post-Independence India.37 Continuing ethnic unrest and insurgency movements have promoted further militarisation, discouraging outside investment,38 while new institutional arrangements for the region, including the creation of the North Eastern Council (NEC) in 1971, the North Eastern Development Finance Corporation (NEDFi) in 1995, and subsequently the overarching Ministry for the Development of the North Eastern Region (MDoNER) in 2001, along with ample and often under-utilised central government development ‘packages’, have failed to put in place the comprehensive connectivity infrastructure required to correct the NER’s economic isolation.39 Additionally, the NER lacks adequate all-weather connectivity within and between its component states, as well as with the neighbouring countries (Bangladesh, Bhutan, China, Myanmar and Nepal) with which it shares some 98 percent of its borders. It has been a matter of adverse comment, particularly in the NER, that India’s Look East Policy, formulated in the early 1990s coinciding with the beginning of structural adjustment, did not take India’s Northeast Region into active consideration. To the contrary, overland access to ASEAN countries and East Asia was routinely

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deemed to be both economically unviable and strategically undesirable, given political uncertainties in Myanmar, the many long lasting insurgency movements in India’s NER and the prevailing Indian cordon sanitaire perspective on frontier security. The LEP focus was on maritime trade with the burgeoning economies of South East Asia–Thailand, Indonesia, Singapore, Philippines and Malaysia in the first instance, and then the wider ASEAN region, including the less developed but now fast growing CLMV countries (Cambodia, Laos, Myanmar, Vietnam). A quarter century on, maritime trade continues to overwhelmingly dominate India–ASEAN economic engagement, with the ambitious multi-modal Mekong–India Economic Corridor (MIEC), albeit still to become operational, as its new signature project.40 The late 1990s saw a change, with the economic development of the NER becoming linked in both public and academic discourse with the restoration of the historic arteries of trade and connectivity in the wider sub-region. In 1994, now pursuing a more ‘realistic’ policy towards the political regime in Myanmar, India signed an agreement with Myanmar to enable limited cross-border trade, and shortly thereafter entered a trilateral partnership with Myanmar and Thailand to develop the 1,360 km India–Myanmar–Thailand Trilateral highway from Mae Sot–Myawaddy on the Thai–Myanmar border through to the Myanmar–India border at Tamu–Moreh.41 It was in this evolving context that the early feelers from Yunnan academic and governmental research institutions for the creation of a sub-regional ‘growth zone’ including provinces of Southwestern China, India’s eastern and Northeastern states, northern Myanmar and Bangladesh found a generally sympathetic hearing in India’s NER,42 as also in Bangladesh, where Rehman Sobhan, the distinguished academician of the Centre for Policy Dialogue, furbished the projected economic integration of East, Southeast and South Asia in the beguiling garb of the historic ‘Southern Silk Route’.43 Building on the recommendations of a high-level government committee tasked with examining the infrastructure deficit in the NER44 and following intensive consultations with the chief ministers of all the NE states,45 the authoritative and path-breaking North Eastern Vision 202046 devoted a robust penultimate chapter to arguing the case for a leading role for the NER within the remit of the Look East Policy to put an end to the region’s ‘economic imprisonment’ within its international borders.47 In this task, shared cross-border ethnicities and cultural ties could be leveraged

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as potential assets for sub-regional integration, rather than as selfevident threats to national security.48 On the political stage, it has now become de rigueur for visiting Union Ministers, Prime Ministers and Presidents to endorse the centrality of the NER to India’s ‘Look East’ (now ‘Act East’) policy, and the necessity of regional integration for the NER’s further development.49 In parallel, and with increasing velocity, numerous academic volumes and commissioned reports have addressed the interwoven issues of overland connectivity through the NER with Southeast and East Asia, the region’s infrastructure deficit, the current extent and future potential of cross-border and inter-regional trade, the scope for developing trans-border value chains, developments in India’s bilateral political and economic relations with neighbouring Bangladesh and Myanmar, and the rapidly growing role of China in underwriting infrastructure development in India’s near neighbourhood.50 While serious doubts remain in the Indian security and diplomatic establishments on the wisdom of opening up the volatile NER and partnering China in sub-regional development through the BCIM mechanism,51 in the NER itself there would appear to be considerable enthusiasm for the BCIM project,52 and even a measure of competition among NER states to take the lead. This enthusiasm is, however, tempered by concern for the preservation of the many unique cultures of the hill tribes of the NER and for the environmental and social impacts of large infrastructure projects, especially in the hydro sector;53 the urgent need for appropriate skill development to ensure that the BCIM-EC translates into meaningful employment;54 the economic impacts of cross-border trade on local industry – usually summed up in the warning of ‘Chinese goods flooding the market’;55 traditional and non-traditional security threats, especially drugs- and weapons-smuggling on the perimeter of the notorious ‘Golden Triangle’;56 and the highly emotive and politically inflammatory issue of illegal migration. In other words, the BCIM Economic Corridor should be more than just a physical-cum-logistics passageway from one point on the map to another (caricatured as the loading of a container truck in Kunming and its unloading in Kolkata/Haldia), but should bring about tangible benefits and improved livelihood prospects for the communities along its path or within its wider sway of influence.57 To this may be added a marked degree of cynicism (often represented as a Centre versus Northeast States disconnect, or as an enduring and incurable

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‘governance’ deficit in the NER itself) as much-hyped infrastructure projects fail to materialise on the ground, with mounting time and cost overruns; or simply wash away in the next rainy season. But the real source of resentment in the NER has been the perceived reluctance of the Union government to proactively and consistently involve the state governments and civil society institutions of the region in the scripting of neighbourhood policy. In interviews conducted by the Institute of Chinese Studies in September 2013 with some well-known opinion-makers in the NER, informants expressed the hope that the BCIM-EC initiative would result in the speedy completion of the many slow-moving or stalled connectivity infrastructure projects. At the same time they expressed concern that the decision on the BCIM-EC, though in itself an apparently welcome step in opening up to the near neighbourhood, appeared to have been made by the Union government (primarily the Ministries of External Affairs, Home and Commerce) without adequate consultation with the NER state governments and civil society organisations. In their view, the MDoNER and the NEC had failed to adequately solicit and represent NER public opinion with regard to the BCIM-EC; to undertake the comprehensive perspective planning required to make the NER an effective bridgehead for the LEP; and to constructively mediate the various conflicts of interest between and within the NE states themselves, thereby potentially fuelling rather than mitigating ethnic and communitarian tensions and further deterring investment in the region.58 These sharp reactions underline the need for greater transparency and dialogue between the Union government and the various NER states in the first instance; between the relevant Ministries and institutions of the Union Government (MEA, MDoNER, Commerce and Industry, Finance, Road Transport and Highways (MoRTH), Railways, Home, Defence, the Planning Commission [now NITI Aayog], etc.); and with civil society institutions (business interests, academic and expert groups, and NGOs in the field). It appears that such dialogues (even between the central and state governments, or within and between different government departments) tend to be ad hoc, personality-driven, intermittent and relatively uncoordinated – at least insofar as the generation of a coherent ‘Master Plan’ for a transnational project such as the BCIM-EC is concerned.59 As we see in the following section, an ‘economic corridor’ is a particular, and also continuously evolving species of economic activity, characterised by specific objectives and features.60 While an economic

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corridor can and should leverage existing national infrastructure projects, it nonetheless needs to be conceptualised ab initio as a ‘regional project with national implications’/‘national project with regional implications’,61 requiring the active support and participation of local stakeholders, both state and non-state actors. As suggested elsewhere, it would appear that the agreed routing of the BCIM-EC, that is, along the alignment of the ‘K2K’ Car Rally of 2013,62 was the outcome of many and complex considerations that may not have been mindful of the specific requirements of a functional economic corridor, though with good perspective planning this alignment may ultimately prove to have been inspired.63 For a variety of reasons, including the only recently revised arcane restrictions on ‘border trade’,64 formal trade volumes across India’s Northeast borders with Bangladesh and Myanmar remain sub-optimal. At the same time, illicit trade continues to flourish following traditional trading routes and leveraging ties of kinship, culture and community.65 Obviously, the large volumes of unrecorded and unregulated trade through the NER come with security, health, safety and other risks, beyond revenue loss and the unfair competition of third-country goods – mostly Chinese and Thai – with locally manufactured products. But, while there is no denying the grim reality and security risks of weapons-, drugs-, and people-smuggling through well organised criminal and insurgent networks,66 we may also concede that the primordial ties of kinship and community are equally essential to the building of robust trans-border cooperation zones (‘border nodes’), as well as to the creation of a sense of cross-border or sub-regional community or identity, transcending local/parochial ethnicities. Vague as it may seem, the latter is an emotional/psychological component of subregional integration which should not be underestimated, nor misconstrued as evidence of a want of Indian patriotism in the NER.67

Reassessing the ‘Economic Corridor’ development strategy 68 In 1998, the Greater Mekong Subregion (GMS) project, sponsored by the Asian Development Bank in 1992, had adopted the ‘economic corridor’ modality as its basic thrust. In one sweep, the ADB re-designated its ongoing and planned transport connectivity projects as ‘economic corridors’, creating thereby a new template for projects of regional and sub-regional economic integration.

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However, a decade or so later, in the sobering context of global economic downturn, the ADB initiated a critical review of the GMS ‘corridor’ experience. The outcome was the promulgation of a new ‘strategic vision’ for the GMS as it entered its third decade.69 This re-formulation had several components which we have rehearsed in other contexts, but will summarise briefly here. Firstly, based on empirical experience, it was now recognised that transportation connectivity is a necessary, but certainly by no means a sufficient, condition for an ‘economic corridor’ as this institution is now sought to be defined. Simply put, an economic corridor needs to have a significant economic rationale and demonstrated potential over and above the mere connection of dots on a map. In a hard-nosed cost-benefit analysis, the short- or medium-term economic returns of investment in transportation infrastructure must be seen to justify the investment. By this calculus of viability, most of the GMS Economic Corridors proposed or under development – including, significantly, economic corridors connecting Myanmar with India’s NER – would need to be re-designated as mere transportation corridors serving local or national, rather than sub-regional or regional development imperatives.70 Secondly, and not unrelatedly, the new strategic vision sought to re-conceptualise the process whereby a transportation corridor is transformed into an economic corridor proper. In the early formulation, the transformation was seen to be enabled and catalysed largely by ‘logistics facilitation’, that is, the implementation of the various ‘soft’ infrastructure measures that enable the speedy and efficient cross-border movement of goods and services.71 Trade facilitation measures remain an indispensable component of the new vision, of course, but along with these was added the development of the so-called ‘back-end linkages’ of rural infrastructure and small and medium enterprises in the hinterland of the corridor to ‘widen and deepen’ the productive capacity of the region through which the economic corridor would pass, and thereby make the impact of corridor development more inclusive and people-friendly.72 Indeed, more recent self-assessments of the outcomes of the various GMS Strategic Action Plans (SAPs) go further to emphasise such goals as the “effective integration of less developed areas”, poverty alleviation projects focused on the control and prevention of HIV/AIDS and other communicable diseases, biodiversity conservation, and capacity building, for the tourism sector in particular.73

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Thirdly, and again drawing on the GMS experience, the new model emphasised the importance of local level trans-border collaboration involving local governments, business chambers and civil society groups.74 This new way of thinking was institutionalised in 2008 in the GMS Economic Corridors Forum (ECF), headquartered in Kunming, which aimed “to enhance collaboration among areas along the corridors and among GMS forums and working groups”, through “improving interaction between public and private sectors and between central and local levels of governments”.75 Innovatively, the ECF included a Governors’ Forum designed to “enable coordination among governors or equivalent authority of the provinces along the economic corridors”.76 Reviewing progress after a full round of ECF meetings among the six GMS partner countries, the 7th ECF Forum held in Kunming in June 2015 affirmed the importance of the ECF and its Governors’ Forum in the transformation of the original GMS transport corridors into ‘full-fledged economic corridors’,77 and in ensuring “the ownership of corridor development initiatives by local authorities, communities and private sector”.78 Moving ahead from the establishment of physical transportation and logistics corridors, the ECF-7 Joint Ministerial Statement recommended the establishment of Special Economic Zones at selected borders between GMS countries “to facilitate and attract the flows of people, goods, capital, technology and information and other factors of production, with [a] view [to] speeding up the development of these priority border areas and the sub-region as a whole”.79 And, looking even further ahead, the ECF-7 proposed a path-breaking cross-border e-commerce initiative “to help Medium, Small and Micro-sized enterprises to better integrate into [the] international market, and increase the chance for SMEs to better participate in global supply chains with lower cost”.80 This pronounced focus on the development of ‘border nodes’81 in the typically underdeveloped peripheries of nation states is necessarily a collaborative effort of local communities (state and civil society) on both sides of the international borders.82 The concern for the encouragement of local stakeholders’ involvement and SME development shown in the reformulated ADB sub-regional integration strategy appears a far cry from the ‘tianxia’ [imperial] grandiosity of the OBOR vision of land-based and maritime Eurasian connectivity83 in which, as noted, Yunnan province had been officially assigned a bridgehead role. It is equally

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a far cry from Indian ‘establishment’ thinking on the potential of cross-border economic integration which has habitually been more comfortable pursuing pragmatic goals in a bilateral (country-tocountry) context than within a consciously designed regional or sub-regional framework;84 and, more importantly, has seen the charting of foreign policy, in its diplomatic, economic and security dimensions, as the exclusive prerogative of the central government in the constitutionally authorised division of labour between the Centre and the States.85 Realities are more complex, however, as Jabin Jacob has pointed out in a recent article, and appearances deceptive. ‘Communist’, ‘authoritarian’ and ‘ostensibly centralized’ China “has been far more open to decentralization than is commonly assumed”,86 and “in fact witnesses a constant cycle of centralization and recentralisation of powers between the centre and the provinces under the Communist Party of China”, reminiscent of centre–province relations in imperial times,87 while ‘democratic’ and ‘federal’ India “has been far more unitary than its federal structure mandated”.88 In other words, it is increasingly evident that the balancing and reconciliation of local, state/provincial, national and global development imperatives is an ongoing challenge for both countries.89 Meanwhile, from the early 1990s, coinciding with the almost simultaneous rise of ‘regional parties’ in coalition governments at the Centre, structural adjustment of the economy, and the articulation of the ‘Look East Policy’, Indian states have begun to play an increasing role in the scripting of foreign policy, with both negative (obstructionist) and positive (‘win-win’) outcomes.90 Under the National Democratic Alliance (NDA) government, this emerging reality has been provided with both a patina of theoretical respectability, and an institutional framework for conducting pragmatic ‘Act East’ activities.

‘Cooperative Competitive Federalism’: an opportunity for the eastern and Northeastern states? Just a year after the NDA won the May 2014 general election with a massive majority, Prime Minister Narendra Modi made a well-publicised visit to China.91 The Prime Minister was widely applauded in the Indian media for taking a ‘firm’ stand on contentious strategic issues even as he successfully garnered some

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US$22 billion in Chinese investment agreements.92 Curiously (or not so curiously), President Xi’s pet OBOR project found no public mention, but the BCIM-EC was invoked in several contexts and endorsed, albeit rather tepidly, in the final Joint Statement93 which also agreed to expand the ‘positive list’ of tradable commodities through the three India–China Land Customs Stations at Nathu La (Sikkim), Lipu-Lekh Pass (Uttarakhand) and Shipki La (Himachal), and to designate Nathu La as a new route for Indian pilgrimage to Kailash-Mansarovar.94 One of the innovative aspects of this state visit was the inauguration of a dialogue forum, the India–China State/Provincial Leaders’ Forum (ICSPL).95 The first such meeting held by India in any country, the ICSPL was described as ‘a new vehicle’ for advancing cooperation between the two countries through State/Provincial level cooperation in the fields of “trade and investment, agriculture, skill development, smart cities, urban planning, clean energy, education, tourism, [and] people-to-people exchanges”. The ICSPL Forum mechanism awarded official recognition and a positive ‘spin’ to emerging realities on the ground. Over the last decade, as noted, China’s ‘Going Out’ strategy had increasingly seen Chinese provinces and municipalities wooing the governments of industrialised or resource-rich Indian states and pressing for sister-state/ province and sister-city relationships; and, conversely, some Indian states (Gujarat under Narendra Modi’s leadership notable among them) responding gleefully to the Chinese blandishments. Present at the ICSPL Forum from the Indian side were the Chief Ministers of the states of Gujarat96 and Maharashtra, the Mayors of Ahmedabad and Chennai, the Administrator of Hyderabad (Telengana) and the Acting Chairman of the New Delhi Municipal Corporation.97 This empowerment of the states and union territories as active agents in the conduct of foreign (economic) policy was signalled institutionally by the creation of a Division of Liaison with State Governments within the Ministry of External Affairs, and doctrinally promoted as the external dimension of the principle of ‘cooperative, competitive federalism’,98 the internal dimension of which was the partial devolution of planning from the Centre to the States, registered in the replacement of the Planning Commission by a new institution, NITI Aayog, whose Governing Council includes all state Chief Ministers and Lieutenant Governors, among others.99 Understandably perhaps, given the unresolved India–China border dispute in India’s NER, none of the NE states were participants

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in the ICSPL Forum, lending weight to allegations of ‘double standards’ in the Union government’s investment strategy “that makes Chinese investments in Gujarat acceptable, but not acceptable if they are made or intended for [the] Northeast”.100 Be that as it may, it is clear that the opportunistic and fortuitous investment partnering of Chinese provinces/municipalities and Indian states/union territories under the aegis of the ICSPL Forum is of a different order to the cooperation of border states and districts under the purview of the GMS Economic Corridors Forum mechanism which, as noted, primarily seeks to bring together local level state, business and civil society interests to promote the development of ‘border nodes’ and efficient physical and logistic infrastructure for trans-border trade. Nonetheless, the ethos and goals of economic corridor development are also served by the co-promotion of non-proximate ‘gateway’, ‘commercial’, and ‘interchange’ nodes along the linear corridor route. Thus, Kunming has established sister-city relationships with Mandalay, Chittagong (on a BCIM ‘spur’) and, from 2013, a muchawaited partnership with Kolkata, the terminal gateway of the BCIM-EC. In fact, Kunming and Kolkata were already partnered in a civil society-led Track II dialogue forum, known as the Kolkata-to-Kunming (‘K2K’) Forum, founded in 2002 as a common platform for representatives of government departments, business chambers and interests, and academic and cultural organisations from West Bengal and other Eastern and Northeastern states.101 But whether or not the NE states find a place, individually or collectively, at the high table, they have continued to press for the opening of more Integrated Check Posts, Land Customs Stations and ‘border haats’102 along the borders with Bangladesh, Myanmar, Bhutan and China (TAR), ‘pushing the envelope’ of established central government policy and supposed security constraints to engage economically, socially and culturally with their neighbours. Two recent examples must suffice here. A major historical trading route linking Kunming and Kolkata is the so-called ‘Ledo’ or ‘Stilwell Road’ which was built at great human and financial cost during the last years of the Second World War to carry supplies from India to Free China.103 From the railhead of Ledo in Assam, it passes through a short stretch of the present state of Arunachal, crossing from the Nampong Land Customs Station through the Pangsau Pass into Myanmar, thence to Myitkyina (Kachin State), Bhamo, and along the wartime ‘Burma Road’ to Baoshan and Kunming. This was the so-called ‘Northern’ route

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of the three potential BCIM routes from Kunming to Kolkata.104 While the re-opening of the Stilwell Road to trade and traffic has been a long-term demand of the NER states of Arunachal Pradesh and Assam,105 and also strongly advocated by Yunnan delegations at BCIM Forum meetings over the years, it was consistently rejected by the Indian Government, ostensibly on grounds of China’s territorial claim to Arunachal Pradesh as ‘Southern Tibet’, as well as the disturbed state of Myanmar’s adjacent Kachin province and the presence there of insurgent groups from the Northeast, some of them purportedly nurtured by China. Other commentators have claimed that it was Myanmar that was hesitant to open this route, again on grounds of insurgency movements; and latterly that China, too, had reservations, despite the huge investment by Chinese firms in highway development in Northern Myanmar. Against this background, it came as a great surprise to many to learn of the arrival on 30 December 2015 at the Nampong Land Customs Station of a truckload of horticultural and other exhibits from Baoshan (Yunnan), destined for the Assam International Agri-Horti Show in Guwahati.106 While this development was scarcely reported in the national media, it will most surely have had a demonstration effect: just 3–4 days overland journey from Baoshan to Guwahati! Another example of subnational initiatives shaping Indian foreign policy comes from the state of Tripura, bordered by Bangladesh on three sides. Leveraging the commonality of Bengali culture and the goodwill generated by the historical role of Tripura state in supporting the Bangladesh Freedom Struggle in 1971, Tripura has managed to achieve the seemingly impossible objective of enabling the transit of goods from the Indian ‘mainland’ into India’s NER, initially on a case by case basis,107 while simultaneously providing an outlet to the sea for Northeast products via the port of Chittagong. According to Subir Bhaumik, who has dignified this ‘proactive’ cross-border engagement with the title, ‘the Agartala Doctrine’, the Tripura case illustrates how Indian states can have a greater say in the conduct of national foreign policy as ‘responsible stakeholders’, especially on issues that affect them directly, without undermining larger national interests, as had been perceived to be the case far too often in the bygone era of coalition politics.108 In fact, initiated by the state, by private institutions or by civil society organisations, cross-border contacts between the NER states and neighbouring Bangladesh and Myanmar are rapidly growing,

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whether in the cultural field (as in the Pangsau Pass winter festival in Arunachal Pradesh, or the Hornbill Festival in Nagaland), or in the social sector (as patients from Myanmar seek to avail of medical treatment from well-known hospitals in Manipur, or patients from Bangladesh travel to Kolkata or to Shillong for treatment). Similarly, many Myanmar students are studying in schools and institutions in the NER. There is clearly a huge scope for local level cross-border cooperation in services and in the social sector, even as the security- and politically driven fencing of borders against ‘infiltrators’ proceeds apace. The project of ‘border haats’ (markets) for the exchange of local produce,109 enthusiastically welcomed by state and local governments, holds the promise of restoring or legitimising traditional systems of exchange, and contributing to social development on the national peripheries.110 Regrettably, the pace of development of the requisite infrastructure for border haats appears to be slow and half-hearted, the positive rhetoric notwithstanding, with the result that the ‘informal’ cross-border exchange of commodities and necessities continues relatively unchecked, with all the risks involved.

The BCIM Economic Corridor and the BCIM regional cooperation forum: does the Forum still have a role to play? At this point, after our long peregrination, we return to the pragmatics of BCIM cooperation and the specific question of whether or not the Track II BCIM Regional Cooperation Forum has become redundant following the official-level commitment of May 2013 to explore the potential for creating a BCIM Economic Corridor. The answer depends to an extent on one’s understanding of the role and function of so-called Track II dialogue. In this regard, it must be said, there are varying views. In one perspective, the major function of a Track II dialogue is to prepare the ground for Track I inter-governmental engagement. Once the latter objective is achieved, the scaffolding can be safely removed, leaving it to official mechanisms to get on with the job. In the case of the BCIM, this track-change transition has been unusually slow, for reasons rehearsed in other contexts,111 with uncertainty remaining even now [May 2016] as to whether or not the Indian government is fully committed to the project. Indeed, the signs are somewhat ambivalent and, as mentioned, the encapsulation of the

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BCIM within China’s OBOR project has undoubtedly complicated both public and official perceptions.112 Alternatively, some authorities argue that the conduct of Track II dialogue independently or parallel to official-level dialogue can serve a useful function, encouraging creative ‘out-of-the-box’ thinking, and generally acting as a confidence-building mechanism. This is particularly so in conflict situations or when the relations between the countries concerned have been strained,113 as has intermittently been the case between India and the three BCM partners, China in particular, in the years since the BCIM Regional Cooperation Forum came into being, as well as between Bangladesh and Myanmar on the Rohingya issue, and also between China and Myanmar. It is a matter of observation that both China and India over the last quarter century have each endeavoured to exclude the other from the regional and sub-regional forums in which they have membership or a leading role, even as they may cooperate opportunistically in various global forums.114 This is one of the reasons why the founders of the K2K Forum (see preceding text) insist that the Track II status of the K2K Forum and its sub-national state/province cooperation framework are positive assets which to some extent, if not entirely,115 serve to insulate the project from the inevitable ups-anddowns of the state-to-state relations of two rising Asian powers, thereby enabling ‘graduated’ and ‘sectoral’ progress, step-by-step, towards the still-distant goal of BCIM sub-regional integration. But there is a third and mediating model to be considered. In this model, Track II dialogue is not necessarily rendered redundant by Track I engagement; nor is it simply a stand-in for Track I, in cases where inter-state relations are fraught and fragile, or too tendentiously in the eye of the public media. It is rather conceived as a valuable supplement and complement to Track I activities – perhaps even the key to ultimate success – by mobilising and leveraging regional public opinion. Interestingly, an initiative of this type has been evolving, quite independently of the global economic corridor discourse (discussed in the section on the “economic corridor” development strategy above), in an NER civil society organisation known as the Asian Confluence,116 probably one of several such efforts in different domains that seek to encourage cross-border dialogue and engagement outside the narrow security and diplomacy paradigms. Reflecting on the slow progress on the ground of several of India’s regional and sub-regional projects of the last two decades (the LEP/AEP, SAARC, BIMSTEC, Mekong-Ganga Cooperation,

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etc.), this conclave calls for “complementary and supplementary efforts by the Civil Society at the level of the community and the people”, to draw on the ‘common history’ of the NER with the South East Asian neighbourhood so as to “catalyze the process of restoring our shared heritage of close socio-cultural, spiritual, economic and strategic bonding that existed not too long back, prior to colonization by foreign powers”.117 As articulated by spokespersons for the Asian Confluence, ‘government’ (central, state and local) in the ‘first space’, and ‘business’ in the ‘second space’ are both built on and sustained by the ground-swell of the ‘third space of the people’ (civil society initiatives), working together towards the common goal of integration with the near neighbourhood.118 But, to return to our theme of the future of the BCIM Regional Forum. Initially it had appeared that the BCIM Regional Forum had de facto become redundant with the announcement of the BCIMEC project, with financial stringency a sufficient excuse.119 But there are also some sound pragmatic reasons for the continuation of the Track II sub-regional dialogue under present circumstances. To begin with, the inter-governmental BCIM-EC Joint Study Group is an ad hoc body whose work will come to an end with the submission of the Joint Study Group Report for approval by the respective governments. Moreover, if and when approved by all four countries, the physical and institutional creation of the BCIMEC would inevitably be a long-term process, involving many steps and intense negotiations among the four partner countries, along with a massive financial outlay. In the meantime, it would be important that the momentum of discussion among the partners be kept up, the BCIM-EC project promoted to – and defended among – a wider circle of stakeholders, and new ideas generated in the process.120 In other words, the BCIM Regional Forum can play a vital mobilisation role, both internally and externally. Secondly, and relatedly, the BCIM-EC is fundamentally an economic project, conceived within, let us say, a broad ‘trade facilitation’/‘ease of doing business’ framework, and ultimately to be assessed on this basis. To be sure, the terms of reference (ToR) of the BCIM-EC Joint Study Group Report are not narrowly economistic, but include address to issues of sustainable development, human and social development and poverty alleviation, and people-to-people contacts, including in the tourism sector. While such themes are typically construed as ‘soft’ and well-meaning ‘add-ons’, subsidiary to the ‘hard’ issues of trade facilitation, connectivity, and

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finance and investment to be tackled at the inter-governmental level, we had earlier noted that recent rethinking on the economic corridors development strategy has emphasised the importance of the backend development of the corridor hinterland on the one hand, and the sense of ‘ownership’ of the project by local stakeholders on the other. Thirdly, and again relatedly, when observed through the lens of Centre–State/Province dynamics in both India and China,121 the original sub-regional rationale of the BCIM Regional Forum, namely, the co-development of the relatively backward peripheral areas of contiguous nation states through the opening up of crossborder trade has merit in its own right from the perspective of the inclusive development of border regions.122 This can and should extend to consideration of other important areas of cross-border cooperation, such as disease control, environmental and heritage conservation, the promotion of sustainable ecotourism, waterand energy-sharing, human resource and skill development, and the recovery and documentation of the palimpsest of shared arts, crafts, cultures and ethnicities in a sub-region divided by national borders. Finally, coming into being long before China’s OBOR project, the BCIM has by now become a highly visible test case of India’s sincerity in pursuing the much-toted ideal of regional/sub-regional connectivity in a multilateral cooperation format. India’s credibility is seriously at stake. At this delicate point in time, as the Look East Policy (LEP) takes on a more robust shape as the Act East Policy (AEP), India should surely not risk incurring the opprobrium of the partner countries and of the sub-region of India that is centrally involved (NER and West Bengal) by conspicuously soft-pedaling the BCIM Regional Forum process. Neighbouring Bangladesh in particular is deeply invested in the BCIM-EC project of opening overland communication with the markets of Southwestern China, in the associated redevelopment of the port of Chittagong (a traditional outlet of southern NER states to the Bay of Bengal), and in the long-term development of new Deep Sea Ports in the Cox’s Bazaar region.123 In other words, as some commentators have argued (to my mind convincingly), the pre-existing BCIM road map may actually provide an excellent opportunity for India to cooperate at a subnational level in one small but significant segment of China’s OBOR/BRI project124 which, albeit proposed and propelled

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by China (Yunnan Province), has been genuinely consultative over a decade and a half and where, with forethought and planning, India’s economically disadvantaged NER has potentially much to gain.125 The Manmohan Singh–Li Keqiang Joint Statement of May 2013 was an ‘in principle’ acceptance of the idea of a BCIM Economic Corridor. Its realisation will be a question of resource mobilisation on the one hand, and political will on the other. In the face of widespread mistrust of China’s strategic and economic ambitions in the South Asian neighbourhood, complicated now by the OBOR/BRI factor, political will cannot be taken for granted: it will need to be promoted and sustained by the ‘ground-swell’ of public sentiment, particularly in the sub-region of India that is directly involved. The basic road map for the BCIM-EC project, i.e., putting in place adequate physical transportation infrastructure, a slew of trade facilitation measures and intergovernmental cooperation mechanisms, is already at hand in a range of economic corridor projects in Asia and globally. The BCIM Regional Cooperation Forum has done its job, and set the ball rolling. But, having reached this point (after an inordinately long gestation), the BCIM project should not be allowed to wither on the vine of bureaucratic indifference and diplomatic timidity. The BCIM Forum has an important role to play in fostering the idea of a BCIM subregion, in keeping the BCIM project in the public mind, in confidence-building through the quotidian ups-and-downs of bilateral relations, and in initiating modest demonstration projects (such as the K2K Car Rally of 2013) to that end. Participants in the 12th BCIM Regional Forum (Yangon 2015) had privately confided that the old format of Forum meetings appeared to have run its course. They felt that if the Forum were to continue as supplement or complement to the long-term project of creating the BCIM Economic Corridor, its focus and format would need to change accordingly. To this end, a pragmatic, project-based approach to issues of common sub-regional concern would appear to be the best way forward, keeping up the spirit of dialogue and pressing on with a range of practical and publicly visible activities that would create the enabling environment and requisite momentum for sub-regional integration at this geo-strategic and geo-economic junction of South, Southeast and Eastern Asia.

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Notes 1 Acknowledgements: This essay is a substantially revised and updated (till end May 2016) version of the paper presented at the ICSSR-NERC International Conference on ‘BCIM: Sub-regional Cooperation for the Development of the Peripheral Areas’ (27–28 November 2014), drawing on my subsequent writings on the evolving BCIM-EC process. I should also acknowledge the helpful comments of participants in the ‘Sino-Indian Think-Tank Forum’, organised on 9–10 January 2015 by the Research Institute for Indian Ocean Economies (RIIO), Yunnan University of Finance and Economics, (Kunming), in partnership with the Observer Research Foundation (India), as well as the substantive assistance of young researchers associated with the Institute of Chinese Studies – Alok Ranjan, Jayshree Borah, Mirza Zulfiqur Rahman and Subir Rana. Primary materials have been sourced from the archives of the Institute of Chinese Studies, Delhi, which has been the liaison institution for both the BCIM Regional Cooperation Forum and the BCIM Economic Corridor Joint Study Group. 2 “Joint Statement on the State Visit of Chinese Premier Li Keqiang to India”. 20 May 2013. ¶ 18. www.mea.gov.in/bilateraldocuments. htm?dtl/21723/Joint+Statement+on (accessed on 16 June 2014). The proposal was reaffirmed in the Joint Statement issued following the visit of Prime Minister Manmohan Singh to China, 22–24 October 2013: “Joint Statement: A Vision for Future Development of India – China Strategic and Cooperative Partnership”. 23 October 2013’, ¶ 4. www. mea.gov.in/bilateral-documents.htm?53/Bilateral/Multilateral_Docu ments (accessed on 16 June 2014). 3 Uberoi, Patricia. (2016). “The BCIM Economic Corridor: A Leap into the Unknown?” In Bhaumik, Subir (ed.), The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy, New Delhi: Oxford University Press, pp. 189–218. 4 Uberoi, Patricia. (2016). “The BCIM Forum: Is It Sustainable?” In Das, Gurudas and Thomas, C. Joshua (eds), Look East to Act East Policy: Implications for India’s Northeast, New Delhi: Routledge, pp. 74–93. 5 The one exception, and undoubtedly a significant one, was the Joint Statement issued at the end of the 9th BCIM Regional Forum meeting held in Kunming in January 2011 which, in the section on regional connectivity, recorded that ‘[i]t was agreed to enhance the thrust for improved regional connectivity and to focus on establishing the Kunming-Mandalay-Dhaka-Kolkata Economic Corridor’. See ‘Joint Statement on Promotion of BCIM Regional Cooperation’, ¶ 5. 6 The flagship Indian corridor project, the Japan-financed Delhi-Mumbai-Industrial Corridor, was initiated only in 2008. 7 Uberoi, “The BCIM Forum: Is It Sustainable?” 8 See Mishra, Binoda Kumar. (2015). “BCIM-EC and the North East: Explaining India’s Reluctance”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: ICWA and Pentagon Press, pp. 97–108; and Mishra, Binoda Kumar. (2016). “BCIM-EC and the Northeast: A Case for Graduated Engagement”. In

The BCIM Economic Corridor 193 Bhaumik, Subir (ed.), The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy, New Delhi: Oxford University Press, pp. 168– 188. For a more detailed analysis of the complexities and anomalies of this situation, accommodated under the euphemism of ‘multi-track’ approach, see Rana, Kishan S. and Uberoi, Patricia. (2012). India’s North East States, the BCIM Forum and Regional Integration, New Delhi: Institute of Chinese Studies, Monograph, No. 1, pp. 101–111; also Uberoi, Patricia. (2009). “Eighth BCIM Forum for Regional Economic Cooperation, Nay Pyi Taw, Myanmar, 23–24 July 2009: Report and Comments”. China Report, 45(3): 241–252. See also the chronological account from a Yunnan perspective by Chen, Lijun and Kong, Can. “The Chinese Vision of the BCIM Economic Corridor”. In Bhaumik, The Agartala Doctrine, pp. 238–246. 9 See “Minutes of the First Joint Study Group of Bangladesh–China– India–Myanmar Economic Corridor”, Kunming, P.R.C., 18–19 December 2013. www.indianembassy.org.cn/newsDetails.aspx?Newsid=455 (accessed on 20 September 2014); and “Minutes of the Second Meeting of the Joint Study Group of Bangladesh–China–India–Myanmar Economic Corridor [BCIM-EC]”, Cox’s Bazaar, Bangladesh, 17–18 December 2014, “Joint Statement”. 10 For an account and assessment of the China-Pakistan Economic Corridor, see Ranjan, Alok. (2015). “The China-Pakistan Economic Corridor: India’s Options”. ICS Occasional Papers (May 2015). www.icsin. org/publications/the-china-pakistan-economic-corridor-indias-options (accessed on 15 April 2016); also Singh, Mandip. (2013). “Li Keqiang Visit to Pakistan: Assessing the Outcome”. IDSA Issue Brief, No. 5, New Delhi: Institute for Defence Studies and Analyses, June 2013. 11 Note the use here of the term ‘Joint Working Group’, as against ‘Joint Study Group’ for the BCIM-EC, though the two appear to be conflated in Chinese usage. Working Group suggests that a collective commitment has already been made, while Study Group suggests a project in the initial stages of development. 12 Properly called the National Development and Reform Commission. 13 “Joint Statement – Deepening Comprehensive Strategic Coopera tion Between the People’s Republic of China and the Islamic Republic of Pakistan”. 23 May 2014, § III. www.mofa.gov.pk/pr-details. php?mm=MTIwMA (accessed on 20 April 2016). Among the 11 agreements signed on this state visit was an MoU on ‘Cooperation for Long Term Plan on China-Pakistan Economic Corridor’. 14 For a chronology of the BRI Initiative from its announcement to the release of the authoritative White Paper at the end of March 2015, see e.g. Chen, Lijun and Kong, Can, “The Chinese Vision of the BCIM Economic Corridor”, pp. 246–249; also, Xinhuanet, “Chronology of China’s Belt and Road Initiative”. http://news.xinhuanet.com/ english/2015-03/28c_134105435.htm (accessed on 1 June 2015). 15 Uberoi, Patricia. (2016). “Problems and Prospects of the BCIM Economic Corridor”. China Report, 52(1): 19–44. Sage Publications, Los Angeles/London/New Delhi/Singapore/Washington DC DOI: 10.1177/0009445515613868.

194  Patricia Uberoi 16 See e.g. “Speech by External Affairs Minister at the Inauguration of Raisina Dialogue in New Delhi”. 1 March 2016. http://mea.gov.in/ Speeches-Statements.htm?dtl/26432 (accessed on 5 March 2016); and “Speech by Foreign Secretary at Raisina Dialogue in New Delhi”. 2 March 2015. http://mea.gov.in/Speeches-Statements.htm?dtl/26432 (accessed on 5 March 2016). 17 The 12th BCIM Regional Forum was ultimately held in Yangon in February 2015. 18 See Ren, Jia. (2009). “Restructuring the Institutional Framework for BCIM Regional Cooperation”. Paper presented at the Eighth BCIM Forum, Nay Pyi Taw, 23–24 July 2009; also Uberoi (2009). “Eighth BCIM Forum for Regional Economic Cooperation”, 241–252. 19 For a comprehensive early account of the Western Development Programme, see e.g. Lai, Hongyi Harry. (2002). “China’s Western Development Program: Its Rationale, Implementation, and Prospects”. Modern China, 28: 432–466. Aravind Yelery provides a neat analysis of the economic rationale of the subsequent, albeit overlapping, ‘Going Out’ strategy of economic development. See his “China’s ‘Going Out’ Policy: Sub-National Economic Trajectories”. ICS Analysis, No. 24 (December 2014). www.icsin.org/publications/chinas-going-out-policysub-national-economic-trajectories (accessed on 29 April 2015); also “Applying the ‘Going Out’ Strategy: Chinese Provinces and Cities Engage India”. ICS Analysis, No. 29 (March 2015). www.icsin.org/ publications/applying-the-going-out-strategy-chinese-provinces-andcities-engage-india (accessed on 29 April 2015). 20 Note that Myanmar is also a foundation member of the GMS, and that Bangladesh is a member of the ADB-supported SASEC comprising Bangladesh, Bhutan, India (especially the NER and North Bengal) and Nepal – a grouping earlier known as the South Asia Growth Quadrangle (SAGQ), which has now been institutionalised as a SAARC sub-regional grouping (BBIN) with particular focus on water- and energy-sharing, in addition to the conventional issues of connectivity and trade facilitation in which some small but significant gains have recently been made (i.e. the BBIN Motor Vehicle Agreement, 2015). See De, Prabir. (2015). “Bangladesh, Bhutan, India, Nepal Motor Vehicle Agreement: Deepening Regional Integration”. Economic and Political Weekly, 50(52): 110–115. 21 There was no mention at that time of the OBOR project. To the contrary, presentations on the financing of connectivity infrastructure were made by delegates from the Asian Development Bank (2013) and UNESCAP (2013). See Asian Development Bank. (2013). “The GMS Success Story”. Paper presented at the First Meeting of the BCIM Economic Corridor Joint Study Group, Kunming, 18–19 December 2013; also, United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). “UNESCAP Main Activities and Other Initiatives in Asia and the Pacific Related to International Transport Corridors”. Paper presented at the First Meeting of the BCIM Economic Corridor Joint Study Group, Kunming, 18–19 December 2013.

The BCIM Economic Corridor 195 22 National Development and Reform Commission (NDRC), Ministry of Foreign Affairs, and Ministry of Commerce of the Peoples Republic of China. “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road” (First Edition with State Council Authorization), 28 March 2015. http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html (accessed on 25 May 2015). 23 See e.g. Beauchamp-Mustafaga, Nathan. (2015). “Chinese Provinces Aim to Find their Place Along New Silk Road”. China Brief, 15(10): 1–3; European Council on Foreign Relations (ECFR). “ ‘One Belt, One Road’: China’s Great Leap Outward”. China Analysis, June 2015; Jacob, Jabin. “China’s Provinces and Foreign Policy: Lessons and Implications for India and Its States”. In Bhaumik, The Agartala Doctrine, pp. 254–270; Krantz, Agatha. (2015). “One Belt, One Road: What’s in It for China’s Economic Players?” In ECFR, “ ‘One Belt, One Road’: China’s Great Leap Outward”. China Analysis, June 2015, pp. 8–10; Uberoi, “Problems and Prospects of the BCIM Economic Corridor”. 24 See Krantz, Agatha. “China’s AIIB: A Triumph in Public Diplomacy”. In ECFR, “ ‘One Belt, One Road’: China’s Great Leap Outward”. China Analysis, June 2015, pp. 14–16. The proposal was mooted by President Xi and Premier Li in tours of Southeast Asian countries in October 2013, with the Articles of Agreement finally signed in June 2015. Interestingly, the first project of the AIIB, in collaboration with the ADB, is a highway section in Pakistan. 25 The first confirmed project of the Silk Road Fund is investment in the Karot Hydropower project and other hydropower projects under the CPEC. We may also note the parallel setting up in July 2014 of the New Development Bank (NDB), an initiative of the BRICS multilateral grouping, tasked with mobilising resources for infrastructure and sustainable development projects. 26 NDRC et al., “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”. 27 See Ranjan, Alok. (2015). “The China-Pakistan Economic Corridor: India’s Options”. ICS Occasional Papers, May 2015. www.icsin.org/ publications/the-china-pakistan-economic-corridor-indias-options (accessed on 15 April 2016). That recent documents / maps show three distinct routes for the CPEC (Eastern, Western and Central) presumably indicates the rival claims of different stakeholder states, and possibly also a tussle between the Pakistan army and the civilian government. See Chaudhuri, Pramit Pal and Ahmad, Imtiaz (2015). “From China to Pakistan: A Well-Thought-Out 3,000 km Lifeline”. www.hindustantimes. com/world/from-china-to-pakistan-a-well-thought-out-3-000km-lifeline/ story-ms4IozCLW0IPwwsLAvMYWI.html (accessed on 1 May 2016); and Rana, Shahbaz (2016). “Army Seeks Role in CPEC Administration”. http://tribune.com.pk/story/1085784/for-timely-completion-army-seeksrole-in-cpec-administration/ (accessed on 1 May 2016). 28 It is believed that the original focus of the BRI was on Western China and Central Asia, linked to the strategic goal of stabilising the restive Xinjiang Province, but that ‘China’s south-eastern coastal provinces actively lobbied to be part of the initiative, leading to the drafting of

196  Patricia Uberoi a second route . . . to be launched concomitantly’ (see Krantz, “One Belt, One Road”, p. 9). Some economists are of the opinion that with this dilution and expansion of the Silk Road project to embrace the Maritime Silk Route, China will lose much of its competitive advantage and ‘face much greater difficulties along the maritime Silk Road than it would have if it had focused only on the western route’ (ibid.). See also Atul Bhardwaj, who argues that ‘[t]he primary aim of OBOR is to connect China with Europe through Central Asia and Russia’, in challenge to Western dominance of the sea lanes of communication (SLOC) (Bhardwaj, Atul (2015). “Silk Routes versus Sea Lanes: The Return of Landlubbers”. Economic and Political Weekly, 50(22): 10. 29 NDRC et al. “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”, emphasis added. 30 Uberoi, “Problems and Prospects of the BCIM Economic Corridor”. 31 Note also that the NDRC is the office for both the Western Region Development programme (dating from 1999–2000), as well as planning for the Revitalization of Northeast China (initiated in 2003). On the rationale for the project to revitalise the Northeast along the lines of the Western Regions Development programme, see e.g. Dong, Lisheng. (2005). “China’s Drive to Revitalize the Northeast”. China Perspectives (online), March–April 2005. https://chinaperspectives. revues.org/462 (accessed on 10 April 2016). 32 The other two macro-regions identified are the ‘Coastal Regions’, including Hong Kong, Macao and Taiwan, building on “the unique role of overseas Chinese”; and the ‘Inland Regions’. This new cartography of the BRI differs both from the development index based differentiation of East, West and Central zones (sometimes adding the North East as a fourth focus), as well as from the conventional 6-fold regional classification that had earlier included Guangxi in a ‘South-Central’ (Zhongnan) zone, along with Henan, Hubei, Hunan, Guangdong, Hainan, Hong Kong and Macao. See “List of Regions of the People’s Republic of China”. https://en.wikipedia.org/wiki/List_of_regions_of_ the_People%27s_Republic_of_China#Economic_regions (accessed on 15 April 2016). 33 It may be noted that in some discourses or cartographic representations, the BCIM-EC (with seaport connection at Kolkata or Chittagong) and the CPEC (terminating at Gwadar) are presented as North-South connecting links between the East-West continental and the Maritime Silk Routes. A further North-South corridor presently under discussion at the Track II level is the China [TAR]–Nepal–India Trilateral Corridor. Nepal has reportedly agreed to ‘join’ the OBOR initiative, extending the rail-line from Shigatse in Tibet. See “Nepal to Join Silk Road Economic Belt Through Tibet”. The Hindu, 3 January 2015, New Delhi. www.thehindu.com/news/international/south-asia/nepal-to-join-silkroad-economic-belt-through-tibet/article674934.ece (accessed on 20 May 2016). 34 In the South Asian context, Tibet was mentioned with reference to border trade, tourism and cultural cooperation with Nepal. See ­Beauchamp-Mustafaga, “Chinese Provinces Aim to Find Their Place

The BCIM Economic Corridor 197 Along New Silk Road”, p. 2; also Ravi Bhoothalingam on trans-­ Himalayan connectivity through Nepal (“One – Belt – One – Road: To Join or Not to Join?” The Wire, 14 June 2016. http://thewire. in/2016/06/14/one-belt-one-road-to-join-or-not-to-join-42582/ (accessed on 15 June, 2016); and Jabin Jacob for the potential synergy of China–Nepal connectivity plans with the OBOR design, involving a China (TAR)–Nepal–India economic corridor (“Chinese Provinces and Nepal: The Case of Tibet Autonomous Region”. https://icsdelhiblogs. wordpress.com/2016/04/29/chinese-provinces-and-nepal-the-case-oftibet-autonomous-region (accessed on 25 April 2016). 35 Beauchamp-Mustafaga, “Chinese Provinces Aim to Find Their Place Along New Silk Road”, p. 2. 36 In this chapter, the Northeast Region (NER) refers to the ‘seven sister’ states of Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura, which are joined to the Indian ‘mainland’ by the narrow Siliguri (‘Chicken’s Neck’) corridor. The non-contiguous state of Sikkim became administratively a part of the NER from 2002. 37 See for instance, Sarma, Atul. (2005). “Why the North-Eastern States Continue to Decelerate”. Man and Society: A Journal of North East Studies, 2(1): 1–20; and Sarma, Atul. (2012). “North-East as Gateway to Southeast Asia: ‘Big Dream and Home Truths’ ”. In Deka, Sujit (ed.), Population, Development and Conflicts in Northeast India, Guwahati: EBH Publishers, pp. 1–20. 38 Bhaumik, Subir. (2009). Troubled Periphery: Crisis of India’s North East, New Delhi: Sage Publications; Government of India (GOI), Ministry of Development of North Eastern Region (MDoNER), and North Eastern Council (NEC). (2008). North Eastern Region: Vision 2020, New Delhi: MDoNER and NEC, pp. 289–294. http://mdoner. gov.in/writeraddata/sublinkimages/Vision_2020.pdf (accessed on 10 March 2012). 39 For further details, see Rana and Uberoi, “India’s North East States”, pp. 21–25; also Bhaumik, Troubled Periphery; GOI/MDoNER/NEC, Northeasten Region: Vision 2020; Das, Samir Kumar. (2015). “Between the National and the Global: Intermediate Institutions and the Political Economy of Borders in India’s North-East”. In Datta, Sreeradha and Mazumdar, Sayantani Sen (eds), Political Economy of India’s North-East Border, Kolkata: Maulana Abul Kalam Azad Institute of Asian Studies & New Delhi: Pentagon Press, pp. 1–11; De, Prabir and Majumdar, Manab. (2014). Developing Cross-Border Production Networks between North Eastern Region of India, Bangladesh and Myanmar: A Preliminary Assessment, New Delhi: RIS, pp. 21–34. www. ris.org.in/sites/default/files/pdf/Final%20Print-Cross%20Border%20 Monograh-WEB.pdf (accessed on 21 May 2016); Government of India (GOI), Planning Commission (1997). Transforming the Northeast: Tackling Backlogs in Basic Minimum Services and Infrastructural Needs (High Level Commission Report to the Prime Minister [‘Shukla Commission Report’])”. New Delhi: Planning Commission. http:// planningcommision.nic.in/report/genrep/ne_exe.pdf (accessed on 12 April 2010); Haokip, T. T. [Thongholal]. (2015). India’s Look East

198  Patricia Uberoi Policy and the Northeast, New Delhi: Sage Publications; Sachdeva, Gulshan. (2000). Economy of the North-East: Policy, Present Conditions and Future Possibilities, New Delhi: Konark Publications; Sarma, “Why the North-Eastern States Continue to Decelerate”; and Sarma, “North-East as Gateway to Southeast Asia”. 40 Supported by ASEAN, this multimodal project envisages maritime connectivity between the Chennai/Ennore ports in Southern India and the newly developed Dawei deep sea port on Myanmar’s southern coastline, linked to superhighways connecting to Bangkok, Phnom Penh and Ho Chi Minh City. For further details see De, Prabir. (2012). ASEAN–India Connectivity Report: India Country Study, New Delhi: Research and Information System for Developing Countries; Seshadri, V. S. (2014). Transforming Connectivity Corridors between India and Myanmar into Development Corridors, New Delhi: Research and Information System for Developing Countries (RIS). http://aic.ris. org.in/wp-content/uploads/2014/Trans%20Report.pdf (accessed on 1 October 2014). 41 The Trilateral Highway was proposed by Thailand as a major project of its Look West Policy. See Shekhar, Vibhanshu. (2010). “Thailand’s Look West Policy: Opportunities and Challenges for India’s Northeast”. In Gogoi, Dilip (ed.), Beyond Borders: India’s Look East Policy and Northeast India, Guwahati, Assam: DVS Publishers, pp. 166–189; also. Bhatia, Rajiv K. (2015). India–Myanmar Relations: Changing Contours, New Delhi: Routledge; Das, Ram Upendra. (2016). Enhancing India-Myanmar Border Trade: Policy and Implementation Measures, New Delhi: RIS and Government of India, Department of Commerce; and Seshadri, Transforming Connectivity Corridors Between India and Myanmar into Development Corridors, p. 46. 42 See Che, Zhimin. (1998). “Proposition on Formation of ‘Sub-Regional Cooperation Zone of China, India, Myanmar and Bangladesh’ ”. Paper presented at the Conference on “Regional Development in India and China”. New Delhi, 19–20 November 1998; Roy Burman, B. K. (1998). “Problems and Prospects of Development of North East India, Upper Myanmar and Southwestern China as an Economic Region”. Paper presented at the Conference on Regional Development in India and China. New Delhi, 19–20 November 1998; Uberoi, “The BCIM Forum: Is It Sustainable?” 43 Sobhan, Rehman. (1999). Transforming Eastern South Asia: Building Growth Zones for Economic Cooperation, Dhaka: Centre for Policy Dialogue and The University Press Ltd; Sobhan, Rehman. (2000). Rediscovering the Southern Silk Route: Integrating Asia’s Transport Infrastructure, Dhaka: Centre for Policy Dialogue; and Das, Samir Kumar. “Between the National and the Global: Intermediate Institutions and the Political Economy of Borders in India’s North-East”, pp. 8–9. 44 Government of India (GOI), Planning Commission, Transforming the Northeast: Tackling Backlogs in Basic Minimum Services and Infrastructural Needs.

The BCIM Economic Corridor 199 45 Government of India (GOI), Ministry of Development of North Eastern Region (MDoNER), “Minutes of the Meeting Chaired by Shri Pranab Mukherjee, Hon’ble Minister of External Affairs to Discuss Issues Relating to ‘Look East Policy vis-à-vis North Eastern Region’ ”, New Delhi, 31 October 2007. http://mdoner.gov.in/sites/default/files/ LOOK%20EAST%20POLICY7575715857.pdf (accessed on 20 May 2016). It would appear that this very interesting document, which is marked ‘Restricted’, became publicly available only recently. 46 GOI, MDoNER, and NEC, North Eastern Region: Vision 2020. 47 See the subsequent GOI/MDoNER policy paper on the potential role of the NE states in India’s Look East Policy, Look East Policy and the North Eastern States, New Delhi: MDoNER, F. No. 17/8/2009-DONER(LEP), 2011; also GOI/MDoNER, “100 Days Agenda of the Ministry of DoNER: Minutes of a Meeting Chaired by Secretary, MDoNER on Look East Policy vis-à-vis North East India”. 12 August 2009; and “Minutes of the First Meeting of the Inter-Ministerial Group (IMG) Chaired by Secretary, MoNER on (a) Development of Road and Port Projects in Myanmar and (b) Improvement of Road Connectivity and Customs Facilities at Indo-Myanmar Border”. 8 April 2010. 48 The ‘cultural’ perspective has been strongly spelt out in the policies and activities of the GOI’s Mekong–Ganga Cooperation (MGC) project, initiated in 2000 (mea.gov.in/aseanindia/about-mgc.htm); also Divya Jeevan Foundation (DJV), The Shillong Consensus, Conference Report on ‘India’s North Eastern States and Eastern Neighbours: Engaging for Connectivity, Culture and Prosperity by an Intelligent Third Space: The Shillong Dialogue, 5th–6th December, 2014, Shillong’. However, as with India’s other regional cooperation initiatives, effective cooperation has been slow to fructify. See, e.g. Arndt, Michael. (2015). “The Story of Four Lost Regional Groupings”. The Hindu, Business Line, 9 March 2015. www.thehindubusinessline.com/opinion/storyof-four-lost-regional-groupings/article6975236.ece (accessed on 25 May 2016). 49 See e.g. Modi, Narendra. (2016). “Prime Minister’s Address at 65th Plenary Session of North Eastern Council”. 27 May 2016. www.pmin dia.gov.in/en/news_updates/pms-address-at-the-plenary-session-ofthe-north-eastern-council/ (accessed on 1 June 2016); also Mukherjee, Pranab. “Speech by the President of India, Shri Pranab Mukherjee, to the Members of Arunachal Legislative Assembly, Itanagar, Arunachal Pradesh, 29 November 2013”; and “Speech by the President of India, Shri Pranab Mukherjee at the Celebrations of the Fiftieth Anniversary of Nagaland Statehood and Hornbill Festival, Kisama (Nagaland)”. 1 December 2013. www.facebook.com/presidentofindiarb/ posts/442416232525030 (accessed on 26 May 2016); and Sailo, Laldinkima. (2013). “India Woos Its Northeast: Development and Diplomacy Factors”. ISAS Brief No. 308, Singapore: National University of Singapore, Institute of South Asian Studies. 50 See e.g. among numerous recent publications, Asian Development Bank (ADB) and Asian Development Bank Institute (ADBI). (2015).

200  Patricia Uberoi Connecting South Asia and Southeast Asia, Tokyo: Asian Development Bank Institute; Bhatia, Rajiv K. and Mishra, Rahul (eds). (2015). BCIM Economic Corridor: The Road Ahead, New Delhi: Indian Council of World Affairs and Pentagon Press; Bhatnagar, Aryaman and Passi, Ritika (eds). (2016). Neighbourhood First: Navigating Ties Under Modi, New Delhi: Durham University and Wiley Blackwell (Observer Research Foundation & Global Policy Series); Bhaumik, Subir (ed.). (2016). The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy, New Delhi: Oxford University Press; Das, Enhancing India-Myanmar Border Trade; Das and Thomas, Look East to Act East Policy; Datta and Mazumdar, Political Economy of India’s North-East Border; De and Majumdar, Developing Cross-Border Production Networks between North Eastern Region of India, Bangladesh and Myanmar; Gogoi, Dilip (2010). Beyond Borders: Look East Policy and North East India, Guwahati and New Delhi: DVS Publishers; Haokip, India’s Look East Policy and the Northeast; Haokip, T. T. (2015). “Sub-Regional Initiatives and North East India”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Corridor: The Road Ahead, New Delhi: ICWA and Pentagon Press, pp. 85–96; Narayan, S. and Sailo, Laldinkima (eds). (2015). Connecting India to ASEAN: Opportunities in India’s Northeast, New Delhi: Manohar; Sailo, Laldinkima. (2015). “Northeast India in an Evolving Look East Policy: Barrier to Bridge”. In Narayan, S. and Sailo, Laldinkima (eds), Connecting India to ASEAN: Opportunities and Challenges in India’s Northeast, New Delhi: Manohar, pp. 31–53; Seshadri, Transforming Connectivity Corridors between India and Myanmar into Development Corridors; Yhome, K. (2014). Northeast’s Growing Salience in Regional Diplomacy, New Delhi: Observer Research Foundation Analysis, 29 September 2014. www.orfonline.org/cms/sites/orfonline/modules/analysis/ AnalysisDetail.html?cmaid=72796&mmacmaid=72797 (accessed on 29 April 2015). 51 Sibal, Kanwal. (2014). “Silk Route to Tie India in Knots”. Mail Today, 25 February 2014. mea.gov.in/articles-in-indian-media.htm?dtl/22999/ Silk+route+to+tie+India+in+knots (accessed on 2 June 2014). 52 In a survey conducted by the Centre for Environment, Social and Policy Research in November 2014 with respondents drawn from NER political parties, bureaucracy, academia and media, almost 89 percent affirmed that the BCIM has the potential to benefit the NER economy. Some, 88 percent felt that ‘serious human security issues like weapons and drugs smuggling could be better addressed through a multilateral forum like BCIM than at a bilateral level’. See “Bangladesh, China, India and Myanmar Economic Corridor Beneficial for Region’s Economy: Survey”. The Economic Times, 2014. http://articles.economictimes.indiatimes.com/2014-11-25/news/56455379_1_regionnortheast-indian-manipur (accessed on 20 May 2016). 53 Hussain, Monirul. (2008). Interrogating Development: State, Dis placement and Popular Resistance in North East India, New Delhi: Sage Publications; Rahman, Mirza Zulfiqur. (2014). “Territory, Tribes,

The BCIM Economic Corridor 201 Turbines: Local Community Perceptions and Responses to Infrastructure Development along the Sino-Indian Border in Arunachal Pradesh”. ICS Occasional Paper No. 7, June 2014, New Delhi: Institute of Chinese Studies. 54 See for a comprehensive coverage of NER labour issues the articles and references in Kshetrimayum, Otojit (ed.). (2013). Labour and Development: Special Issue on ‘Labour, Employment and Social Protection in North East India, Noida: V.V. Giri National Labour Institute. 55 Bhoothalingam, Ravi. (2016). “Can the Chinese Connection Speed India’s Development?” Economic and Political Weekly, 50(19): 33–38; and “One – Belt – One – Road”. 56 Jacob, Jabin T. (2010). “The India-Myanmar Borderlands: Guns, Blankets and Bird Flu”. SPIRIT Occasional Papers, No. 6, Sciences Po (Bordeaux), October 2010. 57 Observations at the Stakeholders’ Consultative Workshop on “The Role of the Bangladesh–China–India–Myanmar (BCIM) Economic Corridor in Regional Integration: Perspectives from Northeast India”, 18–19 July 2014, Guwahati. See also Asian Development Bank (2015). “Revisiting the GMS Economic Corridor Strategies and Action Plans. Discussion Paper Prepared for the 7th Economic Corridors Forum, Kunming, Yunnan Province, PRC”, Manila: Asian Development Bank, p. 4. www.adb.org/countries/gms/strategy (accessed on 25 May 2016); Das, Enhancing India-Myanmar Border Trade, pp. ix, 3–6. 58 Institute of Chinese Studies. (2013). “BCIM Economic Corridor Interview Series”. Mimeo, restricted circulation. 59 This is evident from the Minutes of a meeting of central ministers and NER state chief ministers convened in October 2007 by the MDoNER to discuss issues relating to the LEP vis-à-vis the North Eastern Region, (GOI/MDoNER, ‘Minutes of the Meeting Chaired by Shri Pranab Mukherjee, Hon’ble Minister of External Affairs to Discuss Issues Relating to “Look East Policy vis-à-vis North Eastern Region” ’. For other notable reported examples of inter-ministerial dialogue, especially related to NER connectivity issues, see GOI/MDoNER. (2009). “100 days Agenda of the Ministry of DoNER: Minutes of a Meeting Chaired by Secretary, DoNER on Look East Policy vis-à-vis North East India”, 12 August 2009; and “Minutes of the First Meeting of the Inter-Ministerial Group (IMG) Chaired by Secretary, MoNER on (a) Development of Road and Port Projects in Myanmar and (b) Improvement of Road Connectivity and Customs Facilities at Indo-Myanmar Border”, 8 April 2010. A half-decade later, as timelines shift, many promises are still to be fulfilled. Cf. Rana, Kishan S. (2016). “SubRegional Diplomacy: An Imperative of our Time”. In Das, Gurudas and Thomas, C. Joshua (eds), Look East to Act East Policy: Implications for India’s Northeast, New Delhi: Routledge, p. 111. 60 De, Prabir. (2014). “Economic Corridors and Regional Economic Integration”. In De, Prabir and Iyengar, Kavita (eds), Developing Economic Corridors in South Asia, Mandaluyung City, Philippines: Asian Development Bank, pp. 15–40.

202  Patricia Uberoi 61 Srivastava, Pradeep. (2011). “Regional Corridors Development in Regional Cooperation”. ADB Economics Working Paper Series, No. 258, Manila: Asian Development Bank. 62 K o l k a t a  P e t r a p o l e / B e n a p o l e  D h a k a  S y l h e t  S h e o l a / SutarkandiSilcharImphalMoreh/Tamu and on to Mandalay, entering Yunnan Province at Muse/Ruili (Ranjan and Uberoi 2013). For an informative account of the impressive infrastructure at the Muse/Ruili border crossing by way of contrast with the two functioning LCSs linking the NER and Myanmar, see Seshadri, Transforming Connectivity Corridors between India and Myanmar into Development Corridors, pp. 46–51. 63 Uberoi, “Problems and Prospects of the BCIM Economic Corridor”. 64 For a summary of these restrictions with respect to NER-Myanmar trade, see Das, Enhancing India-Myanmar Border Trade: Policy and Implementation Measures, pp. 10–11; and Seshadri, Transforming Connectivity Corridors Between India and Myanmar into Development Corridors, pp. 51–56. It is still too early to assess the impact of important changes in November and December 2015 in the IndiaMyanmar trade regime, including the abolition of the ‘barter trade’ that had facilitated exchange of locally produced commodities, along with the transition from ‘Border Trade’ to ‘Normal Trade’. 65 Estimates of the value of informal trade in 2014 vary widely, e.g., from Rs. 100 crores to Rs. 3,600 crores at Tamu/Moreh (Seshadri, Transforming Connectivity Corridors between India and Myanmar into Development Corridors, pp. 40–42). At the Zokhawthar LCS in Mizoram, almost all trade is informal and unrecorded, with ‘miniscule’ officially recorded trade (ibid.: 44–45; Julien Levesque and Rahman, Mirza Zulfiqur. (2008). “Tension in the Rolling Hills: Burmese Population and Border Trade”. IPCS Research Papers No. 14, New Delhi: Institute of Peace and Conflict Studies. www.ipcs.org/pdf_ file/issue/1636771605IPCS-ResearchPaper14.pdf (accessed on 20 May 2016). Volumes of illicit trade with Bangladesh, including cattlesmuggling, are also reported to be considerable (see Ghosh, Palash. (2014). “Cattle Smuggling: A Dangerous, Illegal and Highly Profitable Trade Between India and Bangladesh”. International Business Times, 4 February 2014. www.ibtimes.com/cattle-smuggling-dangerousillegal-highly-profitable-trade-between-india-bangladesh-1553155 (accessed on 1 May 2016). 66 Jacob, “The India-Myanmar Borderlands”; Nag, Dulali. (2010). Local Dynamics, Universal Context: Border Trading Through Moreh, Manipur, Kolkata: Mahanirban Calcutta Research Group. www. mcrg.ac.in/PP31.pdf (accessed on 13 August 2015); Seshadri, Transforming Connectivity Corridors Between India and Myanmar into Development Corridors; Sur, Malini. (2013). “Through Metal Fences: Material Mobility and the Politics of Transnationality at Borders”. Mobilities, 8(1): 70–89. 67 Cf. Rana, “Subregional Diplomacy: An Imperative of our Time”, p. 110.

The BCIM Economic Corridor 203 68 This section draws on the argument presented in Uberoi, “The BCIM Economic Corridor: A Leap into the Unknown?” pp. 195–202, and ADB, “Revisiting the GMS Economic Corridor Strategies and Action Plans”. 69 Asian Development Bank (ADB). (2011). The Greater Mekong Subregion Economic Cooperation Program: Strategic Framework, 2012– 22. Manila: Asian Development Bank. 70 Gautrin, Jean-Francois. (2014). “Connecting South Asia to Southeast Asia: Cross-Border Infrastructure Investments”. ADBI Working Paper 483, Tokyo: Asian Development Bank Institute. www.adbi.org/ working-paper/2014/05/27/6271.connecting.south.asia.southeast.asia/ (accessed on 1 July 2015); Srivastava, “Regional Corridors Development in Regional Cooperation” 71 De, “Economic Corridors and Regional Economic Integration”, p. 16. The non-tariff trade barriers and procedural obstacles to efficient cross-border trade are particularly in evidence in the South Asian region, one of the world’s economically least integrated regions. For a recent assessment, see United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and Asian Development Bank (ADB). (2014). Trade Process Analysis Report for Subregional Cooperation in South Asia. https://goo.gl/2Hrmb7 72 Asian Development Bank. (2012). Transport and Logistics in the Greater Mekong Subregion: Final Report (Technical Assistance Consultant’s Report), Manila: Asian Development Bank; Brunner, HansPeter (ed.). (2010). North East India: Local Economic Development and Global Markets, New Delhi: Sage Publications; and Brunner, Hans-Peter. (2013). “What Is Economic Corridor Development and What Can It Achieve in Asia’s Subregions?” (Asian Development Bank Working Paper Series on Regional Economic Integration No. 117), Manila, Asian Development Bank; Srivastava, “Regional Corridors Development in Regional Gooperation”, p. 11. 73 Asian Development Bank, “Revisiting the GMS Economic Corridor Strategies and Action Plans”, pp. 8, 13. 74 See also Wiemer, Calla. (2009). “Three Cases of Cross-Border Economic Corridor Development with Lessons for the Greater Mekong Sub-Region”, Manila: Asian Development Bank (courtesy the author); and Wiemer, Calla. “Economic Corridors for the Greater Mekong Subregion”. EAI Background Brief No. 479, Singapore: National University of Singapore, East Asian Institute. www.eai.nus.edu.sg/BB479. pdf (accessed on 19 May 2014). 75 For a summary of the successive proceedings of the GMS Economic Corridors Forum, see www.adb.org/sites/default/files/related/31979/ ECF-4-Synopses-Past-ECF-Meetings.pdf (accessed on 21 April 2016). 76 Joint Communiqué (‘Kunming Consensus’), First ECF, Kunming, 6 June 2008. 77 Asian Development Bank Greater Mekong Subregion (GMS) Economic Cooperation Program (ECP). (2015). “Joint Ministerial Statement: Seventh Economic Corridors Forum”, “Fostering Pragmatic

204  Patricia Uberoi Cooperation towards the Future of GMS Economic Corridors”, ¶ 5. www.adb.org/sites/default/files/related/34055/ecf-7-joint-statement. pdf (accessed on 21 April 2016). 78 Ibid, ¶ 13, emphasis added. See also Asian Development Bank, “Revisiting the GMS Economic Corridor Strategies and Action Plans”, p. 20. 79 Ibid, ¶ 6. 80 Ibid, Annex B. 81 The literature on economic corridors identifies four types of ‘nodes’ for development along the linear corridor pathway: ‘gateway nodes’ (at the beginning and end of the corridor); ‘border nodes’; ‘commercial nodes’ (industrial or agro-industrial); and ‘intersect nodes’ (where corridors intersect). See Uberoi, “The BCIM Economic Corridor: A Leap into the Unknown”, p. 212, n. 19; Asian Development Bank. (2012). CAREC 2020: A Strategic Framework for the Central Asia Regional Economic Cooperation Program, 2011–2020. Mandaluyong City, Philippines: Asian Development Bank, p. 28. 82 Asian Development Bank, “Revisiting the GMS Economic Corridor Strategies and Action Plans”, p. 20. 83 Jacob, Jabin T. (2015). “China’s ‘New Tianxia’ and the Indian Response”. ICS Working Paper, May 2015. www.icsin.org/publica tions/chinas-new-tianxia-and-the-indian-response (accessed on 2 May 2016). 84 See e.g., Arndt, Michael. (2015). “The Story of Four Lost Regional Groupings”, The Hindu, Business Line, 9 March. http://www.thehin dubusinessline.com/opinion/story-of-four-lost-regional-groupings/ article6975236.ece (accessed on 25 May 2016); Lama, Mahendra P. (2011). “Cooperation in the BCIM Region: Rethinking Opportunities and Newer Approaches”. Paper presented at the 9th BCIM Forum, Kunming, 18–19 January 2011; Rana, Kishan S. (2008). “Regional Diplomacy and India–China Economic Relations”. China Report, 44(3): 297–306; and Rana, “Sub-Regional Diplomacy: An Imperative of our Time”, pp. 115–117. 85 Constitution of India, Seventh Schedule. See also Bhaumik, The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy; Rana, “Sub-Regional Diplomacy: An Imperative of our Time”, p. 112; Tharoor, Shashi. (2016). “The Domestic Elements: States as Stakeholders”. In Bhatnagar, Aryaman and Passi, Ritika (eds), Neighbourhood First: Navigating Ties Under Modi, New Delhi: Observer Research Foundation and Global Policy Series (Durham University and Wiley Blackwell), pp. 124–128. 86 Jacob, “China’s Provinces and Foreign Policy: Lessons and Implications for India and Its States”, p. 254. 87 Ibid, p. 256. 88 Ibid, p. 254. 89 Zhang, Li. (2015). “Sub-Regional Connectivity: Momentum, Emerging Issues and Governments’ Leverage”. Paper presented at the First China-India Think Tank Forum, Kunming, 9–10 January 2015. 90 Bhaumik, Subir. (2016). “Introduction: Agartala Doctrine – The ‘Tripura Line’ of Appropriate Response in Foreign Policy”. In

The BCIM Economic Corridor 205 Bhaumik, Subir (ed.), The Agartala Doctrine, pp. 1–40; Bhaumik, “Conclusion: Relevance and Road to the Future”, in ibid., pp. 319– 325; Tharoor, “The Domestic Elements: States as Stakeholders”. 91 For an assessment, see e.g. Mohanty, Manoranjan. (2015). “History Challenges Modi in China”. Economic and Political Weekly, 50(22) (30 May): 13–16. www.epw.in/commentary/history-challenges-modichina.html (accessed on 2 June 2015); Rana, Kishan S. (2015). “Prime Minister Narendra Modi’s Visit to China, May 2015”. China Report, 51(4): 327–338; Uberoi, “Problems and Prospects of the BCIM Economic Corridor”. 92 Government of India (GOI), Ministry of External Affairs (MEA). (2015). “Business MoU / Agreements signed at India-China Business Forum during PM’s visit to Shanghai, 16 May 2015”. http:// mea.gov.in/bilateraldocuments.htm?dtl/25248/Business_MoU_ Agreements_signed_at_India_China_Business_Forum_during_PMs_ visit_to_Shanghai_May_16_2015 (accessed on 1 June 2015). 93 Government of India (GOI), Ministry of External Affairs (MEA). (2015). “Joint Statement Between the India and China during Prime Ministers Visit to China”. 36. www.mea.gov.in/bilateral-documents. htm?gtl/25240/Joint_Statement_between_the_India_and_China_ during_Prime_Ministers_visit_to_China (accessed on 2 June 2015). 94 Government of India (GOI), Ministry of External Affairs (MEA), “List of Agreements signed during the visit of Prime Minister to China”, 15 May 2015. http://mea.gov.in/bilateral-documents.htm?dtl/25260/ List_of_Agreements_signed_during_the_visit_of_Prime_Minister_to_ China_May_15_2015 (accessed on 25 June 2015); Uberoi, “Problems and Prospects of the BCIM Economic Corridor”, p. 33. 95 The ICSPL Forum mechanism was institutionalised in MoUs signed between the Ministry of External Affairs and the International Department of the Central Committee of the Communist Party of China, and between the Ministry of External Affairs and the Chinese People’s Association for Friendship with Foreign Countries (CPAFFC). See GOI / MEA, “List of Agreements”, ¶ 5, ¶ 18); also Roy, Shubhajit. (2016). “CMs to Meet Chinese Provincial Leaders Today”. Indian Express, 15 May 2016. http://indianexpress.com/article/india/indiaothers/cms-to-meet-chinese-provincial-leaders-today/ (accessed on 25 May 2016). 96 The Gujarat Chief Minister, Ms Anandiben Patel, went on to lead a large business delegation to the highly developed coastal province of Guangdong, a denominated ‘sister-province’ of Gujarat, and to nearby Hong Kong. For a detailed account, see e.g. “Gujarat CM Takes Concrete Steps towards Fostering Ties with China”. www.thehoteltimes.in/ index.php/directory/news-a-reports/1410-in-presence-of-honble-pmof-india-gujarat-cm-signs-I-mous-in-hong-kong-and-china (accessed on 25 May 2016). 97 The Chinese People’s Association for Friendship with Foreign Countries (CPAFFC), “The First Forum of Leaders of Regions of China and India held in Beijing”. en.cpaffc.org.cn/content/details19–47931. html (accessed on 6 July 2015). The Chief Minister of the state of

206  Patricia Uberoi Andhra Pradesh had visited China in the month preceding PM Modi’s visit in what was seen by some commentators as a curtain-raiser for the ICSPL (see e.g., Maini, Tridivesh Singh. (2015). “More Leaders, Better Relations”. The Hindu, 21 April 2015. www.thehindu. com/opinion/op-ed/more-leaders-better-relations/article7123051. ece?utm_source=InternalRef&utm_medium=relatedNews&utm_ campaign=RelatedNews (accessed on 25 May 2016). 98 Keshavamurthy, H. R. (2015). “Transforming India’s Development by Way of Structured Change Through Cooperative, Competitive Federalism”. Government of India, Press Information Bureau, Special Service and Features, 11 February 2015. http://pib.nic.in/newsite/ PrintRelease.aspx (accessed on 28 June 2015). 99 Uberoi, “Problems and Prospects of the BCIM Economic Corridor”, p. 32. 100 Bhaumik, Subir. (2014). “Why Did NE States Back off from K2K!” www.tripurainfoway.com/column-details/104/why-did-ne-statesback-off-from-k2k.html (accessed on 23 April 2016). 101 See Borah, Jayshree. (2014). “West Bengal-Yunnan Linkage Through the K2K Forum”, New Delhi: Institute of Chinese Studies, BCIM-EC Background Papers, Mimeo. Apart from areas of commercial cooperation (the tea industry is a notable example), the relatively ‘soft’ agenda of cooperation in tourism, culture, the arts, and education has had a prominent place in the K2K Forum. The K2K Forum is now a programme of the Centre for Studies in International Relations and Development (CSIRD), Kolkata, a think tank that has for many years been engaged in policy research on the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). For further details, see the CSIRD, www.csird.org.in. 102 Officially notified local markets, held at regular intervals, for the exchange of products and necessities between people on both sides of the border. Essentially the border haat is a skeuomorph institution, imitating the functions of traditional rural markets. 103 Pattnaik, Jajati K. (2016). “Should the Stilwell Road be Reopened?” Economic and Political Weekly, 51(15), April. https://www.epw.in/ journal/2016/15/reports-states/should-stilwell-road-be-reopened. html (accessed on 25 May 2016); Thomas, C. Joshua. (2016). “Stilwell Road and Development of India’s Northeast”. In Das and Thomas (eds), Look East to Act East Policy, pp. 229–237. 104 See, e.g., Rahmatullah, M. (2015). “Prospects of Opening Up Connectivity for NER of India to South and Southeast Asia through Bangladesh”. In Narayan, S. and Sailo, Laldinkima (eds), Connecting India to ASEAN: Opportunities and Challenges in India’s Northeast, New Delhi: Manohar, pp. 177–196. 105 Personal communication, Pradyut Bordoloi, former Congress MLA from Tinsukia Division in Northern Assam and Minister of Industries in the Tarun Gogoi Government. See also Jacob, “China’s Provinces and Foreign Policy”, p. 265. 106 The Yunnan delegation had been invited by the Northeast Federation on International Trade (NEFIT). For reports and comments on

The BCIM Economic Corridor 207 this extraordinary event, coming after some 70 years of disuse, see e.g. Arpi, Claude. (2016). “Reopening of Stilwell Road Is Historic for India-China Ties”. 11 January 2016. www.dailyo.in/politics/north east-stilwell-road-ledo-xi-jinping-bcim-kiren-rijiju-tibet-himalayaskailash-mansarovar/story/1/8386.html (accessed on 25 May 2016); Arunachal, Times. (2015). “China Reconnects with India at Stilwell Road”. 30 December. www.arunachaltimes.in/china-reconnectswith-india-at-stilwell-road/ (accessed on 25 May 2016); Pisharoty, Sangeeta Barooah. (2016). “Hope Rises in North East as China Road Springs to Life, Just for a Day”. The Wire, 17 January 2016. http://thewire.in/19435/hope-rises-in-northeast-as-old-china-roadsprings-to-life-even-if-just-for-a-day (accessed on 25 May 2016); and Pattnaik, “Should the Stilwell Road be Reopened?” I thank Ambuj Thakur and Mirza Zulfiqur Rahman for responding to my queries on this unexpected development. 107 Huge machinery for the Palatana power plant in 2012 (The Economic Times, “Palatana Power Plant to Supply 100 MW to Bangladesh from March 23”. http://economictimes.indiatimes.com/industry/energy/ power/palatana-power-plant-to-supply-100-mw-to-bangladesh-frommarch-23/articleshow/51224922.cms (accessed on 15 April 2016); and urgently required diesel and food-grains, including 35,000 tons of rice, in 2015. 108 Bhaumik, “Introduction: Agartala Doctrine”, p. 2; Tharoor, “The Domestic Elements: States as Stakeholders”. 109 Ranjan, Alok. (2014). “Border Haats (Bazaars) and Regional Development”. ICS Background Papers on the BCIM Economic Corridor, Delhi: Institute of Chinese Studies. 110 For instance, the infrastructure created for the border haats could also be utilised for clinics for the local population from both sides of the border, as could facilities provided under the Border Area Development Programme (BADP), handled by the Ministry of Home Affairs. 111 See e.g., Mishra, Binoda Kumar. (2011). “Effectiveness of Track II Approach in Promoting the Idea of BCIM: The K2K Example”. BCIM Newsletter, 1(1): 141–144 (paper presented at the 9th BCIM Forum, Kunming, January 2011); Mishra, “BCIM-EC and the North East: Explaining India’s Reluctance”; and Mishra, “BCIM-EC and the Northeast: A Case for Graduated Engagement”. For an early comparison and contrast of the BCIM initiative with the Russia-India-China (RIC) Trilateral dialogue, which also started as a Track II project about the same time, see Uberoi, Patricia. (2008). “India-China Initiatives in Multilateral Fora: Two Case Studies”. China Report, 44(3): 307–318. 112 Uberoi, “Problems and Prospects of the BCIM Economic Corridor” 113 See in general Kaye, Dalia Dassa. (2007). Talking to the Enemy: Track Two Diplomacy in the Middle East and South Asia, Santa Monica, CA: Rand Corporation; also the excellent and still relevant analysis by B. Raman in reference to India–Pakistan relations; Raman, B. (2003). “Track 2 Diplomacy and Pakistan”. South Asia Analysis Group, Paper No. 764, New Delhi: Observer Research Foundation. www.southasiaaalysis.org (accessed on 1 June 2016).

208  Patricia Uberoi 114 Arndt, “The Story of Four Lost Regional Groupings”; Rana and Uberoi, “India’s North East States, pp. 71–90. 115 Bhaumik, “ ‘Why Did NE States Back off from K2K!”. 116 See Divya Jeevan Foundation, “The Shillong Consensus”. 117 Shrivastav, P. P. (2014). “Preface”. In Divya Jeevan Foundation, “The Shillong Consensus, p. ii. 118 Ibid. Kishan S. Rana records other instances wherein Track I initiatives have sought the support of non-governmental organisations; see Rana, “Sub-Regional Diplomacy: An Imperative of our Time”. 119 As it happened, with the work of the BCIM-EC JSG still under way, it would be another two years before the scheduled 12th meeting of the BCIM Regional Forum took place in Yangon in February 2015, concluding the 3rd round of quadrilateral meetings. The mooted 13th Regional Forum meeting in Kunming, originally scheduled for January 2016, is pending [as of May 2016] and, it must be said, not for want of effort on the part of Yunnan provincial government officials. 120 That China is well aware of the importance of media exposure is evident, e.g., in the recent media-focused international conference on the Asia-Europe Meeting (ASEM) (see Ramachandran, Shastri. (2016). “ASEM, Connectivity and Media”. www.china.org.cn/opin ion/2016-05/30/content_38561985.htm (accessed on 31 May 2016), and in the resolve of the Yunnan government to press for a second, but this time ‘media’-focused, BCIM Car Rally (see 12th BCIM “Yangon Statement”). 121 Arguably in Myanmar, too. 122 See KPMG and FICCI. (2015). “Emerging North-East India: Economically and Socially Inclusive Development Strategies”. www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/ Documents/KPMG-FICCI-North-East-India-2015.pdf (accessed on 15 April 2016). 123 The geographical anomaly of the inclusion in the Joint Statement of the First BCIM-EC JSG Meeting of Chittagong as a BCIM-EC node has already been noted, but there is no doubt that the multi-modal road/rail/waterway connectivity between Chittagong and Agartala, which is now becoming a reality, would be a major gain for the two southern states of the NER, namely, Tripura and Mizoram. 124 Cf. Bhoothalingam, “One–Belt–One–Road: To Join or Not to Join?”; Saran, Samir and Rej, Abhijnan. (2016). “Engage the Dragon on Balochistan: How New Delhi can Counter Islamabad/Rawalpindi’s Good Cop, Bad Cop Routine”. Times of India, 4 February 2016. 125 This was also the general consensus of two roundtable expert discussions conducted soon after the ‘official’ OBOR vision document was unveiled at the end of March 2015: “China’s Silk Road Proposal, the BCIM Economic Corridor and Related Issues: A Discussion Meeting”. Institute of Chinese Studies, 16 April 2015; and “One Belt One Road Initiative of China”. Indian Council of World Affairs, 25 May 2015.

Chapter 10

BCIM Economic Corridor

C. Joshua ThomasBCIM Economic Corridor

Opportunities, obstacles, options and the road ahead C . Joshua Thomas

The 21st century is the age of regional cooperation and integration. The waves of regional and sub-regional cooperation sweep across the globe. In Asia, Greater Mekong Sub-Region (GMS),1 Association of South East Asian Nations (ASEAN), South Asian Association for Regional Cooperation (SAARC), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), etc., have been functioning with various degrees of success. The Bangladesh–China–India–Myanmar (BCIM) Forum for regional cooperation, formerly known as the ‘Kunming Initiative’,2 was founded in 1999 aiming to restore the historical arteries of overland connectivity that once linked India’s eastern seaboard and Northeastern states with China’s Southwestern province of Yunnan through present-day Bangladesh and Northern Myanmar. It seeks to deepen friendly cooperation among the four member nations and link South Asia with Southeast Asia and East Asia by building multi-modal connectivity, harness economic complementarity and enhance people to people relations.3 It may be noted that the idea of BCIM Economic Corridor is seen as a part of grand Chinese connectivity project of the One Belt, One Road (OBOR) where the ‘belt’ traces the historical Silk Road that traverses a number of countries in Central Asia, West Asia and the Gulf, to reach Europe, the ‘Road’ is the Maritime Silk Road that links China’s eastern coast with ports on the rim of the South China Sea, the Malacca Straits, the Indian Ocean and then on to the Mediterranean. In fact, OBOR is an ambitious scheme that aims to build rail, road and sea connectivity to link China with the rest of the world. This initiation could potentially touch 4.4 billion people and within a decade, could generate trade above US$2.5 trillion. Thus BCIM-EC should be seen in the larger canvas and often viewed as a departure

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from the USA-centric world order and beginning of the Sino-centric world order where China is expected to write the rules of the game. This chapter would like to focus on the opportunities and obstacles of forging the BCIM cooperation and alternative options before India which might be pondered for foreign policy making.

Opportunities The proposed establishment of BCIM Economic Corridor is indeed a bold, visionary and foresightful initiative having the potential to promote cooperation, development and peace in Asia. It would play a great role for regional prosperity and has the potential to chart a new Asian history.4 It aims at connecting the people across the Southern Silk Route and exploring the century old economic and cultural linkages among the people of the region. It promises huge developmental gains for the whole sub-region as it brings together four countries with 40 percent of the world population, 13 percent of the world GDP and 10 percent of the world’s surface area. In fact, it links two Less Developed Countries (LDC) – Bangladesh and Myanmar, with two of the world’s largest and fastest growing economics – China and India. The overriding objective of the BCIM-EC is cooperation and integrated socio-economic development of the sub-region where tangible benefits accrue to the people in an equitable manner. Even though BCIM is one of the richest regions in the world – in terms of natural and human resources and home to nearly 500 million people – it is also of the least integrated areas, economically as well as socially.5 BCIM sub-regional cooperation has the potential to promote growth in Southwest China, Bangladesh, Myanmar and Northeast India by way of utilising the complementarities of these regions. China can provide the manufacturing inputs, India can provide the services, Bangladesh can provide cheap labour and Myanmar and Northeast India can provide natural resources. The mobilisation of these cross-border synergies is destined to make the BCIM as one of the economically vibrant zone that can transform the landlocked NER and Southwest China into land linked areas through the development of cross-border connectivity.6 It can also harmonise the resources and markets across the borders and strengthen the forces of industrialisation in Myanmar and Bangladesh. The seamless connectivity across the border within BCIM will not only

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break the isolation of India’s Northeastern region and Southwest of China but also facilitate them to grow according to their comparative advantage in all the four countries of the BCIM forum. From India’s perspective, the BCIM will mark another important dimension of India’s LEP/AEP which has been earnestly pursued since the early 1990s. The primary aim of the LEP has been to enhance trade, investment and connectivity between India and countries to its immediate east extending up to Southeast Asia, East Asia and the Pacific. This provides the opportunity to optimise the dynamic synergies of the extended Asia-Pacific neighbourhood not just as a means of accelerating socio-economic development but also as a factor for regional peace and security. To a large extent, India’s LEP has already delivered significant economic gains both in trade and investment.7 The point needed to be noted here is that the significant gains from LEP have gone to the coastal states of Tamil Nadu, Andhra Pradesh, and West Bengal. As the continental route through Northeast India – the bridgehead to East and South East Asia – is simply not there, LEP has bypassed NER. It is thus important to look east through the Northeast so that the regional economy could leverage from the markets across the borders. For this, BCIM-EC will be unique in so far as it places the Northeastern states of India at the heart of the sub-regional cooperation fulfilling the long-standing aspiration of the landlocked NER for the regeneration of cultural and economic ties with countries of the neighbourhood. As 98 percent of NER’s border is with the neighbouring countries, BCIM offers an excellent opportunity to convert the landlocked region into land linked region. As the ‘belt’ does not pass through South Asia, countries in this region including India will be left out of the proposed OBOR initiative for regional integration. However, the proposed BICM-EC is supposed to act as a connector between the Belt and the Road and thereby provide feeder connectivity to South Asia. However, as the Maritime Silk Road will connect Chinese Eastern provinces like Fujian, Guangdong, Guangxi and Hainan with Kuala Lumpur through Malacca Strait and then Indian port of Kolkata before crossing the northern Indian Ocean to Nairobi, Kenya and then to further north around the Horn of Africa before moving through the Red sea into Mediterranean, with a stop in Athens finally meeting the land-based Silk road in Venice–India, if opts for, can easily be a part of the ‘Road’.

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Obstacles Although BCIM initiative has taken 17 years to move from Track I to Track II, no clear-cut breakthrough is in sight yet. It has been observed that while China is the enthusiastic partner of this initiative, India appears to be a reluctant partner, and both Bangladesh and Myanmar play the role of supportive partners. It is often thought that India’s such inexplicable reluctance is due to the volatility of her Northeastern region (NER) which is supposed to be a part of the BCIM.8 Further, it has been argued that the disparities that exist in the BCIM region are unlikely to produce equal economic dividends for all the members of the arrangement. In a relative gain calculation, India perceives itself to be the least gainer (thus the bigger loser) given the present state of economic preparedness of the Northeast region vis-à-vis the other members of BCIM specially China. Besides this, fragile cross-border security environment is another major inhibiting factor that might stand in the way of successful operation of the BCIM Economic Corridor. China has always expressed strong opposition to any international investment in Arunachal Pradesh citing it as a disputed territory. Moreover, China is planning a massive economic corridor through Pakistan-occupied Kashmir ignoring India’s concerns that it is a disputed area. Apart from this, there are certain concerns of the Indian establishments that need to be noted. As China’s economic interests in the Indian Ocean have expanded rapidly in recent decades, Beijing’s naval interest and profile in the region also grew steadily. In the past decade, Beijing has also focused on building maritime infrastructure in the Indian Ocean. Its investment in the development of new ports at Gwadar in Pakistan, Hambantota in Sri Lanka and Kyaukphyu in Myanmar, has generated a serious concern in India about China’s long-term and real intentions in the Indian Ocean. Although these are all civilian ports for now, Delhi has its own worries that these civilian ports may portend a permanent Chinese naval presence in the Indian Ocean. New Delhi has a grave concern about the Beijing maritime diplomacy in the Indian Ocean. Further India’s persistent security concerns, including the unresolved border dispute and the lingering trust deficiency are the biggest challenges which India faces in dealing with China. Options There is a growing debate among the strategic community as to whether India should go for the BCIM-EC or not. If BCIM-EC is

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viewed as part of OBOR, then the options before India are: first, India becomes a willing partner to promote a Sino-centric regional order and in exchange gets Chinese investment and technology for her own development, more particularly on her Northeastern region which is a backward region. India should welcome and join the project, albeit with due caution, and actively seek areas of congruence where the development of infrastructure under OBOR (sea port development, connectivity, infrastructure, etc.) could dovetail with India’s own development priorities and requirements. Second, India becomes an unwilling partner and mobilises resources and technology from China and other developed countries. Third, India proposes alternative regional connectivity projects and executes those mobilising resources from the existing global financial institutions. Fourth, India integrates herself economically with China and strategically with USA and its allies in order to facilitate transfer of technology that will accelerate the growth at home. Fifth, India might align her strategic vision to that of USA’s and collaborate with Japan, South Korea, Vietnam and Australia in erecting a fence in order to restrict the growing Chinese might in Asia. However, if BCIM-EC is viewed as independent of OBOR, one school of thought does not find it rewarding for India to promote BCIM-EC as the capacity of Northeast to trade with China is almost non-existent. It feels that given the current scenario, NER can only be a dumping ground for cheap Chinese goods which would rather kill the yet-to-be-attained growth potential of the region. Southwest China, the focus of the BCIM-EC from China’s perspective, comprising Yunnan, Sichuan and Guizhou provinces beside the Chongqing municipality accounts for 19.5 percent of China’s populations, and 11 percent of China’s GDP. Since its economy is primarily agrarian, its contribution to China’s export is merely 2.2 percent. This school feels that instead of the BCIM-EC, integrating the Bangladesh economy with that of the Northeast would be far more realistic and beneficial to the region. Integrating the region’s economy with that of Bangladesh through better connectivity is not only viable and desirable but is crucial to its peace and prosperity.9 However, the potential of BCIM-EC for the development of NER cannot be ignored. Another perspective argues that engagement with the Chinese economy will provide NER the scale and demand whereas engagement with Bangladesh and Myanmar will provide the opening to the seas, lack of which is always considered a hindrance to the NER’s development. It feels that China provides the

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much needed ignition to the economy of the NER and avoiding engagement with China will close this opportunity for NER. The way out is to exercise the option of engaging China in a calibrated manner. If India chooses to ignore China, the latter will feel no compulsion or incentive to reduce its hostilities towards India. On the other hand, if there are multiple levels of engagement between India and China, there can be enough incentives for China to desist from any aggressive or hostile action vis-à-vis India. Gradual and incremental economic engagement with China and the immediate regional neighbours would have a positive impact on the mutual perception between India and China which might facilitate towards amicable resolution of the outstanding issues between these two nations.10 The road ahead There is no doubt that, BCIM, if it comes true, will brighten the prospect of an Asian century in the making. Foreign policy of a country should not be solely guided by strategic perspectives based on balance of power axioms; it needs to factor into the virtues of good neighbourliness as well. Some of the unquestionable benefits that will accrue to India in general and her Northeastern Region in particular are listed below: Potential for connectivity to transform landlocked to land linked: Some of the studies done on BCIM-EC has suggested that India will benefit from BCIM, in many self-evident ways. For example, Agartala (Tripura) is 1,650 km from Kolkata (West Bengal) when one travels through the Siliguri – Chicken’s Neck, the narrow strip of land north of West Bengal, which is only 33 km wide. In contrast, the distance gets reduced to just 350 km if the journey passes through Bangladesh.11 Moreover, India’s Northeastern states have no access to the sea, even though Tripura’s southernmost border town, Sabroom, is only 72 km from Chittagong, an international port in Bangladesh. It has been accepted that one major reason behind Kolkata’s decline after India’s independence is its unnatural isolation from its natural eastern neighbourhood. Apart from denting the development of West Bengal and India’s Northeast, this has hurt Bangladesh too. BCIM-EC, by way of connecting India’s Northeast with its mainland through Bangladesh corridor will prove to be a game changer for the development of the region.

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Potential to bolster India’s energy security: With natural gas reserves of about 200 trillion cubic feet, the largest in Asia-Pacific, Bangladesh, like Myanmar, could also become one of the major energy exporting countries. Both Myanmar and Bangladesh natural gas reserves could be used to meet the growing energy needs in India. Potential to enhance tourism: Tourism too will get a boost if BCIM arrangement comes into force. Bangladesh attracts less than 1 million tourists in a year. For India’s Northeastern states, the figure is less than 200,000. Contrast this to the fact that Vietnam attracts 8 million, Camboida 5 million, and Thailand 26 million foreign tourists annually. However, the entire Northeastern region of India has tremendous potential for adventure tourism, ecotourism, wildlife tourism, etc. Infrastructural Push: It may prove prudent to deploy India’s limited resources to build an Indian Ocean network of ports, with connecting highways and rail routes, exemplified by Mekong-Ganga corridor and the Sittwe-Mizoram multi-modal transport corridor. The Kaladan multimodal Transport Model, India-Myanmar-Thailand Trilateral Highway all needs to be completed at the earliest which will provide India a great opportunity to conduct trade and investment in South and Southeast Asian region. The proposed BCIM-EC could then become a complement to this India-centric logistical network.

Conclusion As the economy of China is five times higher than India and India has no capacity to block the project OBOR anyway, to which the new Chinese leadership is fully committed, and the fact that China needs India’s support for this initiative provides an opportunity for India to attempt to tie its own projects, such as, the ‘Mausam’, ‘Spice’, ‘Cotton’ routes, with the Chinese initiative. Indian perception to China’s OBOR project need not be either dismissive or worried, nor should we dismiss it as a “Chinese national project” and look the other way. Our objective should be to see how we can utilise the many economic, infrastructural and other opportunities opened up by OBOR. The rise of China, and the attendant geopolitical transformation of the region, will take place with or without India; so it is better to use this transformation to further India’s national interests. It is important for New Delhi’s strategic planners to recognise that when it comes to dealing with key regional

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challenges and opportunities, unilateralism is not the way. We need to create alliances and coalitions to confront challenges and better utilise opportunities, and in today’s ‘loose multipolar’ world, our alliance behaviour should be guided by clear strategic objectives rather than traditional friendships alone. Currently, India has neither the resources nor the political and economic weight to put in place competitive and alternative connectivity networks on a global scale. Therefore, for the time being, it may be worthwhile to carefully evaluate those components of the OBOR which may, in fact, improve India’s own connectivity to major markets and resource supplies and become participants in them just as we have chosen to do with the AIIB and the NDB. Therefore, instead of keeping ambivalence on the OBOR initiatives in the region, New Delhi should consider to actively participate and shape the agenda. As the OBOR initiatives are the driving force to strengthen exchanges among people of different nations and nationalities, regions and religions, lands and languages which consolidate the foundation of friendship among people and contribute positively to peace and development in Asia, Africa and Europe, both India and China need to look for areas of convergence and make the OBOR initiative truly as a global initiative. Either as part of OBOR or independent of OBOR, the BCIM-EC could play a pivotal role in India’s Act East Policy. Apparently the economy of NER may look weaker vis-à-vis the economy of Southwest China, but there are certain areas where the region enjoys relative advantage. NER is rich in biodiversity, hydropower potential, oil, gas, coal, limestone and forest wealth. It has enormous potential in agriculture and horticulture sectors. It produces considerable surplus in case of a number of agro-horticultural products like ginger, turmeric, large cardamom, citrus fruits, pineapple, banana, jute, bamboo, cane and plywood. Manipur and Assam are rich in silk. Of late, healthcare services in some parts of NER are proving to be a success. The talent of NER youths in the information technology sector is well acknowledged. Based on these advantages, India can initiate the process of economic interaction between NER and Southwest China by way of becoming a party to BCIM-EC and subsequently expand the scope and scale of operation of this subregional cooperation. Besides the prior mentioned initiatives, speeding up the political initiative for the resolution of differences over territorial boundary between India and China, the two most important pillars of BCIM,

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will no doubt go a long way in cementing economic cooperation. As conflict and cooperation hardly go together as the former obfuscates the later, multiple cooperative processes need to be unleashed for the success of BCIM in general and sub-regional cooperation involving India and China in Asia in particular.

Notes 1 Singh, Swaran. (2007). “Mekong-Ganga Cooperation Initiative: Analysis and Assessment of India’s Engagement with Greater MeKong SubRegion”. Occasional Paper No.3, IRASCC, Bangkok, Thailand. For SAARC details see www.saarcstat.org/content/country-reports 2 Ranganathan, C. V. (2001). “The Kunming Initiative”. South Asian Survey, 8(1): 117–124. 3 Uberoi, Patricia. (2016). “Problems and Prospects of the BCIM – Economic Corridor”. China Report, New Delhi: February 2016, no. 53, pp. 19–44; Rana, Kishan S. and Uberoi, Patricia. (2012). “India’s Northeast States: The BCIM Forum and Regional Integration”, ICS Monograph, no. 1, New Delhi, December 2012. 4 Kulkarni, Sudheendra. (2015). “Charting a New Asian History”. The History, September 1, 2015. www.thehindu.com/todays-paper/ tp-opion/charting_a_new_asian_history/article7601197.ece?css=print (accessed on 6 November 2015). 5 “The BCIM-EC: A Background Note”. Consulative Workshop held at Guwahati, Organised by Institute for Chinese Studies (ICS), New Delhi, p. 1.; Bhatia, Rajiv K. and Mishra, Rahul. (2015). BCIM Economic Corridor: The Road Ahead, New Delhi: Pentagon Press. 6 Das, Gurudas, Paul, Ujjwal K. and Mathur, Tanuj. (2015). “SubRegional Cooperation for the Development of Landlocked Peripheral Areas: The Case of BCIM”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM – Economic Corridor: The Road Ahead, New Delhi: Pentagon Press, pp. 62–84. 7 For a detailed reference on Look East Policy, see, Haokip, Thongkholal. (2015). India’s Look East Policy and the Northeast, New Delhi: Sage Publications; Das, Gurudas and Thomas, C. Joshua (eds). (2016). Look East to Act East Policy: Implications for India’s Northeast, New Delhi: Rutledge; Sajjanhar, “India’s Act East Policy so Far and Beyond”. Gateway House at www.gatewayhouse.in/indias-act-eastpolicy-far-beyond/print/ (accessed on 30 May 2016). 8 Mishra, Binoda Kumar. (2015). “BCIM-EC and the North-East: Explaining India’s Reluctance”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: Pentagon Press, pp. 97–110; also see, Mishra, Binoda Kumar. (2016). “BCIM:EC and the Northeast: A Case for Graduated Engagement”. In Bhaumik, Subir (ed.), The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy, New Delhi: Oxford University Press, pp. 168–1888.

218  C. Joshua Thomas 9 Ravi, R. N. (2014). “BCIM Economic Corridor: A Blatant Hoax”. The Assam Tribune, Guwahati, 22 July 2014. 10 Binoda Kumar Mishra, op cit. 11 Das, Gurudas. (2012). Security and Development in India’s Northeast, New Delhi: Oxford University Press.

Part III

BCIM and India’s Northeast

Chapter 11

Northeast India in BCIM Economic Corridor Rakhee BhattacharyaNortheast India in BCIM Economic Corridor

Rhetoric and reality Rakhee Bhattacharya

The idea of restructuring India’s economic policy in 1991 had not only saved its severe domestic economic crisis, but eventually in the following decade transformed the country’s economy with rising growth rates to almost 8 percent. Such transformation has given India a chance to explore and expand its transnational economic partnership through both bilateral and multilateral cooperation. India deliberately attempted to extend regional cooperation with emerging East and Southeast Asian economies through its Look East Policy in the same time of its economic reforms. Such rising Indian economy also had drawn attention of China, which already became an economic giant through its own liberalisation policy, which began a decade earlier than India in 1980s. By the end of the decade of 1990, a proposal came from China’s non-governmental Kunming Initiative to form a Track II sub-regional forum for a vibrant economic corridor, cutting across the four neighbouring nations. One of the major reasons of this initiative was to engage China’s Southwestern region in this proposed economic corridor, which has been comparatively underdeveloped. Thus, similar to ancient Southern Silk Route, this proposal in 1999 called BCIM Economic Corridor (BCIM-EC) carefully attempted to connect rising India, growing Southwest China, and resourceful and strategic Bangladesh and Myanmar. Given the significance of such trans-regional arrangement of four connected nations through the borders of Northeast Region (NER) of India, the latter did not reject this proposal. India was already on its way for regional and sub-regional cooperation to expand its economic opportunities through its Look East Policy and to establish links to Southeast Asian countries. But given China’s stronghold in this region for a

222  Rakhee Bhattacharya

prolonged period, and also the political instability in other two proposed partners of BCIM, Bangladesh and Myanmar, India’s response towards this economic corridor was slow in the initial period. India was confronted with various cross-border activities due to these nations, which had been affecting and destabilising its NER to a large extent, both in terms of internal security and economic development. It was therefore not possible for India to take any official diplomatic stand on this proposed sub-regional forum for a long time. Finally, in December 2013, when the first intergovernmental joint study group meeting on BCIM took place in China, India sent its positive signal for this forum. Subsequently in the second official meeting in December 2014 that took place in Bangladesh, the State diplomacy towards this sub-regional forum showed the signs of taking off even at Track I level. The forum aims to explore the long 2,800 km economic corridor as a vibrant trans-regional space of these four nations. But having the composition of both heavy and low weight Nations of BCIM in terms of economic size and scale, the foremost challenge of this forum is how equitably and efficiently the benefits could be dispersed across these concerned nations’. An evolving strong bargaining frame and negotiating mechanism at democratic policy level may to a large extent ensure both equity and efficiency of such economic corridor. As China, Bangladesh and Myanmar are the neighbouring nations of India’s NER, which is economically less advantageous, the biggest challenge of India is how best to engage this region in this proposed corridor. With the region’s proximity to these proposed nations of BCIM, the initiative of a corridor across these nations needs a desirable inclusion of NER. Thus in 2013, a historic 3,000 km long BCIM car rally was taken place to connect this long route through Northeastern towns Silchar and Imphal. If BCIM becomes an active economic corridor, more such initiatives on Indian part are essential to incorporate NER and to make such eastern sub-regional forum a success. In the past, even with Look East Policy, which is considered to be a successful foreign policy of Indian State, this region of India hardly could become an active partner. Such regional fora so far remained rhetoric for NER despite being the gateway of India to connect all Eastern and Southeastern neighbouring nations. This chapter therefore brings out the centrality of Northeast India (NEI) in terms of its

Northeast India in BCIM Economic Corridor 223

location and how best the region could be a part of this proposed BCIM Economic Corridor. The central argument of the chapter therefore is, India can maximize its economic gains from this forum, if and only if its NER is provided space to become an active economic participant The market of NER needs to be engaged competitively and efficiently, rather than remaining a transit and dumping ground The chapter is structurally divided into following sub-sections: • • •

Changing Neighbours and New Hope to NEI NEI and its Market BCIM Economic Corridor and Economic Regionalism

Changing Neighbours and New Hope to NEI NEI’s neighbourly relation has been in deep trouble for the last many decades. While looking back, most of its neighbours have perpetually remained hostile and unfriendly since the Colonial regime, when border making and border drawing was their regular exercise. In this process several natural relations and connections amongst communities and people across the borders were distorted. This Colonial interference had aggravated cross-border security issues in the post-Independent period, keeping economic and development issues of the region as dormant. But after a prolonged period of trouble, the current changing political scenarios in the neighbouring nations of NER would hopefully be significant. A careful negotiation on development agenda with these neighbouring nations may change the discourse of NEI to a more stable one. Thus Bangladesh, one nation of BCIM composition, made a political transition towards democracy in 2008 with Awami League Government with Sheikh Hassina’s leadership, which came to power for the second term in the year 2014. This transition has given India a sign of hope to attain a stable political and economic relationship with Bangladesh having its NER as a central space. Similarly in 2012, when the other nation of BCIM composition, Myanmar, also attempted a political transition from prolonged Military Junta regime, a blowing wind of change became visible in the neighbourly

224  Rakhee Bhattacharya

relations of India. The historic by-election in Myanmar on 1 April 2012, and finally the general election in November 2015 have made a smooth transition of power from Junta regime to National League for Democracy with Daw Aung San Suu Kyi’s leadership. This finally shows a ray of hope not only to Myanmar and its people, but to this entire sub-region, which is connected to this country. Such political change in both Bangladesh and Myanmar now becomes significant for making BCIM an active economic corridor, which can be beneficial to both these changing nations, which have been economically devastated and remained least developed. This political change in the neighbours of NER also brought a new paradigm towards its own security and development perspectives, and has given space to Indian policy circle to initiate concrete ideas of sub-regional cooperation. India’s positive signal towards BCIM now therefore makes sense, particularly for its NER to look beyond the borders and perceive a trans-regional economy having all Southwest China, Bangladesh and Myanmar. India already has started showing its renewed eagerness towards its Eastern neighbours, and by 2014, both ‘Act East’ and ‘Neighbour First’ policies were in place, which strategically aim to intensify cooperation with Eastern neighbours having its NER as central. This situation is therefore important and unique for NEI to initiate its own plan of action for economic development and then re-establish lost relations with its neighbouring nations to take advantage directly from a forum like BCIM. The internal situation in NER is presently changing and in recent times many of its states have demonstrated signs of peace and political stability after many years of violence, giving rise to hope and optimism among its people.1 Most badly affected states of the region now need to look for political stability and resistance against such violence, as it has caused damage to its economic development and human security. Cross-border cooperation for economic benefits can be meaningful now in this congenial time with both Bangladesh and Myanmar in the process of democratisation, and NEI may look for neighbourhood support to resolve its long-standing problems. Forming economic corridor and regional cooperation through BCIM would also create space to explore multiple economic opportunities of this entire region and then to ensure human security to its people. This forum, consisting of Bangladesh, Myanmar, India and China can bring together a continuous economic space with 40 percent of the world population, 13 percent of world GDP and 10 percent

Northeast India in BCIM Economic Corridor 225

of the world’s surface area, which undoubtedly can be one of the most significant locations for future geo-economic strategies. NER can find a central space in this forum, as it borders all other three nations and can provide passage to connect them as a contiguous space. At bilateral level, India has already initiated engagement with both Myanmar and Bangladesh having its NER as a central space, and its careful, cooperative approach and negotiation is helping immensely to rebuild trust with both these nations. Various attempts on economic, business and strategic fronts have been experimented between Bangladesh and the states of Northeast. Tripura has engaged with Bangladesh extensively on trade and cultural exchange activities. Very recently in January 2015, the state has opened its first border haat at Srinagar, towards the southern part of the state bordering Bangladesh. The state plans for another border haat soon at Kamalasagar in western Tripura. Srinagar is the third functional border haat in NEI; the first two were already opened in other state Meghalaya in 2012 in Kalaichara (India) and Baliamari (Bangladesh) border area, and Dalora (Bangladesh) and Balat (India) border area. These border haats are allowed to sell local agricultural and horticultural products for improving traditional marketing activities with Bangladesh. These border haats were closed for decades together for strategic and security issues. The report says the country now plans to set up 70 more such border haats along its border with Bangladesh in phased manner, out of which 35 have been proposed along the border of West Bengal, followed by 22 along Meghalaya border, five in Tripura and four in Assam2. Four more locations are identified to set up such haats along the Mizoram border with Bangladesh. Similarly the historic Land Boundary Agreement Act 2014 is another step towards resolving old problems of enclaves, and is expected to bring long lasting resolution to the people of Assam and Bangladesh who were at the cross-road of border disputes. This international Radcliff boundary between India and Bangladesh drawn by the British has resulted thousands of people to live in unsettled enclaves (111 Indian and 51 Bangladesh enclaves) as citizens of one country but living in territories surrounded by that of the other. This land swap deal between the States of India and Bangladesh according to Garg (2013) is historic to open an era even for bilateral relation by improving India’s local image and by giving citizenship rights to about 52,000 people; 37,000 on the Bangladesh side and close to 15,000 on the Indian side. Such important notes on a bilateral relationship with

226  Rakhee Bhattacharya

Bangladesh would in all possibilities have long-term economic benefits. India could seek from Bangladesh as a goodwill gesture transit rights to its Northeast, bringing development to this struggling region. Resolving the land issues would enable borders in these areas to be secured and Indian State can officially initiate a search for a solution on the issue of immigration, a thorny problem for Assam for nearly three decades. Such bilateral steps on a broader level indicate the changing and pro-active nature of Indian diplomacy. The land swap deal in this regard is an opportunity for India to adopt a new foreign policy discourse that engages the state units and the public, while giving the Northeast a chance to participate in the rewriting of its own history.3 Similar attempts to improve bilateral relation with Myanmar is also on the way, and immediately after its general election in 2015, India has announced to play a constructive role to consolidate its democracy, which has been reiterated in 2016 when Myanmar’s President visited India, and again in Prime Minister Modi’s meeting with Suu Kyi in latest East Asian Summit in 2016 to support at ‘every step’ in this new journey of Myanmar. For engaging with Northeast, the states of the region already have proposed 15 border haats along the India-Myanmar border to increase trans-border trade and business between NER and Myanmar. Ministry of Development of Northeastern Region (DoNER, 2015) also suggested that states like Arunachal Pradesh, Manipur, Nagaland and Mizoram – which share a 1,643 km-long border with Myanmar, should have 15 such haat along the border with Myanmar.4 So the changing political atmosphere within NER can induce a culture of negotiation and political responsibility to the states of the region within India’s federal structure. This can ensure more power to the states of Northeast pertaining to issues related to this region of India and may help to resolve many such issues by becoming a part of the negotiation process. A report by Suhasini Haidar (2014) highlights that in October 2014, the Indian State has announced a Centre-State Coordinating Office at Ministry of External Affairs (MEA), Government of India, which is supposedly to increase political engagement between MEA and state governments and to coordinate state delegates to visit abroad, passport issue and political clearance, also to set up a database of statelevel tie-ups and work on sister cities.5 Such flexibility in policy issues within the existing federal structure is useful to move ahead with constructive engagement between the states of Northeast and its neighbouring nations.

Northeast India in BCIM Economic Corridor 227

NEI and its Market In the post-Independent period, NEI’s growing economic demand was never taken into consideration through any liberal economic policy reforms due to persistent security issues. Thus despite its proximity to five Eastern neighbours of India and then the whole of Southeast Asia, NEI’s market could never have the chance to expand and explore. NEI’s economic development therefore remained heavily State-centric. Therefore during the time of India’s economic liberalisation, the idea of using free market as a dominant force was a far distant dream for the region. Many of the existing private investors during the decades of the 1980s and 1990s rather had to wind up because of its internal unrest and issue of extortion by militant groups. So in the 1990s when India was growing economically with the policy of neoliberal market agenda, Northeast India was regressing due to its internal situation which did not favour pro-market agenda for economic development. Thus despite having tremendous potential to grow as one competitive market, it is still perceived as a periphery of the larger Indian market. Both its labour and product markets remained almost dormant, and the region over time was used as a passage and transit for some legal and substantive illegal trade and other economic activities. The traditional markets on the other hand for which the region is famous for, have not scaled up, regulated, integrated and commercialised optimally to become an emerging market hub for its neighbouring nations. Thus for example the famous and largest South Asian women’s market Ima Keithel which is located in the state Manipur is barely scaled up to expand the state’s economy and to contribute to larger market of NEI. Ima Keithel has been a most prominent market space from time immemorial and over time has made transformation with increasing transactions and activities. Today the market is located within three pink-coloured and huge double-storied concrete structures at the heart of Imphal, each having around thousand stalls to accommodate about three thousand women engaged in their age-old practice of marketing; but is barely connected beyond this space. This market, primarily controlled by Meitei woman of Manipur, is an integral part of the food security link for the entire population of Manipur, and women traders thereby are inextricably linked to the state’s local economy, spilling over to their culture and society, and providing roots to their identity since times immemorial. Similar such markets

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that exist in various other states of the region in isolated manner are also limited to the extent of trading with traditional local agricultural, handloom and handicraft products, and operate on the basis of cooperation and goodwill of various ethnic communities. With rising attention of NEI for economic development, policy attempts can be taken to integrate all these isolated traditional markets, which can help to expand and connect the regional market of NEI by increasing its size and scale. Thus if border haats can attain policy significance for trading with local traditional products across the borders of NER, all these existing traditional markets also can have similar significance for trans-regional economic activities with its neighbours, and can be linked innovatively to increase the trade and transaction volume. The recent findings of De and Majumdar (2014) show that agriculture still is the mainstay of the economy of NEI, accounting for about 22 percent as its major livelihood. The registered manufacturing sector is still at nascent stage, which contributes below 5 percent to its GDP. The region is the home of 4.24 lakhs of SMEs, which provide large employment to its people, but is still negligible in terms of contributing to its economic growth and has not captured international market and trade with such rich local traditional products.6 Such initiative to expand and integrate traditional markets may help the region to improve economic growth and then eventually can help to restore connection with neighbouring markets. To engage with the neighbouring markets through a forum like BCIM, Indian State needs to create good infrastructure, transparent governance, favourable tax system and congenial law and order situation within NER. All these can create an atmosphere for doing business and connecting to regional markets. India at large still lags behind in doing business and creating a competitive market, and according to a recent World Bank report (2014), India ranks 142 out of 189 nations in doing business.7 But with current reform agenda of Indian State like ‘Make in India’, many policy reforms towards investment and open market operation are on the way, though the larger challenge of balanced regional development still remains. According to Gaur (2012), there still exists considerable lack of competition not only in national markets but also in regional and local markets at the state-level in India. Thus lack of competition is visible in areas like infrastructure, consumer and intermediate goods, agriculture, public procurement, mining, etc. Such a situation occurs due to anticompetition practices by market players and public policy-induced competition distortions.8 India’s markets are still dominated largely

Northeast India in BCIM Economic Corridor 229 Table 11.1  Northeast India: Market Indicators States

Per Capita Population Total Density length of NSDP 2011) railway (2013– network 2014, Rs (2010– at current 2011 in prices) km)

Arunachal 85,468 Pradesh Assam 44,263 Manipur 41,573 Meghalaya 61,548 Mizoram 76,120 Nagaland 77,529 Sikkim 1,76,491 Tripura 69,705 All India 80,388

17 398 115 132 52 119 86 350 382

Literacy Daily Rate Wages (2011) (2010– 2011)

1.26 65.4 2,433.99 1.35 0.0 1.50 12.85 0.0 151.40 64,460

72.2 79.2 74.4 91.3 79.6 81.4 87.2 74.0

Own Tax as % of GSDP (2010– 2011)

-

2

137 98 202

5 3 4 2 2 5 4 -

155 163 62 203

Sources: CSO reports, Census reports, Basic Statistics of NER 2015, NEC, and Govind Bhattachjee, Special Category States of India, New Delhi: OUP, 2016

by oligarchic frame and are region-specific. In this context, NER so far has not played any significant role as its local market remained small and fragmented. Market size, which is normally determined by factors like GDP growth, per capita income, population density, population growth, number of consumers, number of potential cities, etc., do not reveal an encouraging scenario in Northeast India (Table 11.1). Given the low population density and difficult topography, consumer markets are scattered and small in size in NEI. According to Indicus Analytics report (2009), only two cities so far made it to India’s top cities in market size – Guwahati at rank 53 and Agartala at rank 97. Of the other major cities, Shillong and Imphal have expenditures of less than Rs 2,000 crore. Aizawl, Itanagar, Kohima and Gangtok all have market size of less than Rs 1,000 crore.9 Thus the resource potentials and strategic location of NEI have so far not been realised to develop a full-fledged market for economic development. The region’s extraction (oil and coal) and plantation (tea and rubber) economies which were created mostly by Colonial State are so far used for exporting surplus without creating any local viable economy by engaging local labour force and local entrepreneurship. NER market therefore continues to suffer from geographical isolation and lack of economic competition, creating

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large economic disparities with other parts of India. Except for a few State capital towns, the region hardly has any urban centre and growth pole, and suffers from stagnation in rural economy with subsistence agricultural production. All these have failed the region to become a favoured destination for the investors and marketing professionals despite its geoeconomic significance. But as overall political situation is improving and some of its states like Sikkim and Tripura are performing better, its demand curve is expected to expand. According to De and Majumdar (2014), with emerging peace and stability in the region, new investment and registration of companies are being witnessed in Northeast India. Here Assam has taken a lead and as of 2011 about 745 new companies have entered the market with the authorised capital of almost Rs 2 billion. With 60 new companies, Meghalaya comes next. However, the business environment still lacks competition and market ethics.10 Such environment needs to be retained through public awareness and policy measures on various skill and entrepreneurial trainings for modern economic avenues along with revamping its traditional economic practices. Creation of regionfriendly manufacturing units with ecological safeguards, agricultural modernisation, and financial institutions are essential for NEI’s market to grow. A finding by Thomas (2015) shows that total workers in manufacturing sector in NER was merely seven lakhs, which is only about 1.37 percent of India’s total 512 lakhs manufacturing workers in 2009–2010 workers. The net increase in factory sector employment in NER thus show a trend of increase from about 9 thousand in 1960s to 27 thousand in 1970s, which has declined to −2 in 1980 (this has been the most turbulent decade of NER with conflicts and violence) and further gained to 29 thousand and 39 thousand respectively in 1990s and 2000s as against 1,763, 2,407, 332, 1,726 and 1,741 thousands respectively in India during the same decades.11 With more local participation, such expansion of market can be inclusive. Presently the share of industry, employment and investment in the region do not reflect such situation (Table 11.2). Increasing local participation in the market can create avenues for local employment and livelihood, which can help to reduce the levels of income poverty in the region (Table 11.3). The World Development Report in the year 2000–2001 mentioned that Markets work for the poor, because poor people rely on formal and informal markets to sell their labour and products, to

Northeast India in BCIM Economic Corridor 231 Table 11.2 Industry, Employment and Investment Scenario in Northeast India: 2011–2012 States

Industry (No.)

share

Employment (no.)

Assam Manipur Meghalaya Nagaland Sikkim Tripura India

2,417 1.38 1,54,881 84 0.05 3,565 96 0.05 6,484 88 0.05 2,696 55 0.03 6,644 414 0.24 29,272 1,75,283 100 1,19,38,131

Share

Investment Share (Rs crores)

1.30 1,326 0.03 6 0.05 295 0.02 28 0.06 180 0.25 157 100 2,59,302

0.51 0.00 0.11 0.01 0.07 0.06 100

Source: MOSPI, Government of India

Table 11.3 Rates of Poverty, Unemployment, Inflation and Outmigration in NER States

Poverty (2009–2010)

Unemployment (2011–2012)

Arunachal Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura India

25.9

2.1

37.9 47.1 17.1 21.1 20.9 13.1 17.4 29.8

4.7 3.6 0.7 3.1 17.8 1.1 12.8 2.3

Inflation (2014) 9.75 8.5 3.7 14.3 7.6 12.2 15 7.7 6.5

Source: Planning Commission, MOSPI: Government of India

finance investment, and to insure against risks. Well-functioning markets are important in generating growth and expanding opportunities for the poor people.12 Along with high unemployment rates, the region is also affected with high inflation rates, as it is heavily dependent on other parts of India even for the basic necessities. Such a situation, according to Gaur (2012) hurts the poor disproportionately by paying higher prices for basic items and by spending much larger proportion of their incomes on them.13

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Creation of sustainable local market would not only provide solution to such chronic problem but can also provide scope for potential demand for more output to increase the scale of its economy. On an experimental basis, the region can attempt to create some satellite urban centres with growth poles with adequate forward and backward linkages. This may empower some backward and peripheral areas within Northeast to compete in the emerging market. Such policy attempts with focus on greater equalisation principle can also restrain social and intra-community unrest in the region. Thus market having larger contiguous space, more products, variety of sectors and enough people engaged in exchange may help NER to grow goodwill amongst various communities and then gradually take part meaningfully in the State-led sub-regional forum like BCIM. In the long run the advantages of the BCIM Economic Corridor will be significant for NER by accessing to bigger market. But to gain share in the bigger market, the region needs to expand its production hub by creating an environment-friendly industrial zone. This can boost entrepreneurial activities and can engage NEI’s labour force in a constructive manner, which are presently out-migrating in search of better livelihood opportunities. Outmigration of youth from NER is a ‘recent phenomenon’ and is increasing fast, as pointed out by Remesh (2016), is primarily for ‘educational and employment consideration’.14 But an economically friendly NER can restrain such out-migration. Therefore a changing situation and perspective is essential to attract investment even from neighbouring countries, which so far is extremely insignificant due to its small, isolated and fragmented local market size and lack of potential demand for a foreign firm’s output. BCIM Economic Corridor and Economic Regionalism NEI as a region therefore needs to understand that with global forces and emergence of new capitalism, the role of market is more forceful than the role of State for investment and economic growth. Integrated economies across the world are in advantageous position to raise the quantum of investment, and in this context, the idea of both regional and sub-regional economic cooperation has become significant. Thus if any particular region or state is unable to compete with this change, it is forced to suffer from regional disparity, inequality and isolation. The political economy of regional cooperation can create scope for deeper economic engagement

Northeast India in BCIM Economic Corridor 233

and connectivity at different levels, and can make ways for labour mobility, open trade, financial flows and economic growth. Various such regional market forces are pushing for a closer network of physical, business, financial and human capital. In this regard, countries and regions are at constant search for new markets of trade, engagement, connectivity and expansion.15 In this context, it is gradually being realised that Eastern neighbourhood of India bordering NER can no longer sustain themselves in isolation amidst perpetual border disputes and conflicts and strength of this region needs to evolve from ‘within’ by cooperation and engagement. And in this context, no region can be perceived as periphery, as it would have some significance and potentials to participate in such larger concept of economic cooperation. East and Southeast Asian economies have already achieved success through various sub-regional and regional cooperations, and the most prominent amongst them is ASEAN. In the last century, first Japan, then the East Asian tigers and then China followed by India, have demonstrated impressive economic performance. Similarly, a gradual shift in global financial power to Asia is also currently visible, and very recently in 2014 China has led 21 Asian nations including India to form a multilateral financial organisation in the form of Asian Infrastructure Investment Bank (AIIB). This financial organisation is to some extent seen as an alternative to Bretton Woods Institutions and Western hegemony.16 This financial forum of AIIB has accommodated all BCIM countries. Moreover, BCIM consists of those nations which have deeply connected ancient civilisational histories and can very well become a cultural and civilisational entity of this region. Such shared history was lost due to various crossborder conflicts, dividing the nations politically for long period. But changing political structure can now once again mobilise regional cooperation, providing a new regional economic identity in this contiguous geographical space. This can promote regional interest and can identify and resolve common problems by promoting larger and common issues of economy and can also gradually expand to a new sub-regional economic zone (SREZ) based on economic imperatives of this entire region. According to Dent and Huang (2002), five driving forces for emergence of such new regionalism can be: economic complementarities, geographical proximity, political and economic framework, infrastructural linkage and market accessibility. BCIM nations can attempt to ensure such new regionalism based on these driving forces and can push towards the direction

234  Rakhee Bhattacharya

of closer integration. Economic cooperation also refers to measures that link up infrastructure and improve management and sharing of common resources.17 NEI is an important strategic location of BCIM, which so far could not make any major economic game change. But with enforced policy decision, this should play a role of centripetal force for such regional economy and can potentially alleviate regional conflicts by providing a constructive space to connect all these four nations. NER can thus play a positive role even to help India at large to rebalance its relation with China. Rival nations in this region need to learn how to foster trust, dialogue and cooperation through such positive initiative of economic regionalism. This culture of fair economic engagement can foster both equity and efficiency to all members nations, and as pointed out by Gaur (2012), would help to develop NER by forming a natural partner for decision-making at both firm and State levels. Decades of government interference and control within the region has hindered the growth of competition culture in Northeast economy and in its local markets.18 As there is little disagreement that NEI’s economic potential is so far underutilised, such sub-regional initiative like BCIM Economic Corridor can generate hope in the region.

Notes 1 Bhattacharya, Rakhee. (2014). Northeastern India and Its Neighbours: Negotiating Security and Development, New Delhi: Routledge, p. 223. 2 Chakraborty, Sujit. (2014). “70 Indian border markets to be open to Bangladeshis”, 10 October, Business Standard. 3 Sanjeeb Garg, Ibu. (2013). “The India-Bangladesh Land-Swap Deal”. The Diplomat, 3 September. http://thediplomat.com/2013/09/theindia-bangladesh-land-swap-deal/ (accessed on 1 July 2015). 4 Report, “Third ‘border haat’ Along India-Bangladesh Frontier Opens”. The Assam Tribune, 13 January 2015. 5 Haidar, Suhasini. (2014). “MEA to Oversee Foreign Investments in States”. The Hindu, 25 October 2014. 6 De, Prabir and Majumdar, Manab. (2014). “Developing Cross-Border Production Networks Between North Eastern Region of India, Bangladesh and Myanmar: A Preliminary Assessment”. Report by Research and Information System for developing Countries, New Delhi. 7 Report. (2014). “Report Doing Business 2015 Going Beyond Efficiency”. World Bank. 8 Gaur, Seema. (2012). “Role of Competition Law and Policy in Making Markets Competitive”. In Malhotra, Rajeev (ed.), A Critical Decade: Policies for India’s Development, New Delhi: Oxford University Press, p. 166.

Northeast India in BCIM Economic Corridor 235 9 Report. (2009). “Demand Curve: Glimpses into the Indian Economy and Consumers”. Indicus Analytics. www.slideshare.net/indicusanalytics/ demand-curve-glimpses-into-the-indian-economy-and-consumers (accessed on 24 January 2015). 10 De, Prabir and Majumdar, Manab. (2014). “Developing Cross-Border Production Networks Between North Eastern Region of India, Bangladesh and Myanmar: A Preliminary Assessment”. Report by Research and Information System for developing Countries. 11 Thomas, Jayan Jose. (2015). “Regional Aspects of Indian Industrialisation”. In Chandrasekhar, C. P. (ed.), Economics: Indian Industrialisation, New Delhi: Oxford University Press, p. 58, 75. 12 World Bank. (2001). World Development Report 2000–0: Attacking Poverty, New York: Oxford University Press. 13 Gaur, Seema. (2012). “Role of Competition Law and Policy in Making Markets Competitive”. In Malhotra, Rajeev (ed.), A Critical Decade: Policies for India’s Development, New Delhi: Oxford University Press, p. 159. 14 Remesh, Babu P. (2016). “Migration and Marginalisation: A Study of North East Migrants in Delhi”. in Moshra, Deepak K. (ed.), Internal Migration in Contemporary India, New Delhi: Sage India, pp. 71–75. 15 Bhattacharya, Rakhee. (2008). “Indo-Myanmar Tie towards Emerging South and Southeast Asia: Vision Re-Examined”. In Dash’s, P. L. (ed.), Emerging Asia in Focus: Issues and Problems, New Delhi: Academic Excellence. 16 Pratap Singh, Mahim. (2014). “India Signs up for China’s Asian Bank”. The Hindu, 25 October 2014. 17 Dent, Christopher M. and Huang, David W. F. (eds). (2002). Northeast Asian Regionalism: Lessons from European Experience, London: Routledge Curzon. 18 As cited by Gaur, Seema. (2012). “Role of Competition Law and Policy in Making Markets Competitive”. In Malhotra, Rajeev (ed.), A Critical Decade: Policies for India’s Development, New Delhi: Oxford University Press, p. 171.

Chapter 12

‘Northeast’ in India’s ‘Act East’ Subir Bhaumik‘Northeast’ in India’s ‘Act East’

A reality check Subir Bhaumik

The geo-political imagination seeking to place India’s troubled Northeast at the heart of its ‘Look East’ (now ‘Act East’) policy has generated much enthusiasm since it first started to unfold in the 1990s. Many analysts in India started to see the frontiers of Northeast India no longer as barriers but as “gateways of opportunities of international trade and commerce”.1 Some have gone to the extent of saying this new ‘strategic vision’ could be a game changer for Asia. “India’s Look East policy – the overtures since the 1990s towards South East Asian countries – holds promises of historic proportions for trans-national region-building in the area”.2 India’s ‘Look East’ policy initiative can end – or so is it felt – the long neglect and consequent backwardness of the country’s Northeast by linking it to the tiger economies of Southeastand East Asia. But it is also seen as giving India a “strategic, cultural and economic space” to the East, which is denied to it in the West due to the volatile and fluid situation in Pakistan, Afghanistan and the rest of Middle East and Central Asia.3 India is also aware of the importance of working the‘Look East’policy through the country’s Northeastern region to end decades of isolation suffered by this insurgency-ravaged region that is distant from the Indian mainland and is connected to it by a tenuous 21 km wide corridor. But after two decades of policy interventions within the broad canvas of India’s ‘Look East’ Initiative, it is time to assess its impact and focus on policy options for the future, especially in view of the challenges faced while trying to access SoutheastAsia through India’s Northeast. Since there is considerable literature on the origins and unfolding of India’s‘Look-East Policy’,4this chapter will actually seek to focus on the considerable hurdles and limitations encountered in carrying

‘Northeast’ in India’s ‘Act East’ 237

forward India’s ‘Look East’through Northeast – problems caused by the nature of physical terrain, the history of violent conflicts in the region and its immediate neighbourhood which remains volatile and the poor state of transport infrastructure and local industries in Northeast India and Myanmar, through which India has to access other ASEAN countries by land. In view of these limitations, it will never be easy for India to ‘look east’ through its Northeast which opens into the conflict-ridden, poorly developed areas of Myanmar, mostly located on difficult physical terrain. Therefore, it will be argued that though India will have to try to use the Northeast as a land bridge to Southeast Asia more for ending the isolation of this frontier region to boost its future growth, India and its economy will largely have to ‘look east’ through the sea into Southeast Asia for trade and human movement for a wide variety of reasons. It makes definite logistic and economic sense to try using the Northeast to open out to Southwest China, which unlike Southeast Asia, is landlocked, but decision-making levels in India are still divided on issues like re-opening the World War II-vintage Stillwell Road. That introduces an element of uncertainty on whether India is prepared to take some risks that goes with allowing the ‘Look East’ to blossom to its full potential by using the Northeastern ‘land bridge’. Security concerns specially related to Chinese military presence and China’s growing influence in Myanmar tend to hold back India in precisely going ahead with the initiatives that are needed for the ‘Look East’ policy to deliver the desired results. It obviously makes much more sense to access Southeast Asia by sea for trade and human movement, than through the Northeast, for reasons elaborated below: (a) India’s major industrial centres are on the western and eastern coasts, far west, up north or down south, from where shipping goods to Southeast Asia by sea makes much more commercial and logistic sense, than to move them inland into Northeastern India, with all its transport bottlenecks. Even export of raw materials like iron ore is easier and cheaper if they are moved into India’s eastern ports like Paradip, Vizag or Haldia from central India on way to Southeast Asia. India’s major markets and the bulk of its population are in the mainland states and it makes much more sense to bring in goods from Southeast Asia by sea through the ports on the eastern coast – Calcutta/Haldia, Paradip, Vizag and Chennai. Such imports will be much more

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cost-effective and time-saving than if they were to be brought in through the Myanmar-Northeast India land route.   For example, Calcutta is just 1,614 km or 1,003 miles (872 nautical miles) by sea from Bangkok. But if some traders want to send a consignment from an industrial location or a mining area in eastern India to Thailand, a few hundred kilometres to Calcutta port by road or rail followed by sea transport would make much more sense than by going to the land route. From Calcutta to Siliguri on the “Chicken Neck” is about 600 km, from Siliguri to Moreh on Manipur-Myanmar border is 1,022 km and then from Moreh to Mae Sot on MyanmarThailand border would be another 1,360 km as and when the Trilateral Highway comes up. From Mae Sot to Bangkok or anywhere else in Thailand would be another few hundred to more than one thousand kilometres. The land distance is more than double than by sea and calculating the relative transport cost, with rising fuel prices, the cost differential between the land and the sea route is enormous. (b) India’s ‘Look East’ policy will never work unless Bangladesh facilitates the necessary transit linkages to help India connect its mainland to the Northeast. Unless the pre-partition transport linkages are re-established and India is able to integrate its road and rail infrastructure with Bangladesh, the Northeast cannot be easily accessed and if that is not possible, there is no point for India in attempting to connect to Southeast Asia through the Northeast. The reality is that India first needs Bangladesh to help access its own Northeast before being able to use the region to connect to Southeast Asia.   Bangladesh will allow that to happen only if it is able to gain major concessions on a host of issues like getting a fair share of the waters of common rivers, major trade concessions that will help it address its highly adverse trade balance with India, solution of its land boundary disputes and resolution of its maritime boundary disputes with India in a way that Bangladesh can avoid being ‘sea-locked’. Again, India-Bangladesh relations so far have tended to be affected by regime changes in Dhaka, which introduces a huge element of uncertainty in bilateral relations. (c) Myanmar is the only country in Southeast Asia with which India’s Northeast shares a land border. Therefore, India’s ‘Look East’ policy through Northeast will largely depend on how

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India’s relations with Myanmar and the internal situation in that country shapes up. There is a standard foreign policy argument here – how can India’s relations with so many countries of Southeast Asia be left to depend on its relations with one country, Myanmar, which is now passing through an uncertain process of change from military rule to democracy but which is unable to resolve its multiple ethnic conflicts, some of which have aggravated in the last two years. (d) India’s success in handling the ethno-nationalist movements in its own Northeast has been limited. The most important and oldest among them, the Naga movement for self-determination, is far from resolved, despite twenty years of negotiations. The strongest separatist groups in Manipur, from where India is trying to develop its road and rail network into Southeast Asia through Myanmar, are still active and far from neutralised, despite substantial deployment of armed forces in the tiny state. Only the two southernmost states in the region, Tripura and Mizoram, have managed to largely control the ethnonationalist conflicts but Tripura has no border with Myanmar and Mizoram opens into Myanmar’s Chin Hills which itself is a poorly developed and conflict-prone region with abysmal transport and administrative infrastructure. A detailed analysis can highlight the difficulties such conflicts can create for developing modern transport infrastructure to facilitate trade and human movement with neighbouring countries. (e) Important decision-making blocks in India have great reservations about using the Northeast to open out to Southwest China. Using the ‘land bridge’ of Northeast India to access Southwest China (and through it other areas of China far away from its eastern coast) makes much more business sense than trying to access Southeast Asia by land. So ‘Look East’ through Northeast India could work better for Sino-Indian bilateral trade, if a substantial part of it passed through the region. Shanghai from Calcutta is 4665 nautical miles (more than 5000 km) by sea whereas Kunming from Kolkata (by the route used for the February–March 2013 BCIM car rally is 3026 km. If one were to add the cost of transport by land over 1500–2000 km from Shanghai to western or Southwestern China, the cost differential is obvious and huge and that in itself would justify exploring the land route through Northeast India and Upper Myanmar.

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But military officials in India feel opening the World War II vintage Stillwell Road to regular traffic will provide China with a great strategic advantage in the event of a war on the land borders of the two nations (as in 1962). Trade officials say the Stillwell road could be used by China to dump its goods on Northeast India and through it to the rest of the country. The fear of losing a trade war or a conventional war seems to create reverse pressures within India on pursuing its ‘Look East’ policy to its logical conclusion.

India’s Northeast: troubled periphery India’s Northeast is seen as a region where India looks less and less like India and more and more like the highlands of Southeast Asia. The ancestors of most of the ethnic groups that populate this remote Indian region hail from Southeast Asia or Southwest China and are broadly of Mongoloid stock, which is why some call India’s Northeast the country’s “Mongoloid fringe”.5 Most ethnic groups who moved into what is today India’s Northeast came from the east, but after the advent of the British, the migrants mostly came from the Indian mainland which lies west of the region. The Ahoms who ruled Assam for several centuries or most of the other ethnic groups who inhabit the various states of Northeast India originally migrated from Southeast Asia or Southwest China into where they now live in. That pattern changed when the British started encouraging migration from the Indian mainland into the Northeast after their conquest of Assam in the 19th century. As the flow of migrants from west to east – from the Indian mainland to what is now Northeast India – increased, the contours of the contemporary ethnic conflicts began to emerge. India’s Northeast has a long 1,643 km border with Myanmar, through which it can access other countries of Southeast Asia or China’s Yunnan province. But it has no land borders with any other Southeast Asian country, unlike China’s Yunnan province, which has borders with Myanmar, Laos, Thailand and Vietnam. Which is why perhaps China’s “Bridgehead strategy” to connect to Southeast Asia using Yunnan as a connecting bridge makes much more sense than India’s ‘Look East’ policy through Northeast. In a way, the success of India’s ‘Look East’ policy through Northeast would be more or less totally dependent on India’s relations with Myanmar and the domestic situation in both Northeast India and Myanmar, where there is a long record of internal conflicts, some of which remain unresolved and are, in fact, starting to flare up again.

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India’s Northeast is still home to scores of ethnic insurgencies. Myanmar also suffers from ethnic rebellions like in the Kachin and the Karen inhabited areas which the country’s military seeks to crush. Ethnic conflicts have also ravaged the Rakhine (former Arakans) province, through which India is trying to work its Kaladan multi-modal sea-river access to Northeast India and Myanmar. Which means the physical terrain through which India’s ‘Look East’ policy is supposed to unfold with its package of trade and transport connectivity is still prone to conflicts that tend to explode more often than appearing closer to solutions. That would adversely impact on how the ‘Look East’ policy using the Northeast can play out over a definite time frame because it can not only delay but sometimes ever derail crucial projects. A close look at India’s road transport network in Northeast India connecting the Indian mainland to Myanmar through the troubled region will help underline the difficulties. India’s national highway number 31 enters the Northeast from West Bengal through what is popularly called the “Siliguri Corridor” (after the biggest town in the area) or the“Chicken Neck” (because that’s what it looks like on a map). This corridor is barely 21 km wide and is flanked by Bangladesh and Nepal. The point at which it enters the state of Assam, the most populous state in India’s Northeast, is dominated by the Bodo tribes but it also has substantial non-Bodo minorities like Muslims and Hindus of East Bengali origin, Assamese Hindus and tribes people of Central Indian origin, popularly called “Adivasis”, whose ancestors were brought to Assam from the states of Jharkhand, Bihar and Orissa as cheap labour for the tea gardens. These tribes’ people, Santhals, Mundas and Oraons, have been at odds with the Bodos as much as the Bengali Hindus and Muslims or the Assamese Hindus over the Bodo demand for a separate state. From 1979 to 1985, Assam witnessed a powerful nativist movement aimed at expelling ‘foreigners’ from the state. The Assamese regional groups say the state has experienced huge illegal migration from Bangladesh and Nepal and they want all the illegal migrants detected and expelled from the state. Hundreds died during the movement in police firings and ethnic riots that escalated after a controversial state election in February 1983. The Muslims of East Bengali origin bore the brunt of the riots and more than 2000 are said to have died in a central Assam rural outback called Nellie.6 An accord between the Indian federal authority and the All Assam Students Union (AASU) brought an end to the movement in 1985. But within two years, Assam was facing a violent agitation, this time

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by the Bodo tribes people. The Bodos say they are more indigenous to Assam than the ethnic Assamese, a nationality which has evolved over the centuries by assimilating different ethnic groups and tribes living in and around the river Brahmaputra. In 1987, the All Bodo Students Union said the tribe has suffered enough discrimination in Assam and were now determined to campaign for a separate state of their own. “Divide Assam 50–50” is the slogan that came out of the ABSU’s 20th conference in 1987 and the Bodo student-youth groups unleashed considerable violence that included bombing of public transport, both rail and buses, and crowded marketplaces. An accord with the Bodoland Liberation Tigers Force (BLTF) in 2003 led to the creation of an autonomous council under the 6th Schedule of the Indian constitution. The aim was to pacify the Bodos with some form of self-rule short of creating a separate state. Between 1996 and 1998, the entire area now covered by the Bodoland Territorial Autonomous Council witnessed violent riots between Bodos and non-Bodos. Hundreds died and nearly a quarter of a million people were displaced. Similar riots in the summer of 2012 again displaced more than a quarter of a million people. This time the riots were between the Bodos and the Muslims of East Bengali origin. Bodo groups say they want to push out ‘illegal migrants from Bangladesh’ which the Assam government has failed to do so far. The Muslims of Bengali origin are also more organised than before, with a party called the All India United Democratic Front (previously Assam United Democratic Front) representing them strongly in the Assam state assembly, where it now had 16 legislators in a house of 126. The riots in 2012 were not onesided as before – the Muslims were also found to be hitting back in areas where they already have greater numbers. The movement for a Bodo state has now been renewed by the All Bodo Students Union and some fraternal groups. That would mean that the crucial transport corridor (road-rail) that connects India’s Northeast to the country’s mainland remains a disturbed zone that has not only witnessed long bouts of intense violence affecting resident population groups but also crucial infrastructure, especially rail and road transport, that has been systematically targeted by Bodo armed groups. On the eve of the Indian Republic day (26 January, 2013), a bomb explosion barely missed a crowded passenger train near Kokrajhar, the town where the Bodoland Territorial Autonomous Council (BTAC) is based.

‘Northeast’ in India’s ‘Act East’ 243

Since the ‘Siliguri Corridor’ is so narrow, the only way to bypass the turbulent Bodo region is to explore road and rail connectivity through Bangladesh, which has not happened so far. But on that later. Suffice it to say, the area of western Assam through which India connects to its Northeast has been for the past three decades a volatile turbulent region marred by ethnic conflict that has the potential to explode into large-scale violence and cause major disruption to the movement of goods and people. It is not only the Assam side of this narrow corridor that has faced violent disruptions due to ethnic movements. On the West Bengal side of the corridor, the Nepali-speaking Gorkhas have been agitating for a separate state they want to be carved out of the tea-producing district of Darjeeling. In recent years, they have demanded the inclusion of some areas on the foothills called “Dooars” into their proposed state. Though the Indian government and the state government of West Bengal have tried to placate the Gorkha groups by giving them an autonomous council to run the Darjeeling region, the groups have periodically resumed their demand for a separate state, the latest being in July 2013 after Delhi announced formation of a new state of Telengana in southern India. The Gorkha groups now say they will not settle for anything short of a separate Gorkhaland state – the Bengal government says it is also determined not to let that happen. The Gorkhas are asking for inclusion of some areas of “Dooars” which have upset the non-Gorkha communities living in this area. Clashes between Gorkha and non-Gorkha communities have erupted on a few occasions, threatening movement on the crucial highway. Similarly, the highways and rail links to Northeast are threatened by renewed statehood movements in Assam state, where Bodo, Karbi and Dimasa tribes people have started campaigns for separate states. The other major road corridor to connect to Myanmar through the Northeast also passes through an area long devastated by ethnic conflict and separatist violence. The national highway No. 39 that enters Nagaland from Assam and passes through its main commercial town Dimapur and capital Kohima to end further south to Manipur’s capital Imphal and frontier town of Moreh has been regularly affected by blockades and violence. National Highway No. 53 enters Manipur from Assam’s Barak valley and goes to connect Imphal through Jiribam. The Naga tribes dominate both

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these highways. Since talks began between the Indian government and the National Socialist Council of Nagaland (NSCN) in 1997, the Manipur government has steadfastly opposed the NSCN’s demand for inclusion of Naga-dominated areas of the state into a “Greater Naga state”. Meitei groups in the valley have opposed this demand and their violent opposition to the extension of the 1997 Naga ceasefire to Manipur forced Delhi to back off and limit it to Nagaland. The Naga student-youth groups under the United Naga Council which backs the NSCN’s “Greater Nagaland” plan have regularly chosen to enforce long-duration road blockades on both National Highway 39 and 53 to cut off Manipur from the rest of the country. This has happened at regular intervals and every time it happened, it went on for months rather than days. In 2004–2005, traffic on these highways was affected for 92 days due to blockades and strikes. In 2005–2006, strikes and blockades disrupted traffic on these highways for 121 days. In 2006–2007, similar disruptions for 83 days were reported on these highways. In 2007–2008, the disruptions affected traffic on the highways for 103 days. In 2008–2009, disruption affected traffic on these highways for 60 days, but it shot to 154 days in 2009–2010 and 292 days in 2011–2012 with one blockade lasting for 90 days. The strikes were of shorter duration – between one to three days, but some of the blockades were long, as long as three months. Local media reports in Manipur which report extensively on these strikes and blockades by Naga groups also detailed the damage done to vehicles and bridges and other infrastructure. The Naga groups have exercised the ‘highway blockade’ option as a weapon to tone down Manipuri resistance to the “greater Nagaland” demand, but the miseries caused by paucity of essential commodities during these blockades has only hardened Manipuri opinion against the ‘greater Naga state’ demand. Since the Naga issue is far from resolved and has apparently hit a road block on the “Greater Nagaland” demand, it can be expected that the highway blockades will be used in future as and when it is seen as essential to pile pressure on the Indian government. Moreh sits opposite Myanmar’s Tamu town from where Indian Border Roads Organisation (BRO) has built a modern highway to Kalewa that goes on to connect Mandalay. On the Myanmar side of the highway, the political situation has not been very disturbed, except for periods that witnessed powerful pro-democracy movements across the whole country. The insurgencies in Kachin, Chin

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and Rakhine (former Arakan) provinces are far away from this highway. But on the Indian side, the Highway No. 39 passes through Nagaland and Manipur, which have been two of the most disturbed states in India’s Northeast. In Nagaland, the fighting between the Naga rebels and the Indian security forces have not taken place since the 1997 ceasefire with the NSCN, but the several Naga rebel factions have been fighting among themselves. The delay in finding a solution to the vexed Naga problem has also led to systematic extortion on the national highways on the Nagaland-Manipur stretch by NSCN factions as well as the Kuki and Meitei armed groups, who all seek to tax the trade with Myanmar to raise funds for their armed campaign against India. So not only are these highways that connect Northeast India to Myanmar susceptible to blockades that disrupts trade but also to extortion which raises the cost of trade substantially. Only contraband trading like narcotics and weapons can manage to sustain such disruptions and extortions because profit margins are very high. The highway from Kohima to Imphal and the one from Silchar in Assam to Imphal (Highway No. 53) is dominated by the Nagas because they inhabit these stretches in large numbers. The highway from Imphal to the border town of Moreh is dominated by Kukis who also have rebel groups fighting for a separate homeland. The Kuki groups have also caused disruptions, blocking the highway by calling strikes to back up their demands – though their blockades have been of much shorter duration than that of the Nagas. Of the four Northeast Indian states who have borders with Myanmar, only the one separating Manipur’s Moreh town from Myanmar’s Tamu town goes through relatively easy physical terrain and is seen as viable for substantial cross-border trade and human movement. This is because the highway from Moreh to Kalewa goes on to connect to Mandalay into the heartland of Myanmar. Nagaland and Arunachal Pradesh’ borders on the very difficult stretches of Sagaing and only the Stillwell Road that passes through this area has some potential for cross-border trade – but more with China than with Myanmar’s mainland. Mizoram borders on the Chin state and is seen as more useful as a connect between Indian mainland and the rest of the Northeast through Myanmar’s Rakhine and Chin state up from the port of Sittwe through the Kaladan Rriver. This is where India is pushing ahead with its Kaladan multi-model transport project. But it is seen as the alternative access between Indian

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mainland and the Northeast, an alternative to the ChittagongTripura route, rather than one that will allow India to ‘look east’ to Southeast Asia through Myanmar. So, if Manipur is crucial to focus east for India, which is perhaps the case, the trouble is that battling ethnicities such as the Nagas are capable of closing down both the highways that connect the state to the rest of the country. The Siliguri Corridor (connecting Assam to India), the Kohima-Imphal highway and the Silchar-Imphal highway all pass through sensitive troubled areas which have been prone to violence and disruptions on a fairly regular basis. These disruptions not only affect regular movement of cargo and people but they also affect and delay any effort to upgrade road and rail networks needed to connect to neighbours like Myanmar.

Bangladesh: crucial to India’s look east Unlike China’s Yunnan province which, though remote, is firmly connected to the country’s mainland, India’s northeast cannot be properly accessed from the country’s mainland without Bangladesh agreeing to facilitate the process by enabling transit and connectivity. A recent example will help emphasise the need for upgradation of these highways and rail networks in India’s Northeast and also that Bangladesh is crucial for India to connect its mainland to the Northeast. For nearly five years, the 700 MW gas-based power plant at Palatana in the Northeast Indian state of Tripura could not be completed as heavy equipment like transformers needed for this project could not be brought in through the national highways (No. 31 that connects Northeast to rest of India and No. 44 that connects Tripura to Assam) because more than 20 bridges on these highways were considered too weak and unsafe to transport such heavy equipment. After the Awami League government came to power in Bangladesh in January 2009, both the Indian government and the state government of Tripura started negotiations for use of the Chittagong port to bring in the heavy equipment for the Palatana project. Bangladesh finally permitted the use of the Chittagong port and the river port of Asuganj for bringing in the heavy equipment needed for Palatana, strictly on and one-off basis. The equipment was shipped to Chittagong and then brought up to Asuganj by the river. Later it was moved into Tripura from Asuganj by land over a distance of only 40 kilometres. The project has now been commissioned and the Tripura government has been offering

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100 MW of electricity to Bangladesh which is suffering from a huge power shortfall at the moment. But Delhi is yet to take this forward and Bangladesh is yet to get power from Palatana. The efforts to upgrade the highways and convert the railway network in many parts of Northeast to broad gauge has fallen much beyond schedule after the usual delays in undertaking the projects. Apart from the problem of supply of materials, much of which has to be procured from outside the region, extortion and threats by armed non-state actors have caused these delays. In Tripura, the work for connecting capital Agartala by rail to Kumarghat in the north of the state really took off only after the state had managed to control the raging tribal insurgency in the state. In late 1990s, the project was a victim of large-scale extortions by the two major armed rebel groups, National Liberation Front of Tripura (NLFT) and the All Tripura Tiger Force (ATTF), as contractors complained they were asked for huge sums of money that would compromise their profitability. The rebels resorted to enmasse abductions of workers from the construction sites if their financial demands were not met. They were particularly active in the three mountain ranges – Longtarai, Atharamura and Baramura – through which the rail link had to pass and it was not possible to provide static security at all the construction sites over such a difficult hill terrain. But after these rebel groups were decimated by a combination of police action and political initiatives in the mid-2000s, work on linking Agartala to Kumarghat by rail progressed at great speed. Now that peace has returned to Tripura, the government is also pushing for a rail link to Sabroom town in the south of the state from Agartala. The fact that it has taken 60 years to put Tripura on India’s railway map shows how long it can take to plan and implement upgradation of transport infrastructure in the Northeast. The inevitable cost and time overruns often end up delaying, sometimes totally derailing, such projects. The centrality of Bangladesh to India’s effort to ‘Look East’ through its own Northeast was recently emphasised by the BCIM car rally which was flagged off at Calcutta on 22 February and ended at Kunming in early March. The 20 participating teams, about 80 people in all, entered Bangladesh at Petrapole-Benapole crossing and passed through Jessore, capital Dhaka and Sylhet, before entering India’s Northeast on way to Myanmar and China. Though the Bangladesh leg of the rally was less than Myanmar, the unmistakeable importance of Bangladesh in linking Southeast

248  Subir Bhaumik Table 12.1  D istance Differential between Northeastern Towns/State Capitals and Calcutta via Chicken’s Neck (Siliguri Corridor) vis-à-vis through Bangladesh From

To

Via Chicken’s Neck

Via Bangladesh

Agartala Silchar Guwahati Shillong Imphal Aizawl

Calcutta Calcutta Calcutta Calcutta Calcutta Calcutta

1,680 km 1,407 km 1,081 km 1,181 km 1,742 km 1,657 km

450 km 600 km 830 km 720 km 900 km 800 km

Distance Differential 1,230 km 807 km 261 km 461 km 842 km 857 km

Source: Security and Development in India’s Northeast, Gurudas Das, OUP, 2012.

Asia or Southwest China to the Indian mainland was not lost. The distance differential between Calcutta and the Northeast Indian state capitals will help highlight the importance of getting to use Bangladesh for transit from Indian mainland into Northeast India (Table 12.1). But there are some problems that stand in the way of using Bangladesh to connect India’s Northeast with the mainland, some bilateral, others internal to Bangladesh. (a) The bilateral relations seem to improve or deteriorate with regime changes in Bangladesh, possibly also in India. Continuity is important for a bilateral relationship to change the diplomatic landscape but so far, the nature of India–Bangladesh relations has been regime-specific. When the Congress is in power in Delhi and Awami League in Dhaka, relations tend to move into top gear. The relationship goes back to the days of the 1971 civil war, from which Bangladesh emerged as an independent nation, a process in which Indian support and ultimate military intervention played a major role. But when the BNP-Jamaat coalition is in power in Dhaka, relations with India tend to go from bad to worse. Bangladesh has long been a safe sanctuary for rebels from India’s Northeast – a fact the BNP–Jamaat coalition government stridently denied – until Sheikh Hasina’s Awami League came to power with a landslide majority in December 2008 parliament polls. Scores of Northeast Indian separatist leaders and activists were arrested or chased away only to fall into the hands of Indian

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security forces. Many of them subsequently opened negotiations with Delhi because they were left with little choice. But if the Awami League goes out of power, the situation may change. Since democracy was restored in Bangladesh in 1991, power has changed hands in every parliament elections at five-year intervals. Important policy decisions like allowing India to use Bangladesh to access its Northeast will be difficult to implement in view of likely regime changes. India has tried to open out to the BNP by hosting her chairperson Begum Khaleda Zia in Delhi in November 2012 but the kind of Indian support that one can now see for Sheikh Hasina on crucial issues like ‘war crimes trials’ is not likely to enthuse the BNP and surely not its ally, Jamaat-e-Islami, to better relations with India. In fact, Khaleda Zia cancelled her scheduled meeting with Indian president Pranab Mukherji during his Dhaka visit on 5–7 March 2013, citing ‘security concerns’ and her BNP and ally Jamaat-e-Islami called three days of nationwide strikes covering the entire visit of the Indian President. (b) Even with friendly regimes in Delhi and Dhaka, contentious issues are difficult to resolve because of India’s federal polity. Indian states bordering Bangladesh are often not kindly disposed to resolving issues like river water sharing and land or maritime boundary disputes. In September 2012, Indian Prime Minister Manmohan Singh was on the verge of signing the Teesta River water sharing agreement with the Hasina government during his visit to Dhaka, when West Bengal chief minister Mamata Banerji opposed the deal. Manmohan Singh, whose UPA coalition was dependent on Banerji’s Trinamul Congress for support to survive as the ruling coalition in the parliament, had to back off at the last minute. Now India says the deal should be possible, perhaps because the ruling coalition is no longer dependent on Banerji’s party for survival. Because the Teesta water sharing deal could not be signed, Bangladesh backed off from providing India the right to use Chittagong port for shipment of goods to the Northeast. India will be able to get to use a land-sea corridor for accessing the Northeast through Bangladesh only if Dhaka gets major Indian concessions in sharing waters of common rivers, trade, investment and boundary disputes. (c) Many Indian border states have a tradition of seeing Bangladesh as a bogey. Assam witnessed a six-year long agitation for driving out illegal migrants from Bangladesh between 1979 and

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1985. Settlers with roots in Bangladesh have been targets of nativist violence in Assam for decades. Unlike Tripura which is a Bengali majority state now, politics in neighbouring Assam and Meghalaya have strong anti-settler overtones which can create hurdles for long-term relationship with Bangladesh. The Land Boundary Agreement that India pushed through with Bangladesh has faced stiff resistance from regional parties and the Hindu nationalist BJP in Assam and West Bengal. If Delhi has to back from going ahead with some of these deals because of compulsions on electoral politics in a coalition-dominated federal polity or for fear of adverse regional consequences, it would, as it has, adversely affect bilateral relations with Bangladesh. (d) Bangladesh itself is in the midst of a developing political crisis that could have long-term effects on its stability. Sheikh Hasina’s Awami League government, now in its second successive term, is being accused of returning to power through a non-inclusive election which the leading opposition alliance of BNP and Jamaat-e-Islami refused to join on grounds it was not overseen by a neutral caretaker as before. Since 5 January 2014, the BNP-Jamaat alliance has announced an indefinite transport blockade and punctuated it with regular nationwide strikes. That has not only affected movement of goods within Bangladesh leading to rising prices but also on its exports and specially its land trade with India. Dozens have died in firebombings by agitators. Prime Minister Sheikh Hasina is determined to push forward her economic development agenda,7 but one can only say the turmoil may get worse if the government fails to come up with a political solution and resorts to heavyhanded police action.

Myanmar: key to India’s look east by land Myanmar is the only Southeast Asian country that has a land border with India. Four Northeast Indian states – Arunachal Pradesh, Nagaland, Manipur, Mizoram –share a 1,643 km-long border with Myanmar. Since Myanmar joined the ASEAN in 1997, India has been encouraged to use its Northeast to open out to Southeast Asia through land. The ambitious road and rail link that India seeks to develop to connect to Southeast Asia passes through Myanmar.

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Having developed the Moreh-Tamu-Kalewa-Kalemyo highway, India is now seeking to start work on the Trilateral Highway project that will connect Moreh on India-Myanmar border with Mae Sot on Myanmar-Thailand border via Bagan. Once this is possible, India can look forward to access other ASEAN countries through Myanmar by road. This may take years to achieve at the present rate of progress and planning, but the ambitious Trans-Asian rail link plan that seeks to connect Delhi with Hanoi will be much more difficult and timeconsuming to implement. India will first have to extend its rail link to Manipur’s Jiribam and Moreh towns from Assam’s Silchar before it can link up with the Myanmar railway system, which needs substantial modernisation before it can shoulder the pressures of being the link in the chain for a trans-Asian railway network from Hanoi to Delhi. The former director of India’s Institute of Defence & Strategic Analysis (IDSA) has said: “The major lacuna in India’s Look East policy has been the absence of deep engagement with Myanmar, which is not only India’s neighbour – sharing a land border with India – but also a gateway for India to ASEAN. Closer engagement with Myanmar will give a boost to India’s Look East Policy”.8 Connectivity between the ASEAN countries and India is still poor, primarily because of absence of road and rail linkages through Myanmar. China is far better entrenched in Myanmar since the 1980s and its ‘bridgehead policy’ using the frontier province of Yunnan to develop relations with Southeast Asian countries is proceeding at a much faster pace. The road, rail and waterways connectivity China is settting up or is planning to set up in Myanmar and other Southeast Asian countries with which Yunnan shares a land frontier is progressing much faster than India’s proposed Trilateral Highway project or the rail link to Hanoi. China not only enjoys the geo-political advantage of Yunnan sharing frontiers with not only Myanmar but other ASEAN countries as well, which is not the case with India. China is also spending much more funds on these neighbourhood transport infrastructure projects than India can afford or is prepared to invest. The conversion of the rail track between Lumding and Silchar took 17 years to complete. The Silchar-Jiribam-Tupul-Imphal rail track project is also far behind schedule, as work on it has been impeded by separatist rebel activity, frequent extortions and difficult-to-move construction material. But there is as yet no project

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to connect Imphal to Moreh, without which there is no chance of connecting to the Myanmar railway system, which being still pretty archaic, would make gauge conversion and alignment a very daunting task. Some transport analysts say India is much more keen to complete the Kaladan Multi-Modal project that envisages modernisation of the Sittwe port in the Arakans (Rakhine) province and dredge the Kaladan River upto Mizoram state in Northeast India. “When this project is complete, India can not only use the sea-river route to access its Northeast but also use the Sittwe port for trade with Myanmar. It will be much more cost-effective than using the overland route through Northeast India and then the Moreh-MandalayMae Sot highway”.9 The Kaladan project is also running beyond schedule, not the least because of the tense situation in the Rakhine (Arakan) state. Though the modernisation of the Sittwe port has made considerable progress, the dredging of the Kaladan River and the roads to Mizoram are far from ready. It makes much more sense for transporters and those in exportimport trade to use these relatively peaceful states to send in goods not only to the rest of Northeast but also for onward transshipment to ASEAN countries using the China-developed road-rail network from Arakans (Rakhine) to elsewhere on Myanmar’s borders with its Southeast Asian neighbours.10 From Siliguri on “Chicken Neck” to Moreh on Manipur-Myanmar border, the road distance is just over 1,000 km but travel is cumbersome and expenses are high because of poor highway conditions causing wear and tear, frequent blockades resulting from conflicts that cause delays and frequent extortions by different rebel groups that add to operating costs. From Moreh to Mae Sot would be another 1,360 km as and when the Trilateral Highway is complete but even in Myanmar it will pass through conflict zones. So, the success of India’s ‘Look-East’ efforts to access ASEAN countries through Myanmar will depend on four crucial factors: (a) end of Myanmar’s internal conflicts with ethnic minorities, some of whom are crucially located; (b) the state of India’s relations with Myanmar; (c) upgradation of Myanmar’s road and railway network and its integration with those in Northeast India; and (d)

‘Northeast’ in India’s ‘Act East’ 253

stability of Myanmar’s democratic polity and continuity of policy on core projects like Trilateral Highway. Myanmar now has its first democratic government since 1962. India’s relations with Myanmar have improved but much more needs to be done. India’s decision to hit at rebels inside Myanmar territory in mid-2015 and then own it up has upset Myanmar. Aung Sang Suu Kyi, now State Counsellor and foreign minister, insisted during a recent visit to Delhi in Oct 2016 that India must respect Myanmar’s sovereignty and territorial integrity. As one study has observed: Indo–Myanmar cooperation in the past has been marred by delays and uncertainty. These delays have cost India productive cooperation in the hydrocarbon sector, where China has been the gainer. Undoubtedly, there is far greater potential in Indo– Myanmar relations than the few projects India has undertaken so far. These projects should be competed at the earliest but more needs to be done.11 India will have to invest much more in Myanmar’s rail-road-river transport network if ‘Look East’ through Northeast and Myanmar has to work. India needs to pursue its ‘Look East’policy through Northeast to boost the region’s economy by allowing it to leverage the neighbourhood markets. Delhi needs to break out of the strange security mindset that once pushed it to keep the region’s road network underdeveloped so that the Chinese would not be able to move speedily in Indian territory in the event of a conventional war. It needs to invest more in transport infrastructure within the Northeast, between Northeast India and Bangladesh and between Northeast India and Myanmar. That in the long run may attract domestic and foreign capital to invest in Northeast India to take locational advantage of substantial neighbourhood markets. Only when such investments are made and competitive products in some quantity roll out of such manufacturing units could there be much intraregional trade between Northeast India and neighbouring regions of Myanmar, China and some ASEAN countries. So, the first step for India is to develop the northeast as a manufacturing hub (like China has done in its frontier state Yunnan and which it now seeks to use as its ‘bridgehead province’ to connect to neighbours in

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South and Southeast Asia), which it has failed to do so far despite piecemeal measures like transport subsidies and other incentives. Very often, it has not worked. India has been exporting some petroleum products from Assam’s Numaligarh refinery to Bangladesh using the Brahmaputra River and is seeking to export similar products to neighbouring Myanmar. But Numaligarh will not have enough of crude within Assam to process, because the state’s crude output is falling and many of its refineries may need to get imported crude from Haldia port in West Bengal to process and maintain capacity or near-capacity production. But it would make much more sense to process crude in Haldia refinery and send it to Bangladesh or Myanmar by sea than to send the crude up to Assam for processing and re-export to these neighbouring countries. India’s ‘Look East’ will thus have to operate at different levels. For the mainland states, it will work primarily through the sea. For the Northeast, it will work overland but only when the adverse factors like poor and unresolved conflicts and weak infrastructure are taken care off. But for India’s ‘Look East’ policy to work through Northeast, it is important for Delhi not to shelve or delay the BCIM process, as indeed the current policy drift on the issue tends to suggest. There are fears in Delhi of opening out the Northeast to China which is why the tendency to play a delaying game on the BCIM. While the Manmohan government had agreed on jointly exploring with China the BCIM potential and how to take the process forward, Narendra Modi during his first summit with Chinese President Xi Jinping effectively shelved the BCIM issue. But that has changed for the better. In the informal summit involving Modi and Xi Jinping at Wuhan in China on 28 April 2018, the two leaders agreed to take forward the BCIM process. Since both Bangladesh and Myanmar are as keen as China on the BCIM, it is time India sheds its inhibitions and make BCIM a reality that will benefit India’s Northeast. But if India’s ‘Look East’ through land does not connect to China, which is the leading economy of Asia, it is destined to fail. India’s manufacturing sector which has been averse to investing in Northeast may only move into the region if the proposed BCIM Kolkata-Kunming corridor opens up and gives it easy physical connectivity to the huge Chinese market. From its current production bases, it makes much more sense for Indian manufacturers to connect to Southeast Asian markets by sea. Only if they want to access the Chinese market does a production base in Northeast India and

‘Northeast’ in India’s ‘Act East’ 255

export through the land route become important because the sea route to China’s eastern ports is long and uneconomic. Unless this reality is taken note, limiting India’s look east through Northeast to Southeast Asia will be self-defeating. Informed public opinion in Northeast, evident from a recent public attitude survey by the Guwahati-based CESPR institute, tends to support stronger engagement with China and allowing its investments in the region, not otherwise.

Notes 1 Verghese, B. G. (2004). “Borders Matter More Than Boundaries from the North East Looking Out”. Man and Society: A Journal of North East Studies, 1(Spring). 2 Baruah, Sanjib. (2004). “Between South and Southeast Asia: Northeast India and the Look East Policy”.CENISEAS Papers No.4. Guwahati: Centre for Northeast India, South and Southeast Asian Studies. 3 Rajiv Sikri, former Secretary (East), Indian Ministry of External Affairs, Keynote Address at 2-day seminar “BIMSTEC: What is achieved and Where to go”. Organized by Centre for Studies in International Relations & Development (CSIRD) at Calcutta, 12–13 March 2013. 4 Muni, S. D. (2011). “India’s Look East Policy: The Strategic Dimension”. ISAS Working Paper No 121, February 2011 & Laldinkima Sailo, Northeast India-Southeast Asia Connectivity: Barrier to Bridge, ISAS Working Paper No 162, November 2012. 5 Haksar, Nandita. (2009). “Troubled Periphery: The Crisis of India’s Northeast”, Subir Bhaumik, Sage Publications, New Delhi. 6 Bhaumik, ibid. 7 http://bdnews24.com/bangladesh/2015/01/31/bangladesh-willmove-forward-pm. 8 Arvind Gupta, Myanmar’s Critical Role in Bolstering India’s Look East Policy, presentation made at an International Conference on “Myanmar: Bridging South and Southeast Asia” held at Jamia Milia Islamia University, New Delhi on 30–31 January 2012. 9 Interview with Atin Sen, general secretary, Asian Council of Logistics Management, Calcutta, interview, 20 January 2013. 10 Sen, ibid. 11 Arvind Gupta, ibid.

Chapter 13

BCIM Economic Corridor and Northeast India Prabir DeBCIM Economic Corridor and Northeast India

Need for inclusive development agenda Prabir De India undertook the Look East Policy (LEP) in early 1990s as an effort to strengthen economic and strategic relations with Southeast and East Asian countries. Regional trade liberalisation alone has not been able to achieve increased trade for India. Infrastructure development, capacity building measures, removal of NTBs, and supportive policies and institutions that promote economic activities along identified transport corridors are essential to increase regional trade.1 Among all, weak connectivity of India’s Northeast with rest of India and neighbouring countries has remained the serious deterrent to India’s engagement with Southeast and East Asia. Linking infrastructure is a complex and expensive challenge for the BCIM countries, which requires strong political commitment and the involvement of both the public and private sectors. Seamless regional connectivity is yet to emerge, not only in BCIM region but also in other regions in Asia. There are large opportunities for trade, investment and economic growth due to regional connectivity through multimodal economic corridors.2 At the same time, there will be numerous challenges, such as acquisition of land, rising taxes on citizens in a high subsidy economy for the development of infrastructure, townships and industrial or economic zones, and non-conventional security risks related to illegal migration, trafficking, smuggling of contraband and drugs, etc. With India’s FTA with the ASEAN in 2010, SAFTA in 2006 and the proposed RCEP, economic integration between South and East Asia is set to gain momentum. Trade in BCIM, particularly between India and China, is likely to increase heavily in coming years. This will encourage more fragmentation of production and services between the two regions if the regional economy is adequately

BCIM Economic Corridor and Northeast India 257

supported by cross-border infrastructure facilities, both hardware and software. Accompanying this will be an increase in demand for national and international infrastructure services, for both production and consumption, and for international trade. Reduced costs and time travelled increase the competitiveness of using the corridors in delivering their products to intermediaries or end-users. A failure to respond to this demand will slow down the region’s trade and hamper growth. Unlike LEP phase, connectivity appears to be a vital component of the Act East Policy (AEP). Therefore, the connectivity challenges BCIM countries face require better understanding and adequate support, and the region requires a comprehensive policy that aims to achieve the following objectives: • exploiting synergies in the transportation system, narrowing the gaps between urban and rural areas; • moving towards an open and free market and integrated borders for transport services; • improving economic efficiency to reduce transportation costs and time; • completing the BCIM transport network and improving links with other regions/subregions such as Southeast Asia and GMS; and • encouraging the use of different modes of transportation. In view of the preceding, this chapter reviews the transportation network in Northeast India, presents basics of BCIM-EC and discusses an agenda to connect the Northeast India through BCIM-EC with Southeast and East Asia.

Overview of transportation network in Northeast Region (NER) of India NER states suffer more from inadequate infrastructure and inefficiency. The NER comprises of a heterogeneous group and is characterised by wide gaps in logistics and infrastructure. Table 13.1 presents basic infrastructure and logistics indicators of the NER. The profile suggests that the NER states are relatively better endowed with roads, airports, LCS and tele-density, where the variation across the NER states is not very high except for the road density in Tripura. However, the NER suffers from the unavailability of electricity; many of the NER states are yet to have an adequate

258  Prabir De Table 13.1  Infrastructure Indicators of NER States

Road *

Rail *

IWT *

Airport ** LCS **

Arunachal 23.79 0.02 5.97 Pradesh Assam 36.16 31.03 32.94 8.92 Manipur 42.95 0.06 4.48 Meghalaya 36.11 4.46 Mizoram 43.97 0.07 6.59 4.74 Nagaland 29.80 0.78 22.62 6.03 Sikkim 8.74 Tripura 808.70 14.44 9.54

TeleElectricity $ density ^

1.19 32.34 17.85 4.48 49.04 14.23 6.03 14.09 76.29

46.61 37.77 41.23 31.89 34.33 34.85 40.45

1.54 0.31 0.58 0.98 1.27 0.52 3.22 0.72

Notes: *km per 1,000 sq. km. of area. **Number per 100,000 sq. km of area ^Per 100 population. $Installed electricity per 10,000 population Source: Calculated based on various issues of Statistical Abstract, Government of India

supply of electricity. Next to electricity is the railway, where barring Assam and Tripura, the remaining states have either no railway lines or very negligible railway presence such as Arunachal Pradesh and Manipur. Similarly, only three of the NER states use IWT, among which Assam has the highest density of IWT in the NER. The remaining NER states are yet to utilise the inland waterways for transportation of goods and passengers. In what follows, the NER has gained tele-density, but lacks much in the form of physical infrastructure and logistics. The presence of railways in the NER is more than 125 years old, with the first passenger railway system coming into operation in 1881 between Assam’s Dibrugarh and Sadiya.3 Today the NF Railway directly or indirectly serves all the eight NER states alongside parts of West Bengal and Bihar. There are at present five divisions, which serve the eight Northeastern states, viz. Katihar, Alipurduar, Rangia, Lumding and Tinsukia. The present rail network in the NER is comprised of about 2,602.35 route km. (as of 31 March 2011), out of which 1,454.16 km are on the broad gauge and the remaining 1,148.19 km on the metre gauge.4 Out of the 1,148.19 km remaining on the metre gauge, 1,130 km has already been sanctioned for conversion to broad gauge. Seventeen projects with the goal of new line, gauge conversion, doubling rail track and railway electrification are currently in progress with a total estimated cost of Rs 16,153 crore. Out of these, ten projects have been

BCIM Economic Corridor and Northeast India 259

declared as National Projects where up to 75 percent of the funding for the project is met by the Central Government and 25 percent by the Ministry of Railways.5 As a result of this focused attention, the Railways’ investment in the NER has been going up. Indian Railways is actively engaged in harmonisation and construction of railway tracks in the Northeastern region of India. Railway infrastructure at the India–Bangladesh border posts has to be upgraded in terms of doubling of railway lines, electrification, warehouses, customs and security, etc., particularly at Tripura and West Bengal. Projects for rail connectivity to the state capitals of Sikkim, Meghalaya, Mizoram, Manipur and Nagaland have been sanctioned by Indian Railways and are at various stages of development. The railway line from Jiribam to Imphal should be completed urgently. The Jiribam-Imphal-Moreh rail link (in Indian side) is identified for development and will link India with ASEAN. Although construction work is being carried out on the Jiribam to Tupul section, linking it with Moreh via Imphal (and thereby India with Myanmar and Thailand) depends on how fast the railway system on the Myanmar side is developed simultaneously. The Jiribam-Imphal new line will provide rail connectivity to Imphal with the national mainstream. The first phase of the railway line, Jiribam to Tupul (84 km), is slated for completion by 2016. India and Bangladesh railways are already connected and there are regular goods and passenger services between Kolkata and Dhaka. There is a further proposal to link the rail networks in eastern Bangladesh by connecting the line between Agartala and Akhaura, which would open up the rail route to Chittagong port in Bangladesh from the NER. Roads are of particular importance in the region because they provide access to inland parts of the NER. However, geographic constraints make the construction of roads an expensive endeavour in the NER. NH 31 and 31C (East–West Corridor) have already been completed. Strengthening of highways connecting India and Bangladesh in Northeast India, particularly Assam, Mizoram and Meghalaya, is needed. The Mizoram government is implementing state road development projects, including border road with support of the World Bank. The road, Phuentsholing (Bhutan)-Jaigaon (India)-Hasimara (India)-Changrabandha (India)-Burimari (Bangladesh) (115 km), has to be upgraded into international standard. India has been building link road on NH 54 from Lawngtlai up to the Mizoram-Myanmar border, this being part of Kaladan project under SARDP-NE. Also under the Kaladan project, India is building

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a linking road from Paletwa (Myanmar) to Myeikwa (Myanmar– India border) to Lawngtlai (Mizoram, India). NH 39 from Imphal to Moreh is being strengthened. All National Highways (54, 39 in particular) leading to the borders of Bangladesh and Myanmar have to be upgraded to international standard. Under SARDP-NE, highway projects are currently at various stages of implementation. Among them, the following projects have to be completed urgently: (i) the highway from Aizwal to Lawngtlai and up to the Mizoram– Myanmar border; and (ii) the highway from Imphal to Moreh. The Northeastern States Roads Investment Programme was developed in parallel with the Government of India’s Special Accelerated Road Development Programme in the North Eastern Region (SARDP-NE), which aims to provide better connectivity to the state capitals and district headquarters in the NER by developing two-lane national highways and improving state roads. ADB’s Investment Programme was designed to complement SARDP-NE, focusing on improvements to intrastate connectivity (mainly to district headquarters and other places of administrative and economic importance in the individual states) and enhancing the capacity of state public works departments (PWDs) to manage their road assets.6 On 17 February 2014, the Government of India and ADB signed a US$125 million loan for the second tranche of the ADB-financed Northeastern States Road Investment Programme, approved in 2013. Reconstruction and rehabilitation of more than 236 km of state roads in Assam, Manipur, Mizoram and Tripura will contribute to increased transport efficiency in the project area, as well as better mobility and accessibility in the wider NER. The second tranche adds to the 200 km of state roads already being improved under the first tranche of the investment programme, approved in 2011. Better roads in the region will significantly improve the investment climate for the private sector, both domestic and foreign. Increased mobility and accessibility for many of the isolated communities in the project area may help open up new economic opportunities, boost growth, and reduce poverty. In addition to ADB’s loan of US$125 million, the central and state governments of India have committed counterpart financing of US$32 million. The second tranche of the investment programme is expected to be completed by March 2020.

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The corridors for linking up of the NER with the Southeast Asia considered are (i) Trilateral Highway; (ii) Kaladan Multimodal Transit Transport Project; and (iii) Development of LawngtlaiSaiha-Rhi-Mandalay Road. ASEAN-India physical connectivity in the present form comprises two important projects, namely, (i) India-Myanmar-Thailand Trilateral Highway; and (ii) Kaladan Multimodal Transit Transport Project. The development has been started in most of the areas on the Indian side, container enabled connectivity is the missing link which needs to be included. Some of the projects worth considering: Development of the Rhi-Tidim road sector, strengthening of the bridges under the Trilateral Highway and the Zorinpui-Paletwa road in Myanmar under the Kaladan project. Apart from these corridors the NER states are demanding further developing the links via the old Stillwell road which has been completed upto Pangsau pass and Meluri-Awankhu-Layshi from Nagaland. Lumla-Tashigong road on the Bhutan side also needs to be taken up. The linking of the Chittagong Port from Sabroom in Tripura will open up an effective link for the NER. Besides, Mekong–India Economic Corridor (MIEC) and Sittwe Economic Zone are two important projects which would facilitate multimodal connectivity and investment. The NER has many large and small rivers providing facilities for water transport. The Brahmaputra and Barak rivers have been commonly used as the medium of transport for a long time.7 It is estimated that the NER has about 1,800 km of river routes that can be used by steamers and larger country boats. Setting up/expansion of IWT jetties in Assam is under various stages of implementation. However, the cargo handling capacity at IWT jetties has to be upgraded along Brahmaputra and Barak rivers. India and Bangladesh have a bilateral IWT protocol through which the Government of India has been paying about Bangladeshi Taka 10 crores per annum to the Bangladesh Government to maintain the navigability of the IWT protocol routes. There is a proposal to develop Ashuganj in Bangladesh as an inland transhipment port, which will connect India’s NER with Kolkata in West Bengal. WAPCOS has been appointed by the Government of India for DPR on construction of river terminal at Ashuganj in Bangladesh. In Myanmar, India is building Sittwe Port under the Kaladan Multi-modal Transit Transport Project through a BOT operator. IWT jetties at Paletwa (Myanmar) on Kaladan River are under construction.

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India–Bangladesh–Myanmar IWT links and coastal shipping may be explored. India’s rising trade with BCIM calls for stronger maritime connectivity, since sea-borne trade has increased rapidly in terms of both value and volume. Institutional links between ports and the shipping community, regional (and bilateral) short sea shipping, and training and capacity building may pave the way for stronger maritime links in the region. Once the Sittwe, Kyaukphyu and Dawei ports (Myanmar) become ready for operation, these can be added as new ports of call. The Government of India has recently sanctioned the development of a new port at Sagar (in the state of West Bengal). Maritime connectivity in BCIM would open considerable avenues and opportunities for trade. Operational efficiency of the ports has to be competitive and on par with the best ports in the world. Modern cargo handling equipment must be introduced to improve port performance. Efforts must be made to enhance the quality of services and productivity levels. In this regard, greater economic and/or commercial cooperation is desired from those Southeast Asian countries (e.g. Singapore) that have technological expertise on ports and shipping. Developing infrastructure along the coast of Myanmar presents a major opportunity for connecting India to the rest of Southeast Asia and China through Myanmar. Acting as a crucial intermediary between these two hubs will also enable Myanmar’s port cities to develop and prosper, narrowing regional development gaps. Development of maritime connectivity in BCIM would open significant opportunities for industrial development in India’s NER. The potential of air connectivity in the BCIM sub-region is yet to be realised. Only Kunming, Yangon, Dhaka and Kolkata have intra-regional air connectivity. Air connectivity in India’s eastern and Northeastern region is yet to be developed fully. Only Guwahati airport handles one international flight (Druk Air), which connects Paro in Bhutan with Bangkok in Thailand. Imphal is another airport in NER, which has been declared as international airport and could be utilised for air connectivity within the BCIM sub-region. Strengthening air connectivity in NER would attract international flights, particularly from Southeast Asia, Bangladesh, Myanmar and China, which would help boost trade and tourism. To conclude, stronger connectivity across the NER will build a stronger network of cross-border production chains, particularly

BCIM Economic Corridor and Northeast India 263

with Southeast Asia and Bangladesh. Success of connectivity, however, will depend on how quickly it brings peace and prosperity, particularly to the Northeastern states. Once connectivity projects start attracting investment, engaging development of the region, and improving the quality of life of the local people through generation of employment and reduction of poverty, they become true public goods and culminating in an economic corridor.

BCIM-EC for Northeast India Urban cities in BCIM continue to flourish as major gateways, which are connected by corridors at least within the country. Industrial (and knowledge) clusters in and around the gateways have been evolving over time, for instance, the Dhaka–Chittagong corridor, Mumbai–Pune corridor, Kolkata–Durgapore–Haldia corridor, Chennai–Bangalore corridor, Shanghai–Beijing, etc. Congestion will eventually push out the frontier of production networks to remote or border or inland areas, where economic corridor will trigger for a new perspective of industrial development. Illustrated in Table 13.2, about 11 cities in NER have populations over 1 lakh (2011 census). Assam in NER shows relatively strong positive correlation between urban agglomeration and industrial output (Figure 13.1). Economic corridor will therefore link new industrial zones and towns domestically, and also across borders in BCIM. BCIM corridor is envisaged to start (end) from Kolkata and end (start) at Kunming.8 Along this about 2,490 km corridor, there are four border crossings (China–Myanmar; Myanmar–India; India– Bangladesh (2)), eight customs check-points, four international

Table 13.2  Major Urban Agglomeration in Northeast India State

Population, 2011

Urban Agglomerations/Cities*

Nagaland Manipur Tripura Meghalaya Assam

1,23,777 4,14,288 3,99,688 3,54,325 1,878,053

Dimapur MC Imphal UA Agartala MC Shillong UA Guwahati, Silchar, Dibrugarh, Jorhat, Nagaon, Tinsukia,  & Tezpur UA

Note: Urban Agglomerations/Cities with more than 1 lakh population Source: Census of India

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Figure 13.1  Urban Agglomeration and Industrial Outputs Source: Author’s Construction

time zones, two different working weeks, four Customs EDI systems, two different vehicle driving standards, and four different motor vehicle laws. As indicated in previous chapters, the BCIM-EC has been determined as follows:9 Kolkata–Dhaka–Silchar–Imphal–Mandalay– Tengchong–Kunming. A large part of this route overlaps with the Trilateral Highway (TH), and follows Asian Highway (AH) 1 (up to Mandalay) and AH 14 (from Mandalay to Kunming). Link routes connecting other nodes in Northeast Region (NER) such as Shillong, Dimapur, Aizawl, Agartala, Nagaon and Dibrugarh may also be established. These are the major urban cities in the region, which will become major economic centres along the BCIM-EC. Along the BCIM-EC, India has assumed responsibility for 78 km of missing links and 58 km of upgradation as part of Phase-I in Myanmar. The Indian government’s Border Roads Organisation (BRO) had upgraded the Tamu-Kalewa-Kalemyo (TKK) part of the TH (160 km) in Myanmar from the Indian Northeastern border at a cost of Rs 1.20 billion (about US$27.28 million). India is constructing the Kalewa to Yargi portion (132 km) of the TH. The Yargi to

BCIM Economic Corridor and Northeast India 265

Monywa portion of the TH has been constructed by the Myanmar government. Monywa to Mandalay and to Muse/Rulli is an allweather road. Deeper regional cooperation in BCIM would speed up the development of the corridor. Compared to GMS, where we have some prominent SEZs and deep-sea ports, NER does not have any operational SEZ at present. SEZs and industrial parks in NER would facilitate investments in industrial and services units. At the same time, connectivity improvement along with efficiency in logistics services would contribute to the expansion in both trade and production networks within or across countries. Reduction in the service link cost in connecting production blocks across the border in BCIM would pave the way to strengthening production networks in the NER. Besides, building regional infrastructure through economic corridors is planned to help facilitate international and national transportation, and promote industrialisation in the hinterland. Examples are the Delhi–Mumbai Industrial Corridor (DMIC), a national economic corridor with regional implications; and the Mekong–India Economic Corridor (MIEC) and the India–Myanmar–Thailand Trilateral Highway. Both are cross-border corridors linking South Asia and Southeast Asia.10 Moving to economic corridor, BCIM may have to pass through trade corridors. If corridors in BCIM are initially transport corridors, the same in Central Asia (CAREC) have now been transferred into ‘trade corridors’. The transformation of the transport corridors into economic corridors will depend on the volume, types and pattern of corridor trade and the concomitant level of development in the areas surrounding the corridors. Spatial planning going beyond national policies is needed to support the development of the corridors in BCIM. At the same time, development of one area of the corridor is conditional upon the trading conditions along the entire area of the corridor across countries. Building corridor nodes and gateways and linking the nodes along the corridor would help the region moving towards the ultimate goal of an economic corridor. Railways typically do bulk transnational movement of goods and services among the neighbouring countries. With reference to BCIM connectivity, the needs are four-fold: (1) to link India’s Manipur with India’s main railway corridor, (2) to link Imphal with Kalay in Myanmar (about 212 km), (3) to link Thanbyuzayat with Three Pagoda Pass in Thailand (110 km), and (4) to re-establish and renovate railway networks in Myanmar. Harmonisation of

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railway tracks in the sub-region is essential and the issue of incompatability of railway gauges in different countries will have to be addressed. Without having a compatible and strong railway system inside Myanmar, closer communication would be difficult. RITES completed a preliminary study to establish the Delhi–Hanoi railway link in 2006. Although Railways are in service in major parts of Southeast Asia, there are about 238 km of missing links, which have to be built in Myanmar in order to have Delhi-Hanoi railways in operation. Renovation of railway network systems in southern (Yangon to Dawei) and northern (Mandalay to Kalay) Myanmar is essential.

Trade facilitation and transit In BCIM, soft and hard infrastructure measures along selected corridors aim to accommodate transport activities. For example, all the BCIM countries have adopted trade facilitation programmes in line regional and global commitments. In particular, BCIM countries are also signatories of the WTO Trade Facilitation Agreement (TFA), which was signed on 5 December 2013 at Bali, Indonesia. Customs cooperation, bilateral and regional, has been very much active between the countries in the region. Bangladesh and India are also part of BBIN Motor Vehicle Agreement (MVA) whereas India and Myanmar are part of MVA of Trilateral Highway. Bangladesh and India have signed several agreements to improve connectivity between the two countries during the visit to Indian Prime Minister to Bangladesh in June 2015, which will have positive impacts on BCIM connectivity. On customs cooperation, several important issues have been discussed for implementation, such as harmonisation of customs clearing procedures and documentation, inter-operability of customs EDI systems being followed by customs administrations in SAARC and ASEAN countries; preparation of a simplified form for customs declaration for trade in goods in the SAARC region; harmonisation of 8-digit tariff lines in the SAARC countries and capacity building. BCIM countries shall also take actions to accept (i) the electronic copies of the Certificates of Origin received from importers for clearance of consignments; (ii) 24 x 7 customs at border; and (iii) a Single Joint Customs Point for speedy movement of consignments across the region. At the same time, we need speedy reforms for (i) improvement of customs operations, including a regional

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‘single-window’ system; (ii) planning and implementation of a coordinated border management strategy; (iii) joint customs control, at least select one select post; (iv) infrastructure development such as approach road development, installing scanners, etc.; and (v) capacity building for customs and border officers. To operationalise the BCIM-EC, both government and private sectors have shared responsibilities. While we need government in promoting an integrated trade facilitation programme and customs, the private sector’s cooperation in acceding to such measures is also required. The foremost requirement for BCIM-EC is to operationalise a regional transit in the BCIM region. Without a regional transit, BCIM-EC may not work. Under regional transit, goods and services move freely with compliance to certain rules and regulations in a given region. Transit should not only be inter-country but also intracountry through territories of other BCIM participating countries. Ultimately, BCIM countries shall implement key trade facilitation projects in the region, which will help the countries to streamline border transactions and improve overall competitiveness.

Institutional mechanism Developing economic corridors can help diversify the region’s industries and make them competitive globally though technology, logistics and other business support services. An economic corridor network is essential for BCIM countries to get their goods to markets more efficiently, quickly and cheaply. However, economic corridor alone cannot be successful until and unless other operational priorities such as trade policy, trade facilitation and transit, institutions, energy corridors, telecommunications, etc., are in place. Therefore, a strategic partnership for policy development to set up economic corridor and an action plan to foster regional cooperation and integration have to be in place. One of the challenges of economic corridors is that their success closely depends on policy reform, capacity development, and the strengthening of institutions.11 This is where regional cooperation assumes importance. The challenges can broadly be divided into two segments. One, the hardware aspects, such as transport facilities (physical infrastructure, logistics networks, maintenance and so on), that are important to ensure the flow of goods and services within and across BCIM and beyond. Two, the software aspects, such as trade facilities (customs, time and cost expended at borders, institutions and

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governance, dispute settlement, safeguards and so on), that are crucial to making the hardware work efficiently. Both will need drastic intervention from governments and policymakers. The task would be to overcome institutional constraints and bottlenecks that are hurting regional competitiveness by making trade expensive. Four specific institutions may be explored. Four countries may consider negotiating the BCIM-EC Motor Vehicle Agreement (MVA). The project may be implemented by a country-level team, headed by country-level concerned Ministry. To monitor the progress of the project, a high-powered committee at the Ministerial level may be set up, which will give a policy direction to the project.

Conclusion This chapter suggests that efforts to promote regional connectivity through economic corridors such as BCIM-EC need to address policy reform in a number of areas. So, institutions and investment have an important complementary role in enhancing BCIM’s infrastructure development. Regional cooperation also has an important catalytic role to play in this process. By sharing each other’s experiences, regional cooperation can make countries efficient by integrating them to regional markets. An economic corridor integrates markets by fostering trade. An economic corridor can have huge payoffs in the BCIM countries at a time when the region is looking for higher investments in industrial sector, and planning to deepen regional trade through global and regional value chains. Making BCIM ‘seamless’ would require complementary policy initiatives by countries, regional organisations, and multilateral development institutions to strengthen the capacity of the four countries for development of the economic corridor. Stronger connectivity will build a stronger network of cross-border production chains in NER, particularly with Southeast Asia and Bangladesh. Conversely, inadequate backward links in rail, water and road will continue to hamper the economic integration. There is no doubt that the present institutional linkages are improving, but they must be strengthened further to support the connectivity projects between India and Southeast and East Asia. Connectivity is the enabler. However, its success will depend on how quickly it brings economic prosperity, particularly to the Northeastern states of India. Once connectivity projects start attracting investment, promoting the development of the region and improving the quality

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of life of the local people through employment generation and poverty reduction, the economic corridor would become a truly ‘public good’ in the best sense of the term. While prospects in India’s trade with East and Southeast Asia trade have grown rapidly, challenges too have become more complex, making it an underperformer in realising trade potential. Non-tariff policy barriers have gained importance as tariff-based barriers to trade have gradually declined. Among others, lack in connectivity undoubtedly plays a critical role for such a belowaverage performance in regional trade. There are three major tasks ahead for completion of the Trilateral Highway as well as BCIM-EC. We need to complete the construction and improvement of two sections of the Trilateral Highway– Kalewa to Monywa via Yargyi, and the replacement of all vintage bridges falling on the highway. BCIM-EC countries should negotiate and finalise a regional transit transport agreement or MVA for the corridor. These proposed agreements will allow vehicles to move seamlessly for regional and international trade transportation purposes. Through this agreement, we could identify modalities of transportation, introduce operating procedures for vehicles to travel on the highway, and set up the rule book for public utilities. A stronger coordination between India and East and Southeast Asian countries would be helpful in building cross-border connectivity. Success of any regional connectivity projects will depend how strong the backend integration is. At present the backend integration in most of physical connectivity is relatively weak in India. Backend integration with national connectivity projects is therefore essential in order to reap the benefits of growing economic linkages between India and Southeast and East Asia.

Notes 1 Refer, for example, Brunner, Hans-Peter. (2013). “What Is Economic Corridor Development and What Can It Achieve in Asia’s Subregions?” (Asian Development Bank Working Paper Series on Regional Economic Integration No. 117), Manila, Asian Development Bank; De, Prabir and Iyengar, Kavitha. (2014). Developing Economic Corridors in South Asia, Mandaluyung City, Philippines: Asian Development Bank.

270  Prabir De 2 Various studies have identified the important transport or industrial corridors in the region, including the SAARC Regional Multimodal Transport Study (SRMTS), BIMSTEC Transport Infrastructure and Logistics Study (BTILS), GMS Economic Corridor Study, etc. For example, expanding the range of effective transport corridors into multimodal economic corridors could increase trade from South Asia with the rest of the world by over 30 percent (Asian Development Bank. (2014). “Myanmar: Unlocking the Potential Country Diagnostic Study”. August 2014. www.adb.org/sites/default/files/ publication/42870/myanmar-unlocking-potential.pdf (accessed on 10 November 2014)). 3 Unfortunately, the railway system in the NER was severely disrupted with the partition of India in 1947. However, the creation of a new railway zone in 1958 for the NER, the Northeast Frontier Railway (NF Railway) helped in further development of the railway system in the NER. NF Railway was carved out of the North Eastern Railway with headquarters at Maligaon, Guwahati. 4 Sourced from Annual Report, Indian Railway. 5 Sourced from NTDPC (2014). India Transport Report: Moving India to 2032, National Transport Development Policy Committee (NTDPC), Planning Commission, New Delhi. 6 Asian Developmemnt Bank (ADB). (2011). “Framework Financing Agreement”, Manila, available at www.adb.org/sites/default/files/ project-document/73252/37143-013-ind-ffa.pdf 7 With the growth of the tea industry these rivers became important carriers of trade. The East India Company started the water route along the Brahmaputra from Kolkata to Dibrugarh in 1844 and steamships were introduced by the Joint Steamer Company in 1847. At about the same time, Silchar was linked with Kolkata along the Barak-SurmaMeghna navigation channel. However, with the partition of India in 1947, water transport in the NER has made slow progress. 8 BCIM Economic Corridor (BCIM-EC) has been identified as one of the flagship projects of BCIM regional cooperation. At the 10th BCIM Forum meeting held at Kolkata in February 2012, Kolkata to Kunming Highway plan was unveiled, and a route survey of 2,490 km completed jointly by four BCIM countries. The route of K2K Highway is identified as Kolkata-Dhaka-Imphal-Mandalay-Lashio-Muse-Kunming (2,490 km). 9 There is some overlap with BIMSTEC corridor 1: Kolkata–Dhaka– Silchar–Imphal–Moreh/Tamu–Mandalay–Bago–Myawaddy/Mae Sot– Tak–Bangkok–Laem Chabang. 10 Refer, for example, RIS. (2012). ASEAN-India Connectivity: India Country Study, New Delhi: Bookwell; and Kimura, F., Kudo, T. and Umezaki, S. (2011). “ASEAN-India Connectivity: A Regional Framework and Key Infrastructure Projects”. In Kimura, F. and Umezaki, S. (eds), ASEAN-India Connectivity: The Comprehensive Asia Development Plan, Phase II, ERIA Research Project Report 2010–7, Jakarta: ERIA, pp. 1–56 for further details of the cross-border corridors. 11 These lessons draw on the experience of GMS economic corridors.

Part IV

Geo-economics of BCIM

Chapter 14

Can new Myanmar contribute to BCIM integration? Chaw Chaw SeinCan New Myanmar contribute to integration?

Chaw Chaw Sein

Myanmar’s reform and implementation for periphery area Since opening up in 2011, waves of reform were being implemented under new government. Among the reform measures, the top priority for social sector reform is poverty reduction in Myanmar. Border areas, which can be said as periphery, are far away from mainland and market centres. Besides, minority groups often inhabit them. Under the concept of border area development to boost trade and economic development in line with the social sector reform, the first national workshop on “Rural development and Poverty alleviation in Myanmar” was held in Nay Pyi Taw in May 2011. Stakeholders from a wide range of Myanmar society such as high-level policymakers, government officials, representatives from local civil society organisations and NGOs, business people, academics and members of the mass media are taking part.1 With the aim to reduce poverty, community-driven rural development projects have been implemented since 2013 with financial and technical assistance from the World Bank.2 The projects are also designed to encourage the public to nurture cooperation with local government authorities and enable life-long learning for capacity enhancement through transparency, accountability, gender equality and social as well as environmental protection.3 The government, the UN and international organisations are contributing border regions development, progress of human resource development tasks for people in border area.4 Development plans are being implemented under the initiatives of Ministry of Health, Ministry of Education, the Ministry of Progress of Border Areas and National Races and Development Affairs (PBNARDA) and other related ministries for

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indigenous races living along border areas of Myanmar.5 But, there still remain challenges for peace, stability and poverty alleviation in the border areas. After assuming office in 2011, Myanmar’s future directions also opened new opportunities for her to integrate into regional organisations and cooperate with its regional neighbours. Myanmar had participated in regional organisations such as ASEAN, BIMSTEC, ACMECS and GMS since 1997 and now playing an active role. The 24th and 25th ASEAN Summits were successfully held in 2014 with the attendance of ASEAN’s dialogue partners including China, India, US and EU. Such kind of activities demonstrates that Myanmar now becomes a responsible member of the international community. Likewise, Myanmar, which is part of Bangladesh–China–India–Myanmar (BCIM) has also the responsibility to achieve the objectives as laid down in BCIM.6 The New Myanmar with her waves of reform and transition is now entrusted with a more active role to play in regional and international affairs. Myanmar government would demonstrate the ending the troublemaker in the region in terms of political reconciliation among ethnic groups, relatively successful peace-building process initiated by quasi-civilian government. Therefore, how will Myanmar demonstrate her position in BCIM is another issue to be addressed by the government.

Assessing BCIM The BCIM Forum has come to 14 years since it originated in 1999 at Kunming, Yunnan province of China. It was formed with the aim to link India’s eastern seaboard and Northeastern states with China’s southern province of Yunnan through Bangladesh and Myanmar. This area covers four Southwestern provinces of China-Yunnan province, Sichuan province, Guizhou province and Chongqing municipality, six states in the Northeast of India and the eastern seaboard state of West Bengal, the whole territories of Myanmar and Bangladesh. This area is also the meeting point of the three markets of China, Southeast Asia and South Asia. It can also interconnect the two major markets of China and India and even the markets in the whole of Asia.7 Each country has its own importance in connection with this region. For Myanmar, market access to India and China are important.

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During 14 years, 11 meetings on BCIM have been held by member states. However, it appears to have made little progress towards achieving its objectives. The major problem is how to make the BCIM a more effective and sustainable instrument of regional integration. Although it has considerable potential, it has very modest outcomes to date. Thus, the cooperation of the four countries is of great importance to their own economic growth as well as its reflection on the world economy.8 In this context, the priority items on the agenda of successive BCIM meetings were Trade, Transport and Tourism, called “3-Ts”.9 Nevertheless, after 14 years of intense dialogue and cooperation, 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. In other words, the special and uniquely valuable feature of the BCIM from Myanmar’s perspective is the complementarity of the goal of economically backward regions of the country especially in the periphery area along Myanmar and each of Bangladesh, China and India border. Despite the priority items on the agenda of BCIM meetings were Trade, Transport and Tourism, at the 11th BCIM Forum in Dhaka in February 2013, the 3-Ts transmuted into TTE (Trade, Transport and Energy). However, social, cultural and environmental issues found no place on the formal agenda of this meeting. The soft social, cultural and environmental cooperation agendas as well as tourism promotion are seen as relatively peripheral to the hard-core issues of trade, connectivity and energy cooperation and to the task of building the institutional support through which these hard-core objectives can be carried forward by the four governments.10 For the promotion of trade, both Track I and Track II initiative can be seen. The BCIM Business Council was set up in 2012 with the aim of strengthening friendly economic, trade and investment relationships between the countries. The main purposes of the BCIM Business Council is to organise business delegations for business visit and exchanges of business information and participate in each other’s international conferences, trade fairs and exhibitions.11 Regarding Track I initiative, a joint statement was released at the end of Prime Minister Manmohan Singh’s visit to Chennai in October 2013. India and China agreed to consult Bangladesh and Myanmar with a view to establishing a Joint Study Group (JSG) on strengthening connectivity in the BCIM region for closer economic,

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trade and people-to-people linkages and to initiating the development of a BCIM Economic Corridor (BCIM-EC) or Southern Silk Road. As a follow up, a JSG of BCIM has outlined a number of steps to be taken to convert the concept into reality.12 Myanmar showed interest in the BCIM-EC concept by participating in the first JSG meeting in Kunming.13 The corridor is planned to run Kunming in Yunnan Province of China to Kolkata in India and link Mandalay in Myanmar and Dakha and Chittagong in Bangladesh. Actually, the BCIM-EC aims to promote trade and investment in the region through trade facilitation measures and greater participation of private and public sectors. It is likely to encourage further interest by Chinese and Indian firms in Myanmar.14 It is designed to promote multi-sectoral cooperation in road transport, trade services and investment, sustainable development of the environment and people-to-people contact in the BCIM region.15 To be successful, sub-regional cooperation zone especially for the development of periphery areas, the key requirement is the building of modern communication and transportation networks such as regionally connected rails, roads, air routes and ports in the subregion through coordination by each country. Myanmar shares border with Bangladesh, Indian, China, Laos and Thailand. For the development of Myanmar-Bangladesh border areas as well as for improving regional connectivity to boost trade and economic cooperation, the construction of Bangladesh-Myanmar friendship road is under planning. This road would be extended up to Kunming in the future. This proposed Bangladesh-Myanmar friendship road would also facilitate the proposed BCIM corridor. The said road would also be connected with Thailand, Malaysia and Singapore known as Asian Highway.16 Bangladesh also established a river port at Teknaf to provide the shortest link with the border town of Maungdaw across the Naaf River.17 Indeed, the regional road construction and transportation facilities between Myanmar and Bangladesh would contribute much to facilitate trade and business relations as well as interactions between the people of the two neighbouring countries. At the last Joint Trade Commission (JEC) meeting held in January this year at Nay Pyi Taw, Bangladesh and Myanmar had set a target to increase annual bilateral trade to US$500 million, five times higher than the present figure, through further enhancing the ties between the two countries. As agreed at the JTC meeting in

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Myanmar, the two neighbours would find out possible ways and means to promote the bilateral trade. Ensuring smooth transportation between Myanmar and China is important for swift flow of commodities and improvement of socio-economic life of peoples living in the border areas. Since 2000, Yunnan province has been upgrading the highway connecting the provincial capital of Kunming with the Yunnan-Myanmar border. Up till 2007, there were seven road links to Myanmar.18 In order to promote effective regional transportation and facilitate trading, 460 km long Mandalay-Lashio-Muse Union Highway connecting Muse on the Chinese border and Mandalay was paved and expanded for truck transportation in 1998. This road constituted a part of the old Burma Road,19 also known as the Lashio-Kunming Highway which was opened to traffic in late 1938 and about 1,120 km long, extended from the Lashio railhead through Muse and onto Kunming in China.20 This road is also known as ASEAN Highway – 14 links with not only neighbouring countries but also other Asian countries.21 Moreover, a 76 km long Momauk and Lwejel road connecting Laiyan at the Chinese side was constructed by Chinese experts and completed in December 2006.22 Indeed, the development of road links between the two countries has greatly contributed to the swift commodity flow thereby ensuring the improvement of cross-border trade between them. With the aim to promote cross-border trade between Myanmar and India as well as overall socio-economic development of the region, the Tamu-Kalay-Kalaywa Road, also known as India-Myanmar Friendship Road, in Myanmar was constructed at a sanctioned cost of Rs 121.35 crore by the Government of India23 and opened on 13 February 2001.24 This road was part of the well-known old Burma Road during the Second World War, which passed through Kohima-Imphal-Moreh in India and Tamu-Kalaywa and beyond in Myanmar. It is to be extended to Mandalay. Ultimately, the road will be a key link in a proposed Asian Highway linking the continent to Europe.25 With the opening of this road, export/import transactions through Tamu-Moreh border trade post have been carried out much faster and there have emerged opportunities for development of border trade as well as economic development of border areas. Besides, to promote border trade, India offered assistance to construct Rhi-Tiddim and Rhi-Falam roads along the Chin-Mizoram border.26

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Sittwe Port, situated at the mouth of the Kaladan River and nearly 400 km far away from Mizoram’s capital Aizawl, is a deepwater port under construction by India since 2010 in Sittwe, Rakhine State in Myanmar on the Bay of Bengal. The US$120 million port is being financed by India as a part of the Kaladan Multimodal Transit Transport Project, a collaboration between India and Myanmar. An agreement on the project was signed between the governments of India and Myanmar in April 2009. The project is aimed at developing transport infrastructure in Southwestern Myanmar and Northeastern India, primarily to provide an alternative route to landlocked India’s NER. The US$500 million Kaladan project includes the construction of a deepwater port at Sittwe, the dredging of the river to enable cargo vessels to navigate the river from Sittwe to Mizoram in India, the construction of a river port at Paletwa in Myanmar’s Chin State and the upgrade of highways from Paletwa to Myeikwa on the Indo-Myanmar border. Thus, if the Kaladan multi-model transport project will over, vessels from India will have the chance to load pulses and beans, betel nuts and turmeric fingers at Sittway port as import items to India. In fact, through the Kaladan project, India would give the NER’s access to the sea routes via the Myanmar port of Sittwe. In order to develop a land route for large-scale trade between India and China, the reconstruction of the famed ‘Stilwell Road’ or ‘Ledo Road’ linking Ledo in Assam with Kunming in Yunnan Province of China by passing through northern Myanmar is under processing. An upgrade of the 312 km stretch of Stilwell Road could lower transportation costs between India and China by 30 percent and escalate already growing Sino-Indian trade through the BCIM Corridor. This road is also important for border trade between Myanmar and Arunachal Pradesh in India’s NER. India and China have also agreed to manage collaboration on development projects of common interest in third countries as well as on strengthening border trade through Nathu La Pass (Sikkim). To assess the connectivity contributed by two major powers, China is always well ahead of India on the front. Many of China’s border provinces now act as smooth conduits linking China with its neighbouring countries. At the Strengthening Connectivity Partnership, the Chinese President committed to a US$40 billion fund for infrastructure development among the Silk Road Economic Belt nations which involve revival of the ancient Silk Road between China and Europe via Afghanistan and Central Asia, besides

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linking BCIM Corridor as well as China–Pakistan Economic Corridor. China envisages an economic corridor linking its Southwestern Yunnan province through Myanmar to Kolkata as a key segment of a land-based “Silk Road economic belt”, and is also planning to boost ties with port cities, such as Chennai, through a “Maritime Silk Road” starting out from Southeastern Fujian province through South China Sea to Indian Ocean and the Persian Gulf. China also plays a leading role in AIIB, an international financial institution to promote the economic development of Asia and creation of wealth and interconnectivity of infrastructure through investment and through productive fields. Regarding the proposed 21st century Maritime Silk Road, Myanmar considered that the route can play an important role in the development of the country by bringing new economic opportunities for Myanmar and its people. Besides, Myanmar welcomed the establishment of Asia Infrastructure Investment Bank (AIIB), an initiative by China. Myanmar also pledged to cooperate in these sectors and signed the MoUs and agreements with China including the MoU on Bilateral Economic and Technological Cooperation under the Framework of BCIM-EC.27 In assessing India, Prime Minister Modi launched the “Make in India” initiative when he took office in 2014. This vision is to transform India into a global manufacturing and industrial hub. The core of this vision is to improve business, investment in industry and capacity building and connect India with its friendly neighbours through trade and investment in a number of industrial corridors. One such corridor, a very much part of his “Make in India” initiative is the NEI-Myanmar industrial corridor. The idea behind this is not only to improve connectivity and increase investment in the NEI to realise its potential but also promote trade and investment with Myanmar through India’s ongoing connectivity projects. According to Prime Minister Modi, our ties with Southeast Asia are deep rooted. Strengthening relations with ASEAN nations is an important part of our “Act East” policy. It is central to our dream of an Asian century, where India will play a crucial role.28 India’s Look East Policy has been criticised for just looking from the window. But the new Prime Minister’s statement at the ASEAN Summit seems to have hopes for Myanmar. However, as the

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economic heart of India like Delhi and Mumbai lie on the western coast of India and without an economic zone in eastern coast, it comes up with the question of how India can connect with Southeast Asia, even for Myanmar. There is also weakness in physical connectivity like direct air link to India. As Myanmar is extending her foreign relations as well as opening up for FDI, Japan seems to take more interest better than India. Japan is quite interested in investing deep sea project. They would like to use the corridor GMS Dannang (Vietnam) to Dawei by using the southern corridor of GMS. Japan is interested to build infrastructure in the eastern coast of India including Chennai so that Chennai- Dawei Corridor will the beneficial for Japan. That is the reason why Japan proves a lot of interest in Dawei Deep Sea Project in Myanmar. This will benefit not only for Myanmar but also for India.

Challenges for the development of Myanmar’s periphery Although BCIM has plenty of potential, there are several difficulties and problems to achieving the objectives of the forum.29 It is still characterised by relative poverty of the Southwest within China, of the Northeast within India, and of both Bangladesh and Myanmar.30 The policies enabling so-called ‘border trade’ and bureaucratic constraints as well as inadequate infrastructures and financial institutions hinder ‘border haats markets’.31 Security environment is one major negative factor inhibiting the successful realisation of the forum. As poverty, ethnic division and collision and rampant transnational crimes characterise the border areas, it needs to accelerate cooperation on construction of rail and road networks, logistic centres, industrial parks and development of scenic areas as well as on resolving security challenges along the borders of BCIM.32 Due to the problem of Bengali refugees crossing over to Bangladesh and Myanmar, there exists instability along the Myanmar–Bangladesh border.33 Conspiracy on arms and ammunitions provision to ethnic minorities armed movement in Kachin state and Wa Special Administrative Area is implication in Sino-Indian rifts. Severe fighting between Myanmar Defence Force and Kachin Independent Army since December 2013 had caused great concern for China. Armed conflict between KIO and its allies namely, Arakan

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Army, ABSDF, TNLA became implication for India. The offensive operation of Myanmar Defence Force during 2012 clashes caused concern for India on the ground that some KIO outposts have been moved out to Myanmar-India border in the area of Kabaw valley. Internal stability with peaceful development is of important in pursuing defence and foreign policy of Myanmar. Concerns about Nagaland in Kabaw valley, KIO clashes in Kachin state and Was area in the Shan State together with the unrealistic claim of federal army are critical factors in domestic stability and progress as these areas are remote and difficult to have access for Myanmar government. Besides India’s unofficial and informal proposal of delineating the international territory in 2014, the trijunction border point of China–Myanmar–India are the testing grounds for Myanmar stand towards its two giant neighbours.

Conclusion What can Myanmar gain in executing BCIM? There may come out both opportunities and challenges for Myanmar perceives in executing BCIM. The energy sector has a crucial role to play in Myanmar’s economic development and increasing geo-strategic importance. Neighbouring countries such as China, India and Thailand face growing import dependencies and projected increases in energy demand to keep pace with economic growth. Gas and oil are the largest component of Myanmar’s export basket. Gas and oil pipeline from Kyaukphyu to Kunming opened in 2013 and will bring much needed supplies to China. Strategic location of a country is either negatively or positively important in manoeuvring its national interest especially its location is between emerging power and rising power. Positively it may gain economic opportunities while at the same time; it may face with uncertainties spread out from rising rival neighbours. Myanmar is now regarded as a newly emerging destination for businesses on account of its strategic geographical location. Given the shift in the global focus from Trans-Atlantic to Asia-Pacific, Myanmar has acquired a strategic position for the countries of the region. Myanmar’s opportunity is now becoming as a commercial corridor for both giant neighbours. It is on the cross-road of China’s Outward Policy on the one hand and India’s Look East Policy on the other. For Myanmar, located on the southern tip of Indochina peninsula, possesses an important strategic location on the blinks of

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Indian Ocean and Bay of Bengal, the significant gateway for China to Indo-Pacific regional order. New Delhi is also finding to expand seaborne trade with East Asia much of which is now with China. To avoid challenges, Myanmar has to preserve her national interest in terms of natural resources and strategic location without swaying to one side.

Notes 1 Myint, U. (2011). “Reducing Poverty in Myanmar: The Way Forward”. National Workshop on Rural Development and Poverty Alleviation in Myanmar, Myanmar International Convention Center (MICC) Naypyitaw, 20–22 May 2011. 2 The New Light of Myanmar, Nay Pyi Taw, News and Periodical Enterprise, Ministry of Information, 19.8.2014, p. 1. 3 Ibid, p. 3. 4 The New Light of Myanmar, Nay Pyi Taw, News and Periodical Enterprise, Ministry of Information, 13.9.2014, p. 9. 5 Myo Thu, Yin. (2004). “The Role of International Organizations in Border Areas Development Efforts of Myanmar”. PhD Dissertation, University of Yangon, Yangon, May 2004, p. 3. 6 The Kunming Initiative, Yangon, Department of Border Trade, Ministry of Commerce, 1999, p. 1. 7 Uberoi, Patricia. (2013). The BCIM Forum: Retrospect and Prospect, New Delhi: Institute of Chinese Studies, p. 6. 8 Ibid, p. 3. 9 Ibid, p. 14. 10 Ibid, p. 13. 11 “The 10th BCIM Forum: A Step ahead in regional cooperation”, http:// www.bizbangladesh.com/business-news-2832.php 12 “BCIM Economic Corridor: Prospects and Issues” 13 “Minutes of the First Meeting of the Joint Study Group of Bangladesh-China-India-Myanmar Economic Corridor (BCIM EC)”. Beijing, Embassy of India (accessed on 20 December 2013). 14 Sahoo, Pravakar and Bhunia, Abhirup. “BCIM Corridor a Game Changer for South Asian Trade”. www.eastasiaforum.org/2014/07/18/ bcim-corridor-a-game-changer-for-south-asian-trade/ 15 Minutes of the First Meeting of the Joint Study Group. 16 Kaladan news. “Bangladesh New Proposal to Build Cross – Border Friendship Road”. www.kaladanpress.org/index.php/news/381news-2015/april-2015/4746-bangladesh’s-new-proposal-to-buildcross-border-friendship-road.html 17 Report of the Fourth BCIM Forum, Yangon, Department of Border Trade, Ministry of Commerce, 2003, p. 46. 18 Guo, Xiaolin. (2007). “Towards Resolution: China in the Myanmar Issue (Silk Road Paper)”. Washington, Central Asia – Caucasus Institute and Silk Road Studies Program, March 2007, p. 57.

Can New Myanmar contribute to integration? 283 19 Kudo, Toshihiro. (2006). “Myanmar’s Economic Relations with China: Can China Support the Myanmar’s Economy?” Discussion Paper No. 66, Tokyo: JETRO, Institute of Developing Economies, p. 11. 20 Becka, Jan. (1995). “Historical Dictionary of Myanmar”. Asian Historical Dictionaries, No. 15, Metuchen, NJ: The Scarecrow Press, p. 53. 21 The New Light of Myanmar, Nay Pyi Taw, News and Periodical Enterprise, Ministry of Information, 19.5.2013, p. 1. 22 The Myanmar Times, Vol. 19, No. 380, Yangon, 20–26 August 2007, p. 11. 23 “India News: Special Annual Issue”. Yangon, Embassy of India, 2001, pp. 24–25. 24 Ibid, p. 21. 25 Thein, Cho Cho. (2008). “Regional Cooperation in Transport: Myanmar Perspective on BIMSTEC”. CSIRD Discussion Paper.42. Kolkata: Centre for Studies in International Relations and Development, September 2008, p. 20. 26 Seminar on Across Borders: India – Myanmar Trade and Economic Cooperation, Yangon, Embassy of India, November 2004, p. 23. 27 The Global New Light of Myanmar, Yangon, Global New Light of Myanmar Printing, 15.11.2014, p. 3. 28 “Narendra Modi: Strong ASEAN ties vital for India, Indo-Asian News Service”. www.india.com/news/india/narendra-modi-strong-asean-tiesvital-for-india-188074/ 29 “The BCIM Economic Corridor: Prospects and Issues”. www.vifindia. org/article/2014/june/02/bcim-economic-corridor-prospects-and-issues 30 Uberoi, The BCIM Forum: Retrospect and Prospect, p. 7. 31 Ibid, pp. 14–15. 32 “The BCIM Economic Corridor: Prospects and Issues”. www.vifindia. org/article/2014/june/02/bcim-economic-corridor-prospects-and-issues 33 “Relations with Bangladesh since 1988”. www.idsa.in/report/Myanmar RelationswithBangladeshsince1988.210509.html

Chapter 15

BCIM sub-regional economic corridor

Anasua Basu Ray ChaudhuryBCIM sub-regional economic corridor

Will it be a game changer? Anasua Basu Ray Chaudhury

From strengthening political ties to fostering economically beneficial associations, connectivity has become a buzzword in recent years. This is primarily because the importance of giving a fillip to regional/sub-regional integration is being understood and acknowledged at political, economic as well as social levels. To achieve this goal, the importance of connectivity within geographically contiguous region, especially physical connectivity is indispensable. Keeping these facts in consideration the BCIM Forum for economic cooperation involving Bangladesh, China, India and Myanmar was founded in 1999, which has focused on promoting infrastructure, trade facilitation and economic development in the sub-region stretching from Southwest China to eastern India engaging Myanmar, India’s Northeast, and Bangladesh. Indeed the issue of promoting connectivity between the peripheries of the concerned countries has been intensified in recent years, owing to China’s strong drive for the initiative. Till date, the Forum has held 13 meetings. Earlier the initiative (popularly known as Kunming initiative) was regarded as Track II in its nature which was upgraded to Track I coordination in 2011. During the visit of Chinese Premier Li Keqiang to India in May 2013, the initiative received a boost when the idea of forming a BCIM Economic Corridor (BCIM-EC) was mooted for the first time at the level of heads of government. The corridor aims at regional cooperation between the four countries, especially with respect to trade and commerce, people to people connect, setting up of special economic zones and industrial hubs along the corridor. Though started with great enthusiasm the pace of creating economic corridor in the BCIM sub-region has been slow in recent years. Experts say that India’s apprehension on China’s intention

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behind the initiative is the main cause for the sluggish growth of the BCIM-EC. How to promote security, peace and economic development in its Northeastern region has become a major concern for India. The geo-strategic, geo-political compulsions still create hindrance to have geo-economic benefits. Against this backdrop can the BCIM-EC really be a gamechanger? To what extent the experiences of Greater Mekong Subregion (GMS) in creating economic corridor in Southeast Asia can help the decision makers of the BCIM subregion to move forward? To what extent does involvement of Asian Development Bank (ADB), (UNESCAP) or any other international agencies create congenial atmosphere to sideline nations’ geo-political goals for geo-economic gains within this sub-region? These are few questions that this article intends to deal with.

BCIM-EC: current state of affairs AS the third meeting of the joint study group (JSG) took place after a long gap of 3 years in Kolkata on 25 April 2017, China pushed for setting up of an inter-governmental mechanism that can elevate the process of implementing the economic corridor.1 It may be recalled here that so far as the general mechanism of BCIM to achieve its objectives is concerned this sub-regional initiative is based on incremental ways of decision-making comprising the followings: firstly, all countries are to submit their respective country reports; secondly, one report should be produced out of the four country reports in the next stage; thirdly, a joint working group should be set up amongst the four countries which would meet periodically to prioritise and sequence the implementation of the economic corridor; fifthly, coordination committees should be set up within each of the four countries to coordinate experts from various fields related to the development of the economic corridor.2 It is worth mentioning that the Kunming Initiative was taken keeping the fact under consideration that a regional outlook on the concerns of development, security and prosperity was undoubtedly more beneficial than striking out one’s own.3 Indeed, an important aspect of the BCIM was the Kolkata-Dhaka-Mandalay-Kunming car rally, a part of the Kunming initiative, held in 2013. The Rally had been flagged off at Kolkata on 22 February 2013 by the Chief Minister of West Bengal. The Car Rally passed through Dhaka, Silchar (Assam), Imphal (Manipur), Mandalay and Ruili (Yunnan). The Rally was received positive feedback in all four countries and

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highlighted connectivity in this sub-region. The Rally was flagged down in Kunming by the Vice Governor of Yunnan Province in Southwest China. The Sports Minister of West Bengal represented India at the function.4 Both India and China agreed to set up a JSG to identify specific programmes on building the economic corridor and the first ever meeting of the JSG was held on 18–19 December 2013 in Kunming. With the Indian government’s focus on regional connectivity and China’s push for a development of an ‘economic belt’ along the Southern Silk Road and a ‘Maritime Silk Road’, all four countries are now engaged in the initiative, as articulated during the second JSG meeting in Cox’s Bazar, Bangladesh held in December 2014.5 At the Cox’s Bazar meeting, the JSG of the four countries comprising 17 representatives from Bangladesh, five from Myanmar and India each and 15 from China presented their respective country reports.6 Detailed discussions were held on those reports and at the end of the meeting it was decided that the four countries will prepare combined reports on each area based on the four country reports in the next six months. Bangladesh will prepare a combined report on the framework of the economic corridor and sustainable development. India will prepare a report on energy and trade while China on connectivity and investment. The proposed 2,800 km-long economic corridor will traverse from Kolkata via Benapole/Petrapole on the India–Bangladesh border to Dhaka and Sylhet, Bangladesh before again entering Indian territory near Silchar, Assam. After passing through Imphal, it moves to the Tamu-Kalewa friendship road in Myanmar. After crossing Mandalay and Lashio the road will reach Kunming via Ruili, Longling and Dali. The proposed route is a part of the historic Silk Route. With multi-modal connectivity comprising roads, railways, airlines, water routes, telecommunication networks and energy pipelines, the corridor will connect Southwestern China, eastern and Northeastern India, Myanmar and Bangladesh to form a thriving economic belt. Experts say the corridor can give much needed boost to the intra-regional trade, as the intra-BCIM trade has remained fairly low. The trade potential of the corridor stands at US$132 billion, according to a study by Research and Information System for Developing Countries in India.7 While BCIM seeks to build up economic corridor connecting peripheries of member countries it will be relevant to analyse the genesis of Greater Mekong Sub-region (GMS), which has become a

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major source of inspiration behind creation of economic corridor in the BCIM sub-region. What is the structural framework of the corridors in GMS? How does decision-making system operate within a cooperative multilateral framework of the GMS? Is there any catalyst behind inter-governmental architecture of connectivity in the GMS? The next few sections delve to deal with these questions. Rationale of the GMS In 1992 the six countries along the Mekong River – Cambodia, the People’s Republic of China (PRC, specifically Yunnan Province and Guangxi Zhuang Autonomous Region), the Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand and Vietnam took initiative to form a sub-regional cooperation under the aegis of the Asian Development Bank (ADB) with a vision to promote and create favourable conditions for economic cooperation of mutual benefit among the member states in the Southeast Asia. The result was the formation of the GMS which covers an area about 2.6 million square kilometres (roughly the size of Western Europe)8and is a home for around 326 million people.9This sub-region has great economic potential and development prospects as it is rich in natural resources in terms of flora and fauna that provide both income and sustenance to the inhabitants. The Mekong River and its tributaries support agricultural and fishing industries. The sub-region is also a source of timber, minerals, hydropower and considerable coal, oil and gas reserves. Its geographical position makes it a gateway of trade with Malaysia, Singapore and the rest of Southeast Asia. Nevertheless, most part of this basin’s economy and society has developed very slowly and a large part of this sub-region is still regarded as world’s poorest area. The GMS economic cooperation programme aims to encourage trade and investment among the member countries by seamless crossborder movement of goods and people based on the strategy called 3Cs. The three-pronged strategy of connectivity, competitiveness and community10is primarily concerned with minimising potential conflicts over a common resource and also enhancing multi-dimensional confidence-building measures. Initially, the GMS countries targeted promoting joint activities in some functional areas of potential including infrastructure, trade and investment, tourism, environmental protection, and human resource development, creating a favourable environment to develop long-term cooperation for mutual benefit

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among countries in the sub-region. To operationalise the GMS economic cooperation program, institutional mechanisms were put in place to sustain the collaboration and ensure effective project implementation. The first summit of the leaders of the member countries held in Phnom Pen in November 2002 and since then altogether five summits have been held so far. Organisational framework of the GMS The GMS Program has been pursued through a three-tier institutional arrangement consisting of (i) a GMS leaders’ summit at the political level (held every three years); (ii) a ministerial-level conference supported by meeting of senior officials at the policy level; and (iii) sector forums and working groups at the project and operational levels. Moreover a national inter-ministerial committee assisted by a designated national secretariat coordinates GMS activities in each country. The ADB provides overall secretarial support to the GMS Program in coordination with national secretariats in the GMS countries. These arrangements have provided an adequate administrative framework for implementing the GMS Strategic Framework. While evaluating the activities of the GMS the experts argue that the decision-making of the sub-region is ‘flexible’, ‘simple’, and ‘generally effective’ in supporting the pragmatic, activitydriven, and results-oriented approach. It has also been stated that the capacity of the GMS national secretariats is being improved and most of the GMS forums and working groups have taken steps to sharpen the focus of their work and make their activities more effective, for example by further prioritising planned projects and preparing strategies and work plans to guide their activities.11 Strategic framework and the concept of corridors in GMS Recognising importance of the private sector in economic development in GMS, United Nations Economic and Social Commission for Asian and the pacific (ESCAP) has worked closely with the ADB, donor agencies and the GMS business sector to enhance private sector development in GMS under three different frameworks: (a) the Forum for the Comprehensive Development of Indo-China; (b) Advisory Assistance to Industry for Export Promotion and (c) the GMS Trade Facilitation Working Group. In 1999, ESCAP formulated a

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comprehensive approach to business sector development in GMS called the ‘Hi-Fi’ Plan highlighting four main strategies: H  – human resources development at the enterprise level, including a series of targeted management training initiatives; i –  institutional capacity building of private sector associations and chambers of commerce and industry, advisory services to exporters and establishment of a GMS Business Support Centre; F – facilitation measures, especially in the area of trade and related procedures; i –  investment promotion through increased interfacing between the foreign and domestic business communities and creation of a stronger enabling environment for investment. A GMS Business Forum was established in October 2000 to give GMS countries further help in creating an environment conducive to the private sector. The Forum aims to promote business activities and investment by building up the capacity of the local private sector, creating networks between local firms and foreign firms and enhancing the public-private sector interface in GMS, including the major multilateral agencies. It also serves as a mechanism for enlisting private sector support for development and provides a direct and regular channel for the private sector to communicate with the GMS Governments.12 A Strategic Framework for the GMS was adopted at the 10th GMS Ministerial Conference in November 2001. The framework outlines the following five development thrusts: Strengthen infrastructure linkages through a multi-sectoral approach; Facilitate cross-border trade and investment; Enhance private sector participation in development and improve its competitiveness; Develop human resources and skill competencies; Protect the environment and promote sustainable use of the subregion’s shared natural resources.13 Recognising the important role of the private sector in economic development in GMS, United Nations Economic and Social

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Commission for Asian and the pacific (ESCAP) has worked closely with the ADB, donor agencies and the GMS business sector to enhance private sector. It is evident that for over the last 23 years, GMS’s cooperation programme has been a catalyst for high-priority sub-regional projects.14 By the end of 2011, ADB had extended loans and grants of US$5.1 billion altogether for 56 investment projects. Total cost of all these projects was US$15 billion, of which the GMS governments provided about US$4.3 billion and development partners funded about US$5.6 billion. The projects involved sub-regional roads, airport and railway improvements, hydropower for cross-border power supply, tourism infrastructure, urban development, and communicable disease control. In addition, ADB-supported177 technical assistance projects with a total cost of US$286.1 million for project preparation, capacity development, economic and sector work, and coordination and secretariat assistance. With the assistance of the ADB the countries of the sub-region have prepared and adopted a new GMS Strategic Framework for the period of 2012–2022 in the Fourth summit held on 20 December 2011 at Nay Pyi Taw, Myanmar. The strategy is anchored on the approach of focusing on developing economic corridors. As per the strategy the member countries have formed the economic corridors forum to boost efforts to transform GMS transport corridors into economic corridors. The forum is designed to strengthen collaboration among areas along the corridors and among GMS sector working groups and will act as a single body focusing on economic corridor development. The aim is to improve interaction not only between public and private sectors but also between central and local governments. In this context it is to be mentioned that the ADB formulated a Transport Master Plan that identified priority transport infrastructure investments in 1995. Subsequently, in 1998, this Transport Master Plan was updated to incorporate the corridor concept and identify three main corridors: North–South, East–West, and Southern. In 2003, the Transport Master Plan was upgraded to include the GMS Cross-Border Transport Agreement initiative, which is a multilateral legal instrument among GMS countries to allow easier (seamless) movement of people, goods and vehicles across borders of member GMS countries. In May 2006, the Transport Sector Strategy (TSS), 2006–2015 was published as the first comprehensive GMS transport infrastructure assessment. The TSS, 2006–2015

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prioritised 36 transport investment projects which will help to integrate subregion’s network of transport links. These transport corridors and linkages will provide a base for the development of economic corridors. As of now three major economic corridors have already been completed, namely, the North–South, the East– West and the Southern economic corridors.15 GMS Corridor development strategies and action plans have already been prepared for each of the economic corridors to help ensure that they contribute to enhanced agriculture, industry, and service sector development and trade facilitation, which will lead to overall promotion of economic growth and poverty reduction. These strategies differ significantly from earlier strategies in recognising the important interlinkages across sectors while being very focused on relatively fewer high-profile initiatives. For each corridor, there is a plan for carefully planned investments aimed at strengthening urban development, upgrading logistics, improving the network of feeder and rural roads, and developing other transport modes. A need for a new sub-regional master plan highlighting these investments has been felt. It has been decided that several special economic zones (SEZs) or industrial parks will be developed at the borders between the member states or along the corridors and for easier movement of goods and people between the member states improvements in transport sector will also be essential. In addition, private sector investment through supply chains will need to be encouraged. Further development of the corridors must also take due account of food and energy security and climate change concerns. Within the context of this broad set of sector and cross-sector issues, a comprehensive approach to the urgent need to improve transport and trade facilitation (TTF) has been finalised that covers transport facilitation – including expanding and streamlining exchange of traffic rights. According to the GMS strategic framework the Economic Corridors Forum will coordinate the overall development of the corridors at sub- regional level, including through implementation of the agreed strategies for each of the corridors and strengthening coordination and ownership of the strategies at the provincial and local levels. Consideration will also be given to expanding the responsibilities of the forum to include a wider range of cross-sector issues, including trade and investment facilitation and the development of urban areas along the corridors. This will require increased coordination with other sector working groups and a clear division

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of responsibilities that also reflects the specific institutional arrangements of each of the GMS countries. For example, transport sector agencies will need to take the lead on cross-border transport facilitation through exchange of traffic rights, while a different set of agencies will need to focus on other aspects of corridor development related to trade facilitation and investment promotion. Efforts will also be made to integrate the progress and lessons learned with respect to trade and investment facilitation for the economic corridors into the broader agenda of trade and investment facilitation being pursued in the context of ASEAN integration and in other forums.16 It is expected that new investments will be spread across a variety of sectors, including physical infrastructure and urban and rural development along the corridors. Investments will be made in urban services, including water and sanitation, as well as in feeder roads and other transport modes, such as railways. Technologically, smart investments in energy and telecommunications will also be made. In addition, green technology will be an important new focus. The experts argue that the GMS enters its third decade with a renewed ‘sense of unity’ and a ‘clear path forward’.17 The importance of knowledge management and partnership has also been recognised in the new strategy. It is noteworthy that the GMS partners have acknowledged that the sub-region’s third decade will be a challenging time, as the program further matures. In this phase support from the private sector will also be necessary to bring sub-regional cooperation to a new and higher level.18 The projects’ statistics reveal that by June 2014, the GMS had carried out 74 investment projects worth of US$16 billion, including those relating to the development of transport systems, hydropower, tourism infrastructure, and contributing to socio-economic development and poverty reduction in the sub-region. In 2014 GMS member nations approved the regional investment framework (RIF) at the 19th GMS Ministerial Meeting, which aims at realising the new GMS cooperation strategy for the 2012–2022 period. The RIF includes over 200 investment and technical assistance projects with a total initial capital of US$51.5 billion. In due course the leaders of the member states will also evaluate reports on the implementation of agreements and initiatives taken under the RIF along with the investment forum, business forum, youth forum as well as reports received from development partners.19

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Having discussed GMS in much detailed style we now look at BCIM to critically evaluate the issues and concerns behind creation of economic corridor. It has been expected that the corridor would merge the China-ASEAN Free Trade Area, the India–ASEAN Free Trade Area and the ASEAN Free Trade Area into the largest global free trade zone.20 It intends to connect the four member countries through a network of roads, railways, waterways and airways under a proper regulatory framework. Experts argue that the proposed transport corridor in the BCIM region has been highly inspired by the GMS model of connectivity. As the current focus of BCIM talks is on an inter-regional road network, in the next section we intend to analyse pros and cons of creation of such road networks. It is to be revealed at the very outset the concept of linking all four countries by road under the banner of the BCIM has strengthened the notion that this economic corridor would subsequently open up the whole of the Northeastern region of India to Southeast Asia and China and turn it into a significant channel of trade. The essential philosophy of India’s Look East Policy (LEP) now refurbished as ‘Act East’ is that India must find its destiny by linking itself more and more with its Asian partners and the rest of the world. The experts argue that India’s future and economic interests are best served by closer integration with the rest of Asia.21

Proposed transport corridor in the BCIM-EC: some concerns Physical connectivity is the bedrock of all of other forms of connectivity such as economic links, social links and people to people interactions. Given the geographical proximity of the BCIM countries, the establishment of road, rail, inland waterway and maritime links is vital for integrating the sub-region as well to encourage and develop economic interactions that would contribute to the socioeconomic improvement of the contiguous zone. Beyond this, it implies ‘linear connectivity’ along a physical transportation artery within a defined space or location, linking various nodes of production, distribution and consumption, and supported by programmes, policies, institutions and agreements that facilitate cooperation between the economic clusters along the corridor route. The focus on linking provinces in the BCIM – in this case, Yunnan and West Bengal – seems to have given a new impulse to

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galvanising the plan. It has been reported that the member states have taken serious steps to build the main artery of the 2,800 kmlong, K2K transport corridor. The corridor will pass through the nodes of Kolkata–Petrapole/Benapole–Jessore–Dhaka–Sylhet– Deola/Sutarkandi–Silchar–Imphal–Moreh/Tamu-Kalay–Mandalay–Muse/Ruili–Tengchong–Dali–Kunming. Here one point is to be considered that not all of the roads connecting the nodes are in good condition. Therefore, one of the primary tasks is to upgrade the existing network and improve them so that they are able to withstand traffic. Existing roads which connect with international highways should also be improved and made durable enough to bear the load of cross country trade and traffic. According to a news report a stretch of about 200 km, from Kalewa to Monywa in Myanmar, needs to be upgraded as an all-weather road. More so, the segment between Silchar in Assam and Imphal in Manipur needs immediate upgradation (which India is upgrading presently). From Kolkata, the capital of West Bengal, the corridor will head towards Benapole, a border crossing town in Bangladesh. So far as the corridor route is concerned, after passing through Dhaka and Sylhet, it will re-enter the Indian territory near Silchar in Assam. The rest of the passage will be connected with Imphal and then pass through the India-built 160 km long Tamu-Kalewa friendship road in Myanmar. However, there are 70 weak bridges, one of which has been repaired by Myanmar till date. The remaining 69 bridges need upgradation and repair. These will not be repaired by Government of India through BRO, but by the Myanmar government instead.22 It is part of the 1,360 km-long cross-border Trilateral Highway.23 Mandalay will be the next focal point of the corridor before the road enters Yunnan, after crossing Lashio and Muse in Myanmar. The Chinese stretch of this artery road extends from Ruili before reaching Kunming through Longling and Dali. The central corridor can be connected with two supplementary passages to the north and the south. Starting from Kunming, the northern passage heads towards Myitkyina, capital of Kachin state in Myanmar before extending to Ledo in Assam. After crossing Dibrugarh and Guwahati, this road enters northern Bangladesh and joins the central corridor inside the country, before reaching Kolkata. At present, this route is problematic because it enters a small portion of Arunachal Pradesh over which India and China have a territorial dispute. Besides, a part of this stretch is insurgency-prone, and therefore unsafe.24

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The BCIM corridor would be incomplete without drawing Mizoram into the framework through the Kaladan multi-modal transit transport project (KMTT). Under this plan, Mizoram would be connected with Myanmar’s port of Sittwe, through the Kaladan River, and the passage will provide all the landlocked NortheasternStates access to the sea. Compared with the land route, Sittwe provides these states direct access to Kolkata, just 539 km away. The goods destined for the Northeast will be unloaded at the Sittwe port and then travel 160 km along the Kaladan River to Paletwa and then along a 210 km highway connecting to the Indian border at Lawngtlai, Mizoram. A Land Customs Station (LCS) at Zorinpui in the Lawngtlai district of Mizoram will be established.25 The KMTT project currently under construction under the auspices of India’s Ministry of External Affairs is combining overland (road/ rail), inland waterway or maritime passageways together, as is the proposed Mekong–India Economic Corridor (MIEC) linking southern India with the GMS countries viaDawei port in southern Myanmar.26 Though in terms of cost-benefit analysis maritime route appears to be favourable over land-based routes, however it is always advisable to see these two modalities as complementary rather than oppositional.27 A crucial logistical issue has been identified in the KMTT project which needs to be addressed for the project to realise its objectives. The KMTTP comprises a complex process of disembarkation and re-embarkation at Setpyitwin in Myanmar.28 According to the rules at present, goods travelling to Mizoram and further into the Northeastern states in India need to be transferred into land vehicles from waterway containers. This is because the Kaladan River is navigable only up to Paletwa and the route towards Mizoram is a surface transport route. Hence to make the multi-modal aspect of the project fruitful, there needs to be smooth operations and facilities in place.29 According to a news report China proposes to build a high speed railway line between Kunming in the Southwest of the country and Kolkata. The link would be part of the BCIM Economic Corridor aimed at boosting trade and relations. The proposed 3,000 km rail corridor, starting from the capital city of Yunnan Province and passing through Myanmar and Bangladesh, could be funded through China’s Silk Road development fund or the Asian Infrastructure fund. The rail corridor will pass through Mandalay in Myanmar and the Bangladeshi cities of Chittagong and Dhaka before entering West Bengal and ending in Kolkata.30

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While India already has established connectivity with Myanmar (Moreh-Tamu-Kalewa road as well as trade points at Moreh-Tamu and Zowkhathar-Rhi besides the implementation of the Kaladan project) the same however, is yet to be arrived at with Bangladesh. The landlocked Northeastern region forms the hinterland of the Chittagong port in Bangladesh and access to this port would be beneficial for trade from the Northeast. The importance of land connectivity can be best realised when these links are extended to the nearest ports. In this sense, another important port is Ashuganj, which sits on the Meghna River in the Brahmanbaria district of Bangladesh. The port is 37 km from Agartala, the capital of Tripura and would be a vital link among India’s Northeastern states. The Ashuganj port is underdeveloped, and that is the challenge. It is still in the process of being modernised and there is an imperative for the institutionalisation of infrastructural support. It is true that overall the number of roads has improved in Bangladesh. But what is important for Bangladesh is the development of more durable roadways that are capable of handling heavy vehicles.31 The condition of cross-border roads, especially those with India is very poor and therefore affects bilateral trade.32 Whatever be the case, it is clear that the spatial planning of the BCIM-EC needs very careful thought with respect to the larger design for networked and multimodal connectivity within India’s Northeast between the Northeast and the rest of India, and between the Northeast of India and the neighbouring countries that comprise 98 percent of the region’s borders.33 The Indian government’s report of 2008, entitled Vision 2020, assures the establishment of necessary infrastructure and better connectivity within the region and, subsequently, with the larger South and Southeast Asian region. For the seamless movement of trade as well as passenger traffic, the governments of both India and Bangladesh have undertaken the establishment of land ports and land custom stations. India has planned 13 ICPs along its entire international border (with Pakistan, Nepal, Bangladesh and Myanmar), of which seven are for the India-Bangladesh border. About two or three are functional at the India–Bangladesh border at the moment. ICPs are expected to provide all the facilities necessary for smooth cross-border movement of people, vehicles and goods under one roof. ICPs facilitate the processes of immigration, customs, security, quarantine, etc. The following are the infrastructural facilities provided at the ICPs: Passenger terminals, internet facility,

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cargo inspection sheds, quarantine laboratory, banks, isolation bay, cafeteria, currency exchange, cargo process building, warehouse/ cold storage, clearing agents, scanners and parking.34 Building transport corridors: role of ADB and SASEC Presently the ADB, the main catalyst behind creation of transport corridor in the GMS is playing a very crucial role in the BBIN subregion. Acknowledging the technical and facilitating role played by the ADB in pushing the Bangladesh–Bhutan–India–Nepal Motor Vehicle Agreement (BBIN MVA), the concerned members have requested the bank to continue supporting the initiative and help ensure the efficient implementation of its work plan. The parties also acknowledge the progress of the ADB-supported South Asia Subregional Economic Cooperation (SASEC) program – also an initiative among the same group of four nations – to enhance their interconnectivity. In parallel projects, the ADB-funded SASEC is also providing support to Bangladesh and India to upgrade old roads and build new ones. In India these projects are being designed to improve connectivity in this part of India where movement is often hindered by hilly terrains and climatic elements such as heavy rains. Under the programme, the ADB is set to lend $300 million to India for improving regional road connectivity in the Northeast. The country signed an agreement with the ADB on 26 March 2015 for developing 500 km of roads along the north Bengal-Northeastern region. The ADB is funding road projects in India’s Northeastern region to establish transport linkages with neighbouring countries.35 It is expected that these connectivity projects may strengthen formation of transport corridor in the BCIM sub-region in near future. Infrastructure deficit is constraining market-led growth and access to social services in Bangladesh. ADB’s assistance in the transport sector has boosted pro-poor economic and social development. Following Strategy 2020, ADB continues to help improve road networks and bridges, connectivity, transport efficiency, urban infrastructure, and ports’ infrastructure and efficiency through automation in order to strengthen access to markets, enabling costeffective movement of goods and commodities, and triggering economic development. Under the Sixth Five Year Plan of Bangladesh for 2011–2015, the government aims to develop a balanced and integrated transport network. Development will be concentrated

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on five main corridors: Dhaka–Chittagong, Dhaka–Northwest, Dhaka–Khulna, Dhaka–Sylhet, and Khulna–Northwest. ADB continues to support the government’s endeavours and has provided loans for 39 projects and technical assistance for 56 projects in this sector. Since 1973 ADB assistance for the transport and information and communication technology (ICT) sector accounts for 21.22 percent of total ADB assistance to Bangladesh during 1973 to 2013, amounting to about $3.0 billion. It has been reported that the ADB will provide $1.5 billion to Bangladesh to build a dual-gauge railway line that will bring key trade and tourism to the southern most parts of Bangladesh. The new railway, part of the Trans-Asia Railway network, will also improve access to Myanmar and beyond. The Trans-Asia Railway – an initiative led by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) – aims to provide seamless rail links between Asia and Europe to better connect people and markets.36 In a similar way the ADB is assisting Myanmar to develop its infrastructure. ADB’s strategy for reengagement with Myanmar in the transport sector consists of three separate but interrelated phases: preparation of an in-depth sector assessment, strategy, and road map to further strengthen ADB’s understanding of the transport needs, challenges, and constraints, and to identify – in partnership with the government – priority areas for support; provision of technical assistance in the form of policy advisory services, planning, institutional capacity building and training, and project prefeasibility studies. Technical assistance in these areas will be first step towards restructuring and strengthening the sector, and recasting responsibilities among the six ministries currently in charge of the subsectors; and preparation, financing and implementation of infrastructure investment projects.37 Under the circumstances it cannot be ruled out that ADB may play an active role of improving transport linkages across borders to develop economic corridors in the BCIM sub-region in one-way or the other. Irritants in developing the BCIM-EC It has become almost a well-known fact that India’s Northeast is one of the most complex regions in the entire Indian territory and all connectivity projects under the larger initiative of the Look

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East Policy (now refurbished as Act East) have to pass through this region. It is thus vital to engage the people of the states of India’s Northeast sharing their borders within BCIM framework to understand their gains out of the road and communications networks being envisioned. Therefore, it is important to have a consultative mechanism to integrate India’s Look East Policy with the requirements of India’s Northeast. There is a need to study the export potential of the Northeast and match that with the demand conditions in markets such as Bangladesh, China and Myanmar. While highlighting the significance of congenial circumstances in the Northeast for such exports to take place it is also important to create sustainable projects in the region in collaboration with the other countries in the BCIM grouping. It is true that some steps have already taken place in terms of road connectivity however much more needed to be done to take the full advantage of transnational connectivity. Local capacities are needed to be built up according to the priority of the projects. The BCIM-EC would link two Least Developed Countries (Bangladesh and Myanmar) with two of the world’s largest and fastest growing economies like India and China. As the transport corridor traverses areas of relative underdevelopment, touching landlocked Southwestern part of China and India’s Northeastern region, a distinct geographical area whose backwardness cannot be addressed through merely national developmental programmes, the region may emerge as a zone of opportunities through connectivity linkages between the two Asian giants.38 The priority focus for the BCIM corridor in the near future would be issues like non-tariff barriers, the harmonisation of standards and the whole range of trade facilitation measures and these would need to be further buttressed with transnational arrangements for transit and the eventual movement of vehicles and other forms of transportation across national borders. After all, good infrastructure is crucial for people-to-people contacts in fostering greater understanding, cooperation and goodwill. The key nodes in the development of ‘mini-corridors’ are the border crossing points, gateway nodes (very often sea ports) and interchange nodes, along with commercial nodes, both industrial and agricultural. In this, and in the development of value chains along the corridor, Small and Medium Enterprises (SMEs) will have a special role to play as the fulcrum of local enterprise and entrepreneurship.39

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It is true that since its inception in 1999 with the primarily aim to boost the economic prowess of the region and increase connectivity, the BCIM has been unable to be productive in any substantial manner. Despite the apparent willingness of the four countries, they have been limited by several factors in their endeavour to make the initiative prosper. One of the prime reasons for this is the fact that there is considerable political reluctance that hinders its success. The border regions of the BCIM countries have a complex development-security conundrum. The protracted ethnic conflicts in India’s Northeast and northern Myanmar have had serious security and development impacts on the border areas of the BCIM region.40 With the political and constitutional changes that have taken place, Myanmar is keen to balance its position with other countries and reduce its reliance on Beijing. There are in fact several areas of convergence between India and Myanmar with regard to energy investments, geo-strategic and maritime security. Indian policy with respect to Bangladesh is vital as India shares the longest border with the latter and also because it is often acknowledged that ‘India’s Northeast is Bangladesh-locked’. Against this backdrop utilisation of Chittagong, Kolkata, Haldia and Kulpi ports for enabling the exchange of both trade and passenger movement is to be considered. It is also important to encourage large-scale transportation of goods through Bangladesh to the Northeastern region. The state of affairs between India and China is the most vital aspect impacting the proper functioning of the BCIM. From India’s perspective, two reasons are pointed out in regard to the Sino-phobia’. One, the concerns that opening up of the Northeast would flood the Indian markets with Chinese goods and two, that the same prospect would make the Northeastern border security vulnerable. Many believe that it is part of Chinese policy to keep the border issues unresolved, wean away Nepal, Bangladesh and Myanmar and arm Pakistan, thereby limiting India’s influence in the subcontinent. On the other hand, there is the much talked about ‘Asian Century’ and the view that “India and China need not fear each other, as it is not ‘India or China’ but ‘India and China’ which would redefine the global economy”.41 It is worth-mentioning here that while speaking on Asian connectivity at the Raisina Dialogue on 1 March 2016 in New Delhi, India’s External Affairs Minister Sushma Swaraj stated that “We bring to bear a cooperative rather than unilateral approach and believe that creating an environment of trust and confidence is

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the prerequisite for a more inter-connected world”.42 However, it is very unfortunate that there is dearth of trust and confidence in India–China relations presently. China’s initiative in developing the CREC, Chinese opposition to India’s permanent membership of the UN Security Council as well as membership of nuclear export control regimes such as NSG; China’s supply of nuclear and missile technologies and material to Pakistan in violation of its international commitments; and the Chinese indifference to resolve the lingering border dispute, are some burning issues that keep the bilateral relations in a state of tension. Under the circumstances is the BCIM-EC really a gamechanger? Or will this project, like others proposed by China under its One Belt One Road (OBOR) initiative, result in the most benefit accruing only to the Chinese provinces involved? These are the questions still haunting the South Block. Indeed, the BCIM Economic Corridor has the potential of transforming a conflict zone into a cooperation zone provided trust and positive perceptions among the member states are ensured. In order to have smooth operationalisation of the corridor adequate regulatory measures are to be taken. Such regulatory measures may check any possible negative impacts of the corridor by emphasising: (a) importance of dialogue with all stakeholders at different levels to engage them in the process (as of now the BCIM initiative is based on the ‘top-down’ approach, with minimal consultation with local stakeholders); (b) importance of understanding the role of perception of the neighbouring countries across the border about the BCIM initiatives; and (c) importance of functional synergy between planning and execution of the projects on sectoral basis. As the BCIM is still in its formative stage the experiences of the GMS can be of help to understand the dynamics of geographical proximity over historical disputes.

Notes 1 “Meet In Kolkata: China Pushes for Inter-Governmental Mechanism for BCIM Economic Corridor”. http://indianexpress.com/article/india/ meet-in-kolkata-china-pushes-for-inter-governmental-mechanism-forbcim-economic-corridor-4628361/ 2 Minutes of the BCIM Economic Corridor Planning Experts Group held on 28 November 2014 at New Delhi. 3 Basu, Pratnashree. “From Kunming Initiative to BCIM Corridor”. www. orfonline.org/cms/sites/orfonline/modules/analysis/AnalysisDetail.html? cmaid=56396&mmacmaid=56397 (accessed on 10 September 2015)

302  Anasua Basu Ray Chaudhury 4 “BCIM Car Rally Concludes Successfully”. www.mea.gov.in/pressreleases.htm?dtl/21265/BCIM+Car+Rally+Concludes+Successfully (accessed on 10 August 2015). 5 In response to question no. 256 on BCIM corridor in Lok Sabha debates held on 22 July 2015 the Minister of State, Ministry of Foreign Affairs shared this information with the house. www.mea.gov.in/ lok-sabha.htm?dtl/25635/Q+NO256+BCIM+CORRIDOR (accessed on 13 September 2015). 6 “4 Nations agree to create fund”, Daily Star, 19 December 2014. www. thedailystar.net/4-nations-agree-to-create-fund-56053 (accessed on 10 September 2015). 7 Ibid. 8 See Asian Development Bank (2012). “Overview: Greater Mekong subregionn-Economic Cooperation Programme”. Philippines. 9 Ibid. 10 Ibid. 11 Asian Development Bank (2011). The Greater Mekong Subregion Economic Cooperation Program Strategic Framework 2012–2022. Philippines, p. 7. 12 “Regional Cooperation: Conceptual Framework and Asia-Pacific Experience”. ESCAP Report. www.unescap.org/sites/default/files/ch2_0.pdf (accessed on 27 August 2015). 13 Asian Development Bank, “Greater Mekong Subregion: Twenty Years of Partnership”. Philippines, pp. 13–14. 14 Asian Development Bank. (2012). “Greater Mekong Subregion: Twenty Years of Partnership”. Asian Development Bank, Philippines, pp. 13–14. 15 Initial review of the Greater Mekong Subregional Transport Sec tor strategy 2006–2015, GMS Secretariat. “Southeast Asia Department”. ADB, December 2014, p. vi. www.adb.org/sites/default/files/ institutional-document/150656/initial-review-gms-transport-sectorstrategy-2006-2015.pdf (accessed on 2 August 2015). 16 Asian Development Bank, “Greater Mekong Subregion: Twenty Years of Partnership”, P.18. 17 Asian Development Bank, The Greater Mekong Subregion Economic Cooperation Program Strategic Framework 2012–2022, P. 122. 18 Ibid. 19 Nhan Dan http://en.nhandan.org.vn/politics/editorial/item/3019802 strengthening-greater-mekong-sub-region-co-operation-and-links.html (accessed on 2 august 2015). 20 Pratnashree Basu, same as note 3. 21 Opening Statement of Ambassador Rajiv K. Bhatia Director General, ICWA at Seminar on “BCIM Economic Corridor”. New Delhi held on 5 December 2013. http://icwa.in/pdfs/DGopeningst05122013.pdf (accessed on 14 September 2015). 22 Ministry for the Development of the Northeast. www.mdoner.gov.in/ node/1505 (accessed on 20 February 2015). 23 The 1360 km cross-border transportation network would link Moreh (India) to Mae Sot (Thailand) through Bagan (Myanmar). It is expected that the project will be completed by 2016.

BCIM sub-regional economic corridor 303 24 “China, India Fast-Track BCIM Economic Corridor Project”. The Hindu, 26 June 2015. www.thehindu.com/news/national/china-indiafasttrack-bcim-economic-corridor-project/article7355496.ece (accessed on 11 September 2015). 25 Interview with Anil Viswakarma, Project in charge, Essar, Sittwe, Myanmar on 27 March 2015. 26 The corridor proposes to connect Ho Chi Minh (Vietnam) with Dawei (Myanmar) via Bangkok (Thailand) and Phnom Penh (Cambodia) and further linking it to Chennai (India). 27 Uberoi, Patricia. (2014). “The BCIM Economic Corridor: A Leap into the Unknown?” ICS Working paper, November 2014, p. 7. 28 “Kaladan Multi-Modal Project in Myanmar”. Manipur Online, 19 December 2010. http://manipuronline.com/look-east-policy/kaladanmulti-modal-project-in-myanmar/2010/12/19 (accessed on 10 June 2015). 29 Interview with U Tun Htay, Port Officer, Senior Pilot, Myanmar Port Authority, Rakhine State, Sittwe Port on 25 March 2015. 30 “New Silk Route? China Plans Kunming-Kolkata Railway Link”.Economic Times, 18 June 2015. http://articles.economictimes.indiatimes.com/2015-06-18/news/63567726_1_rail-corridornew-silk-route-bangladesh-china-india-myanmar (accessed on 15 September 2015). 31 See “Connecting South Asia and Southeast Asia: A Bangladesh Country Study”. Mustafizur Rahman, Khondaker Golam Moazzem, Mehruna Islam Chowdhury, and Farzana Sehrin, ADBI Working Paper Series, September 2014. 32 Chaudhury, Anasua Basu Ray and Basu, Pratnashree. (2015). IndiaBangladesh Connectivity: Possibiklities and Cjanneges, New Delhi: Observer Research Foundation, p. 28. 33 Uberoi, “The BCIM Economic Corridor: A Leap into the Unknown”, p. 15. 34 Ibid, p. 67. 35 Chaudhury, Anasua Basu Ray, Basu, Pratnashree and Bhonsale, Mihir. (2015). “Driving Across the South Asian Borders: The Motor Vehicle Agreement Between Bhutan, Bangladesh, India and Nepal”. Occasional Paper 59, ORF, New Delhi, September 2015, pp. 11–12. 36 “$1.5 Billion ADB Rail Project Will Develop Southeast Bangladesh”. News Release, 26 September 2016. www.adb.org/news/15-billion-adbrail-project-will-develop-southeast-bangladesh 37 “Country Operations Business Plan: Myanmar, 2015–2017”. www. adb.org/sites/default/files/linked-documents/cobp-mya-2015-2017ssa-02.pdf 38 Uberoi, “The BCIM Economic Corridor: A Leap into the Unknown”, p. 11. 39 See Brunner Hans-Peter. (2010). North East India: Local Economic Development and Global Markets, New Delhi: Sage Publications, pp. 24–28; also see Brunner Hans-Peter. (2013). “What Is Economic Corridor Development and What Can It Achieve in Asia’s Subregions?” ADBPaper Series on Regional Economic Integration, No. 117. ADB, Manila.

304  Anasua Basu Ray Chaudhury 40 Yhome, K. www.orfonline.org/cms/sites/orfonline/modules/analysis/ AnalysisDetail.html?cmaid=60745&mmacmaid=60746 41 Basu, “From Kunming Initiative to BCIM Corridor”. 42 Sajjanhar, Ashok. (2016). “Understanding the BCIM Economic Corridor and India’s Response”. ORF Issue Brief, ORF, New Delhi, June 2016, p. 4.

Chapter 16

The BCIM corridor

Ishani NaskarThe BCIM corridor

Geo-economic prospects Ishani Naskar

Since the birth of the modern state system, economics, commerce and trade are powerful drivers behind inter-state relationship. A cursory glance at global economic history is testimony to the fact that the web of trade relations has evolved perhaps since the inception of civilisation though the magnitude and intensity of trade and commercial relations have differed in different historical phases. Adequate maritime and land connectivity have kept trade between civilisations alive. Thus, globalisation is not a phenomenon exclusive to modernisation or the golden revolution. Yet the globalisation that the 21st century is witnessing is propelled upon finance, high-end technology, information, skill and services. Another trend in contemporary globalisation is the gradual push for standardisation, harmonisation and integration of the national economies towards attaining global standards spelt out by global trade organisations like the World Trade Organisation (WTO); at least, establish certain regional economic arrangements in different parts of the world. While economic gains, trade facilitation have been the primary drivers behind regional multilateralism, socio-cultural elements, political determination have emerged as strong factors in building regions. Strong arguments in favour of and against regional arrangements vis-à-vis globalisation have been made but that apart, regionalism is now paralleled by sub-regionalism, a relatively recent development. An offspring of this emerging trend is the establishment of economic corridors. Economic Corridors are believed to harness the potential economic forces of a geographical space. It is rooted on the understanding that regional economic growth and integration could be made possible by an intelligent application of economic geography. Economic geography scrutinises the geographical landscape and

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employs the available resources, economic forces, infrastructure (inclusive of economic corridors) to stimulate economic activities and disburse its benefits to the concerned region. It ought to have positive spin-offs for the region and in this case regions needn’t be confined to national boundaries of a single country. Often regions are defined on the basis of geographical contiguity as much as transboundary economic space that has common if not similar resources, common patterns in economic activities and to some extent not very different demographic profiles. An economic corridor connects the economic nodes, agents employing them such that it works towards incremental economic integration not to mention economic growth. The backbone of economic corridor is infrastructure and specifically connectivity that can ensure a smooth interaction between the economic actors and agents. With the gradual standardisation of trade rules and standards, the lowering of trade obstacles (tariffs and NTMs) and with the almost inevitable drive towards linking regional value chains economic corridors are expected to mature along with the economic matrix urging economic actors to promote the economic corridor as a part of economic and production network. Viable economic corridors are indicative of regional trade compatibility and thus a substantive step towards building a regional block in some distant future. Such corridors have certain general features and to that extent are expected to reap general benefits to the regions they cover. This is not discounting the fact that economic corridors are typical to their own geographical region and economic space. Perhaps there are no stereotypes in economic corridors. Economic corridors are characterised by the industrial layout and structure, composition of the exports, nature of product basket, scope for trade diversification, capacity for contributing to the value chains, demographic composition and density, market accessibility networking including logistics necessary for integration and not the least the policy incentives that attracts entrepreneurship and investments both from within and outside the region. Much of the role expectations from economic corridors are conditioned by the economic matrix of the location, nodes it seeks to connect and the region through which they run. Corridors running through advanced production regions nourished by industrial outputs and having metropolis nodes are quite different to those seeking to running through and connecting economic peripheries. For instance, the Maputo Development Corridor in South Africa is a well-developed transport

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corridor running through a developed area connecting the commercially developed and industrialised areas of South Africa crossing into Mozambique’s Maputo and the deep sea water ports of Maputo and Matola.1 Similarly, the Delhi-Mumbai Industrial Corridor (DMIC) seeks to connect the metropolis and industrial hubs through a strong network of transport, connectivity and logistics. It aims at expanding the manufacturing and services base to promote it as a global standard manufacturing and trade hub.2Similar corridors are there in Europe – the Leipzig to Frankfurt Economic Corridor, Green Cloverleaf Corridor (connecting Calais and Dover) or the Brenner Corridor (connecting Munich and Verona). In contrast there is the Southern Economic Corridor straddling the countries of the Greater Mekong Sub-region, namely Cambodia, the People’s Republic of China (PRC, specifically Yunnan Province and Guangxi Zhuang Autonomous Region), Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand and Vietnam which does not look at such an advanced technology supported industrial economy. The GMS lost not much time in realising the importance of connectivity and in turn economic corridors. This is also a way of encouraging regional cooperation for corridor development. Looking at the issue of theoretical frameworks for regional cooperation led corridor development ADB conducted studies on Economic Corridors.3 It mentioned the evolution of an economic corridor takes several stages – (i) Transport Corridor; (ii) Transport and Trade Facilitation; (iii) Logistics Corridor; (iv) Urban Development Corridor; and (v) Economic Corridor. In many cases neither the stages are well-defined nor do they follow the sequences automatically. In addition, from the urbanisation and development approach, national corridors confined within borders connect urban nodal centres within a particular locality hoping that connectivity would facilitate infrastructure building and encourage infrastructure induced growth and development within that particular region. Regional Corridors from the regional cooperation approach deals with a broader agenda involving more and different stakeholders, different policy issues, and institutional arrangements. The Corridor approach to development as underlined by the ADB is to have a strong backbone of transport along the corridor that encourage project clusters to develop along the corridor and thus induce surrounding areas to engage in the growth expansion process. Apart from ensuring the maximum use of regional resources, the Corridor-induced development provides for a twin advantage of

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identifying and establishing new regional projects and coordinating national projects within the regional framework. Herein one must take note of the fact that from a geo-economic perspective national projects that have regional implications or regional projects that benefit national projects are mutually reinforcing would ensure the overall benefit of the region; transport corridors and regional power grids are good examples of projects that either from a national or a regional perspective benefit the region. The GMS is perhaps the most readily available model of corridor development through regional cooperation. Way back in 2008, the GMS Economic Corridors Forum was established with the aim of transferring transport corridors into economic corridors.4 The three transport corridors include, North-South Economic Corridor (NSEC), the East–West Economic Corridor (EWEC) and the Southern Economic Corridor (SEC). A free trans-border transport agreement, the Agreement for the Facilitation of Cross-Border Transport of Goods and People has allowed for easy transportation – road access and air connectivity.5The transition towards economic corridors is designed to enhance the scope of collaboration between various sectors and groups that are located along the corridor or can get access to the advantages from the corridor. The GMS-Economic Corridor Forum aims at the development of the economic corridor acquiring support from the Asian Development Bank (ADB) through technical assistance, initiating feasibility studies and mobilising funds. The Economic Corridor ADB hopes would promote public-private partnership and cooperation between central and state governments which in turn is expected to create inclusive growth strategy for the people of the region. The GMS has been seen as one of the most promising example of harmonisation and integration of a geographical region across political boundaries. The objectives of promoting connectivity and infrastructural linkages is to not only enhance the scope of trans-border trade within the region but also expand those trading facilities to the neighbouring region of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). This development will be seen as a genuine move towards facilitating trade enhancement and economic integration of South Asia and Southeast Asia within the larger framework of South-South cooperation. Asia is a large subcontinent; the countries are neither at similar economic levels nor are the various regions integrated uniformly. For instance, East Asia is considered to be more integrated in terms

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of setting standards for free trade and trade liberalisation. The spilloffs of a liberal economic environment of that region is enjoyed particularly by Southeast Asia. Multilateral, trilateral and bilateral free trade arrangements are evolving into free trade areas. The most visible free trade arrangement is the ASEAN Free Trade Area that has enticed other Asian prosperous and developing economies like China, Japan, South Korea and India. Thus, the formation of ASEAN+3 (China, Japan and South Korea) and the ASEAN-India Summit which have yielded several free trade arrangements directed towards free trade areas. Yet the other regions of Central Asia and South Asia are not so economically integrated; especially neighbouring South Asia is considered as the one of the least integrated regions of the world. The connectivity between the countries of the region is challenged by divided geography, non-egalitarian economies but more important challenges include historical animosities, political differences and strategic competition(s). The establishment of the regional organisation – South Asian Association for Regional Cooperation (SAARC) has emerged as a non-starter because of the complicated inter-state relations between the major member states of the Association. The SAFTA has also failed to yield the expected results ten years since its establishment. At the 18th SAARC Summit held at Kathmandu Nepal, the theme was “Deeper Integration for Peace and Prosperity”, yet Pakistan was accused of opposing multilateral agreements road (Vehicular Traffic) and railways connectivity which is evidently the backbone of connectivity and integration of South Asia. This has been followed by the cancellation of the 19th SAARC Summit to be held at Islamabad because of rising India-Pakistan tensions and the scourge of terrorism in the subcontinent. It is in this context that many are now of the belief that it is better to promote and develop sub-regions and show interest in sub-regional arrangements. In this context India’s attention to the sub-regional initiatives was underlined in Prime Minister Modi’s speech 2014 SAARC Conference speech where he mentioned, that if all the members of SAARC cannot move together, then some will.6 Perhaps this is a turning point in India’s interest towards sub-regionalism. Following the 2013 meeting between the Indian PM Manmohan Singh and Chinese Premier Li Keqiang, PM Modi’s 2014 statement has reinvigorated the importance of sub-regional initiatives including the BCIM Corridor. This makes it easier considering the fact that India and China are the strong twin pillars of the BCIM

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Corridor. Visibly the BCIM is the region where the interests of these two Asian giants are largely common and they would set apart their differences to make common gains. Chinese Professor Che Zimin identified the geographical contours of this BCIM region through which the corridor is expected to cover – to the Southwest of China, at the Southeastern foot of Himalaya Mountains and bordering on the Bay of Bengal, it is an area where China, India, Myanmar and Bangladesh are close to each other. This area covers four Southwestern Chinese provinces of China including Yunnan Province, Sichuan Province, Chongqing Municipality and Guizhou Province, the six states in the Northeast of India,7 and the whole territories of Myanmar and Bangladesh. This area is also a confluence of the three markets of China, India and Southeast Asia as much as it is a region rich in resources making enough potential for cooperation. Existence of different products in South and Southeast Asian states creates some scope for complementarity in trade. Therefore, the need for a functioning corridor is well founded. From the Indian perspective three benefits are obvious. First it is expected that the BCIM Corridor would boost this geographical region that is also home to another sub-regional arrangement the Bay of Bengal Initiative for Multi-Sectoral Economic Cooperation (BIMSTEC). It will provide a platform for bridging South Asia with Southeast Asia. Second the fructification of the BCIM Corridor will help provide a fillip to India’s enthusiastic Act East Policy – an indispensable element of which is connectivity across borders. Third the success of the BCIM Corridor is expected to open up economies of the states of the Northeast and their integration with the neighbouring regions is expected to fruitful for inclusive development. The rest of the chapterwill highlight these three issues.

BCIM and the BIMSTEC Keeping in mind the fact that the geographical location of BCIM and the BIMSTEC are largely the same there are several similarities though differences are what receives scholarly attention. Both being sub-regional arrangements, the vital difference is that while the BIMSTEC is a sub-regional grouping with members around the Bay of Bengal along with Nepal and Bhutan, the BCIM is rooted on the idea of an economic corridor that involves India. However, going by the BCIM Car Rally Map it touches the states of Assam and Manipur. Yet repeating Prof. Zhimin’s observation, geographically

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the BCIM involves the six states of Northeast India. Moreover, the economic corridor is expected to expand its benefits and increase the beneficiaries as the growth benefits trickles to peripheries, it should gradually cover all the states of Northeast India. But one needs to take note of the fact that the BCIM, unlike the BIMSTEC, only concentrates on the states of Northeast India and doesn’t extend to other east or South Indian states. Myanmar and Bangladesh are common members to BCIM and BIMSTEC. And BCIM and the BIMSTEC look forward to gaining getting maximum access to the Bay of Bengal which is a great location advantage for both the arrangements. Herein India and China both have common interest in getting access to the Bay of Bengal for their landlocked provinces and herein connectivity becomes an issue. The moot point here is whether the connectivity projects undertaken by China and India should be necessarily taken as competitive? The BCIM Corridor as has been described in detail as 2,800 km physical infrastructure connected between Kolkata to Kunming needs Indian infrastructure and road connections.8 The India-Myanmar Friendship is a part of this corridor and it is evident that the BCIM has looped it in. India has invested in the Kaladan Multi-Modal transport project that involves both maritime projects and road connectivity initiatives and primary utilises the inland waterways and roads of the border state of Mizoram. For the BCIM Economic Corridor to become a success, it needs connectivity through Mizoram. It is here that China wishes that the Kaladan Multimodal Transport becomes a part of the economic corridor.9 While the Indian popular perception is that the Kaladan Multi-Modal Project is a competitive project the fact is that connectivity and infrastructural growth largely benefits the region and a network of seamless connections and easy flow of goods, people and transport is a precondition for this kind of seamless connect. There is a growing demand from the region for connectivity and improved infrastructural support so that it can attract private investments and spur industrial growth. The industrial boost will not only heal the backwardness of the provinces but also help reduce the deficit with China.10 Bangladesh and recently Myanmar11 has found sense in supporting infrastructural support and industrial growth and mentioned earlier they are members of the BIMSTEC too. From somewhere close to a mere 3 percent, in 201412 the intraregional trade has risen to 7 percent13 and hopes have been pinned on the newly signed BIMSTEC Free Trade Area. However, for free

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trade to become possible, physical and soft infrastructure is necessary and has been reiterated time and again. The BCIM Corridor with its connectivity proposals could prove crucial to supplement the BIMSTEC initiatives provided India or China does not view any of these initiatives from a binary perspective.

BCIM as a fillip to India’s Act East Policy The Look East Policy has apparently matured into the Act East Policy in the 21st century. The Act East Policy is expected to be instrumental in improving India’s relations with East Asia and Southeast Asia. It aims at reaching out to the countries beyond the ASEAN region – to Japan, China and South Korea and work towards deeper integration with the region through developing economic, political and strategic linkages. These linkages are supported by India’s efforts at strengthening her relations with her immediate neighbour(s) – in this case, Southeast Asia. India’s linkage to Southeast Asia is dependent on her access to Myanmar; it is popularly known that Myanmar is India’s gateway to Southeast Asia. India’s endeavour at re-establishing ties with Myanmar made a breakthrough with the 1994 border trade treaty; it is a stepping block towards gaining access to physical connectivity. India’s access to Southeast Asia through Myanmar brings into focus Northeast India for it is through this region that India can get access to Southeast Asia. Access to the ASEAN economies requires that the region should receive attention to boost the economic performance. Preconditions to attaining economic level playing fields (with the neighbouring regions) attract investments, provide financial facilities, government support in the form of investment friendly policies, good governance, strong infrastructural arrangement inclusive of physical and digital connectivity. The Act East Policy thus stresses on the three“C”s – Commerce, Culture and Connectivity14 which when fully accomplished would help establish these preconditions. Connectivity as it were espoused by the experts encapsulates not only the need for the ability to reach across borders physically, but also establishing the human contact through cultural and social linkages. Now in establishing the connectivity, the efforts at the national level (i.e. infrastructural projects undertaken by the respective Governments) must be supplemented by regional efforts. This is where regional corridors have a crucial role to play; one is reminded of Pradip Srivastava’s discussion on economic corridors wherein regional projects with national implications have been

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encouraged by the ADB.15 The BCIM should be analysed from this perspective. Even as a transport corridor providing the scope for movement of goods and people the BCIM would support the Look East Policy helping India enhance the trade ties with the ASEAN region. One must also take note of the fact that ‘Look East’ involves not only the Northeastern states of India but also the rest of India; if the other provinces of India need access to Southeast Asia, there is the need to establish the connectivity that would pass through Bangladesh, span across Northeastern provinces to reach the borders of Myanmar and beyond. It is here that the BCIM Corridor becomes relevant because Bangladesh is an inseparable member of the Corridor and large parts of India could very well use the opportunity to get easy access to Southeast Asia transiting through Bangladesh. The maturity of the BCIM Corridor will support the Act East Policy especially that now there is a free trade agreement between India and the region that was signed in 2009 and became functional in 2010.16 The advantage of the Corridor lies in the fact that it establishes both maritime and land connectivity looping in ports, rail and road contacts; seen in consonance with the Mekong– India Corridor the region will evolve into a larger network that will be a part of grand connectivity project. Notwithstanding the fact that while the BCIM Corridor is popularly perceived as a part of China’s One Belt One Road Initiative (OBOR), the Mekong–India Economic Corridor (MIEC) as an Indian initiative of connectivity strategy, corridors are a part of grand designs of connectivity – the golden quadrilateral, the Asian Highway Network, to name a few. The additional advantage of Corridors is that they will not only ensure smooth connection between nodes and provinces, they will level enhance economic activity gradually involving adjacent areas into the process of development. Logically the BCIM Corridor and the MIEC should complement each other in their objectives. Thus, whether proposed by BCIM or by India, economic corridors should lead to a win-win situation and attract neighbours to economically engage with the region. From the Indian perspective, the relations BCIM and the success of the Act East Policy is not only positive, but perhaps directly proportional.

A hope for Northeast India The BCIM Corridor as a species of sub-regionalism17 prioritises that part of India which has gradually emerged as the inalienable part of India’s endeavours in reaching out to her eastern neighbours – the

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Northeast. It is evident from the amount of discussion and literature that has been doing the rounds in the academic and policy making circles of the country. It sheds light on the dynamics of the region that is critical for the success of the policies that India has either conceived or has been a part of. Therefore, whether India’s Act East Policy, or India and the BIMSTEC or India’s position on the BCIM Economic Corridor, the Northeast remains the constant direct stakeholder to these initiatives and processes. The general perception has been that Northeast India had failed to gain enough attention from the Central Government primarily because the policies like the Look East Policy (aka Act East Policy) were conceived for the entire country and not keeping in mind any region in particular.18 It is over the years that geo-political dynamics of these neighbourhood policies made India realise the significance of her Northeast. Subsequently with the establishment of the BIMSTEC, the inception of the BCIM Economic Corridor and the launch of the Mekong-Ganga Cooperation (MGC), India’s gaze towards the region has changed from that of a hard-core security orientation to one of launch pad for these policies. It has been now well understood that the Northeastern part of India is the gateway to Southeast Asia and East Asia. As India’s gaze towards Southeast Asia intensified, the need to establish the physical connect through Northeast India became the need of the hour. Subsequently Northeast India was projected as the land bridge that would help establish the connection and accessibility between India (larger parts of India) with Southeast Asia. This underlined the need to establish an extensive and intensive grid of physical contacts – connectivity becomes the buzzword for the Northeast. Now the economic corridors that began as a transport corridor makes a strong case for the need to support the development of the BCIM. This is not to submit that connectivity in this region is dependent exclusively and entirely on the development of the Corridor. On the contrary India’s modest efforts at building some infrastructural support that are directed towards gaining access to the neighbouring region have begun to give returns. The network of roads is to be supported by an expanding network of railways though many of them are either at a nascent stage or are facing challenges. For instance, the JibramImphal railway is expected to be complete by 2019, but it faces several challenges including militancy and political unrest. There are other projects like the Guwahati–Lumding–Badarpur–Kumarghat–Agaratala railway is at its nascent stage; so too is the railway

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proposal in Mizoram, from Bhairabi bordering to Sairang. There is a feasibility study on the ambitious project of a route from Sairang to Hmawngbuchhuah in Southern Mizoram alongside the Rakhine state of Myanmar and close to the Kaladan Multimodal Transit Transport Project (KMTTP). It is a one of those trans-border connectivity projects that India would perhaps invest to strengthen the Act East Policy.19 As has been mentioned earlier the project proposals of the BCIM-EC as also the BIMSTEC Connectivity with all the proposed network of road, rail and maritime connections, will only supplement and not compete with the connectivity endeavours undertaken by India under the Act East Policy. Moreover, if the economic corridors follow the right trajectory, achieving economic development and acquiring the right level playing field is a positive outcome for the Northeast. That achieving the level playing field is necessary for Northeast is based on the observation that the region is both landlocked and underdeveloped and in order to participate in the inter-regional trade involving both China and the Southeast Asian neighbours the economic calibre of the eight states. Trade (and investment) induced development can only be possible if only the economic potential of the region is fully exploited. Yet there are different perceptions on the causal relationship between connectivity and the economic development of the Northeast. Not only doubting the feasibility and plausibility of the projects, there has been fundamental questioning of the whole connectivity-driven development paradigm. The neoliberal economy approach as certain literature put it, projects connectivity as a means of exchange of goods and services and not so much about connecting villages and towns, people and communities. In short, the neoliberal approach preconditions the need for connectivity in order to achieve economic wellbeing. On the contrary there are questions on how connectivity can address the issue of recession and financial downturn(s). Most important there have been questions on how connectivity would automatically lead to development without addressing the endogenous factors and challenges.20 There is a strong apprehension that without establishing extensive and deeper connectivity wherein peripheral towns and villages could be connected with the main corridor routes, the corridor will remain ineffective. So long as the thrust is only on transport passage concentrating on free flow of goods and services, it will only benefit the big business houses; large sections of society will be bereft from what apparently seems inclusive growth.

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Conclusion BCIM was always believed to be China’s project and from the Indian side the idea of responding positively to the Chinese scheme of things would not be easy. In this context, the creation and contribution of the joint study group was indicative of India’s approach towards the BCIM enterprise. Yet the feasibility study did not make explicit mention of the economic corridor perhaps because the concept seemed unique. Though India has begun an ambitious project of building a robust network of roads that are coterminous with economic corridors, they are not regional projects. Bharatmala is a huge project of some 27,000 kilometres of seamless vehicular travel within the country that will deepen economic activities. When India looks at BCIM-EC there are two points that come into focus. First, any standing reference to successful regional economic corridors in this region is not there. Second the idea of involving China in a constructive mode of regional engagement is something more of an experiment that is yet to prove its metal. Moreover, the establishment of a Corridor is seen as one of the conditions for achieving economic development but establishing a causal relationship between the two may not be easy because the logic that is often given is that economic corridors are necessary condition for economic development but not sufficient condition.21 Thus a mere connection between the certain points along a transport route is not enough to induce development. In any case transport corridors are only considered the hardware for movement of people and goods that would induce trade. A transport agreement and a flexible visa regime would supplement as software that would make the transport corridor viable. Yet to ensure that transport corridor matures into an economic corridor, one needs to include the developmental aspect that is conditional upon the ability to create backend linkages involving peripheral towns, villages and trading centres. The deepening and widening of the productivity process in the region of the corridor would also allow for drawing in Smaller and Medium Enterprises (SMEs), small-scale entrepreneurs and ensure greater participation of the people from the remote areas of the region. Besides a transport corridor needs to take into account emerging strategic concerns in the form of non-traditional challenges like communicable diseases and other health hazards, drug and trafficking issues, imperilled ecosystems that will remain a part of the integration process.

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Sub-regional initiatives that involve India, be it the BIMSTEC or the BCIM or even the BBIN are essentially policy driven initiatives that emanate from inter-state negotiations and primarily involving governmental actors often from the Central Government(s). It is to imply that the development of sub-regional initiatives is rather a top-down approach where policy formulations are executed with the hope that it will reach down the social ladder and yield positive results for inclusive growth. Yet the experience of sub-regional initiatives of the region like the GMS has underlined the need for involving local stakeholders; thus, the Economic Cooperation Forum (ECF) of the GMS located at Kunming, involves the stakeholders – the provincial governments, the business communities, and members of the civil society. The model of the GMS envisages the need for two kinds of cooperation – between the public and private sectors and between the Central and the local governments. As for the BCIM, the Forum(s) have tried to chart the way of its progress. Yet there are various issues that ought to be addressed in order to ensure positive outcomes of the nascent integration process. Since 2013, India’s commitment to the BCIM process became official by shifting gears from the Track II to the Track I Process. This shift makes the BCIM project from the Indian perspective, a national one. Yet this shifting of gears must be balanced by the understanding that the BCIM Corridor is as much a provincial project as a national one. Unfortunately, the Northeastern provinces feel the BCIM is an exclusionary project rather than an inclusionary one. The provincial stakeholders, while remaining enthusiastic about the region’s role as the gateway of Act East Policy, view the BCIM process as a top-down incision on the region’s geo-strategic access with Southeast Asia. For instance, the route that has been indicated by the 2013 BCIM Car Rally as a probable transport Corridor is a linear one; it is oblivious to the need of connecting the other parts of the Northeast so that an extremely well-connected grid could emerge. One must remember that the Northeast is an area with developmental asymmetry(s) on the one side and ethnic plurality and diversity. The Corridor ought to be designed to suit the needs and demands of the region thus making a case for a bottom-up approach of the BCIM process. Unlike the GMS-ECF or the BIMSTEC secretariat the BCIM Forum has no such headquarters nor an office – it leaves one crying for an executing force that would push forward the BCIM

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agenda with an eye to the reality. There are apprehensions about the overbearing presence of China, but one must understand that the influence of China cannot be shunned and BCIM as a subregional process has to engage China. China on its part has to be constructively engaged because it is dependent on Northeast India (Bangladesh and Myanmar) for the landlocked province of Yunnan. Moreover, China takes BCIM quite seriously as it is conceived as a part of the Belt Road Initiative (BRI). The Northeastern provinces are set to benefit from it provided that the conventional Indian foreign policy discourse turns a new course by some minimum decentralising in decision making and by promoting and practising cooperative-competitive federalism. Prime Minister Modi’s India– China State/Provincial Leaders Forum (ICSPLF) launched in 2015 is symbolic of India’s turn towards cooperative-competitive federalism. However, the caveat is that the Northeast Indian states are not a part of the Forum because of the strategic baggage of the region. The other important difference between the GMS-ECF and the ICSPLF is the absence of the civil society and non-state stakeholders of the BCIM sub-regional process. Thus, the development of the BCIM Corridor is feared to suffer from widening and deepening. Perhaps in this case the BCIM needs to be complemented by the Act East Gateway approach as much as by the BIMSTEC connectivity initiatives. Moreover, with the ideational connect by declaring sister cities like Kolkata-Kunming, some amount of node to node contact is also established. Track II processes would play a substantive role in building upon this ideational connect by involving stakeholders of the two ends – state government representatives, Chambers of Commerce, business enthusiasts, academics, cultural personalities of both China and West Bengal and the Northeast. This has been the contribution of the Track II process Kolkata to Kunming Forum aka K2K Forum operating since 2002. It is recognised by both the Government of India and by the Government of West Bengal. Although the BCIM business has been recalibrated as a Track I process, the role of Track II initiatives like the K2K and the BCIM Forum cannot be belittled. Track II provides a window for democratising the integration process by facilitating the participation of various stakeholders and including their inputs to the BCIM process. Moreover, the plurality of approaches would clarify the geoeconomical pros and cons of this evolving sub-regional endeavours alongside the geo-strategic dynamics of the BCIM. Therefore, the Track I and the Track II process must function in partnership with

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each other to nourish and help the BCIM process yield the desired geo-economical benefits to the members.

Notes 1 Maputo Corridor Logistics Initiative. www.mcli.co.za/mcli-web/mdc/ mdc.html (accessed on 25 October 2016). 2 “Delhi Mumbai Industrial Corridor Development Corporation”. www. dmicdc.com/index.aspx (accessed on 25 October 2016). 3 Srivastava, Pradeep. (2011). “Regional Corridors Development in Regional Cooperation”. ADB Economic Working Paper Series No. 258, Philippines, Asian Development Bank, May 2011. 4 “Multisector Development in the Greater Mekong Sub-Region”. www. adb.org/countries/gms/sector-activities/multisector (accessed on 29 October 2016). 5 “Mekong Economic Corridors”. RIS Mekong-Ganga Policy Brief No. 2, October 2007, pp. 1–2. 6 “Text of Prime Minister’s Speech at 2014 SAARC Summit in Nepal”. 26 November 2014. www.narendramodi.in/text-of-primeministers-speech-at-2014-saarc-summit-in-nepal-2 (accessed on 20 December 2016). 7 From the Chinese perspective Arunachal Pradesh does not constitute a part of India, but the Indian Territory in the Northeast also includes Arunachal Pradesh. See, Patricia Uberoi. (2013). “The BCIM Forum: Retrospect and Prospect”. ICS Working Paper, 1 November 2013, online version available. 8 From Kolkata the corridor will move towards Benapole to cross into Bangladesh where it will pass through Dhaka and Sylhet and then move back into the Indian Territory to reach Silchar and lead to Imphal. After reaching Imphal, the Corridor will cross over Myanmar where it will be connected to the Tamu-Kalewa road also known as the India Myanmar Friendship Road. The rest of the corridor would go through Lashio, Muse and Mandalay in Myanmar. The Chinese stretch to Kunming will go from Ruili to Longling to Dali and thereon to Kunming. Read “China, India Fast-Track BCIM Economic Corridor Project”. The Hindu, 26 June 2015. www.thehindu.com/news/national/chinaindia-fasttrack-bcim-economic-corridor-project/article7355496.ece (accessed on 12 November 2016). 9 Sajjanhar, Ashok. (2016). “Understanding the BCIM Economic Corridor and India’s Response”. ORF Issue Brief Issue No.147, June 2016, p. 2. 10 “Northeastern Region’s Economic Cooperation in BCIM Economic Corridor”. The Sangai Express, 12 May 2016. www.thesangaiexpress. com/north-eastern-regions-cooperation-bcim-economic-corridor/ (accessed on 12 November 2016). 11 At the recent state visit by Aung San Suu Kyi to China, Myanmar has declared support for both the BCIM and the Maritime Silk Road, Read. (2016). “Myanmar to Support Silk Road BCIM”. The Hindu,

320  Ishani Naskar 20 August 2016. www.thehindu.com/news/international/myanmar-tosupport-silk-road-bcim/article9012366.ece (accessed on 12 November  2016). 12 Rahman, Mohammad Masudur and Kim, Chanwahn. (2016). “Prospects for Economic Integration of BIMSTEC: Trade and Investment Scenario”. International Journal of u- and e- Service, Science and Technology, 9(4): 239. 13 Kelagama, Saman. (2016). “BIMSTEC: Regional Integration in the Bay of Bengal”. BIMSTEC Newsletter, 72(1) (June 2016): 4. 14 For details see, Chand, Manish. (2014). “Act East: India’s ASEAN Way”. Ministry of External Affairs, Government of India, 10 www.mea.gov.in/in-focus-article.htm?24216/ November 2014. Act+East+Indias+ASEAN+Journey (accessed on 1 December 2016). 15 Srivastava, “Regional Corridors Development in Regional Cooperation”, p. 5. 16 Agreement on Trade in Goods under the Framework Agreement on Comprehensive Economic Cooperation Between India and the Association of Southeast Asian Nations. http://commerce.gov.in/trade/aseanindia%20trade%20in%20goods%20agreement.pdf (accessed on 29 November 2016). 17 Das, G. and Thomas, C. R. (eds). (2016). Look East to Act East, Implications for India’s Northeast, New York: Routledge, p. 83. 18 The Look East Policy (LEP) was conceived under circumstantial duress wherein economic failure, change in the international political order and the weakness of South Asian regionalism drove India to turn towards the East and thus the ‘Look’ word was conceived. In this the ‘Look East’ originated from the Centre and there was no scope of exclusive focus on the contiguous region. The later focus on the region originated from the gradual change from LEP II to Act East Policy wherein the need to ‘Act’ required an active involvement of the Northeast states. Read, Sudhir Devare et al. (eds). (2014). India’s Look East – Act East Policy: A Bridge to the Asian Neighbourhood, Pune: Symbiosis Institute for International Studies, Symbiosis International University; Mishra, Rahul. (2014). “From Look East to Act East: Transition in India’s Eastward Engagement”. The Asan Forum, 1 December 2014. www.theasanforum.org/from-look-east-to-act-east-transitions-inindias-eastward-engagement/ (accessed on 2 December 2016). 19 Kashyap, Samudra Gupta and Halliday, Adam. (2016). “Massive Push to Railway Infrastructure Under Way in the Northeast”. The Indian Express, 22 July 2016. http://indianexpress.com/article/explained/thenew-northeast-expresses/ (accessed on 4 December 2016). 20 The observation is that from ancient times trade in the subcontinent region (as India was the subcontinent) was based on all forms of trade routes followed by traders. It is later with the flourishing of trade and economic prosperity roads and boats could be constructed to establish the human contact between not only traders but scholars, religious preachers, artisans and pilgrims. Notwithstanding the need for connectivity, it was boosted by trade and commerce. Over the period of time the rationale was turned around and economic development

The BCIM corridor 321 was made conditional to connectivity. For a detailed discussion read, Srikanth, H. (2016). “Look East Project: Subregional Connectivity Project and Northeast India”. Economic and Political Weekly, 51(47) (November): 19. 21 Uberoi, Patricia. (2016). “Moving Forward on Parallel Tracks? A New Perspective on the BCIM Initiatives”. The ICS Working Paper, New Delhi: Institute of Chinese Studies, September 2016.

Chapter 17

One more step from temporary to permanent

Liu PengOne more step from temporary to permanent

BCIM sub-regional cooperation and its institutional platform Liu Peng

The BCIM cooperation mechanism has made important progress in 2013, followed by rising of the Track II BCIM Regional Cooperation Forum to Track I BCIM Economic Corridor. From the level of institutionalisation of the regional cooperation, the institutional level did not significantly improve, in essence, the BCIM Economic Corridor is the same as the previous BCIM regional cooperation forum, and still is a dialogue platform of this region, only to mention that the actors participating in the dialogue change from the think tank into government agencies. International regimes are not only the achievements and main manifestation pattern of the regional and sub-regional cooperation, but also an important impetus to promote the regional and sub-regional cooperation. International regimes, created cooperatively by sovereign states, are subject to all these sovereign states, and relatively independent, so the international regimes have an important role in guaranteeing the continuity and stability of regional cooperation. After 15 years of efforts, the BCIM regional cooperation has realised important crossing from Track II to Track I. Ensuring and maintaining the continuity and stability of BCIM sub-regional cooperation, and improving the level of institutionalisation of BCIM regional cooperation has become an important task for the next phase. This chapter intends to review and evaluate each system and mechanism of existing BCIM sub-regional cooperation, to analyse the advantages and disadvantages of the existing system, to put forward advices of BCIM sub-regional cooperation in improving the institutional level. At the same time, this chapter will also analyse the difficulties of BCIM sub-regional cooperation in improving the institutional level

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and concerns of all participating countries, and put forward the road map to improve the level of institutionalisation.

The development course of the BCIM sub-regional cooperation mechanism The BCIM cooperation mechanism is a dialogue platform initially launched by Chinese and Indian think tanks. In August 1999, Yunnan Academy of Social Sciences and Economic and Technological Research Center of Yunnan Province sponsored the “BCIM Regional Economic Cooperation and Development Conference” held in Kunming. The conference issued the “Kunming Initiative”. This conference marked the beginning of the BCIM cooperation mechanism. Then, the mechanism basically maintained a dialogue mechanism of holding a conference every year. In 2000, the second “BCIM Regional Economic Cooperation and Development Conference” was held in Delhi. In 2002, the third conference held in Dhaka was renamed the “BCIM Regional Economic Cooperation Forum”, and issued the “Dhaka Declaration”, appealing to all governments to support this mechanism, and trying to rise the current cooperation mechanism from the ‘Track II’ to ‘Track I’. Then the subsequent forums were hosted in turn by the Bangladesh, China, India and Myanmar, and had issued a “Statement of the 4th Conference (Yangon)” (2003), “Kunming Cooperation Statement” (2004), “Delhi Declaration” (2006), “Dhaka Declaration” (2007), “Naypyidaw Declaration” (2009), and “Joint Statement on Promoting BCIM Regional cooperation” (2011). Since the 9th conference, “BCIM Regional Economic Cooperation Forum” was renamed as “BCIM Regional Cooperation Forum”. In 2012, the 10th conference was held in Indian Calcutta and issued the “Joint Statement” (Calcutta). In 2013, the 11th conference of BCIM Regional Cooperation Forum was held in Dhaka Bangladesh, and issued the “Joint Statement of the 11th Conference of BCIM Regional Cooperation Forum”. As mentioned previously, the forms of international regimes are international organisations and international agreements; in addition, some tangible or intangible principles, standards, rules, etc.1 are also included. According to this definition, although BCIM subregional cooperation exist some international regimes of a certain sense, these regimes are very weak. First of all, this regional cooperation doesn’t have any international organisation or international

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organisation prototype, and it is not clear whether these four countries have willingness to establish an international organisation in this region. Secondly, this region does not have clear international agreement. Up to now, these four governments have not formally signed agreements. If BCIM sub-region has certain international regime, the pattern of this international regime is mainly the existence of a certain form of rules, that is, some consensuses on strengthening BCIM cooperation. The international regimes of BCIM sub-regional cooperation should be designed to develop the invisible, informal rules into international agreements and international organisations. From the perspective of participants, the existing regime of BCIM sub-regional cooperation can be divided into two categories. One is a think tank of these four in the regional cooperation forum existing since 1999; the other is these four inter-governmental work group conference started in 2013. Though the central governments of these four countries expressed support attitude towards the Regional Cooperation Forum since its inception, this attitude in some countries is sustaining and substantive, while in some countries only symbolic. From the perspective of forum’s positioning and the four country organisations participating in the forum over a decade, this forum is a Track II, informal, loose international regime. From the angle of international regimes, the largest achievement of this Regional Cooperation Forum is that the BCIM Forum is basically uninterruptedly held, which expresses as a certain international rule in fact; in addition, the continuous held forums and statements issued after previous conferences have emphasised a common principle, that is, these four countries is required to achieve common development through cooperation. Despite that these four have different interpretation about the detailed contents of “achieving common development through cooperation”, yet it as a principle has been accepted, and it can also be said that this forum advocates an international principle in this region. The Intergovernmental Work Group Conference of four countries is another form of regimes. The Intergovernmental Working Group Conference as the dialogue platform at the level of BCIM central governments, if these four countries can give this platform continuous support, this platform have the potential to reach an international agreement or develop into an international organisation. But at present, this dialogue platform just began one year, and the parties still have different opinions on whether or not to use the

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“Working Group Conference”. The 2014 Talk continued to be held in Bangladesh. The support and authorisation that the parties give the Talk is still facing greater uncertainty. Overall, the level of institutionalisation BCIM sub-regional cooperation is still relatively low, without formal international organisation and international regime. The existing principles and rules are mainly reached by non-government level. It is still uncertain whether they can become the officially approved principles and rules.

The strengths and weakness of BCIM sub-regional cooperation mechanisms Strengths of current BCIM sub-regional cooperation mechanisms (1) Flexibility The current regime of BCIM sub-regional cooperation is composed of a semi-official forum and a fledgling Working Group Conference. The characteristic of this combination is informal. Being informal and semi-official just make this regime have great flexibility, which can guarantee it is difficult to be influenced by political relationship between two countries, and give large elasticity to this regime. With regard to BCIM cooperation mechanism, there exists a territorial dispute between China and India, and contradiction in transboundary rivers and territory between India and Bangladesh. With regard to present BCIM sub-regional cooperation, the advance of cooperation must rely on supports and authorisation of four countries. The regime itself doesn’t have independence; especially the governmentlevel cooperation dialogue is more susceptible to the bilateral relations. If the existing BCIM sub-regional cooperation mechanisms are entirely government-level dialogue platform or working group talk, once events like ‘tent confrontation’ or an unexpected event between India and Bangladesh occur, these two governments may stop or quit from the government-level BCIM dialogue and talks, which will make the regime face the possibility of collapse. There exists a more mature regional cooperation forum dominated by think tanks in present regime. Because it is a Track II-level dialogue platform, the influence of changes of bilateral or multilateral relations on the forum is limited, even if bilateral relations become

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deteriorated, the Track II-level dialogue mechanism can still continue, which makes the mechanism with greater flexibility and elasticity. Such a mechanism is very important for cooperation between countries having significant differences. The regime can exist for a long time due to its semi-official properties. Under good bilateral or multilateral relations, countries can officially give greater support and authority to think tank dialogue platform, thus achieving the purpose of promoting cooperation; under poor bilateral or multilateral relations, countries can officially reduce authorisation, but think tank dialogue platform won’t stagnate because of this, thus ensuring the long lasting of regime. (2) Openness The BCIM sub-regional cooperation mechanism is the only multilateral cooperation mechanism for these four countries currently. Although the main topic of the mechanism at the beginning of the founding was the economic cooperation, currently the ‘economic corridor’ that parties mainly strive to promote is also an economic issue; but there is no denying that problems that this region are faced with are not just the economic issues, and economic cooperation cannot solve all the problems. Therefore, this regional cooperation mechanism must eventually include other issues in addition to economic issues. At present the BCIM regional cooperation forum, as an open forum, has the possibility of incorporating other issues. In fact, in recent years the forum has not only covered in economic issues, but non-traditional security, education, culture and other issues have also included. The openness and inclusiveness of mechanism provides a possibility that the international regime of BCIM cooperation can develop into a comprehensive one in this region. Weakness of the existing regime of BCIM sub-regional cooperation (1) The prospect model of BCIM Economic Corridor The BCIM cooperation mechanism has undergone four names: “China-India Myanmar-Bangladesh Regional Economic Cooperation and Development Conference”, “BCIM Regional Economic Cooperation Forum”, “BCIM Regional Cooperation Forum”, and “BCIM Economic Corridor”. The name transformation reflects the

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fact that the cooperation mechanism is not mature and is uncertain. After the BCIM cooperation mechanism transform from an open forum and dialogue platform led by think tanks into BCIM Economic Corridor led by governments, all parties must answer a question: “what is economic corridor” or “what is the vision of economic corridor”, that is, confirming what is the goal of economic corridor, and what kind of economic cooperation mode will be established. The goal of economic corridor is to establish a Free Trade Area or quasi-Free Trade Area or a regional international organisation. If the mode of wading across the stream by feeling the way serves as a progressive cooperation mode in regions with strong cooperation willingness and good cooperative foundation, the applicability of this way will be poor in the region with poor cooperative foundation. The BCIM Economic Corridor must define the goal and its corresponding path at the beginning of building, so as to cohere consensuses of all parties and promote the development of the economic corridor building. (2) Policy uncertainty The BCIM cooperation mechanism at present is in initial and runin stage after being upgraded into Track I ‘economic corridor’. At present, central and local governments of China are making efforts to promote the building of ‘economic corridor’. China’s policy will maintain the stability in ten years. The attitude of India towards the BCIM cooperation mechanism always has been great uncertainty. Although the Indian side agreed to carry out the preliminary research of BCIM Economic Corridor during the visit of Premier Li Keqiang to India in 2013 and the visit of Prime Minister Singh to China, the support of the Indian side to economic corridor still faces great uncertainty: on the other hand, even if the Indian new government continues to support the building of BCIM Economic Corridor, the inefficiency of India government, and disputes between central government and each state will make Indian government difficult to take substantive support measures in the shortterm. Bangladesh always has a positive attitude towards the BCIM cooperation mechanism. Considering their existing differences on many issues between Bangladesh and India, for Bangladesh, the Bangladesh–China–Myanmar Economic Corridor excluding India is an acceptable option. Before the democratic reform in Myanmar, Myanmar holds a more positive attitude towards the BCIM

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economic cooperation mechanism, while after reform; it is not clear how Myanmar will treat this mechanism. (3) Connectivity difficulties Connectivity is not only the basis of the BCIM economic cooperation, but also the main appeal of China. China holds a positive attitude to achieve BCIM connectivity. China has basically completed the domestic construction of relevant sections of the highway and railway, and funded to construct part sections abroad, but the huge investment and risks in the infrastructure of interconnected overseas sections aren’t what China could and should bear. India has done plenty of plans and constructions for the whole road network construction of its Northeast region, but the construction process is slow; in addition, the whole road network construction in the Northeast of India is ‘internal-oriented’, that is, at present India is mainly committed to realise the connection among the internal states of the Northeastern India and among the main cities. Indian considerations about the connectivity of BCIM region mainly focus on domestic security; at present India mainly holds a reluctant attitude. Bangladesh holds a positive attitude towards the realisation of connectivity and especially hopes to realise the connection between China, Myanmar and Bangladesh; therefore Bangladesh has made the preliminary planning, and has a certain foundation, but due to economic development and the attitude of Myanmar, the current progress is not large. Myanmar is a key junction for realising BCIM connectivity, no matter whether the proposed south line, the middle line or the north line must pass through Myanmar. However, Myanmar’s relatively backward infrastructure, increasing doubts about China and the promotion of democracy make Myanmar face uncertain. (4) The domestic integration difficulties The BCIM sub-regional cooperation mechanism is not only faced with the problems of cooperation among countries, but also faced with domestic integration difficulties. The geographical range of the BCIM sub-regional cooperation covers China’s Yunnan, India’s Northeast region and West Bengal, the north region of Myanmar and Bangladesh. But all countries of this mechanism can surpass its geographical scope.

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Yunnan is the major province of China participating in the BCIM sub-regional cooperation. China expects that Yunnan become a gateway of China’s Southwest region opening to the outside world by participating in the BCIM cooperation mechanism. But all provinces in Southwest of China have their own international positioning and all hope to become the centre opening to the outside world in this region. Chongqing constructs “One River Two Railways Three Oceans” 2 international trade channel, hoping to be the centre opening to the outside world in China’s Southwest region; Sichuan positioned itself as an “ important intersection and traffic corridor connecting Central Asia, South Asia and Southeast Asia”; Guizhou positioned itself as “national important base, traffic junction of southwest, demonstration area, innovation zone, etc.” At the same time, Guizhou put forward to strive to build itself into “globally famous and domestic first-class tourist destination, leisure resort, and important cultural communication platform”. As can be seen, all China’s five Southwest provinces want to become the window opening to the outside world in Southwest region, and have made the corresponding preparations. Therefore if Yunnan wants to be the gateway opening to the outside world in the Southwest region, it is also facing fierce competition at home. India is divided into Northern, Southern, Eastern, Midwest and Northeast regions. West Bengal in the Indian official definition belongs to the eastern region. The states of India’s Northeast region occupy a total area of 178.4 thousand square kilometres, accounting for 6 percent of the territory of India; this region has a population of about 44.21 million, accounting for 3.65 percent of the total population of India. The states in Northeastern region, except Assam, cover a small area and are mainly mountainous terrains. There exists an obvious gap in economic and social development level between the Northeast of India and other regions. In 2009 the GDP per capita of Northeast region was 21 thousand rupees, approximately accounting for a half of national average level of 41.968 thousand rupees. In addition, there exist obvious internal differences among the states in Northeast region. India has a complex relationship between the central and the local government. In addition, the ruling party of each state is not the same, and the ruling party of each state is possibly different from the ruling party of Indian central government, as well as there exists large difference between states. Therefore, letting all states involved in the BCIM mechanism is faced with the problem of internal integration.

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The integration of Indian and Chinese domestic actors in the BCIM cooperation mechanism is difficult, while the integration of Myanmar’s all domestic actors in BCIM cooperation mechanism is more difficult. The BCIM mechanism, no matter what plan or traffic route to select, cannot bypass the local ethnic army of northern Myanmar. The complexity and longevity of Myanmar’s local ethnic armed problems makes this problem more difficultly, so how the central government of Myanmar integrates the local ethnic arms in Northern Myanmar involves whether BCIM cooperation mechanism develops smoothly.

The attitude of four countries towards the promotion of the institutionalisation level of the regional cooperation If we want to study the international regime of BCIM sub-regional cooperation, an unavoidable problem is the attitude of four countries towards the international regime in this region. If these four countries hold a positive attitude towards the construction and promotion of the international regime in this region, the prospect of this regime is more optimistic. In order to better understand this problem, we first review the situations that four countries participate in the international regime. 1.  Attitude of four countries towards the participation in the international regime As mentioned previously, the international regime includes international organisations, international agreements, international conventions, etc. To understand the situations of four countries participating in the international regime, we need to know the situations of four countries participating in the international organisations, international agreements and international conventions respectively. Because the international agreements and international conventions include informal conventions, principles, etc., it is very difficult to carry out a comprehensive statistics on it. International organisations have a relatively fixed form and clear membership system. The situations of all countries participating in the international organisations are clear. Therefore, it is still feasible to consider the situations of all countries participating in the international organisations as indexes to evaluate all countries participating in the international regime although it is not comprehensive.

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According to the statistics in the Yearbook of International Organisations (2014) issued by the Union of International Association, as of 2012, India participated in 3,471 international organisations of various types, including 191 international intergovernmental organisations, and 3,280 international non-governmental organisations. Among all these international organisations, there were 2,272 international organisations that only accepted countries as members. The number of international organisations that India participated in ranked twenty-sixth in the world, ranked second in Asia, next only to Japan. At the same time, India was the place where 68 international organisations headquartered. By the end of 2012, China participated in 2,840 international organisations, including 184 international inter-governmental organisations, and 2,565 international non-governmental organisations. Among 2,840 organisations, there were 1956 international organisations that only accepted countries as members. The number of international organisations that China participated in ranked thirty-third in the world, and ranked fourth in Asia. China was a place where 52 international organisations headquartered. By the end of 2012, Bangladesh participated in a total of 1,347 international organisations, including 136 international inter-governmental organisations, and 1,211 international non-governmental organisations. Among 1,347 organisations, there were 816 international organisations that only accepted countries as members. The number of international organisations that Bangladesh participated in ranked 77th in the world, and ranked 19th in Asia. Bangladesh was the place where six international organisations are headquartered. By the end of 2012, Myanmar participated in a total of 496 international organisations, including 75 international inter-governmental organisations, and 421 international non-governmental organisations. Among 496 organisations, there were 302 international organisations that only accepted countries as members. The number of international organisations that Myanmar participated in ranked 155th in the world, and ranked 36th in Asia. (Table 17.1) From this analysis, we can see that except Myanmar, India, China and Bangladesh frequently participated in the international organisations. Among over 50 countries in Asia, the number of international organisations that India and China participated in ranked second and fourth, and Bangladesh ranked nineteenth. The number of international organisations that Myanmar participated in was relatively small, mainly because the western sanctions limited its qualification to participate in international organisations for many

332  Liu Peng Table 17.1  P articipation Situations of BCIM Four Countries in the International Organisations in 2012–2013 Items

Bangladesh

China

India

Myanmar

The total number of international organisations to participate The number of international inter-governmental organisations to participate The number of international non-governmental organisations to participate The number of international organisations to participate that only accepted countries as members Global ranking Asian ranking The headquarter number of international organisations in this country

1,347

2,840

3,471

496

136

184

191

75

1,211

2,565

3280

421

816

1,956

2,272

302

77 19 6

33 4 52

26 2 68

155 36 0

Source: Collected and concluded from Yearbook of International Organisations (2014), Union of International Association. Note: The ranking was according to the number of international organisations to participate that only accepted countries as members.

years. After the reform and opening up, China’s attitude towards the international regimes and the international organisations changed a lot. According to the statistics, China was one of countries with the highest degree of internationalisation and opening. India had the tradition and experience of participating in the international organisations, and was the most active country in developing countries on participation in international organisations; India has a strong political will to play a leading role in the international organisations.3 Bangladesh, as the ‘middle power’ sandwiched between the great powers, supported the international regime, and realised its own development through the international regime, which is its consistent tradition. After the democratic reform of Myanmar, the climax of joining in the new international regimes would come up. Therefore, we can say that the attitudes of four countries to participation in international organisations were more positive, and

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the number of international organisations they participated in was relatively high. The preceding data only shows the general attitudes of four countries towards the international organisations and international regime. If there is no special consideration, we may assume that these four countries shall hold a positive attitude towards establishing the international regimes and international organisations in this region, but the attitudes of four countries towards the promotion of institutionalisation level in this region will require further analysis. Attitudes of four countries towards promoting BCIM regimes Since the BCIM regional cooperation mechanism was proposed, China has been the main driving force for this mechanism. In fact, it is because of China’s insistent promotion for years that this mechanism has survived. China provided a large amount of manpower, resources support for BCIM regional cooperation mechanism. The car rally, The Newsletter of BCIM Forum, and the proposed initiatives had China’s impacts. With the support of the central government, Yunnan local government played the role of promoters in BCIM cooperation mechanism. The BCIM regional cooperation mechanism changed from Track II up to Track I economic corridor, which was also out of the China’s initiative. In addition, one of China’s 30-year reform and opening up experience was opening to the outside world and participating in the international regime. Therefore, we can anticipate that the China is willing to further promote the institutionalisation of international cooperation regimes in this region. India had a rich experience in participating in international regimes, as mentioned above; its passion for participating in the international regimes was very high. But the attitude of India towards the BCIM regional cooperation mechanism was not clear and ambiguous. This kind of attitude reflected at all levels of India society. India’s official attitude towards the BCIM cooperation mechanism was fuzzy. During the visit of Premier Li Keqiang to India in May 2013, and the visit of India Prime Minister Singh to China in October 2013, although the joint statement issued by both countries mentioned the BCIM Economic Corridor construction, the subsequently signed agreement between the two countries didn’t have any contents about this economic corridor. In the BCIM work

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group conference in December 2013, India had different opinions on whether to use the proposal of “working group conference”. In an interview with the China Radio International, India’s Prime Minister Singh stated that the BCIM Economic Corridor was proposed by Premier Li Keqiang upon a visit to India in May, and India supported it ‘in principle’, because the BCIM Economic Corridor had ‘potential’ promotion role in strengthening bilateral economic ties. India’s media and the public didn’t pay enough attention to the BCIM Economic Corridor. On India’s main think tank websites including India Institute for Defence and Analysis, Institute for Peace and Conflicts Studies in India, ICS, or throughout India’s mainstream media India Times, Hindustan Times, India Economic Times and India TV station, it was difficult to find relevant reports and comments on the BCIM Economic Corridor. In addition, there appeared differences in the government departments. The Ministry of External Affairs was indifferent first and then supportive, and considered that the construction of economic corridor conformed to the common interests of these four countries, and even the senior diplomats put forward advice that the common development planning of four countries should be formulated to put the concept of regional cooperation into specific implementation; Ministry of Home Affairs still considered that the BCIM Economic Corridor was difficult to form if the border problems, and the potential dangers in Northeast region were not solved; the Economic Department were not clear what kind of specific interests of BCIM Economic Corridor can bring to India, which is an embodiment of India. This aspect also showed that the domestic of India were not highly aware of the BCIM Economic Corridor, on the other hand, it also showed that as long as the BCIM Economic Corridor produced practical improvement to the economy of relevant regions in four countries, the India’s Economic Department will not refuse to participate in cooperation. Bangladesh has always been active in the BCIM mechanism. After China and India put the BCIM Economic Corridor construction into the joint statement, Bangladeshi foreign minister Fsarul Amin and Chinese Foreign Minister Wang Yi held a bilateral talk in 13 October 2013. The foreign minister of Bangladesh said that Bangladesh supported the BCIM Economic Corridor construction, and agreed to negotiate the action plan with the other countries and strengthen the BCIM regional economic, trade and personnel exchanges.

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Myanmar’s attitude towards the BCIM mechanism had experienced some changes. Before the democratic reform, it had been holding a positive attitude. After the democratic reform, its attitude was not clear. Myanmar’s attitude towards this mechanism mainly depended on two factors, one was the development of Sino-Myanmar relations; the other was the solution of the ethnic and local armed problems in northern Myanmar. Before the ethnic army in northern Myanmar is solved, Myanmar’s attitude to carry out international cooperation in northern Myanmar would continue to face high uncertainty.

The policy options to improve the institutionalisation of BCIM sub-regional cooperation Effectiveness and legitimacy are the two indicators to measure the institutionalisation level of international region. The main forms of current international regimes are international organisations, international agreements, international norms and principles, etc. These three forms of international regimes don’t have remarkable difference in effectiveness and legitimacy, and their own effectiveness and legitimacy depends on the specific situations. For example, the international agreement on the diplomat protection as determined in Vienna International Convention does not necessarily inferior to the international organisations in effectiveness and legitimacy. As a result, there exist a number of different options to improve the institutionalisation level of BCIM sub-regional cooperation. For the five difficulties mentioned above, we can have some discussion about the prospect model of the construction of economic corridor; in addition, the other four difficulties are hard to have bigger changes in the short-term, therefore, the following passages will preliminarily discuss the development model of economic corridor, which essentially is the problem of road selection of the institutionalisation of BCIM sub-regional cooperation, that is, choose which model as the development direction of enhancing the institutionalisation level of this regime. The clear prospect makes not only all countries have a clear expectation for the regime, but also all countries prepare the corresponding policies as soon as possible to guarantee the sustainable development of the regime. At present, the development models of BCIM sub-regional cooperation mechanism roughly have three types: the first model is to

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institutionalise the BCIM economic cooperation mechanism and economic corridor into a sub-regional cooperation organisation, that is, “BCIM Sub-regional Economic Cooperation Organization”; the second model is to construct the BCIM Economic Corridor into “BCIM Free Trade Zone”; the third model is to stick to the mode of “wading across the stream by feeling the way” (pragmatic way), not set specific targets, and gradually progress. BCIM sub-regional economic cooperation organisation Yunnan and Guangxi, on behalf of China, participated in Great Mekong Sub-region Cooperation (GMS) mechanism. After 20 years of development, GMS has become a relatively mature sub-regional cooperation organisation. GMS’s experience is a strong reference for the development of BCIM existing cooperation mechanism into sub-regional economic cooperation organisation. Greater Mekong Sub-regional (GMS) Cooperation mechanism was established under the promotion of Asian Development Bank (ADB), and its main function is to promote the six countries in Lantsang–Mekong river basin to eliminate poverty and promote economic and social development. Since it was founded in 1992, Greater Mekong Subregional (GMS) Cooperation mechanism under the financial support of ADB and western countries carried out a lot of work in transportation, electricity, communication, agriculture, environment, tourism, human resource development, trade and investment, drug control and substitute plantation, law enforcement and security cooperation, technical assistance and other fields. Currently the social and economic situations of these four countries that BCIM economic cooperation mechanism is involved in have similarities with six countries (China, Laos, Vietnam, Cambodia, Myanmar and Thailand) in Mekong River basin. Yunnan province on behalf of China is one of the main participating parties in GMS cooperation mechanism. Myanmar is one of members of this regime. Bangladesh and the Northeast region of India belong to the areas in which economic and social development is relatively backward, and that are faced with tasks of eliminating poverty and promoting development. If considering GMS as the example, then BCIM Economic Corridor is to develop in the direction of BCIM Organisation for Economic Cooperation and realise the change from economic corridor

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to the institutionalised sub-regional economic cooperation organisation. If regarding the sub-regional economic cooperation organisation as a vision, we will need to address three issues: The first is the willingness of all parties. At this stage, BCIM cooperation mechanism and its upgraded BCIM Economic Corridor only stay in the initial stage. Some countries actively promote, while some countries passively participate. Its transition into subregional cooperation organisation is involved in more complex problems, including sovereignty transfer in a certain degree of participating parties, dominance, setting of the permanent organisation, organisation structure, etc. What is needed to participate in this process are not only administrative agencies of all parties, but also the authorisation of legislative bodies and the approval of relevant agreements. The second is the source of the funds. The sub-regional cooperation organisation with the aim of eliminating poverty and promoting social and economic development is faced with the problem how to get the required funds and technology for development when each country is underdeveloped. The funds and technology of GMS mechanism mainly come from Asian Development Bank (ADB), U.N. Economic and Social Commission for Asia and the Pacific (ESCAP), and some developed countries such as Australia, New Zealand, Japan, the European Union and other countries. In addition to China, the other five countries in GMS are small and medium-sized countries, and Laos, Cambodia and Myanmar are one of the least developed countries in the world, so it is understandable for developed countries to provide financial and technical assistance for this sub-regional cooperation organisation. BCIM cooperation mechanism includes the world’s largest developing country – China and the world’s second largest developing country – India. Even though some international organisations may provide a certain financial and project support for this mechanism, it can be predicted that these funds would not be sufficient. Therefore the funds needed for the BCIM cooperation mechanism mainly depend on themselves, which is the urgent problem. In these four countries, China has the strength and the desire to provide some funds, but the matching of rights and obligations will be generated after funds are provided. Because it is still uncertain whether other countries accept that the decision-making power a country possesses must be consistent with her provided funds, it remains to be discussed for China to provide corresponding share or larger share of funds.

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The third is its relationship with various overlapping international organisations. BCIM cooperation mechanism has many overlaps with the existing cooperation mechanisms and regional organisation in this region. China and Myanmar are participants of GMS cooperation mechanism, and are also the member states of China–ASEAN 10 + 1 cooperation mechanism; Myanmar, Bangladesh and India are members of Bay of Bengal Economic Cooperation Organisation; Bangladesh and India are SAARC members; India and Myanmar are also the member states of Mekong–Ganga Cooperation mechanism initiated by India. The main purposes of these organisations are to strengthen regional cooperation, and promote the economic development. It can be said that the number of sub-regional organisations in this region is large, and there is overlap between their respective goals. Therefore, after BCIM Economic Corridor is upgraded into BCIM Economic Cooperation Organisation, the key to test its vitality is how this organisation realises the non-overlapping development with other sub-regional cooperation organisations, and better achieves the goal of regional economic development. Free Trade Zone model At present, the goal of the primary stage of regional and subregional economic cooperation is to build a Free Trade Zone in many regions. At present, China has 18 Free Trade Zone under construction, involving 31 countries and regions. Among them, there are 12-signed Free Trade Agreements (FTA), involving 20 countries and regions; FTAs under negotiation are six, involving 22 countries. India now has signed FTAs with Nepal, Sri Lanka, ASEAN and other countries, and is negotiating Free Trade Zones with Australia, New Zealand and other countries. It should be said that the intra-regional countries China and India have a certain experience in establishing Free Trade Zones and the negotiations on Free Trade Zones. In addition, China-ASEAN Free Trade Zone has been built and made good progress; China and Myanmar belong to part of ChinaASEAN Free Trade Zone; India–ASEAN Free Trade Agreement came into force in 2010, and India and Myanmar are a part of the India–ASEAN Free Trade Zone. China, India and Bangladesh are members of the Asia-Pacific Countries Trade Agreement (APTA),4 and they have the tariff concession agreement and experience. India

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and Bangladesh are also members of the South Asian Free Trade Zone, which has been officially launched in 2006. China, India and Myanmar are members of WTO. It can be said that there exists an indirect Free Trade network between these four counties: China– ASEAN (Myanmar)–India, India–SAARC–Bangladesh. Therefore, if all parties are willing to establish a Free Trade Zone, four counties of BCIM Economic Corridor will have the basis of launching multilateral free trade negotiations. The biggest difficulty of establishing BCIM Free Trade Zone lies in the trade relationship between China and India. China and India are the members of WTO, members of the “Asia-Pacific Trade Agreement”, and also completed the Regional Trade Arrangement (RTA) joint research. It is difficult to establish Sino-Indian Free Trade Zone or establish BICM Free Trade Zone because there exists a large trade deficit between China and India. At present, the two governments determined to expand the bilateral trade volume up to $100 billion as early as 2010; however, the bilateral trade volume between China and India didn’t rise but fall in recent years. India was the country among the member states of WTO that proposed the most anti-dumping investigations against China. India always holds a cautious attitude towards the opening of market, coupled with its large amount of trade deficits against China, establishing a multilateral Free Trade Zone including China are what many Indian people don’t expect, and they think it will be a big impact for the domestic industry of India. Therefore, if the trade problem between China and India cannot be solved, it is extremely difficult to implement BCIM Free Trade Zone. The model of “Wading across the Stream by Feeling the Way” (pragmatic way) Although the prospect of building the BCIM Economic Corridor into Free Trade Zone or the sub-regional economic cooperation organisation is tempting, because of the previously mentioned five problems, BCIM economic cooperation mechanism is very likely to continue along the current mode of “wading across the stream by feeling the way”. Under this model, we think that China’s policy should focus on two core issues to promote economic corridor construction. The first core issue is Sino-Myanmar cooperation. Under the progressive model, we can consider to implement the BCIM cooperation mechanism step by step:

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Sino-Myanmar→Sino-Myanmar–Bangladesh→Sino–Myanmar– Bangladesh–India. The second core issue is Sino-Pakistan economic corridor construction. The promotion of Sino-Pakistan economic corridor construction can contribute largely to the development of BCIM cooperation mechanism. The body of existing BCIM sub-regional cooperation mechanism are Track I intergovernmental work group talks and Track II BCIM regional cooperation forum. Learning from the experience of GMS cooperation, the intergovernmental cooperation of BCIM Economic Corridor should start from low politics, and low-sensitive field. According to the theory of functionalism, the cooperation effects of these fields will eventually spillover into other fields, thus promoting the cooperation of other fields in this region. Projectoriented cooperation and mechanism construction is an effective way. For conducting institutional design, we shall promote one of the projects firstly as the breakthrough point, and exert its demonstration effect, which may be a feasible method. In addition, Track II BCIM regional cooperation forum should achieve further institutionalisation, from ‘impractical discussion’ to the prospective studies and providing policy options for the transformation of think tank forum. The regional cooperation forum should set up a four-country think tank network, and understand each think tank policy influence and its advantageous fields. On the basis of maintaining the core think tank of the existing regional cooperation forum, the corresponding think tanks of other countries should be invited to participate in the discussion according to the issues and priority, forming a work group on a certain issue or set up a special team to conduct the longer-term research on a particular issue. The special team in a neutral position provides policy options for the cooperation of certain field cooperation, and continuously builds consensus through several negotiations. Under the model of “wading across the stream by feeling the way”, the BCIM Track I intergovernmental dialogue should focus on system design and looking for the breakthrough point, while the Track two regional cooperation forum should further improve the institutionalisation level, expand the participation of think tanks and their professionalism, to provide more policy options. There is a big step forward of BCIM economic cooperation mechanism updating from forum to corridor, but a small step for the whole BCIM economic cooperation. Whether it is forum or corridor, its eventual execution will be a long and tortuous process.

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If we can make these four countries reach consensus on economic cooperation model, it will be a good beginning for the regional economic cooperation.

Notes 1 Principles refer to the belief about the facts, causality and honesty; standards refer to the behaviour standards established in the form of rights and obligations; rules refer to the specialised provisions and prohibition on the actions. For detailed explanation of these concepts please see: Keohane’s, Robert. (2006). “After Hegemony: Cooperation and Discord in the World Political Economy”. Su Changhe et al. Translated, Shanghai: Shanghai Century Publishing Group, pp. 57–61. 2 “One river Two railways Three oceans” international trade channel means: Chongqing connects with the Pacific ocean through Yangtze River; along the Chongqing-Lanzhou railway, exit from the Xinjiang Alataw Pass, across Kazakhstan Russia–Belarus–Poland–Germany– Rotterdam to connect with the Atlantic ocean; along ChongqingGuizhou railway, exit along Guiyang–Kunming–Dali–Ruili, across Mandalay in the central region of Myanmar–Sittwe port to connect the India ocean. 3 Guihong, Zhang. (2010). “India’s International Organizational Diplomacy”. International Watch, (2), p. 50. 4 “Asia-Pacific Countries Trade Agreement” is formerly known as “Bangkok Agreement”. “Bangkok Agreement” was signed in 1975, under the host of Economic and Social Commission for Asia and the Pacific (ESCAP for short). It had reached s preferential trade arrangement between developing countries. Its current member states are China, Bangladesh, India, Laos, South Korea and Sri Lanka. On November 2, 2005, the first ministerial council of “Bangkok Agreement” was held in Beijing, and each representatives passed new agreement text, decided to change “Bangkok Agreement” into “Asia-Pacific Countries Trade Agreement”, and implement the negotiation results of the third round of tariff concession after each member states finished the approval procedures in domestic laws.

Chapter 18

BCIM sustainability dialogue(s) Nimmi KurianBCIM sustainability dialogue(s)

A network approach to capacity building Nimmi Kurian This chapter argues that sub-regionalism represents an important discursive shift as a site of agency that has been under-studied and under-theorised in both research and policy. This could help initiate a meaningful debate on questions of benefit sharing, negotiate trade-offs, and allocate risks and burdens on environmental goods and bads in the subregion. The chapter is organised into three sections. The first section outlines the normative argument for subregionalism as a valuable level of analysis in research and policy. The second section looks at the empirical basis for broadening the BCIM agenda to include questions of sustainable development. The third section makes the case for a network approach to capacity building on sustainable development and suggests three possible networks that could perform critical governance functions within the subregion.

Subregional level of analysis The institutional landscape of sub-regional Asia has been transforming in interesting ways in recent years (Kurian 2014). Asia’s sub-regional diplomacy is acquiring a level of diversity and complexity with a host of sub-regional initiatives like the GMS (Greater Mekong Subregion), the SCGT (South China Growth Triangle), BIMSTEC (Bay of Bengal Multi-Sectoral Initiative for Technical and Economic Cooperation), the Mekong-Ganga Economic Cooperation (MGC), and the BCIM Economic Corridor (Bangladesh– China–India–Myanmar). The BCIM project as a narrative aimed at transforming economic geographies is a familiar one. Countries in the BCIM subregion, particularly India and China have been underscoring the transformational potential of the three Ts – trade,

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tourism and transport within the subregion. The state is today stepping into its periphery armed with a powerful new discourse of prosperity and an even more formidable arsenal of resources. Both Northeast India and Western China are seeing a huge infusion of funds from their respective central governments. India and China are simultaneously working at two fronts, namely to build internal connectivity at the borders as well as to seek cross-border transport linkages with the neighbouring countries. This is part of a longer shift in the making in Indian foreign policy and marks a subregional turn in Indian diplomacy towards the Asian neighbourhood. The foreign relations of subnational governments have been a growing area of subject.1 These enquiries are bringing interesting methodological and conceptual insights that will compel rethinking the region not as a passive location but as an actor with agency. An uncritical framing of the initiative primarily as an economic project has meant that there is a whole set of missing issues and actors that are currently invisible to the policy and research gaze. For instance, the ecological sustainability of the initiative, a growing concern in the borderlands, remains both under-theorised as well as under-studied. Resource degradation is becoming a common feature afflicting the region and interventions that do not respect the supply potential of mountain ecologies are creating and reinforcing interlocking webs of environmental and socio-economic vulnerability. While an economic narrative is valuable as a driver of sub-regional integration, can the heady vision of prosperity lead to a transformation of environmental geographies? Arguably, the discursive potential of sub-regionalism lies in the capacity to reclaim the local as a central actor in the governance agenda. The BCIM sub-regional initiative represents an opportunity to bring the border region into mainstream policy and research imagination issues. It is also a cue to bring people back into subregional debates on development. It is important to note that the sub-regional turn is not fundamentally a new initiative. It bears recalling that Asian social, cultural and economic histories have always been sub-regional histories. Today, economic forces are in fact building on complex histories of transnational social and cultural exchanges that have operated above and below the national level. As Darryl Crawford notes in this context that “social relationships have always been transnational in nature, but today their economic activities have come to match the transnationalism of their social connections and now constitute a series of coordinated

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socioeconomic networks”.2 These multiple sites of interactions can be best understood as ‘cosmopolitan histories’ or more appropriately as ‘histories of Asian cosmopolitanism’.3 These cultural, historical and social processes require a comparative sub-regional Asian canvas as against a national or statist framing. At the outset, this normative potential of sub-regionalism can be evaluated against three possible benchmarks. First, does it have the potential to decentre and disaggregate beyond national frames of reference? Top-down and bottom-up approaches are often understood in either-or terms as if these present alternatives to each other. What is often missed is that that these are overlapping albeit often competing domains that heave and push against the other. For instance, linear models of natural resource management fail to recognise the organic linkages between sustainable conservation and sustainable livelihoods of local people and thereby induce a social exclusion challenge. The community-based approach, on the other hand, while it prioritises the community as an innovation actor is confronted with the sobering reality that the community is almost never the only stakeholder in natural resource governance. Second, does a sub-regional frame have the capacity to rescale and look below the regional level and to offer new insights to mainstream theories of regionalism? To a certain extent, a sub-regional scale of reference consciously moves the policy and research gaze towards geographically proximate units within countries as important sites of transnational cooperation (Kurian 2014). While regional trading blocs and arrangements have been a common phenomenon, both the bilateral and the regional levels have tended to bypass the sub-regional level with its local governance particularities and stakeholders. Subregional cooperation represents a novel extension of the larger regional idea in that the units of cooperation become the adjoining border regions of countries. Third, can a sub-regional frame of analysis help initiate socialisation processes and question the limitations of focussing only on the realm of the formal law as a benchmark of progress? This is an important question to debate given that even when sub-regional cooperation does not result in formal, intergovernmental agreements, it could still help countries begin gradual processes of familiarisation and learning, creating patterns of communication where none previously existed. These are no trifling gains and will prove critical before questions of institutional design; function and mandate of cooperation are debated.

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Thinking sub-regionally on sustainable development There are compelling reasons to bring concerns regarding ecological sustainability onto the sub-regional agenda. The BCIM region is richly endowed with an immense wealth of biodiversity, which emanates from and thrives upon traditional ecological knowledge and has economic, social, cultural and ethical dimensions. Conservation of ecological balance will present common challenges and opportunities that the BCIM region will need to collectively address. As a concept, sustainable development cannot be seen in isolation from critical issues of poverty reduction, land-use management, water supply, sanitation, waste management and disaster prevention. Resource degradation is becoming a common feature afflicting the region and interventions that do not respect the supply potential of mountain ecologies are creating and reinforcing interlocking webs of environmental and socio-economic vulnerability. Water management issues, ecological imbalances in the form of rising temperatures, retreating glaciers and droughts caused by indifferent rainfall are increasingly finding their way to parts of the extended subregion. Climate change is exacerbating the spatial and temporal variations in water availability with the annual runoff in mega deltas such as the Brahmaputra and Indus projected to decline by 14 percent and 27 percent respectively by 2050. This will have significant implications for food security and social stability given the impact on climate sensitive sectors such as agriculture. The increased pressure on resources, erosion concerns and water diversion plans raise livelihood questions for riparian communities both within and beyond borders. The growing pace of forest fragmentation, land conversion and habitat loss also require targeted policy and institutional support since these directly impinge on livelihood chances of the rural poor. While climate change is a challenge that has taken centre stage in the global sustainability discourse, parts of Northeast India along with West Bengal face another serious challenge in the form of groundwater contamination. High levels of arsenic were first discovered in West Bengal as far back as the 1980s. Arsenic contamination poses a health hazard as well as a threat to sustainable agriculture. Given the high dependence of rural populations on agriculture and the contamination of crops, the problem is a dire one. Considerable research is being conducted in Bangladesh on understanding and coping with the challenge of

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arsenic contamination.4 This opens the possibility of sharing lessons and experiences.

Challenges to capacity building Effective capacity-building mechanisms will hinge not just on training and sensitisation programmes but on addressing communication and coordination challenges domestically as well as sub-regionally. For this, effective communication and coordination will be critical since the credibility and utility of ecosystem management needs to be seen not just from the eyes of the government but also from the points of views of its multiple stakeholders. It is only when a diverse set of actors engage in extensive interactions and learn from such interactions that these processes can produce socially inclusive development outcomes. Illustrative examples from the region underline the difficulties involved. For instance, the lack of coordination among domestic and regional state agencies become more glaring in the light of the level of coordination that dark networks are able to attain. For instance, the opening and expansion of economies across Asia has served to drive up a brisk trade in wildlife trafficking. This can be seen from the synchronised operations of that bring together a closely knit set of stakeholders such as hunters, middlemen, militant groups and consumers. The region has emerged both as a conduit as well as a major consumer, both factors significantly increasing the challenge of combating the threat. Organised crime today has gone beyond clan-based organisations catering to local demand to operate at a global level for a global clientele. The difficulties of coordinated action among enforcement agencies in the region are compounded by the ability of traffickers to access multiple border crossings almost at will. For instance, when the China–Myanmar trans-border coordination began yielding results, traffickers quickly moved their operations to the less-regulated China–Vietnam border crossing. Similarly, coordinated action can throw up unexpected challenges as can be seen from the trans-border tiger census that India faced with Bangladesh. The difficulties involved in coordination were evident in the problem of both sides counting the tigers twice over. To avoid the risks of double counting and other errors, India and Nepal recently conducted their first-ever joint survey in 2013 through a synchronised operation.5 These are already bringing

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multiple actors such as volunteers, ecologists, forest staff, conservation biologists, NGOs working alongside forest staff. Even when countries reach an agreement on an environmental problem, there are long gestation periods involved before member countries ratify these. A case in point is the problem of transboundary haze pollution resulting from land and forest fires has been a major concern across Southeast Asia. But even countries agree in principle to the problem and the measures to redressal measures, these do not necessarily translate into binding commitments. For instance, while the ASEAN Agreement on Transboundary Haze Pollution was signed in 2002, the ratification process took 12 years, entering into force only in September 2014.

A network approach to sub-regional sustainability An integrated approach that strengthens coordination and communication has the scope to connect what otherwise remain disparate dots in the sub-regional sustainability framework. The governance of sub-regional commons reflects the archetypal complexities of a transnational region as fugitive resources refuse to stay put within territorial containers. The institutional design of resource governance cannot mimic conventional scales of governance given the inherently diffused scale of resources that make coordination between governance levels inherently a fraught exercise. How do we understand many of these challenges within the BCIM context? Given the interlinkages between environmental goods and services in the region, management issues rightly need to be conceived as regional public goods that require transnational frames as against the national and bilateral frames. But are we making that causal link yet? Its evident synergies with other public goods such as peace and stability also need to be acknowledged. It is this intrinsic nature that makes transboundary resources a ‘means type public good’ given that it can be an important means to safeguard other critical regional public goods such as peace, stability and biodiversity conservation. Can we frame some of these questions in ways that can create institutional entry points for a whole set of missing issues that currently are invisible to the policy and research gaze? This in turn raises two difficult questions that need to be tackled. Can problem-solving models be nimble enough to make the conceptual leap from the national and the bilateral level to the sub-regional

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scale? And can scholarship cross territorial and disciplinary borders to explore issues of resource sharing, governance and livelihood concerns within joint analytic frames? The real test for any effective sub-regional forum will be its ability to forge and strengthen a set of three key networks that could fulfill critical governance functions and nudge the debate towards a participatory environmental regime. Hybrid policy networks Hybrid policy networks reflect the changing nature of diplomacy itself and need to become more of a ‘networking’ activity with a range of actors acting as nodes in forging issue-based coalitions. There are nascent efforts at transnational institution building in the BCIM subregion that are beginning to bring local, national and regional stakeholders together. For instance, the Kailash Sacred Landscape Conservation Initiative set up in 2009 brings together India, China and Nepal to develop a framework for improved management of shared bio-cultural landscape issues.6 The area covered includes the Southwestern part of Tibet, and parts of northern India and North-western Nepal. Its members include ministries from the respective countries, scientific research institutions as well as community-based organisations in the member countries. Similarly, the Brahmaputra Salween Conservation Landscape is another recent initiative by India, China and Myanmar to share experiences on landscape approaches towards biodiversity conservation issues. Three protected areas to be the focus are the Gaoligongshan National Nature Reserve in China; Namdapha National Park in India and the Hkakaborazi National Park in Myanmar.7 Another significant initiative in this regard is the Sundarbans Ecosystem Forum launched by India and Bangladesh in 2011 to coordinate working plans on conservation of the world’s largest mangrove forests. It also for the first time formally recognised the Sundarbans as a single ecosystem spread over 10,000 km in the two countries, 60 percent of which lies in Bangladesh. Research and knowledge networks The importance of developing a comprehensive knowledge base on water resources could contribute in meaningful ways to building habits of trust and predictability. Disputes over data, be it of access

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or of accuracy can be both endemic and damaging to sub-regional trust building. While there is growing recognition of the need for sub-regional cooperation within the BCIM region, there have been limited collective learning opportunities to share information, experiences and lessons on sustainable development. What are the prospects for India to forge issue-based linkages with its sub-regional neighbourhood on a range of regional public goods? Establishing a baseline database for different biodiversity and ecosystems components will be an essential prerequisite to informed public policy on sustainable development.8 Improving the scientific knowledge base could feed substantially into national policies for enhanced management of ecosystems. Several knowledge gaps exist with regard to glacial movements and fragmentation, wildlife species movements and changes in land use. All of these factors are crucial in determining patterns of climate change, hydrological response patterns, causes for ecological imbalances and in informing better policy decisions. Gaps in knowledge regarding the transition of land use also need to be plugged as they have far-reaching socio-economic as well as ecological impacts.9 Similarly, the importance of developing a comprehensive sub-regional knowledge base on water resources will be critical. This is more so since disputes over data, be it of access or of accuracy can be both endemic and damaging to riparian trust building. As past crises have shown, accurate and timely information is vital for successful disaster management. This calls for evolving a system of regular exchange of data and coordination between respective national agencies. Data coordination efforts in a shared region can, as Aaron Wolf argues, allow riparians ‘to get used to cooperation and trust’.10 A successful case in this regard is that of the Mekong Committee, the precursor of the Mekong River Commission, which foresaw the wisdom of investing the early decades of its institutional history to datagathering projects. Grassroots and community networks If effectively shepherded, sub-regionalism could prove to be a valuable policy tool to move beyond the rhetoric and look at the specifics of operationalising a people-centric vision of BCIM. As noted earlier, sub-regional futures need to be subnational futures that bring people back into these visions. Since local communities are the first at the receiving end of a whole host of environmental

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challenges, capacity building efforts should engage with and build on the experiential knowledge and coping systems specific to a region. For instance, citizen science is emerging as an important tool of public policy to enhance biodiversity conservation. Grassroots-based disaster preparedness programmes are effectively using community risk assessments as a means to reduce vulnerability and enhance coping capacities.11 Citizen biodiversity monitoring systems hold out all-round benefits in terms of accurate knowledge about the state of biodiversity for improved decision-making and more effective implementation. There is a gradually growing realisation of the need to build synergies between national and local sustainability goals. This can be seen from the Indian Prime Minister’s call in 2008 underlining the need for State Action Plans on Climate Change to complement the National Action Plan on Climate Change, more so since subjects such as water and agriculture are state subjects. As of now, State Action Plans have been drafted by 22 states and Union Territories with the National Steering Committee on Climate Change endorsing 19 of these. Also emerging is the need to build crosscutting issue linkages. An instance of this is the 2011 regional climate deal that Eastern Himalayan countries reached in Thimphu that underlined the need for collaboration on water, energy, food and biodiversity. There is also scope for BCIM to perform a useful linkage function by connecting several transboundary environmental networks already in place that focus on various aspects related to environmental protection such as the Asian Environmental Compliance and Enforcement Network (AECEN), South Asian Biosphere Reserve Network (SeaBRNet), Asian Network of Sustainable Agriculture and Bioresources (ANSAB), Freshwater Action Network South Asia (FANSA), Himalayan Conservation Approaches and Technologies (HIMCAT) and South Asian Network on Environmental Law (SANEL) among others. Similarly, landscape approaches to conservation have the potential for improved management of shared bio-cultural diversity. Initiatives such as these could help mediate competing interests of diverse institutional actors. Similarly, several problem-solving strategies can be realistic only with active community involvement.12 A case in point is the challenge of waste management in the border areas. With the expansion of urban settlements, increasing footfalls of tourists, trekkers and mountaineers in the region, there is growing extreme biotic pressure and increase in solid waste. A unique conservation initiative launched

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in Arunachal Pradesh in 2008 involves monasteries in the preservation of high altitude wetlands like the Bangajan. The three-year WWF project called Saving Wetlands Sky High will also engage the monasteries in waste disposal activities so as to ensure that tourism does not impact the wetlands adversely. A similar model of conservation with community involvement is the Srepok Wilderness Area (SWA) project in Cambodia.13 It is these shortcomings that call for more inclusive institutional frames encompassing the subnational, national and transnational scales.14 Institutional prescriptions that fail to take into account the multilevel nature of such systems end up with limited adaptive capacity. As Elinor Ostrom argues, a one-size-fits-all policy structure where a single governing authority frames rules governing the use of common pool resources for the whole country becomes highly ineffective in responding to regional and local level variations. There are interesting projects and initiatives that have the potential to become self-sustaining and addressing the lack of convergence between formal government structures and informal bodies. Initiatives such as the North Eastern Region Community Resource Management Project (NERCORMP), The Northeast Rural Livelihoods Project (NERLP) and the Communitisation Project have had a strong accent on capacity building of key actors involved including the government as well as community. These have included sensitisation and awareness campaigns encompassing the political, bureaucratic, community levels with community feedback factored into the programme at every stage of its expansion. These ongoing experiments offer interesting takeaways for rethinking the link between institutions, incentives and innovation in the subregion.15 The real test for governance arrangements will be to not only jump scales but also to make the conceptual leap towards co-governance regimes. Strengthening capacity building within the BCIM subregion thus needs to be prioritised as a strategic requirement with a focus on the direct involvement of border communities as stakeholders in the cross-border resource governance.

Notes 1 For details, see Duchacek, I. (1990). “Perforated Sovereignties: Towards a Typology of New Actors in International Relations”. In Michelmann, H. and Soldatos, P. (eds), Federalism and International Relations, Oxford: Oxford University Press; Hocking, B. (1993). Foreign Relations and Federal States, London: Leicester University Press;

352  Nimmi Kurian Marks, G. and Hooghe, I. (2005). “Contrasting Visions of Multi-Level Governance”. In Bache, I. and Flinders, M. (eds), Multi-Level Governance, Oxford: Oxford University Press; and Blatter, J., Kreutzer, M., Rentl, M. and Thiele, J. (2008). “The Foreign Relations of European Regions: Competencies and Activities”. West European Politics, 31(3): 464–490. 2 Crawford, Darryl. (2000). “Chinese Capitalism: Cultures, the Southeast Asian Region and Economic Globalisation”. Third World Quarterly, 21(1): 180. 3 Harper, T. and Amrith, S. S. (2012). “Sites of Asian Interaction: An Introduction”. Modern Asian Studies, 46: 256. 4 Studies in Bangladesh have suggested that 95 percent of the population affected by arsenic contamination lives within 200 m of a safe well. However, many of these wells fall within private property and ownership issues hinder access to them. Social empowerment, sensitisation drives and close cooperation between governmental and non-governmental actors could result in better access to safe wells. For details, see Mahmood, Shakeel Ahmed and Ball, Carolyn. (2004). “Defining and Implementing Arsenic Policies in Bangladesh: Possible Roles for Public and Private Actors”. Journal of Health and Human Services Administration, 27(2) (Fall 2004): 158–174. 5 The Terai region spread over Southern Nepal and the Indian states of Bihar, Uttar Pradesh and Uttarakhand has one of the densest concentrations of tigers in the world. A reliable database will be vital for conservation strategies to be able to make realistic targets and projections. 6 The KSL members include the Chinese Academy of Sciences, Ministry of Environment and Forests, People’s Republic of China, Government of India and Ministry of Forest and Soil Conservation, Government of Nepal. The lead participating research institutions include the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, G B Pant Institute of Himalayan Environment and Development and the Central Department of Botany, Tribhuvan University. 7 See Consultation Workshop Report. (2009). “Regional Experience Sharing Consultation on the Landscape Approach to Biodiversity Conservation and Management in the Eastern Himalayas: Towards Developing the Brahmaputra-Salween Landscape”. International Centre for Integrated Mountain Development (ICIMOD) and Kunming Institute of Botany, Chinese Academy of Sciences. 8 Kurian, N. (2014). India China Borderlands: Conversations Beyond the Centre, New Delhi: Sage Publications, 2014. 9 For more on ‘transitional theory’ see Erhrhardt-Martinez, K., Crenshaw, E. M. and Jenkins, J. C. (2002). “Deforestation and the Environmental Kuznet’s Curve: A Cross-National Investigation of Intervening Mechanisms”. Social Science Quarterly, 83(1): 226–243. 10 Wolf, A. (1999). “Criteria for Equitable Allocations: The Heart of International Water Conflict”. Natural Resources Forum, A, 23(1): 3–30.

BCIM sustainability dialogue(s) 353 11 Couvet, D., Jiguet, F., Julliard, R., Leverel, H. and Teyssedre, A. (2008). “Enhancing Citizen Contributions to Biodiversity Science and Public Policy”. Interdisciplinary Science Reviews, 33: 8. 12 Nepal, Sanjay K. and Chipeniuk, Raymond. (2005). “Mountain Tourism: Toward a Conceptual Framework”. Tourism Geographies, 7(3): 313–333. 13 The Srepok project has seen multi-stakeholder engagement between the Cambodian government, non-governmental organisations, private sectors and rural communities. The model is aimed at restoring the symbiotic balance between communities, protected areas and tourism development with tourism revenues being channelised back to the community and their environs. 14 Kurian, N. (2016). “Subregionalising IR: Bringing the Borderlands Back in”. In Ling, L. H. M., Abdenur, A., Banerjee, P., Kurian, Nimmi, Lama, M. and Bo, Li (co-authored), India and China: Rethinking Borders and Security, Ann Arbor: Michigan University Press. 15 Kurian, N. (2012). “That’s (not) My Job? Questioning Incentives, Institutions and Innovations”. Systems for Inclusive Innovation in Development (SIID), Policy Brief, Canada, International Development Research Centre.

Part V

Geo-politics of BCIM

Chapter 19

The BCIM

Sanjay Pulipaka and Saranya SircarThe BCIM

Understanding the geo-political dynamic Sanjay Pulipaka and Saranya Sircar

The Bangladesh–China–India–Myanmar (BCIM) Forum for Regional Cooperation is an Asian sub-regional cooperative framework that came into existence in August 1999. It began as the ‘Kunming Initiative’, as an outcome of interactions between scholars and experts at the Track II level. The endeavour was an effort to boost regional cooperation in the sub-region, and develop a ‘growth quadrangle’ or Regional Economic Development Area (REDA).1 The three institutions which played a central role in convening the first meeting in 1999 in Kunming, the capital of the Yunnan province of the Peoples’ Republic of China, were the Centre for Policy Dialogue (CPD) from Bangladesh, India’s Centre for Policy Research (CPR) and Yunnan Academy of Social Sciences in Kunming, China; Myanmar was represented by the Ministry of Trade.2 The intent of the Kunming Initiative was to create an opportunity for the major stakeholders from the four BCIM countries to come together for discussing and identifying initiatives that could contribute to deepening of cooperation among these four countries, in diverse domains.3

History and overview Connections between Indian and Chinese civilisations have always generated intense interests. In ancient times, the Southern Silk Road was reportedly a platform through which silk and other commodities like tea, spices, etc., were traded via China’s Yunnan province and Myanmar to India. In addition to the Southern Silk Road, the ‘Tea and Horse Caravan Road’ also linked India and China through areas such as Yunnan, Sichuan and Tibet.4 More recently during the Second World War, the Stilwell Road was constructed to ensure

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that the Chinese forces received regular supplies and arms from British India. The 1,800 (approx.) kilometres-long road originates from Ledo in Upper Assam and extends up to Kunming in Southwestern China’s Yunnan Province.5 It was constructed under the leadership of General Joseph Stilwell of the US Army between 1942 and 1945.6 The Stilwell Road was earlier named as the Ledo Road, and was later, as per the suggestion of Kuomintang leader Chiang Kai-shek renamed after General Stilwell. The Stilwell Road cuts through hostile terrain and intense vegetation. Along the Stilwell Road, there was an oil pipeline too, connecting Calcutta and Kunming, of approximately 3,218 kilometres long.7 The pipeline was constructed between 1943 and 1945, and more than 100,000 tons of oil was transported from June 1945 to January 1946 through this pipeline, thus providing a solution to the wartime energy crisis.8 It was famous as the ‘longest oil pipeline in the world’ during that time.9 The Stilwell Road, though a wartime effort, also generated interests on possibilities of connecting India and China. It is with the advent of the rise of China, discussions about the interconnections between India and China were revived again. From the Chinese perspective, the BCIM is an important platform to connect landlocked provinces such as Yunnan with international markets. Therefore, it is not surprising that the Track II initiatives on the BCIM also gained momentum in conjunction with the rise in the Chinese economy. The Kunming-to-Kolkata (K2K) Car Rally that was organised in February 2013, with the backing of the governments of the four BCIM countries, definitely caught widespread attention.10 The BCIM was also discussed at the Track I level. As per the “Joint Statement – A Vision for Future Development of India–China Strategic and Cooperative Partnership” (2013), India and China have agreed to establish a Study Group on the BCIM Economic Corridor.11 Subsequently when the Chinese President, Xi Jinping visited India12 and when the Indian Prime Minister visited China,13 the necessity of operationalising the BCIM Economic Corridor was reiterated. The BCIM seeks to facilitate interactions between two large economies, viz., China and India. While Bangladesh is also an emerging economy, Myanmar has substantive economic promise. There is no denying here that China constitutes an important pole in the BCIM framework. China is also a permanent member of the United Nations Security Council (UNSC) wielding veto power, which gives it significant political leverage. When a big-power with

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the right of veto is part of a regional framework, then the regional framework may become the site of balancing and bandwagoning tactics. Further, China has a 10 trillion-dollar economy, and the next big economy in the BCIM framework is India with 2.5 trillion dollars. In terms of trade relations, China is the leading trade partner of all the countries in the BCIM framework. China is one of the leading trade partners of India. In 2015, the total India–China trade stood at US$70.4 billion. During the same year India’s exports to China amounted to US$8.86 billion. However, imports from China amounted to US$61.54 billion making the overall trade deficit of at US$52.67 billion.14 China is Myanmar’s largest trading partner amounting to 40.6 percent of its overall trade.15 China is the second largest partner of Bangladesh with total trade amounting to 13.7 percent of the latter’s overall trade.16 Generally transnational economic corridors seek to connect vibrant production centres across the countries. Such economic corridors seek to leverage relative strengths of various countries to build integrated production centres. However, in this case, the BCIM Economic Corridor goes through the least industrialised parts of India and Myanmar. The production centres in India are located on its western coast, eastern coast, and in major cities such as Delhi National Capital Region, Bangalore, Hyderabad and Ranchi. In the case of Myanmar, the emerging industrialisation is taking place between Mandalay and Yangon. Surprisingly, the BCIM proposals tend to avoid the production centres in both India and Myanmar. Probably this explains a lack of enthusiasm among business communities in India and Myanmar towards these projects. It is possible for some to argue that the operationalisation of this corridor would kick start industrialisation in the backward regions of India and Myanmar. However, this assumption is being refuted by the economic interactions between Myanmar and China.

The Myanmar experience Myanmar has extensive cross-border interactions with China. These interactions, spread over two decades, have not resulted in kick starting industrialisation in northern Myanmar. On the contrary, there is grave concern that Myanmar has become the provider of natural resources to China. For instance, by 2010 Myanmar’s forest cover declined from 58 percent in 1990 to 47 percent in 2010.17 In 2013 Myanmar reportedly sold 2,37,000 cubic metres of teak to

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China, and this is three times the volume of 2012.18 To overcome rapid depletion of forest resources, Myanmar government imposed a complete ban on export of timber to China. Similarly, precious stones from Myanmar have been exported to China at exceptionally low prices. According to some estimates, Chinese traders tend to pay “50 percent under the stone’s value”.19 In addition to formal interaction, there is considerable smuggling of precious stones into China.20 Such massive outflow of precious stones at very low prices implies considerable revenue losses and attendant negative impacts on the livelihoods of people, as well as environmental damage. Similarly, in the Letpadaung copper mines in Salingyi Township of Myanmar’s Sagaing region, there were concerns that Wanbao Mining, the Chinese company did not adequately compensate the local population for their loss of livelihoods due to copper mining activities.21 There were allegations of land-seize, environmental harm and health hazards associated with the project, and there were large-scale protests resulting in a crackdown by security forces.22 An investigation committee headed by Aung San Suu Kyi was constituted, which came up with a report suggesting substantive renegotiation of the contract between military-owned Union of Myanmar Economic Holdings Company (UMEHL) and Wanbao Mining.23 Similarly, Chinese hydropower projects in Myanmar are designed to meet the energy requirements in Yunnan and beyond. The construction of the Myitsone Dam (at the confluence of the Mali and N’mai rivers in Kachin state and the source of the Irrawaddy River)24 by Chinese companies was suspended in 2011 by former President Thein Sein over concerns that it would result in largescale inundation of the forest lines, displacement of people, and disruption of livelihoods of people living downstream of Irrawaddy River. Another major reason behind the suspension of the project is also because the dam is located less than 100 kilometres from a major fault line, posing a risk to inhabitants if an earthquake strikes and weakens the dam’s structure or causes landslides in the reservoir.25 During her recent visit to China, Myanmar’s newly elected State Counsellor Aung San Suu Kyi expressed her willingness to look for a solution to the stalled hydropower project.26 The natural gas from Myanmar’s Shwe gas field in the Bay of Bengal is also being exported to China. Robust economic engagement with China has not resulted in sustainable employment opportunities in Myanmar. Moreover, local communities feel disempowered as they have

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no control or direct benefit that accrues from the exploitation of natural resources. Such alienation has generated intense agony as well as discontent among people. The Myanmar experience raises a few fundamental questions that countries need to ask when operationalising economic corridors. Do economic corridors result in job creation for local communities along their paths? What is their impact on the environment? When two regions with different levels of development interact, what is the impact on the power relations between these two regions? How to ensure that local people receive adequate compensation as well as stakeholding when the natural resources are being harnessed? It is these questions that should inform the operationalisation of the BCIM Economic Corridor. It should be noted that while most of these countries are exporting raw materials to China, they are importing machinery and finished products from China. So the question that naturally comes into play is that if the BCIM corridor gets operationalised then will this trade pattern intensify or will it witness a transformation?

The political context Like the South Asian Association for Regional Cooperation (SAARC), the BCIM has a boundary dispute between the largest countries in the framework. India and China share 3,488 kilometres of border.27 Much of this border is being contested. India and China went to war on the boundary dispute in 1962. The defeat of the 1962 war continues to animate India’s approach to China. However, it should be noted that in the past few decades, not a single bullet has been fired on India–China border. But there is very little room for complacency as border disputes tend to flare up on short notice. This is more so given that in spite of many rounds of discussion, the delineation of the border between India and China has not made any significant progress. In an attempt to identify the road map for resolution of the boundary dispute, Indian National Security Advisor Ajit Doval and his Chinese counterpart Yang Jiechi participated in the 19th round of India–China Boundary talks in Beijing in April 2016.28 Interestingly, after the meeting, a Chinese foreign ministry statement stated Starting from the big picture of long-term development of bilateral relations, both sides will, with the positive attitude of

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mutual respect and understanding and on the basis of existing results from negotiations, stay on the track of political settlement, stick to peaceful negotiations to resolve the boundary question, meet each other halfway [emphasis added] and continue to promote the process of framework negotiation so as to strive for a fair and reasonable solution that both sides accept.29 While references to ‘meeting each other halfway’ are welcome, for India, the delineation of the Line of Actual Control (LAC) constitutes a significant step towards confidence-building. As the Indian Defence Minister, Manohar Parrikar noted that “Marking the LAC is one of the preconditions of smooth border operations. Without that everything goes by perceptions, which has caused problems sometimes”.30 Delineating the LAC will go a long way in addressing the issue of transgression. For instance, according to newspaper reports, a total of 1,612 transgressions took place between January 2010 and August 2014 on the Indo-China border.31 India and China are also having differences of opinion on the composition of various international institutions. While India is keen to become a member of the reformed and expanded UNSC, China seems to be unwilling on such a process. Similarly, while India is keen on becoming a member of the Nuclear Suppliers Group (NSG), there is a perception in India that China is opposing India’s candidature. Recently, China, by putting a technical hold, has stalled India’s bid for a United Nations’ ban on Jaish-e-Mohammad chief, Masood Azhar as a terrorist.32 C. Raja Mohan sums up the disappointment in India over these developments by noting: “Having dreamt an expansive multilateral vision with China, Delhi is now forced to stomach the facts that Beijing does not support India’s permanent membership of the UNSC, has actively prevented Delhi’s entry into the Nuclear Suppliers Group and blocks the consensus on Pakistan-based terrorist Masood Azhar. On top of it all, Beijing cheerily explains all this away by evoking the ‘multilateral principles of consensus and consultation’ ”.33 There are also growing concerns about river water usages, specifically regarding River Brahmaputra, whose waters are shared by China, India and Bangladesh. As a lower riparian state, India is worried about the possible reduction in water flows which would adversely impact Northeastern states, specifically the upstream state of Arunachal Pradesh and the downstream state of Assam.34 The reports that China is planning to construct mega-dams and water diversion infrastructure projects along the Brahmaputra river system is becoming a source

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of concern. Referring to China’s dam construction in other river basins, Brahma Chellaney noted that despite its centrality in Asia’s water map, China has rebuffed the idea of a water sharing treaty with any neighbour. Concern is thus growing among its downstream neighbours that China is seeking to turn water into a potential political weapon.35 On the other hand, India and Bangladesh have made rapid strides in delineating the border between the two countries. The recent land boundary agreement between the two nations has addressed all the territorial concerns. The 2011 Protocol to the Land Boundary Agreement (LBA) of 1974 heralded for the settlement of the outstanding land boundary issues between India and Bangladesh. The 2011 Protocol resulted in a fixed demarcated boundary in all the un-demarcated segments, exchange of 111 Indian enclaves in Bangladesh – with 51 Bangladesh enclaves in India, and a resolution of all adversely possessed areas.36 Similarly, India–Bangladesh Maritime dispute has been resolved. Bangladesh had approached the Permanent Court of Arbitration in Hague for arbitration over the delimitation of maritime boundary under the United Nations Convention on Law of Sea (UNCLOS) on 8 October 2009; and the Permanent Court of Arbitration (PCA), in its verdict (concluded its hearings on 18 December 2013), awarded Bangladesh 19,467 sq. km of the 25,602 sq. km sea area of the Bay of Bengal.37 The award established the “course of the maritime boundary line between Bangladesh and India in the territorial sea, the exclusive economic zone, and the continental shelf within and beyond 200 nautical miles”.38 While the land boundary agreement has improved the relations between the two countries, there are still some outstanding issues such as sharing of the Teesta river waters. The building of hydropower dams on the Teesta River by India for utilisation during the dry season has led to the prevention of the supply of irrigation water to Bangladesh. A clear agreement on sharing of the Teesta river waters will go a long way in further bolstering the confidence in the bilateral relationship. Similarly, India-Myanmar boundary has also been relatively stable. Both countries have similar understanding and agreement on the boundary. The Boundary Agreement between the governments of both the countries was signed on 10 March 1967.39 There is a small irritant on India–Myanmar border in Manipur state concerning nine boundary pillars, as per the minister of state in the

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Ministry of External Affairs.40 However, it should be noted that this is a localised problem and may not impact India-Myanmar relations substantially. There are concerns in India that Indian insurgent groups are using Myanmar as a base for operations. Recently India has conducted a military operation in Myanmar to flush-out the militants of National Socialist Council of Nagaland-Khaplang (NSCN-K) camp in Myanmar. According to reports, the troops (12 Para) crossed the international border near border pillar 151, near the village of Chen Moho, and spent several hours inside Myanmar territory targeting insurgents.41 There are concerns in Myanmar about the movement of armed groups on Myanmar-China border. There are perceptions in Myanmar that armed ethnic groups such as United Wa State Army (UWSA) receive considerable support from Yunnan province of China. Similarly, a relatively large number of ethnic armed groups have robust interactions with Yunnan province. There is a flourishing informal economy on Myanmar-China border which includes opium trade. Myanmar–Bangladesh relations have also been experiencing severe stress in the recent past, especially due to sectarian violence and movement of people. Some argue that the Rohingyas are one of Myanmar’s various ethnic minorities and claim to be the descendants of Arab traders and other groups who have been in the region for generations.42 On the other hand, the Myanmar government argues that they never hosted an ethnic community called Rohingyas and therefore, all those who go by such name are illegal immigrants. There is deep concern in Myanmar that porous border is facilitating illegal migration of people. The sectarian violence resulted in forced migration of people. Bangladesh is pushing back the refugees from the Rakhine state of Northern Myanmar. On the positives, Myanmar and Bangladesh have also addressed their maritime disputes through the International Tribunal for the Law of the Sea, which gave its final verdict in favour of Bangladesh on the issue (that had been in the contest for the past 38 years) on 14 March 2012. Unable to reach a solution bilaterally, Bangladesh approached the tribunal in October 2009.43

Other regional frameworks The articulation of the BCIM is happening in the context of growing regionalisation of the world economy. In the past two decades, many regional frameworks have gained momentum. Even in the

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Indian subcontinent new regional cooperative frameworks have been operationalised. For instance, in addition to the SAARC, today we have the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the Bangladesh, Bhutan, India, Nepal (BBIN) Initiative. This emergence of new regional frameworks has also got to do with the geo-political challenges in the Indian subcontinent. The SAARC framework could not make substantive progress because of the territorial dispute between India and Pakistan. Pakistan’s strategy, thus far, has been to ensure progress in various domains is tied up with the resolution of the Kashmir dispute. Given the intractability of the Kashmir dispute, other fields including regional cooperation have not witnessed rapid progress. As a consequence, other countries in the region have started exploring alternative regional frameworks which are devoid of Pakistani presence. Moreover, the world is witnessing a global economic power shift towards the Asia-Pacific region. These two factors prompted a shift in the regional frameworks towards the eastern regions of South Asia. BIMSTEC An important step in this direction has been the operationalisation of the Bangladesh, India, Sri Lanka and Thailand Economic Cooperation (BIST-EC) in 1997. Subsequently, Myanmar, Nepal and Bhutan joined this framework, and it was also re-christened as the BIMSTEC in 2004. Unlike the BCIM and the SAARC, the BIMSTEC does not have a territorial dispute negatively impacting its functioning. Compared with the BCIM, the power differential in the BIMSTEC framework is relatively less intense. As a consequence, theoretically, the member states will have to spend less time navigating the power politics. The BIMSTEC framework is also an intra-regional framework that connects South Asia with Southeast Asia. This represents a desire among South Asian states to plug in to the emerging economies in South Asia. The BIMSTEC region, with 22 percent of the global population (1.5 billion people) has a combined Gross Domestic Product (GDP) of 2.7 trillion dollars.44 The BIMSTEC, as can be seen, is a maritime economic framework with the Bay of Bengal at its core. Like the BCIM, the BIMSTEC also has varied political regimes ranging from democracy to semi-democracy to military dictatorship. Therefore, sovereign equality and non-interference in internal affairs of others are some of the important principles on the basis of

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which the BIMSTEC has been founded.45 The success of the BIMSTEC will be contingent on many factors. The successful political transition and realisation of the economic promise of Myanmar are critical for the BIMSTEC’s success. While there is no boundary dispute, the irritants in the bilateral relations of member countries should be addressed in a manner which results in equitable outcomes. Further, the political swings in the member countries, for example, Thailand, should not have a lasting impact on economic trajectories of the economies. Within the BIMSTEC framework, there is the common cultural theme of Buddhism among the majority of the member countries. Therefore, issues such as tourism and people-to-people interactions may witness progress with appropriate policies. The necessity of expanding the Bay of Bengal framework, by including new countries, has been emphasised by some of the member countries in the recent past. For instance, to quote Sri Lankan Prime Minister Ranil Wickremesinghe in his Memorial Speech at the National Diet of Japan in October 2015 Since time immemorial Sri Lanka has been at the heart of Indian Ocean trade, and more precisely in the Bay of Bengal. We will continue this tradition by entering into an Indo-Lanka Economic and Technology Collaboration partnership, Free Trade Agreements with Pakistan, Bangladesh and the ASEAN nations bordering the Bay of Bengal–Myanmar-Thailand, Malaysia, Singapore and Indonesia.46 International organisations such as the Asian Development Bank (ADB) and the Economic Research Institute for ASEAN and East Asia (ERIA) have also been articulating the necessity of economic corridors that are complementary to the vision of the BIMSTEC. For instance, the ERIA has proposed a Mekong–India Economic Corridor (MIEC). The MIEC seeks to connect Bangkok in Thailand, Dawei in Myanmar, and Chennai in India to develop an integrated production network. From Chennai, the ERIA proposal suggests developing corridors to Bangalore and Mumbai. Similarly, the ADB is also working on a coastal economic corridor along the east coast of India. Japanese Prime Minister Shinzo Abe proposed the Bay of Bengal Industrial Growth Belt (BIG-B) Initiative during Bangladeshi Prime Minister, Sheikh Hasina’s official visit to Japan on 26 May 2014. This design seeks to promote industrial cluster

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along the Dhaka-Chittagong-Cox’s Bazar belt area of Bangladesh, with a focus on trade and industry; energy; and transportation.47 BBIN and China’s Silk Road The failure to realise the SAARC Motor Vehicles Agreement (MVA) prompted the emergence of the BBIN MVA, which is essentially a sub-regional framework. Countries such as Bangladesh have demonstrated considerable support. For example, the Bangladesh government repeatedly asked Bhutan to expedite the ratification.48 It should be noted that the BBIN MVA happened as India-Nepal relations were recovering from severe stress in the recent past. The success of the BBIN will to a large extent be dependent upon the anxieties and hope among smaller countries about their relationship with India. It is distinctly possible that smaller countries may try to modulate the power asymmetry through larger and comprehensive frameworks. A BIMSTEC MVA may be a next logical step in this direction. The BBIN and the BIMSTEC represent the general tendency among the countries of the Indian subcontinent to connect with the economies of Southeast Asia. Also, China has articulated a Trans-Himalayan Developmental Cooperative Framework involving countries such as Afghanistan, Pakistan, India, Sri Lanka, Nepal, Bhutan, Bangladesh, Myanmar and China. There is a possibility that even Iran may be added to this framework. Interestingly, this cooperative framework, instead of seeing the Himalayas as a barrier, treats it as a bridge for people and economic interactions. The Himalayan region, which is regarded as the ‘Third Pole’ (other two being the Arctic and Antarctic) forms the core of this cooperative framework. Therefore, protecting and nurturing this critical watershed should become the core of this cooperative/collaborative framework. Containing the adverse consequences of climate change and its impact on this sensitive ecosystem can be another node of regional cooperation. In another recent effort to boost connectivity and trade links across South Asia, the China–Nepal–India Economic Corridor was proposed by China in July 2015. Along with the economic corridor, there is a proposal for a railway route between the three countries too.49 China is also in the process of operationalising the China–Pakistan Economic Corridor (CPEC). The CPEC will start from Kashgar in China to Gwadar port in Pakistan, with an estimated cost of $46 billion.50 The CPEC will consist of improved connectivity networks and

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energy projects. In Pakistan, the CPEC will have two arms – one going through Lahore in Punjab to Karachi, and from then on to Gwadar; the other arm of the CPEC will traverse through Khyber Pakhtunkhwa regions to reach Gwadar port. While Chinese officials have invited India to join the CPEC, the recent news items that Gwadar port would also be used by Chinese naval forces generated concerns in India.51 The China–Nepal–India Economic Corridor, the CPEC and the BCIM forum are all part of the larger ‘Belt and Road’ Initiative (Silk Road) that China is seeking to operationalise in Asia. As can be seen, all these frameworks seek to enhance the continental connections.

Conclusion The analysis thus far demonstrates that China seems to be articulating continental regional cooperative frameworks with reference to the Indian subcontinent, and the BCIM framework is a part of this effort. This is not surprising, as China shares continental borders within the Indian subcontinent. On the other hand, India is more keen on moving forward with maritime connectivity frameworks as well. However, India cannot completely ignore continental frameworks of economic integration, as given the landlocked nature of Northeast India. In terms of economic costs, giving Northeast India a quick access to the maritime domain will increase the viability of economic projects in that region. The progress of the BCIM to a considerable extent will be dependent on addressing concerns regarding enhanced connectivity, such as environmental impact, impact on local ethnic relations, and benefits for local stakeholders in natural resources exploitation. While resolution of boundary dispute would be welcome, in case it is not achievable, even delineation of the LAC between India and China will give tremendous impetus to economic interaction, particularly the BCIM framework. There is no need to consider the multiple frameworks – the BCIM, the BIMSTEC, the BBIN – as competing regional constructs. Development of infrastructure facilities under one framework will have spill over impact on others. The Myanmar experience suggests that the principles on the basis of which economic engagement is constructed, is far more important. For the BCIM, the BIMSTEC and the BBIN to be successful, they should result in equitable outcomes, and the framework should be transparent as well as accountable.

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Notes 1 Rahman, Md. Tariqur and Al Amin, Muhammad. (2009). “Prospects of Economic Cooperation in the Bangladesh, China, India and Myanmar Region: A Quantitative Assessment”. Asia-Pacific Research and Training Network on Trade (ARTNeT) Working Paper Series, No. 73, July 2009. www.unescap.org/sites/default/files/AWP%20No.%2073.pdf 2 Srilatha, V. (2015). “BCIM Economic Corridor: A Game Changer in India-China Relations”. In Sidda Goud, R. and Mookherjee, Manisha (eds), China in Indian Ocean Region, New Delhi: Allied Publishers. 3 Ibid. 4 Fuquan, Yang. “The Ancient Tea and Horse Caravan Road’, the Silk Road’’ of Southwest China”. The Silk Road Foundation. www.silk roadfoundation.org/newsletter/2004vol2num1/tea.htm 5 “Beijing Calls for Restoration of Stillwell Road Connecting India, China, Myanmar”. The Hindu, Beijing, June 16, 2016. www.thehindu. com/news/international/Beijing-calls-for-restoration-of-Stillwell-Roadconnecting-India-China-Myanmar/article14425879.ece 6 Rahman, Mirza Zulfiqur. (2016). “Should the Stilwell Road Between India, Myanmar and China be Restored?” The Wire, 13 October 2016. http://thewire.in/72605/india-myanmar-china-stilwell-road-restored/ 7 Yikun, Ge and Wei, Li. (2005). “Links Between Yunnan and India During the Second World War”. In Thampi, Madhavi (ed.), India and China in the Colonial World, New Delhi: Social Science Press. 8 Ibid. 9 Ibid. 10 BCIM Car Rally at www.bcimcarrally.com/ 11 “Joint Statement- A Vision for Future Development of India-China Strategic and Cooperative Partnership”. Ministry of External Affairs, Government of India, October 23, 2013. http://mea.gov.in/bilateraldocuments.htm?dtl/22379 12 “Joint Statement between the Republic of India and the People’s Republic of China on Building a Closer Developmental Partnership”. NarendraModi.in, 19 September 2014. www.narendramodi.in/jointstatement-between-the-republic-of-india-and-the-peoples-republic-ofchina-on-building-a-closer-developmental-partnership-6618 13 “Joint Statement Between the India and China During Prime Minister’s Visit to China”. NarendraModi.in, 15 May 2015. www.narendramodi. in/joint-statement-between-the-india-and-china-during-prime-ministers-visit-to-china-63788 14 “India – China Relations”. Ministry of External Affairs, Government of India, January 2016. www.mea.gov.in/Portal/ForeignRelation/ China_Jan_2016.pdf 15 “European Union, Trade in Goods with Myanmar”. The European Union, 4 November 2016. http://trade.ec.europa.eu/doclib/docs/2006/ september/tradoc_113423.pdf 16 “European Union, Trade in Goods with Bangladesh”. The European Union, 4 November 2016. http://trade.ec.europa.eu/doclib/docs/2006/ september/tradoc_113349.pdf

370  Sanjay Pulipaka and Saranya Sircar 17 Mclaughlin, Timothy and Hla Tun, Aung. (2016). “Myanmar Bans Lucrative Logging in Bid to Preserve Forests”. Reuters, 28 April 2016. www. reuters.com/article/us-myanmar-economy-logging-idUSKCN0XP1JT 18 “China Wood: Restrictions on Myanmar’s Teak Export Throws Chinese Market into Chaos”. BurmaNet News, 26 August 2014. www.burmanet.org/news/2014/08/26/china-wood-restrictions-onmyanmar%E2%80%99s-teak-export-throws-chinese-market-intochaos/ 19 Lwin, Min. (2009). “Chinese Traders Scooping Up Mandalay Gems, Precious Stones”. The Irrawaddy, 3 March 2009. www2.irrawaddy. com/article.php?art_id=15230 20 “Myanmar’s Precious Stones: A New Chance?” The Economist Intelligence Unit, 17 November 2016. http://country.eiu.com/article.aspx?a rticleid=1224824306&Country=Myanmar&topic=Economy&subtop ic=Forecast 21 Toe Lwin, Ei Ei. (2013). “Fury Over Letpadaung Copper Mine Report”. Myanmar Times, 18 March 2013. www.mmtimes.com/index. php/national-news/5175-fury-at-copper-mine-report.html 22 Ibid. 23 Ibid. 24 “Irrawaddy Myitsone Dam”. International Rivers. www.international rivers.org/campaigns/irrawaddy-myitsone-dam-0 25 Ibid. 26 Blanchard, Ben. (2016). “Myanmar’s Suu Kyi Assures China of Solution to Stalled Dam”. Reuters, 18 August 2016. www.reuters.com/ article/us-china-myanmar-idUSKCN10T0LK 27 Ministry of Home Affairs. “Department of Border Management”. www.mha.nic.in/hindi/sites/upload_files/mhahindi/files/pdf/BM_ Intro_E_.pdf 28 “India, China for ‘mutually acceptable’ solution to border dispute”. The Indian Express, 20 April 2016. http://indianexpress.com/article/ india/india-news-india/india-china-border-dispute-peace-talks-ajitdoval-nsa-2762698/ 29 “Should Meet Halfway to Resolve Sino-India Border Dispute: China”. The Indian Express, 22 April 2016. http://indianexpress.com/article/ india/india-news-india/should-meet-halfway-to-resolve-sino-india-border-dispute-china-2765924/ 30 “India, China for ‘mutually acceptable’ Solution to Border Dispute”. The Indian Express, 20 April 2016. http://indianexpress.com/article/ india/india-news-india/india-china-border-dispute-peace-talks-ajitdoval-nsa-2762698/ 31 Jain, Bharti. (2014). “No Chinese Intrusion Since 2010, Only ‘transgressions’: Govt”. The Times of India, 20 August 2014. http:// timesofindia.indiatimes.com/india/No-Chinese-intrusion-since2010-only-transgressions-Govt/articleshow/40457901.cms 32 “Why Is China defending Jaish-e-Mohammad chief Masood Azhar?” The Financial Express, 10 October 2016. www.financialexpress.com/ india-news/why-is-china-defending-jaish-e-mohammad-chief-masoodazhar-pakistan-terrorism-pampore-pathankot-uri-attack/412813/

The BCIM 371 33 Raja Mohan, C. (2016). “Raja Mandala: Power and Principle”. The Indian Express, 18 October 2016. http://indianexpress.com/article/ opinion/columns/brics-summit-goa-china-xi-jinping-narendra-modipakistan-terrorism-nuclear-suppliers-group-raja-mandala-power-andprinciple-3088437/ 34 Rahman, Mirza Zulfiqur. (2016). “China and India’s Race to Dam the Brahmaputra River Puts the Himalayas at Risk”. The Conversation, 26 September 2016. http://theconversation.com/china-and-indias-race-todam-the-brahmaputra-river-puts-the-himalayas-at-risk-65496 35 Chellaney, Brahma. (2016). “Why China Seizing the Flow of Brahmaputra Tributary Is Important”. Daily O, 12 October 2016. www. dailyo.in/politics/china-brahmaputra-hydroelectricity-damsarunachalmekong-tibetan-plateau-xinjiang/story/1/13364.html 36 “India & Bangladesh Land Boundary Agreement”. Ministry of External Affairs, Government of India. www.mea.gov.in/Uploads/Publica tionDocs/24529_LBA_MEA_Booklet_final.pdf 37 Habib, Haroon. (2014). “Bangladesh Wins Maritime Dispute with India”. The Hindu, Dhaka, 9 July 2014. www.thehindu.com/ news/national/bangladesh-wins-maritime-dispute-with-india/article 6191797.ece 38 Roy, Shubhajit. (2014). “UN Tribunal Fixes Indo-Bangladesh Maritime Border”. The Indian Express, 9 July 2014. http://indianexpress.com/article/ india/india-others/un-tribunal-fixes-indo-bangladesh-maritime-border/ 39 “Boundary Agreement Between the Government of India and the Government of the Union of Burma”. Ministry of External Affairs, Government of India, 10 March 1967. http://mea.gov.in/bilateral-documents. htm?dtl/5886/Agreement+on+International+Boundary+with+India 40 “Lok Sabha Unstarred Question No.2165 Indo-Myanmar Border Dispute”. Ministry of External Affairs, Government of India. www.mea. gov.in/bilateral-documents.htm?dtl/22666/Q+NO2165+INDOMYAN MAR+BORDER+DISPUTE 41 Swami, Praveen. (2016). “Targeting NSCN(K) Camp, Army Entered Myanmar”. The Indian Express, 21 August 2016. http://indianexpress. com/article/india/india-news-india/targeting-nscnk-camp-army-enteredmyanmar-2988133/ 42 “Who Will help Myanmar’s Rohingya?” BBC, 5 December 2016. www.bbc.com/news/world-asia-38168917 43 Panday, Pranab Kumar. (2012). “Bangladesh and Myanmar Resolve Longstanding Maritime Dispute”. East Asia Forum, 26 April 2012. www.eastasiaforum.org/2012/04/26/bangladesh-and-myanmarresolve-longstanding-maritime-dispute/ 44 Overview, Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). www.bimstec.org/index.php?page= overview 45 Ibid. 46 “Memorial Speech by Hon. Ranil Wickremesinghe – Prime Minister of Sri Lanka at the National Diet of Japan”. Ministry of Foreign Affairs Sri Lanka, 6 October 2015. www.mfa.gov.lk/index.php/en/media/ media-releases/6214-sl-pmspeech-japan

372  Sanjay Pulipaka and Saranya Sircar 47 Bhavthankar, Aniket. (2016). “Japan’s South Asia Focus: Growing Association with Bangladesh – Analysis”. Eurasia Review, 19 April 2016. www.eurasiareview.com/19042016-japans-south-asia-focus-growingassociation-with-bangladesh-analysis/ 48 “How Modi’s Dream of a Regional Transport Corridor Has Hit a Roadblock in Bhutan”. The Wire, 16 August 2016. http://thewire. in/59296/59296-why-is-bhutan-hesitant-over-bbin/ 49 Patranobis, Sutirtho. (2015). “Beijing Proposes India-China-Nepal Economic Corridor to Boost Trade”. Hindustan Times, 2 July 2015. www.hindustantimes.com/india/beijing-proposes-india-chinanepal-economic-corridor-to-boost-trade/story-aysAO0D6wLjCdP mQEZduoJ.html 50 Shah, Saeed and Page, Jeremy. (2015). “China Readies $46 Billion for Pakistan Trade Route”. The Wall Street Journal, 16 April 2015. www.wsj.com/articles/china-to-unveil-billions-of-dollars-in-pakistaninvestment-1429214705 51 “Chinese Navy Ships to Be Deployed at Gwadar Port: Pak Navy Official”. The Indian Express, 25 November 2016. http://indianexpress.com/article/world/world-news/china-pakistan-economiccorridor-gwadar-port-cpec-4395161/

Chapter 20

BCIM: The geo-economics, geo-politics and the new contexts of Asia’s regionalism W. Lawrence S. PrabhakarBCIM

W. Lawrence S. Prabhakar

The theoretical enterprise of regionalism and its metamorphosis in the age of global and regional economic interdependence had generated profound implications for regional and trans-regional economic integration. Economic integration in its generic and sectoral contexts had evoked much optimism in its peak curve of the 1990s with the optimism of globalisation. Asia featured the new innovative frameworks of regional and trans-regional economic integration that saw the spawning of the ‘alphabet soup’ of regional organisations that had intense economic, commercial-trade, technical assistance and development, infrastructure and connectivity resulting in trade corridors and the people movement across borders and boundaries that were in dispute. The onset of the World Trade Organization accelerated the signing of various Economic Integration Agreements (EIA) The emergent “New Regionalism” featured a large regional or global power as the economic powerhouse that was linked by smaller regional states; the smaller states had in the process had gained much from the economic and structural reforms that enabled them in the smooth integration and even featured liberalisation; smaller states were able to achieve deeper integration and were able to leverage their capacities into agreements with the dominant state. The regional economic integration agreements were based on geographical contiguity that resulted in greater infrastructure development complimented with road, rail-road, sea and air connectivity. The Bangladesh–China–India–Myanmar economic integration agreement represents one of the enduring experiments in Asia’s new regionalism that is often fraught with vexatious border-boundary disputes, maritime delimitation complexities, traditional power rivalries perched on arms race, expenditure and the expending of

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diplomatic and political capital in the maintenance of stability. Given the enduring templates of conflict and disputes that range from the political, territorial to hydrography and other conceivable vistas of contention. The imperatives of economic-commercialtrade-infrastructure connectivity emerges as a Functionalist and neo-Functionalist derivative that has induced into the multi-sectoral cooperation among the four states. Notwithstanding the promises of geo-economic cooperation, the fratricidal geo-politics of China and India has its impact on the BCIM. The chapter endeavours: (a) the review of the Asia’s Rising Powers and the “New Regionalism”; (b) the strategic gambits in the new regionalism and its correlates in the BCIM; c) the complementarity of China’s “One Belt One Road” with BCIM; d) the challenges of China’s OBOR in its ambitious scope and its impact on BCIM in complementing and competing strengths and weaknesses. The emergent paradigm of Rising Powers in International Relations and the advertisement of the rise of ancient civilisational powers like China and India along with Japan and Korea have been considered to be a transforming dynamic in Asia, Africa and Latin America’s regional politics. Built around the rise of the ‘pivotal’ powers, has been the frameworks of New Regionalism that has been built to bolster the matrices of the rising trajectory of national power through economic growth and military power rise of the various ‘Rising Powers’. The icons of economic growth had been identified as the benchmarks of the Rising Powers and often have been touted to be focused on economic growth and development rather than engage in conflicts. China’s trajectory of rise commenced in the 1980s that was followed by India two decades later. The persistent trend of the two civilisational powers in their rise has been growing regional aspirations, endeavouring regional and sub-regional frameworks of economic, technical and other areas of sectoral cooperation1 China and India have thus been propelling their regional and global rise with much advertisement engaging in a benign hegemony in the region.2 The rise of China and India is an often-evoked term of reference in recent years since the nineties. While the ‘competitive rise’ had been in evidence since 2001, there has been evidence of persistence of bilateral boundary/ border issues that often-diverted energies from economic growth and interdependence. In assessing their ‘status’ in contemporary International Relations and in specific reference to Asian International Relations, India and China could be viewed in a holistic scope by addressing

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the ‘Civilizational’ ‘Cultural’ factors that precede the Westphalian state-nation/nation-state binaries. Thus, as Civilisational States, India and China as Asian Powers have been engaging in the expanding profiles of their economic growth-development, ambitions of great power status in the Asian landscape and expanding economic and strategic geographical visions and spaces. It is a fact that the momentous changes since 1980s for China and after 2000 for India had resulted in the huge expansion of the Asian leadership roles of China and India. As China and India grew the two nations developed economic interdependence that has accrued tremendous potential that has been beneficial for these two nations and its impact was on the South Asian and Southeast Asian regions as well. China’s assiduous rise in economic-industrial and militarytechnological influences grew in significant scope that increased its involvement in the region’s multilateral institutions.3 In the quest of China’s expansion into Southern Asia-Indian Ocean, China faces the challenge of “tyranny of distance” and the various traditional and asymmetric challenges in the Indian Ocean Region. China attempts to address this “tyranny of distance” through the development of overland initiatives such as the Bangladesh–China–India–Myanmar Regional Cooperation (BCIM).4 Even as China and India signed the World Trade Organization agreement (WTO), they announced the setting up of two special economic zones where the setting up of a special economic zone in the Yunnan Province was initiated.5* It was in this context that the BCIM Forum for Regional Cooperation project earlier known as the Kunming Initiative6 This was established in 1999. The connectivity links Kunming with Kolkata via Myanmar, India’s Northeast and Bangladesh costing approximately about US$20 billion.7 The BCIM thus fosters the ‘new regionalism’ of sub-regional cooperation. The nations that border each other in this sub-region are characterised by close historical, intra-ethnic relations and developing civil society, while at the same time, the region is also characterised by several violent conflicts between ethnic groups, insurgents, secessionist movements and the government armed forces.8

Bangladesh–China–India–Myanmar (BCIM) in perspective BCIM emerged as a Track II initiative that has gradually gained momentum to Track I Diplomacy* It aims at creating a sub-regional cooperation zone linking the backward regions of Southwest China

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and India’s Northeast through Myanmar and Bangladesh.9 The preliminary steps and the groundwork for the initiative was established as an intergovernmental entity that aimed in achieving trade and connectivity between Kunming and Kolkata (K2K). The evolution continued over a period of two decades of various BCIM Forum meetings that engaged in a cautious approach adopted by the Indian government to engage with China at various multilateral regional cooperation initiatives and the gradual opening up of the Northeast region, which was prone to insurgency. Having worked to explore alternate routes, China and India began examining the possibility of developing the Bangladesh–China–India–MyanmarEconomic Corridor (BCIM-EC) in May 2013. This connectivity became India’s first trans-border overland corridor.10 In May 2013, the BCIM Regional Cooperation initiative entered a new phase where the joint statement issued at the end of the official visit by the Chinese Premier Li Keqiang to India showcased the implications that both China and India would have in terms of the architecture for Asian regionalism or sub-regionalism. It is interesting to note that terms such as growth zone, growth polygon, cooperation zone and others were often used to describe the scope and objectives of the BCIM Forum. However, the BCIM-EC was never fructified in its real purpose and intents until recently. The joint statement of India and China issued in May 2013 elevated the BCIM Regional Forum from Track II to Track I. Till recently the idea of an economic corridor was not prominent within the Indian government’s development planning, although it might have been estimated highly with the Chinese as the thrust to this initiative was adopted in the year 1998 by the Asian Development Bank which funded the Greater Mekong Sub-region project in which the Yunnan province was a member of the founding group in 1992. From the initiation of the BCIM Regional Forum, it has been relatively struggling to raise consistency in terms of quadrilateral engagement from Track II to Track I. Both China and Myanmar had been effectively focused on the Track I engagement in the Forum and with Bangladesh also joining the initiative at this (Track I) level, India continued to remain a foot-dragger.11 In contemporary international relations, regions are considered as political constructs that are cartographic experiments that are subject to constant changes. As a geographically constructed idea, the BCIM is a good inter-regional bridge framework (one that links South, South East Asia and East Asia) enjoining a common set

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of objectives relating to development in the regional context. As an operational framework, China and India are involved as subregional entities along with Myanmar and Bangladesh. India as we have noted earlier was reluctant in terms of the BCIM and in the present context has been very reluctant to any regional framework of cooperation.12 The Indian government in recent times has however indicated that it is investing in regional integration as a priority investment in economic diplomacy. In an incremental measure, the building blocks to India’s Act East Policy is evident in the BCIM framework. The BCIM through its maze of regional connectivity empowers the process of development and opens the Northeast to Southeast Asia and augurs the broad process of strategic community in the region. However, India has several reasons to be sensitive to opening the wide gates of connectivity of the Northeast to Southeast Asia or with Bangladesh, Myanmar and China since it believes that the region would sway from India and has systematically discouraged the participation and representation of the political leadership of the Northeastern region.13 Given the traditionally good neighbourly relations with Myanmar, Myanmar has yet been the site of contention and competition between China and India. The two countries share a 1,600 km border and also a maritime border in the Bay of Bengal. While there are serious concerns from the Indian perspective in terms of influx of illegal immigrants and militants and drug trafficking along the four Northeastern states bordering Myanmar, this region also presents great opportunities for border trade and also a mooted gas pipeline between the two nations which will be beneficial for the Northeastern states of India. China and Pakistan were quick to make relations with Myanmar and China in the process received many concessions and access to natural gas through a China–Myanmar pipeline.14 China also has a substantial naval presence in Myanmar’s ports. Both India and Myanmar share concerns over Chinese influence as it seems that Myanmar is looking to increase competition between China and India for access of the available natural gas in its country. It is in this context that India’s foreign policy towards the military junta underwent a change amidst western criticism in the mid-1990s. Although India has invested approximately $1.6 billion it still has failed to succeed in securing a viable import mechanism.15 Increasing investments in Myanmar by India, is however, no match to Chinese investments in the energy sector which amounts to about $8 billion encompassing hydro-electricity, coal mining, oil and gas.16

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The recent political transition from military junta to democracy in Myanmar seems to have enabled both India and Myanmar to engage more closely. After a hiatus of more than twenty five years, there have been several high-level meetings between the political leadership of both countries. The visit by the Indian Prime Minister to Naypyidaw in April 201217 resulted in an increase in trade investments to approximately US$3 billion by the year 2015. India has also promised that it will credit US$500 million to Myanmar in order to develop livelihood opportunities in border areas and also assist in setting up IT infrastructure. Both the Indian and Myanmar governments have further agreed to build networks through educational institutions such as universities and think tanks.18 The shift in policy in terms of engaging with Myanmar in the Northeastern front is an extension of its twin security and development agenda in which two key parameters have been guiding India’s Myanmar policy since the 1990s.19 First, to facilitate trade and development in the landlocked regions of Northeastern India could be through the construction of transportation routes via Myanmar to Bay of Bengal, Thailand and Yunnan Province in Southwestern China. Second, securing cooperation in terms of counter insurgency operations against insurgent groups of Northeast India in the border areas of Indian and Myanmar was to be achieved. In return, the Indian government would provide military aid and open its border at designated points for overland trade to Myanmar. It is often in the view of Indian policy-makers that opening up of India’s borders with Myanmar will help alleviate conflict and help in establishing peace in Northeast India. With such initiatives and the fast changes that are occurring in Myanmar, Indian policy-makers are rapidly discovering the importance of Myanmar and its significance in terms of its Look East Policy (now Act East Policy) which was initiated during the 1990s.20 Such an engagement with Myanmar also is a consequence of the shifts in Chinese policy towards engaging with Myanmar which included massive increase in military aid, expanding the naval program of Myanmar and supplying signal intelligence facilities in the Great Coco Islands. Chinese aid in terms of modernising Myanmar’s naval bases also has been in Hanggyi, Akyab and Mergui. China also supplied weapons to the Myanmar Army at a very low price in order to get a stronghold in order to gain a strong foothold in the country Since then the Indian security establishment has renewed its efforts to engage with Myanmar in order to counter China’s method of geo-strategic encirclement of

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India – a concern which was a result of China’s growing closer proximity with Pakistan. In 1993 the two nations signed bilateral agreements to prevent drug trafficking and two year later, the Moreh-Tamu border crossing in the state of Manipur was opened. India also became a member of the Mekong-Ganga Cooperation which was established in 2005 by six countries. By the year 2005, Indian became the largest importer of products from Myanmar and became a major exporter of arms to the military junta. Since then trade between India and Myanmar has increased from US$7.4 million in 1990–1991 to US$1.5 billion by the years 2010–2011. However, it must be noted that only US$5 million worth of goods were transported through overland connectivity in Moreh.21 China’s relations with Myanmar grew closer after the emergence of the military junta in Yangon in after the 1988 uprising and the 1989 Tiananmen Square massacre which made both nations seek mutual relations in the face of isolation and criticism from the world community.22 China’s militarisation of Tibet and claims on Arunachal Pradesh have made India realise the need to improve its relations with Myanmar thus resulting in re-opening of its Consulate in Mandalay, where China already had its Consulate.23 In terms of its relations with Bangladesh, both China and India have developed in two different ways. India’s relations with Bangladesh are based on historical legacy. This meant that India enjoyed cordial relations with Bangladesh for a very long time. However, over time the relations between the two countries have been marred by differences, controversies, mutual acrimony and suspicion.24 China on the other hand did not support Bangladesh during the war of liberation in 1975 and even vetoed Bangladesh’s admission in the United Nations Security Council. However, these differences changed when China’s rising global influence has enabled it to be more accommodative towards the smaller South Asian states. Through a host of political initiatives, economic and infrastructural aid, and military aid China has succeeded in gaining friendly relations with countries which were less friendly with India. Various issues highlight the manner in which China has been supportive of Bangladesh’s regional problems especially when it was with India. Its support over the Moore Island controversy and the Ganges water sharing is evident that China has been supportive towards Bangladesh in terms of its regional cooperation ventures in South Asia. China has also emerged as a major arms supplier to Bangladesh. Bangladesh has acquired 65 fighter planes, 39 helicopters and

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a number of coastal patrol boats, tanks and artillery systems. China also assisted in building the only munitions factory in Gazipur. Much of it was given to Bangladesh as military aid or in very low prices. Thus, China has emerged as the backbone of the Bangladeshi military.25 China views South Asia as its closest zone of influence and has managed to assert significant influence in countries which were once under the Indian sphere of influence. Besides maintaining its relations with Pakistan it has also made significant inroads in countries such as Nepal, Bangladesh and Myanmar. This has resulted in eroding the historical advantages that India had over these countries. It may be attributed to the lack of foresight and petty mindedness of the Indian administration in handling differences which have been suitably exploited by China.26 China’s rising global status and its economic clout have served as a catalyst in overcoming some of the historical hangovers which these countries had towards Beijing. In the context of the renewed interest of India in BCIM and the transformative landscape in regional frameworks like One Belt One Road, Maritime Silk Road and China–Pakistan Economic Corridor opens to India a plethora of options as well as uncertainties

Strategic gambits in the new regionalism and its correlates in the BCIM China’s rise and its rapid strides in facilitating and hastening the process of regional integration in the Asia-Pacific – specifically in East Asia, Southeast Asia and its strides in BCIM in South Asia and the recent initiatives of the Maritime Silk Road and the Beit has been transformative. China’s accession to the World Trade Organization (WTO) and its sequel steps in signing of various Free Trade Agreements since 2002 has been augmenting its regional and transregional economic role that has now culminated in the One Belt One Road grand initiative. China’s moment to Great Power ascendancy came after 2008 with the impact of the global economic crisis. It had capitalised this as an opportunity and it leveraged to emancipate the regional and the pan-regional Eurasian countries; through a suave exploitation of its ‘soft power’ – exhibiting its cultural quintessence in the Beijing Olympics that unequivocally announced its arrival on the global stage. In 2013, Beijing comprehended the transformative impacts of the economic crisis of 2008 that was much evident in the flagging United States and European economic recovery, assessed the

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strategic impact of the fatigue of regional wars of US-NATO. With this, China launched the Silk Road Economic Belt in the speeches of President Xi Jinping Kazakhstan and in Indonesian Parliaments symbolising Beijing’s quest for its continental and maritime geopolitics, economics and security diplomatic gambits.27 In this context, all the new regional framework initiatives that have emerged since China’s rise and its attempts to regional integration cannot be viewed purely only from a regional growth and development perspective or its catalysis of regional and global growth, but moreso for its iconic civilisational greatness assertion that comes with a strong emphasis on strategic derivatives from economic gains. In the New Regionalism Approach of China in Southern Asia, BCIM is one critical sub-regional framework that expands China’s market access and infrastructure diplomacy into India and Bangladesh, while Myanmar has already been integrated. Seven strategic gambits are evident in China’s BCIM connection and its leveraging potential in the region that is optimising its presence and influence in BCIM while leveraging its China–Pakistan Economic Corridor to the North and the potential port access in Myanmar and Bangladesh by its Maritime Silk Road initiative. Engaging South Asian Economies by infrastructure connectivity has been China’s prime aim to draw South Asian economies and its market by the first step of constructing infrastructure connectivity that are of durable standards. Road and Rail connectivity from Tibet to Nepal and from China’s Kunming Province to a prospective Northeast destination in the future is a very critical initiative that has seen immense Chinese investment and returns. China’s investments in Bangladesh and Myanmar despite the various vicissitudes of politics and economics has been well-known. China’s Bangladesh investments have seen substantive gains for Bangladesh in recent years in the form of US$24 billion in assistance. It converges Bangladesh and China for a Chinese grant of Bangladesh 150 million RMB (US$23.8 million) for establishing vital economic and technical cooperation projects, in collaboration with China. Besides, 860 million RMB (US$133 million) has been provided by China in the form of a soft loan for the setting up of a Bangladeshi project, aimed at bringing all government offices across the country under one network. China’s economic access diplomacy towards Bangladesh augurs with Sheik Hasina’s Vision 2021 that aims to transform Bangladesh into a middle-income economy.28 China’s infrastructure development projects like bridges and its access nodes to its coal mines and natural gas fields compliments

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with its access to the Bay of Bengal. Besides, Bangladesh prefers a greater deal of defence cooperation with China over India given its advantages of military hardware that China would provide.29 China’s Myanmar connection is yet another vital link in the BCIM which features superior Chinese investment and ease of implementation of the projects has resulted in favour to China over India. Myanmar and China call each other ‘paukphaw’, a Myanmar word for siblings. Paukphaw is not used for any other foreign country, reflecting Myanmar and China’s close and cordial relationship.30 A very significant Chinese economic cooperation in infrastructure development is the Ayeyarwady Transportation Project that opens a transport corridor from Yunnan Province to Thaliana Port near Yangon. China’s Yunnan Province thus has a direct route through Myanmar to a sea port from which it can export products to South Asia, the Middle East and Europe. This corridor has been optimal for China in reducing transport costs with shorter distances and the time to bypass the Malacca Strait in the event of a conflict in the South China Sea.31 The Ayeyarwady directly links China’s Southwestern frontier to the Bay of Bengal and the Andaman Sea. Given the turbulence that China faces in the South China Sea, the Ayeyarwady access provides China a strategic gambit of transportation connectivity that has enormous economic importance and strategic gain. Ensuring Chinese market access in Northeast India via Myanmar and Bangladesh has been China’s key priority. China has been keen to “win the hearts and minds” of the Northeast, although historical and cultural realities do have a mixed experience. India’s ‘Act East’ through Northeast is a very critical economic-strategic gambit that holds off against the Chinese ingress into the region that is of colossal importance for its natural and mineral resources. Given the huge amount of resources, the region has been infested with several insurgencies. It has also seen a very bitter experience of security forces deployments in the region to combat regional and trans-regional insurgencies. China’s access in the region has come through the various border trade arrangements and the huge market that Northeast India offers to Chinese goods that have been economical for the local populace. The Chinese road corridor connectivity in the region has been growing and enduring while the Indian side has commenced its modernisation pace in recent years. The BCIM-EC is an initiative that straddles along the Northeast and opens up the region for intra-regional trade through better

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connectivity. But the lethal combination of the regional insurgencies and a host of non-traditional security threats that emanate from small and light weapons proliferation, narcotics and violence has dampened the Indian enthusiasm in this region – although there have been strong emphatic voices of opening Northeast India into this direction. Enabling Chinese Port access in Bay of Bengal has been Chinese primary goal to avoid the Malacca Dilemma. In recent years, China has been using Thailand as a favoured destination for its investments and interest in developing infrastructure including the development of Kra Canal. The idea of the Irrawady Corridor with Myanmarese ports in the Bay of Bengal and the opening of Kra Canal opens new maritime trade and strategic gambits for China that is keen on using its Maritime Silk Road initiative to link Bangladesh and Myanmar with Sri Lanka and this could actually lead to avoiding India into this road map. China would leverage its SIGINT (Signals Intelligence) facilities in Hianggyi, Kyaukpyu, Zadetkyi, Mergui and Great Coco Islands. In the contexts of BCIM and BIMSTEC, China and India are in the constant process to woo Bangladesh and Myanmar and exercise their competitive influence. In the contemporary contexts of China’s OBOR, the ‘Irrawaddy Corridor’ links Kunming in Yunnan Province to the Bay of Bengal through Burma providing the land-sea access opening China’s western and southern regions. The Irrawaddy corridor is strategic in its importance since it is the primary conduit to transporting gas from Burma’s offshore platforms to Yunnan as well as in overcoming the vulnerability of its shipping in the strategic Southeast Asian choke points.32 In the context of China–Pakistan Economic Corridor (CPEC) the “Karakoram Corridor” opens the Xinjiang-Pakistan onward to the Persian Gulf with access to energy sources in the Persian Gulf. In spatial and strategic terms, access and basing arrangements particularly in Gwadar in the Arabian Sea and Chittagong and Burmese ports in the Bay of Bengal ensure a strategic initiative of China to check Indian advances in South Asia.33 Thus, BCIM and BIMSTEC has prominent Indian participation and presence with regional strategic advantages emanating from geography, yet China has been able to leverage and optimise its advantages in the region in a better efficient manner. Energising regional economies with Chinese goods is China’s most important priority as its economy shows prospects of slower

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growth. Chinese aid such as loans, Chinese labour and Chinese manufactured goods need the South Asian markets even as the near abroad markets are showing signs of slackening growth and diminishing returns. The BCIM and OBOR provide China the avenue to channelise its continual production and labour to new areas that is based on a new regionalism approach that provides for infrastructure and market connectivity in the region. Southern Asia is China’s cross-roads of its network of roads and railroads that link with West Asia and Europe. Eliciting regional resources for China’s growth and development is China’s avowed goal as it builds in access and connectivity, while New Regionalism augurs for pan-regional development at varying levels, BCIM, CPEC and Maritime Silk Road are interconnecting nodes of the network of Chinese access in the region that draws in a deluge of the region’s resources of coal, oil and natural gas, minerals and natural resources funnelling into China’s growth that in turn reciprocates by the trickle to regional development. John Garver34 attributes this approach as “multidimensional friendly cooperation” which in effect draws in the region’s resources that aids China’s growth. In terms of resources access, Southern Asia including Afghanistan at the western end and Northeast at the eastern end along with Bangladesh and Myanmar offer the shortest access routes to draw this variety of resources that funnels into Kunming province. Empowering a possible Chinese surge into the Northeast, Arunachal and wider region is China’s ambient and ultimate objective. With its cartographic designs on Arunachal and the wider region, China aims to build road and border connectivity through existing routes and entry points that would enable a Chinese surge into the region at opportune circumstances.35 Enlarging the Chinese Civilisational connect in the wider region is China’s Civilisational Historical objective that determines and defines its long-standing Southern Asia presence from the Ming era. China’s civilisational-historical pivot ‘legitimizes’ China’s engagement in the region as a non-imperial colonial power projected as a imagery and leveraged as an advantage in the historical-cultural-civilisational contexts of China’s engagement in the post-colonial and post-Western era. China often harps the ‘colonial humiliation’ and draws the Southern Asian post-colonial states empathy that buoys its role in the region – often in perceptions management. The ‘celebration’ of the civilisational connect in the post-globalisation period was quite evident and that was the basis of the One Belt One Road diplomacy that synced Culture, Connectivity and Commerce.36

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The complementarity of China’s “One Belt One Road” with BCIM Beijing views South Asian countries as ‘neighbors’ with whom it is especially important to have friendly, cooperative ties both to increase China’s own economic and political influence and to lessen the ability of potentially hostile powers (currently the US) to injure China’s interest.37 Beijing’s South Asia strategy is ‘to draw out’ its resources to funnel China’s development and reciprocate it with infrastructure aid and assistance.38 In this pursuit of its objective, China pursues multilateralism. Multilateralism in Chinese characteristics has been one of the enduring pivots of China’s South Asia engagement. China’s multilateralism has its continental and maritime perspectives by which it has engaged with the region’s states often deploying its military assets in hardware sales, ship visits, dual use road-rail connectivity and has been able to create a synergy in the Southern Asian region that linked motivations-intentions and capabilities in its economic and military strategy.39 China’s engagement in multilateralism initiatives came in the form of its engagement with SAARC and other sub-regional initiatives like BCIM. Chinese diplomatic presence and participation energised the other states of the region in what was perceived and projected as India-centric region. This diplomatic posture added to China’s continued economic largesse that bolstered Pakistan, Nepal, Bangladesh, Sri Lanka, Maldives and the Indian Ocean island states of Mauritius and Seychelles that all saw the overwhelming Chinese material aid and support outbidding India.40 It is in this long nurtured historical evolution of China’s pivot to the Asia-Pacific (that was unannounced) that derived the One Belt One Road initiative in 2013. China’s sponsored and built infrastructure embeds China in the region and facilitates the spread of culture and norms of the Sino-centric patterns of free market businesses that are already in practice in its continental initiatives of China–Pakistan Economic Corridor (CPEC) and Bangladesh– China–India–Myanmar Cooperation (BCIM). While these two projects have various inbuilt contradictions and tensions between China and Pakistan for CPEC and India and China for BCIM with increasing vulnerability of Chinese personnel and capital to the vagaries of the political environment, China has increased

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stakes for their amicable resolution for preserving its stakes in the region.41 China’s Maritime Silk Road is premised on the investment on maritime infrastructure that elucidates the possibility for overseas basing. China has been developing these access facilities since 2000 with the perception that these facilities are access for China’s future naval operational deployments as well as for their merchantmarine. China’s access has always been viewed as security threats to the regional power India as well as other states.42 The Belt Road initiative actually dampens the explicit intent of China to build purely military oriented facilities, instead it builds investments for its regional influence more by economic and commercial means that in the longer run assures China of its preferential should it decide for a surge into the Indian Ocean.

The challenges of China’s OBOR in its ambitious scope and its impact on BCIM China faces several challenges in syncing the OBOR with BCIM. Both initiatives along with CPEC radiate out of China and are built on parallel routes with the future potential interlocking. With Tibet as its epicentre, China hopes to use the maze of roads to link the region for (a) drawing regional resources and (b) preparing for deployment of its military forces along these corridors in future contingencies to bolster Pakistan and Nepal and also use them as “Compellance points” vis-à-vis India, while continuing its trade and investment with India. China’s objective is to build the land-sea corridor connectivity linking BCIM and MSR as a leveraging potential for its access into the region’s economic and strategic geography. In that pursuit, China is developing routes and building oil and gas pipelines between Kyaukpyu, Myanmar and China’s Yunnan Province.43 This measure is to overcome the ‘Malacca Dilemma’. Thus, the land-sea corridor routes minimise energy transportation and thus sets to overcome China’s dilemmas of a possible US-India concerted action against China during crisis.44 With this strategy in its grand scope, China initiated the India– China industrial and manufacturing corridor from Kunming to Kolkatta of the BCIM that has already been in the pipeline for development routed via India’s Northeast states with a cost of US$20 billion provides for interdependence as well as develop trade and commerce corridors with India. Besides, China has also built its

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East–West axis of access in the Kashgar-Gwadar corridor of industrial and infrastructure development derivative of the CPEC, which is perhaps the grandiose scheme that has been built at a cost of US$18 billion.45 China’s economic-commercial-strategic sea-land corridor projects greatly substantiate Beijing’s most powerful presence in the Indian Ocean region not as a forward deployed naval power alone, but by credible means of economic and commercial diplomacy as well as maritime trade access in the region.46 Together with BCIM, which has a clear Bay of Bengal maritime access, China’s Maritime Silk Road enters the gambit that intends to clearly segregate the economic-commercial-connectivity paradigm while avoiding the articulation of the military-naval dimension explicitly. It is silent about PLAN’s “Out of area” deployments but emphasises on the access-infrastructure dimension. The new regionalism espoused in the post-globalisation phase and the post-economic crisis of 2008 has resulted in the emergence of frameworks of regional cooperation that emerged during the immediate post-Cold War period being transformed into newer frameworks that are reflective of regional cartographic-cultural salience rather than the nation-state framework patterns. With the assertion of Asian civilisations and the reemergence of the Asian Civilisational and Cultural contexts, the idea of the territorial state of the colonial order seems to be in revision in preference of a cultural-civilisational construction that has more cultural and identity factors as the premises for regional cooperation. In the context of great power rivalry, with the competitive salience of regionalism now in emergence that is evident in China’s Power Rise vis-à-vis Peaceful Rise, new regional frameworks like BCIM and One Belt and One Road and their derivatives of the Maritime Silk Road, Silk Road Economic Belt and the China–Pakistan Economic Corridor has been redefined as economic-strategic compellance strategies of an ambitious emerging hegemon which is optimising its leverage of economic power, infrastructure and cheque book diplomacy.

Notes 1 The roots of Track I diplomacy is generally understood as official diplomacy. Official diplomacy looks to establish and develop contacts between the governments of different states by using intermediaries who are mutually accepted by the respective parties (Megalhaes, C. J. (1998). The Pure Concept of Diplomacy, New York: Greenwood Press, p. 17). For a more clearer understanding of Track I diplomacy

388  W. Lawrence S. Prabhakar see Megalhaes, C. J. (1998). The Pure Concept of Diplomacy, New York: Greenwood Press. For further reading on Track I and Track II diplomacy see Diamond, L. and Mcdonald, J. (1996). Multi Track Diplomacy, West Port, CT: Greenwood Press. 2 Scott, David. (2008). “The Great Power Great Game between India and China: The Logic of Geography”. Geopolitics, 13(1): 1–26. Daniels, Rorry. (2013). “Strategic Competition in South Asia: Gwadar, Chabahar, and the Risks of Infrastructure Development”. American Foreign Policy Interests, 35(2): 93–100. 3 Shambaugh, David. (2006). Power Shift: China and Asia’s New Dynamics, CA: University of California Press; Montville, J. (1991). “Track Two Diplomacy: The Arrow and the Olive Branch: A Case for Track Two Diplomacy”. In The Psychodynamics of International Relations: Vol. II Unofficial Diplomacy at Work, Lexington, MA: Lexington Books, pp. 161–175. 4 Brewster, David. (2015). “An Indian Ocean dilemma: Sino-Indian Rivalry and China’s Strategic Vulnerability in the Indian Ocean”. Journal of the Indian Ocean Region, 11(1): 48–59, doi:10.1080/19480881 .2014.994822 5 Singh, Amit. (2012). “Emerging Trends in India Myanmar Relations”. Maritime Affairs, 8(2): 25–47. * The Kunming Initiative first appeared in the remarkable note presented by Professor Zhemin, “Proposition on Formation of Sub-Regional Cooperation Zone of China India Myanmar and Bangladesh”.in this proposition he situates it in the context of the twenty-first century global economic integration where various regional and sub-regional cooperative organizations are continuously emerging. He further observes that although such an emergence is present, China has not effectively utilised it in terms of connecting with India. The region has the capacity to serve as a meeting point of all three markets of south east Asia, China and South Asia which can interconnect the whole of Asia. Despite limited infrastructure this region has abundant natural resources which can be utilised for large-scale development. Given these conditions, Zhimin outlines the likely benefits of this sub-regional cooperation where, if the two nations (China and India) cooperate with such a mechanism, they could contribute to the establishing of a new multi-polar world in order to safeguard peace and stability in the Asian Region as a whole. He notes that sub-regional cooperation will enable rational planning for full utilisation of the available resources and also enable strengthened environmental protection. Linking the markets of China and India through a sub-regional initiative will definitely link the unlinked markets of Asia and integrate the sparsely distributed economic strength of the continent which will also assist in alleviating poverty and enable social development. He further observes that this initiative will be a land bridge which will connect the Indian Ocean with the Pacific Ocean. 6 Xiaoqiang, Fu. (2000). “Proposals for Further Development of Trade and Economic Relations Between China and India”. China Report, 36(3): 391–396, 309; For a seminal literature survey: Benabdallah,

BCIM 389 Lina. (2016). “Towards a Post-Western Global Governance? How Africa-China Relations in(form) China’s Practices”. 1(1) China’s Rising Role in Global Governance: Opportunities and Challenges Rising Powers Quarterly, September, 135–145; Bloomfield, A. (2015). “Norm Antipreneurs and Theorizing Resistance to Normative Change”. Review of International Studies, 42(2): 310–333; Zhang, Yongjin and Buzan, Barry. (2012). “The Tributary System as International Society in Theory and Practice”. The Chinese Journal of International Politics Oxford Journals, 5(1) (Spring): 3–36; Feng, Z. (2016). “China as a Global Force”. Asia and Pacific Policy Studies, 3(1): 120–128; Sohn, I. (2012). “After Renaissance: China’s Multilateral Offensive in the Developing World”. European Journal of International Relations, 18(1): 77–101; Li, Rex. (2004). “Security Challenge of an Ascendant China: Great Power Emergency and International Stability”. In Zhao, Suisheng(ed.), Chinese Foreign Policy: Pragmatism and Strategic Behavior, New York: M.E. Sharpe Inc, pp. 23–57. 7 Singh, Amit. (2012). Emerging Trends in India Myanmar Relations, Uberoi, Patricia. (2016). “Problems and Prospects of the BCIM Corridor”. China Report, 52(1): 19–44. 8 Reinhardt, Dieter and Anja, Senz. (2014). “Closer Cooperation in the Bangladesh-China-India-Myanmar (BCIM) Region – A Success Story of Asian Regionalism”. In Senz, Anja and Reinhardt, Dieter (eds), Taskforce: Connecting India, China and South East Asia – New SocioEconomic Developments, Duisburg: Institute of East Asian Studies, Universitat Duisburg Essen, Duisburg Working Papers on East Asia Studies No. 97/2014. 9 Hussain, Zaara Zain. (2014). “Initiative for Southern Silk Road: Linking Bangladesh, China, India and Myanmar”. ISAS Working Paper No. 192–17. Singapore: National Univeristy of Singapore; Mishra, Binoda Kumar. (2015). “BCIM-EU and the North East: Explaining India’s Reluctance”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: ICWA and Pentagon Press. 10 Uberoi, Patricia. (2016). “The BCIM Forum: Is It Sustainable?” In Das, Gurudas and Thomas, C. Joshua (eds), Look East to Act East Policy: Implications for India’s North East, New York: Routledge; Vaid, Manish and Maini, Tridivesh Singh. (2015). “BCIM: Can India be a Driving Force?” thediplomat.com/2015/01/bcim-can-india-be-a-driving-force/ (accessed on 10 October 2016). 11 Uberoi, “Problems and Prospects of the BCIM Corridor”; Mishra, Binoda Kumar. (2015). “BCIM-EU and the North East: Explaining India’s Reluctance”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: ICWA and Pentagon Press. 12 Rana, Kishan S. and Uberoi, Patricia. (2012). India’s North East States, The BCIM Forum and Regional Integration, New Delhi: Institute of Chinese Studies. 13 Singh, Laishram Rajen. (2006). “The Kunming Initiative: Prospects for Sub-Regional Cooperation”. The Asian Scholar, No. 3. www.

390  W. Lawrence S. Prabhakar asianscholarship.org/asf.ejourn/rajen_sl.pdf (accessed on 10 October  2016). 14 Price, Gareth. (2013). India’s Policy Towards Burma’, Asia ASP 2013/02, London: Chatham House. 15 Chandra, Varigonda Kesava. (2012). “India’s Myanmar Fascination”. Journal of Energy Security. www.ensec.org/index.php (accessed on 11 October 2016). 16 Ibid. 17 Singh, Arvinde. (2000). “Sino-Indian Economic Relations: An Analysis of Recent Trends in Bilateral Trade”. China Report, 36(3): 397–410. 18 Sakhuja, Vijay. (2012). India and Myanmar: Choices for Military Cooperation, Issue Brief. New Delhi: Indian Council of World Affairs. www. icwa.in.pdfs/ibindiamyanmar.pdf (accessed on 11 October 2016). 19 Wu, Zhaoli. (2015). “India-Myanmar Bilateral Relations: Cooperate Actively and Progress Significantly”. In Roang Wang and Zhu Cuiping (eds), Annual Report on the Development of International Relations in the Indian Ocean Region (2014), Heidelberg: Springer, pp. 155–170. 20 Kolas, Ashild and Buzzi, Camilla. (2013). “Opening up the Golden Triangle: India’s Engagement with Myanmar”. In Jason Milkian and Ashild Kolas (eds), India’s Human Security: Lost Debates, Forgotten People, Intractable Challenges, New York: Routledge, pp. 122–134. 21 Kolas, Ashild and Buzz, Camilla. (2013). “Opening up the Golden Triangle: India’s Engagement with Myanmar”. In Miklian, Jason and Kolas, Ashild (eds), India's Human Security: Lost Debates, Forgotten People, Intractable Challenges, London: Routledge, pp. 123–134. 22 Singh, Emerging Trends in India Myanmar Relations’ 23 Lall, Marie. (2006). ‘Indo-Myanmar Relations in the Era of Pipeline Diplomacy’. Contemporary South East Asia, 28(3): 424–446. 24 Datta, Sreeradha. (2008). “Bangladesh’s Relations with China and India: A Comparative Study”. Strategic Analysis, 32(5): 755–772. 25 Ibid. 26 Ibid. 27 Prabhakar, Lawrence W. S. (2017). “China's Maritime Silk Road Economic and Strategic Access in Southern Asia-Indian Ocean: Implications for the Region”. In Sakhuja, Vijay (eds), South Asia Defence Yearbook 2017,New Delhi: Pentagon Press; Lawrence, S. and Prabhakar, W. (2016). “Growth of Naval Power in the Indian Ocean: Dynamics and Transformation Monograph Series”. National Maritime Foundation, New Delhi, January 2016. www.maritimeindia.org/ View%20Profile/Growth%20of%20Naval.pdf 28 Basu, Narayani. (2017). “China’s Strategic and Economic Forays into Bangladesh: Implications for India”. www.indiawrites.org/chinasstrategic-and-economic-forays-in-bangladesh-implications-for-india/ (accessed on 22 April 2017). 29 Baumik, Subir. (2017). “Keener on Arms from China: Bangladesh Dithers Defence Pact with India”. South China Morning Post, 23 April 2017. www.scmp.com/week-asia/geopolitics/article/2075152/ keener-arms-china-bangladesh-dithers-defence-pact-india(accessed on 1 March 2017).

BCIM 391 30 Kimura, F., Kudo, T. and Umezaki, S. (2011). “ASEAN-India Connectivity: A Regional Framework and Key Infrastructure Projects”. In Kimura, F. and Umezaki, S. (eds), ASEAN-India Connectivity: The Comprehensive Asia Development Plan, Phase II, ERIA Research Project Report 2010–7, Jakarta: ERIA, pp. 1–56. 31 Malik, Mohan. (2013). “Historical Fiction: China’s South China Sea Claims”. World Affairs, 176(1) (May–June): 83–90. www.jstor.org/ stable/43554768 32 Sakhuja, Vijay. (2010). “Bay of Bengal Littorals in Chinese Strategic Calculus China Brief”. 10(14). https://jamestown.org/program/bay-of-bengallittorals-in-chinese-strategic-calculus/ (accessed on 20 April 2017). Lawrence, W. and Prabhakar, S. (2011). “China’s ‘Out of Area’ Naval Deployments: Issues and Implications for India” Article #1 China Studies Centre, Indian Institute of Technology-Madras, July. https:// csc.iitm.ac.in/sites/default/files/articles/1_Lawrence.China's%20 Out%20of%20_0.pdf Lawrence, W. and Prabhakar, S. (2009). “Pearl’s New Crescent Future Role and Capabilities of Pakistan Navy”. Strategic Affairs, New Delhi: Centre of Asian Strategic Studies, August 2009. 33 Sakhuja, Vijay. (2012). India and Myanmar: Choices for Military Cooperation, Issue Brief. New Delhi: Indian Council of World Affairs. www. icwa.in.pdfs/ibindiamyanmar.pdf (accessed on 11 October 2016). 34 Garver, John. (2005). China’s South Asian Interests and Policies, Decatur, GA: Sam Nunn School of International Affairs, Georgia Institute of Technology, Prepared for Panel on “China’s Approaches to South Asia and the Former Soviet Stares” US-China Economic and Security Review Commission. www.chinacenter.net/docs/Garver_China_South_ Asian_Policies.pdf?x45945 35 Ahmad, Ali. (2011). “A Consideration of Sino-Indian Conflict”. IDSA Issue Brief, October 24. www.files.ethz.ch/isn/135486/IB_AConsidera tionofSino-IndianConflict.pdf (accessed on 24 April 2017). 36 Prabhakar, Lawrence W. S. (2017). China's Maritime Silk Road-Economic and Strategic Access in Southern Asia-Indian Ocean: Implications for the Region, Sakhuja, Vijay. (eds). (2017). South Asia Defemce Yearbook, New Delhi: Pentagon Press; Singh, Mandip. (2016). “Port de Djibouti: China’s First Permanent Naval Base in the Indian Ocean”. Institute for Defence Studies and Analyses, Issue Brief, 22 February 2016. www.idsa.in/issuebrief/ port-de-djibouti-chinas-first-permanent-naval-base-in-the-indian-ocean_msingh_220216 37 Garver, John W. (2005). China’s Probable Role in Central and South Asia, Asia Program Special Report, No.126, January. 38 Garver, John W. (2012). “The Diplomacy of a Rising China in South Asia”. Orbis, 56(3):392. 39 Garver, John W. (2002). “The Sino-Pakistan Entente Cordiale` and the Future Accommodation of India and China”. In Chambers, Michael R. (ed.), South Asia 2020: Future Strategic Balances and Alliances, Carlisle, PA, Strategic Studies Institute with Stanford University Asia and Pacific Research Center, November 2002, pp. 385–447.

392  W. Lawrence S. Prabhakar 40 Sakhuja, Vijay. (2014). “Maritime Silk Road: Can India Leverage It?” Maritime Matters#4635, New Delhi: Institute of Peace and Conflict Studies, 1 September 2014. 41 Fravel, M. Taylor. (2011). “China Views India’s Rise: Deepening Cooperation, Managing Differences”. In Tellis, Ashley J. et al. (eds), Strategic Asia 2011–2012: Asia Responds to Its Rising Powers-China and India, Seattle: NBR, p. 80. 42 Lawrence, W. and Prabhakar, S. (2014). “India’s Evolving Security Relations and Partnerships in the Indo-Pacific”. Ïn Michel, David and Paserelli, Ricky (eds), Sea Change: Maritime Geopolitics in the IndoPacific Region, Washington, DC: The Henry Stimson Center, December. www.files.ethz.ch/isn/189951/SEA-CHANGE-WEB.pdf   Yung, Christopher D. et al. (2014). “Not an Idea We Have to Shun”: Chinese Overseas Basing Requirements in the 21st Century, Washington, DC: National Defense University Press, November; & Yung, Christopher D. (2015). “Burying China’s ‘String of Pearls”. Diplomat, 22 January 2015. http://thediplomat.com/2015/01/burying-chinas-string-of-pearls/ 43 Overholt, William H. (2015). “One Belt, One Road, One Pivot”. Global Asia, 10(3). www.globalasia.org/issue/chinas-new-silk-roads/ 44 Derr, Amy. (2015). “The Pursuit of Peaceful Expansion: China’s Maritime Silk Road of the 21st Century Through Offensive Realism and Complex Interdependence”. https://21stcenturymaritimesilkroad.word press.com/2015/01/26/the-pursuit-of-peaceful-expansion-chinasmaritime-silk-road-of-the-21st-century-through-offensive-realismand-complex-interdependence/ (accessed on 24 December 2016) & Brewster, David. (2015). “An Indian Ocean Dilemma: Sino-Indian Rivalry and China's Strategic Vulnerability in the Indian Ocean”. Journal of the Indian Ocean Region, 11(1): 48–59. doi:10.1080/1948088 1.2014.994822 45 Lawrence, W. and Prabhakar, S. (2010). “Perilous Convergence: The Emergent China-Pakistan Naval Convergence”. Geopolitics, I(V) (September 2010); Perveen et al. (2015). “Gwadar-Kashgar Economic Corridor: Challenges and Imperatives for Pakistan and China”. Journal of Political Studies, 22(2) (December). 46 Chellaney, Brahma. (2015). “China Reinvents ‘String of Pearls’ as Maritime Silk Road”. 1 May 2015. https://chellaney.net/2015/05/01/ china-reinvents-string-of-pearls-as-maritime-silk-road

Chapter 21

Evolving dynamics of India–China relations

Rahul MishraEvolving dynamics of India–China relations

Implications for BCIM Rahul Mishra

There are no two views about the fact that the 21st century is the Asian Century. The rise of China, emergence of India as an economic power, rise of South Korea’s economic profile, Japan’s revival, and Indonesia’s slow but steady rise in the Asian politics, are already shaping up the rising profile of the Asian century. China is already the second largest economy in the world and is the largest or second largest trading partner of several countries across continents. China became the second largest economy in the world in 2010, surpassing the economy of Japan. Starting from a very modest level in the late-1970s, China has successfully used its abundant labour force to build an export engine that has helped it become the world’s second largest economy after the United States, and to lift hundreds of millions of people out of poverty.1 In a study conducted by Goldman Sachs in 2003, it was projected that by 2040, India will overtake the G-6 economies and in all likelihood, will surpass the United States’ economy before 2050, to become the second largest economy in the world after China. Although India has the potential to become the second largest economy in the world in Purchasing Power Parity (PPP) terms (third in Market Exchange Rate terms), this requires a sustained programme of structural reforms.2 The Goldman Sachs report also states, While growth in the G-6, Brazil, Russia and China is expected to slow significantly over the next 50 years, India’s growth rate would remain above 5 percent throughout the period. India’s GDP outstrips that of Japan by 2032. With the only population out of the BRICS (Brazil, Russia, India, China, South Africa) that continues to grow throughout the next 50 years, India has

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the potential to raise its US dollar income per capita in 2050 to 35 times current levels.3 According to the United States National Intelligence Council report titled “Mapping the Global Future”, by 2020, China and India would emerge as the two largest military and economic powers. According to the report, “The likely emergence of China and India as new major global players – similar to the rise of Germany in the nineteenth century and the United States in the early twentieth century – will transform the geo-political landscape, with impacts potentially as dramatic as those of the previous two centuries”.4 However, it is beyond doubt that between the two Asian giants – China and India –China’s growth has been more consistent and impressive on several counts; India is likely to take few more years to catch up with China, provided the economic reform process is undertaken at a consistent pace. China has already become the world’s second biggest economy with a GDP of US$12.23 trillion in 2017. With a burgeoning economy, it has also gradually achieved formidable military prowess. According to the Economic Intelligence Unit report titled LongTerm Macroeconomic Forecasts Key Trends to 2050, “China is expected to overtake the United States in 2026 in nominal GDP in US dollar terms”.5 The Forbes projects it to be even before 2020, and states that by the end of 2018, China’s contribution to global GDP will surpass that of the United States. In other words, China’s economy will become more significant than America’s.6 With the Asian Infrastructure Investment Bank (AIIB), BRICS New Development Bank (NDB), One Belt-One Road (OBOR) initiative, and leadership role in G-20 grouping, China is poised to take control of the Economic High table. With its leading role in the setting up of the AIIB, China is destined to become even more powerful. Asian Infrastructure Investment Bank (AIIB) sets the stage for China’s greater role in the international economic system as a prominent stakeholder. Headquartered in Beijing, the bank is expected to play a key role in plugging the infrastructure gaps in Asia, which have been estimated at US$8 trillion between the years 2010 and 2020. The setting up of the AIIB will have far-reaching economic as well as politico-strategic implications for countries across Asia and beyond.7

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In the case of India, its huge youth population is likely to contribute more to the country’s growth and development. By 2020, India is set to become the world’s youngest country with 64 percent of its population in the working age group; with the West, Japan, and even China ageing, this demographic potential offers India and its growing economy an unprecedented edge that economists believe could add a significant 2 percent to the GDP growth rate.8 On several growth and development related parameters, there still are numerous challenges that both China and India have to deal with in times to come. In case of the Yunnan Province of China, it is not as developed and connected through rail, road and air links with the neighbouring countries as are several other more developed provinces of China. In addition, in case of Yunnan, China aspires to have access to the sea with the help of Bangladesh and Myanmar, and also through the BCIM. From the above, it is very much clear that out of 31 provinces, Yunnan stands at the 30th position. With respect to India, it is the eight Northeastern states, namely: Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura, that are facing the problem of underdevelopment due to lack of connectivity within the country and with the neighbours of India that share the border with these Northeastern states. In terms of Gross State Domestic Product (GSDP) at Current Prices (as on 31 May 2014) out of 36 states, Assam (19), Tripura (25), Meghalaya (26), Nagaland (28), Manipur (29) and Arunachal Pradesh (30), Sikkim (31) and Mizoram stand at 32nd position. Northwestern Bangladesh has similar issues, as does the bordering provinces of Myanmar. One is not arguing that only these parts of Bangladesh, China, India and Myanmar are facing problems and

Table 21.1  Facts about Yunnan Province of China Province Rank CNY

Yunnan 30

Nominal PPP Level of Reference (US$) (Int’l.$) national GDP GDP per capita (in millions) (%)

29,015 4,658

8,227

59

Source: Taken fromhttp://data.stats.gov.cn/english/

1,371,788

Index Mid-year population (in thousands) 47,279

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other provinces/states/regions are much developed; on the contrary, one would argue that these provinces in the subregion have the potential to pool their resources and come together on a common platform and ensure their collective and expeditious growth and development. While Bangladesh and Myanmar have a range of developmental issues to deal with, in the case of China and India, the swiftly emerging challenge is the rise in regional disparity.

BCIM: A possible solution? Though at the macro level, China and India are far more developed than Bangladesh and Myanmar; all four countries are facing problems of underdevelopment and lack of enough infrastructure and connectivity. Realising that the challenges of underdevelopment and regional disparity are immense, the four countries –Bangladesh, China, India and Myanmar (BCIM), through their respective bordering provinces, are attempting to cooperate through the subregional mechanism. The BCIM is a sub-regional mechanism, the mandate of which is to enable the four countries to strive to pool their resources and work together through the BCIM Forum. In contrast to the other sub-regional initiatives, BCIM came into existence as a Track II initiative, though in the beginning it was named as the “Kunming Initiative”. The first meeting of the Kunming initiative was held in August 1999 in Kunming. Kunming is landlocked and shares boundaries with Myanmar, Laos and Vietnam. The initiative took the shape of a dialogue among the academicians and policymakers over the years; thus, falling between Track 1.5 and Track II dialogues. However, in 2013, the two sides formally agreed to make the BCIM a Track I initiative, thus providing it the sanctity of a government-steered programme. At the end of his maiden state visit to India in May 2013, the Chinese Premier Li Keqiang stated: “The two sides (India and China) appreciated the progress made in promoting cooperation under the BCIM Regional Forum. Encouraged by the successful BCIM car rally of February 2013 between Kolkata and Kunming, the two sides agreed to consult other parties (Bangladesh and Myanmar) with a view to establishing a Joint Study Group on strengthening connectivity in the BCIM region for closer economic, trade, and people-to-people linkages, and to initiate the development of a BCIM Economic Corridor”.9

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Later, during former Prime Minister Dr. Manmohan Singh’s visit to China in October 2013, BCIM found a place in India–China joint statement. It was stated that: “Pursuant to the understanding reached between the two leaders in May 2013, India and China have each established a Study Group on the BCIM [Bangladesh, China, India and Myanmar] Economic Corridor. The visit of the Chinese delegation to India in this regard was noted as a positive step. Further discussions on concepts and alignment of the economic corridor are envisaged. Both India and China would continue to discuss with the other parties to this initiative, and hold the first BCIM Joint Study Group meeting in coming December to study the specific programs on building the BCIM Economic Corridor”.10 After Prime Minister Narendra Modi assumed the office of the Prime Minister of India in 2014, he visited China in May 2015. During his meeting with the Chinese Premier and the Chinese President Xi Jinping, the issue of BCIM gained a sharp focus. It was remarked, “The two sides welcomed the progress made in promoting cooperation under the framework of the BCIM (Bangladesh, China, India and Myanmar) Economic Corridor. Both sides recalled the second meeting of the Joint Study Group of BCIM Economic Corridor, and agreed to continue their respective efforts to implement understandings reached at the meeting”.11 The BCIM region holds immense importance as it is rich in natural resources, including minerals. BCIM covers a total area of 13.7 million sq km which equals to 9 percent of the total area in the world. In addition to this, this region accounts for approximately 40 percent of the world’s total population (2,819 million people) as this is a home to the two most populous countries in the world. In economic terms, BCIM economies account for 7.3 percent of world's GDP. In addition, there is high complementarity.12 Moreover, BCIM has the potential to generate enormous economic benefits in the arena of trade, investment, energy, transport and communication.13 Highlighting the importance of a continental route and connectivity between India and China, Myint-U Thant argues, “Nearly all trade between India and China today is by sea. But it is unclear what will happen if and when Beijing and

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Kunming’s development plans materialise and China’s southwest, with its new oil and gas pipelines, high speed trains and mass tourism, becomes only a day’s drive away from India’s eastern edge. China is already transforming Burma. What will the effect of more open borders be on India?”14 So far the advantages for Bangladesh and Myanmar are concerned, it has been argued that: “Since Bangladesh and Myanmar will be able to access the markets in India’s seven Northeast states and China’s Yunnan province through this BCIM-EC, both Bangladesh and Myanmar would become a lucrative destination for foreign direct investment. These two countries may export their typical local products to the other two BCIM countries (China and India) that are big enough to consume them in no time. Moreover, as China would be developing the infrastructure of BCIM countries for its own economy’s sake, such voluntary infrastructure build-up would help enhance progress of the potential economies of Bangladesh and Myanmar”.15 Clearly, if the four countries work together to make BCIM a forum for equitable benefit for all, it would be in the interest of all, and may gain strength. For that to happen, it is important that all four countries chart out a concrete course of action to set the essential preconditions right for realising that what is at stake for them is kept as top priority. First, it is significant that democratic consolidation in Myanmar after the November 2015 elections takes place peacefully and at the earliest. Despite the landslide victory of the Aung San Suu Kyi-led National League for Demoracy, the democratisation process has been slow and tardy. It would also be equally important to ensure that ethnic strife such as the Rohingya crisis and the Naga issues in Myanmar and India respectively, as well as illegal cross-border movement from Bangladesh to India and Myanmar are also controlled and eventually stopped. To ensure that BCIM functions smoothly, it is important that these issues are resolved on a priority basis keeping neighbouring countries also in confidence. Connectivity lies at the core of the idea of BCIM. As a sub-regional initiative, BCIM seems promising because it has a strong connectivity logic behind it, which would help improve the day-to-day lives

Evolving dynamics of India–China relations 399

of common people of the BCIM subregion. The idea also seems to be picking up pace lately. In that context, it may be highlighted that the recent developments on the BCIM front have been encouraging. The BCIM Car Rally held in early 2013 turned out to be a great publicity campaign which injected vigour about BCIM among respective governments and common people of the region alike. Over the years, member countries of the Forum have discussed issues of trade, tourism and connectivity as well as cooperation in social, cultural and academic fields to enhance interactions at all levels. The 10th meeting of the Forum was held in Kolkata in February 2012. The BCIM Car Rally, held in early 2013, demonstrated the vital significance of regional connectivity. The 11th BCIM Forum meeting held in Dhaka in February 2013 observed that “formidable challenges remained in the form of tariff and non-tariff barriers, weak trade facilitation measures, lack of customs harmonisation and obstacles to cross-border movement of goods arising from weak infrastructure at and beyond the borders”. The statement further suggested that “greater market access, particularly to low income members, BCIM could stimulate trade flows within the region. The idea of Regional Trading Arrangement with enhanced preferential market access and supportive trade related investment measures and incentives for particular countries could be considered in this context”.16 Relevant as they are, the recommendations of the 11th Forum should be kept in mind while taking steps forward on the BCIM front. It should be kept in mind that it is easier to resolve the economic and trade differences right at the beginning. There are several successful sub-regional groupings such as the Greater Mekong Subregion (GMS), the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and so on and so forth. “Development of the peripheries has always been a challenge for large nations, including India and China. However, GMS, Greater Tumen Initiative and IMT-GT can be considered as models of economic growth. Both India and China

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could cooperate in BCIM to develop their underdeveloped peripheries”.17 In most of the previously mentioned sub-regional groupings, China is the biggest country, far beyond the reach of other smaller countries. However, BCIM is different from other sub-regional groupings. First, it involves two major powers of Asia, which despite their willingness to cooperate would not give away their state-centric approach. So, Top Down Approach on BCIM will keep haunting the grouping if it is not placed in conformity with the Bottom Up Approach, i.e., the state and the people’s perspective respectively. Unlike other sub-regional initiatives, where China is the ‘big brother’, in the case of India that is not such a strong possibility. India’s position in sub-regional groupings is different from that of China. India is involved in a range of sub-regional initiatives such as Bay of Bengal Initiative for Multi-Sectoral, Scientific and Technological Cooperation (BIMSTEC), Mekong-Ganga Cooperation (MGC), Bangladesh, Bhutan, India, Nepal (BBIN) initiative. BIMSTEC involves Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand. It aims to pool up energies of South Asian countries with those from Southeast Asia, thereby acting as a bridge between the two regions. A closer look at the BIMSTEC tells that India is at the central position in the region, though it needs to take an extra step to prove its worth as the leader of the BIMSTEC grouping. In Mekong-Ganga initiative, countries of the Mekong basin, namely Cambodia, Laos, Myanmar, Thailand and Vietnam have agreed to work together with India to promote sub-regional growth. In BBIN, the countries of the South Asian region – Bangladesh, Bhutan, India and Nepal – have committed themselves for the cause of sub-regional growth and development. On 15 June 2015, the Motor Vehicle Agreement (MVA) with the aim to regulate passengers, personnel and cargo vehicular traffic between the BBIN countries was signed at the BBIN Transport Ministers’ meeting at Thimphu, Bhutan. From the Indian side, the MVA was signed by Nitin Gadkari, the Union Minister of Road Transport and Highways and Shipping.18 On the signing of the agreement, Nitin Gadkari stated: “This historic agreement will further promote our cooperation in trade and commerce apart from further cementing our ageold cultural ties. The MVA is the “overarching” framework

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to fulfill our commitment to enhance regional connectivity. This will need to be followed through with formulation of the required protocols and procedures in the shortest time possible to realise the ultimate objective of free movement of people and goods in the region. . . . Taken together, this provides enormous opportunity for integration and development of our region”.19 Being two of the most important powers of Asia, India and China’s involvement in a sub-regional initiative such as BCIM naturally brings the real politick into the equation. What complicates the matter even further is the fact that the two countries have a range of conflicting views and interests on regional and international issues in addition to the boundary dispute. Second, unlike, India and Myanmar, India and Bangladesh, or China and Myanmar, there is less cross-border ethnic connection between India and China. Between India and Myanmar, the people residing in the four Northeastern states viz., Arunachal Pradesh, Nagaland, Manipur and Mizoram, ethnic communities have been playing a great role in keeping the cross-border linkages alive. These are the people who would be the immediate beneficiaries of the robust trade and economic linkages and cross-border connectivity. However, in case of India and China, those aspects of ethnic connections are missing. Thus, potential for cross-border people to people links are insignificant in comparison to the other previously mentioned cases. Therefore, the role of people along the border who could press for this initiative is quite limited. One of the prime obstacles in the rise and growth of India–China relations and the BCIM is the protracted boundary dispute between the two countries. China’s transgressions along the boundary in Arunachal Pradesh and Ladakh pose a grave challenge to India’s national security. Illegal occupation of the 5,500 sq. km area of the Pakistan Occupied Kashmir (PoK) poses another challenge to the country. The 73-days long stand-off in Doklam along the IndiaBhutan-China boundary tri-junction has exposed India to even stronger vulnerabilities regarding China’s increasingly growing assertive behaviour. Third, unlike other major powers, India–China communication is still confined to formal state-to-state connection, with military to military connection almost missing. It was only after the April 2018 Wuhan Summit between Prime Minister Narendra Modi and the Chinese President Xi Jinping that the two sides have decided to have more military-to-military communications. For example, it is New

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Delhi and Beijing which play the central role rather than the bordering provinces of the two sides. That said, one cannot totally blame the central governments for the current state of affairs; the security situation along the borders and the protracted boundary dispute has played the most important role in shaping the cross-border situation. Naturally, in such a scenario, the borders are turned into frontiers rather than gateways, leaving very little scope for the people-to-people connections. External security perception dominates the discourse. Fourth, China is keen on including the BCIM under the One Belt, One Road (OBOR) or the Belt and Road Initiative (BRI). Chinese government has labelled BCIM as one of the six land corridors of OBOR. However, India has not yet consented to be a part of the China-led infrastructure and connectivity initiative. India has cited soveriegnty reasons for its non-endrosement of OBOR while agreeing to be a part of AIIB, which unlike OBOR, is inclusive and transparent, with clearly stated terms of reference. On its non-participation on OBOR, India has time and again stated: “The inclusion of the so-called China-Pakistan Economic Corridor (CPEC), which passes through parts of the Indian state of Jammu & Kashmir under illegal occupation of Pakistan, as a flagship project of OBOR reflects lack of appreciation of India’s concerns on the issue of sovereignty and territorial integrity. Government has conveyed to the Chinese side, including at the highest level, its concerns about their activities in Pakistan Occupied Kashmir and asked them to cease these activities”. (Ministry of External Affairs, Government of India, “Question No. 2735 Belt and Road Initiative of China”. 10 August 2017, http://mea.gov.in/rajya-sabha. htm?dtl/28857/QUESTION_NO2735_BELT_AND_ROAD_ INITIATIVE_OF_CHINA) India has clearly expressed that it wants China to be transparent vis-à-vis the Belt and Road iniative, and then only India can extend support to OBOR and agree on BCIM to be a part of OBOR. Nevertheless, the situation is not that grim and has the potential to turn into a win-win situation for both India and China. With the expansion of bilateral relations, cooperation is also reaching new heights between New Delhi and Beijing. In the recent past, China and India have established sister-city relationship. This is yet to take

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a concrete shape and will take time to have an impact on BCIM. As Subir Bhaumik argues, “both India and China are less than clear on how to develop the BCIM Economic Corridor, which is why they have agreed on ‘joint research’ to identify ways and means to go forward. India needs to not rush ahead but slowly explore. And without undue appreciation, a way forward”.20

Conclusion BCIM is undoubtedly facing several bottlenecks, and therefore, there is a need for the leadership of Bangladesh, China, India and Myanmar to arrive at mutually agreeable solutions and mutually agreeable vision for a successful BCIM. To begin with, there is a need to strive for more and more communication, even if it is at the formal level to begin with. By virtue of their locations as the bordering peripheral zones, these areas are still considered frontiers. The need, however, is to turn these ‘frontiers’ into ‘gateways’. It is important to note that such a change would not be effective at just one level. From the policymakers to the security establishment and down to the level of the common people, the changes in the mindset are required. It is not suggested that the security forces lower their guard or show laxity in any way; what is suggested is the change in the mindset gateways can coexist with the security apparatus, and countries can have robust communications and exchanges without compromising with their border security. A fine balance that takes into account both the ‘top down’ and the ‘bottom up’ approach is needed to make the BCIM a success i.e., the changes are needed at the top policy makers’ level, in the attitude of the provincial governments, the security apparatus as also in the attitude of the common people residing in the BCIM area. The top-down approach would involve, among other things, a calibrated policy towards sub-regional cooperation with India’s neighbours including China, and also attempt to tap the potential of the economies of the Indian provinces. So far as the bottom-up approach is concerned, it must involve a clear understanding of what the people of the region demand, what are the common set of challenges that small businessmen, traders and common people face, and which can be collectively dealt with. Only

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by way of taking this into account, the BCIM initiative can gain the popular support in its endeavours and realisation of its goals. It is important to note that such fundamental change in the approach of the member countries is not possible without the resolution of the India–China boundary dispute. The responsibility lies more on China to work towards the resolution of the boundary dispute, as it has made several claims on the border that are not in conformity with historical facts. China needs to address India’s concerns on OBOR and especially the CPEC. Without addressing concerns and adding trasnperancy, much progress cannot be assured. Looking at the overall picture, it is evident that both India and China have shown interest in moving forward with the idea of BCIM as a sub-regional mechanism to promote trade, tourism and connectivity, etc., to develop their underdeveloped areas. While both India and China have shown interest in partnering with Myanmar and Bangladesh, the interaction among the four countries needs to be equally powerful if they wish to make the initiative a tool to promote sub-regional growth. Without having a proper channel to communicate with each other, BCIM would not be able to realise its true potential. It is equally important that India and China’s linkages reach the same degree with Myanmar and Bangladesh as well, in addition to the latter two countries working together to further smoothen their bilateral relations. To conclude, it is often said that “Ignorance is bliss”, but in the case of India and China, particularly in the context of BCIM, ignorance is not bliss. The member countries of the BCIM can no longer afford to ignore the potential benefits of greater sub-regional cooperation. To overcome this ignorance, it is important that the idea is made popular among the masses, which can happen only with more and more debates and discussions on the subject. Sector-wise comprehensive studies on advantages and disadvantages of BCIM should be made available to the public. More importantly, the support of the private sector is crucial. Without the support of the private sector, it would be difficult to sustain the initiative for long. The private companies should be encouraged to participate in the BCIM-steered sub-regional initiatives, which are backed by the central and the state/provincial governments of the member countries. To ensure that BCIM moves forward in the right direction, and without delays, mutual apprehensions between India and China need to be minimised. A calibrated policy to resolve the boundary

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and trade issues is critically important on that count. The other stakeholders, Bangladesh and Myanmar, also need to be equally involved in the BCIM agenda, and not as junior partners. More importantly, a substantive change in the mindset of the policymakers, local businessmen, and common populace is needed to make the BCIM a success.

Notes 1 Soukas, Janne. (2016). “Charting China’s Rise to Trading Superpower”. Global Times, 9 September 2016. http://gbtimes.com/business/charting-chinas-rise-trading-superpower (accessed on 16 September 2016). 2 “The World in 2050: Will the Shift in Global Economic Power Continue?” PWC, February 2015, p. 1. 3 “Dreaming with BRICs: The Path to 2050”. Global Economics Paper No: 99, Goldman Sachs, New York, 1 October 2003. 4 “Mapping the Global Future”, Report of the National Intelligence Council’s 2020 Project, Washington, DC, 2004a 5 “Long-Term Macroeconomic Forecast Key Trends to 2050”. The Economic Intelligence Unit. http://pages.eiu.com/rs/783-XMC-194/ images/EIU_Long-termForecasts_KeyTrends2050_FINAL2.pdf?mkt_ tok=3RkMMJWWfF9wsRouvqnAZKXonjHpfsX56usoUaC2lMI%2F 0ER3fOvrPUfGjI4GT8ZlI%2BSLDwEYGJlv6SgFTbjGMbht2bgMUh U%3D 6 Patton, Mike. (2015). “China’s Economy Will Overtake the US in 2018”. The Forbes, 29 April 2016. www.forbes.com/sites/mikepatton/ 2016/04/29/global-economic-news-china-will-surpass-the-u-s-in2018/#3b7d9529474b (accessed on 2 October 2016). 7 Mishra, Rahul. (2016). “Asian Infrastructure Investment Bank: An Assessment”. India Quarterly, 72(2) (June): 163–176. 8 Shivakumar, Girija. (2013). “India Is Set to Become the Youngest Country by 2020”. The Hindu, 17 April 2013. www.thehindu.com/ news/national/india-is-set-to-become-the-youngest-country-by-2020/ article4624347.ece (accessed on 23 July 2016). 9 “Joint Statement on the State Visit of Chinese Premier Li Keqiang to India”. 20 May 2013. http://mea.gov.in/bilateral-documents.htm? dtl/21723/Joint+Statement+on+the+State+Visit+of+Chinese++Li+Keqi ang+to+India (accessed on 28 August 2016). 10 Ministry of External Affairs, Government of India, “Joint State ment- A Vision for Future Development of India-China Strategic and Cooperative Partnership”, 23 October 2013. http://mea.gov.in/bilateral-documents.htm?dtl/22379 (accessed on 23 October 2013). 11 Ministry of External Affairs, Government of India, “Joint Statement Between the India and China During Prime Minister’s Visit to China”. 15 May 2015. www.mea.gov.in/bilateral-documents.htm?dtl/25240/ Joint_Statement_between_the_India_and_China_during_Prime_ Ministers_visit_to_China (accessed on 12 August 2016).

406  Rahul Mishra 12 Rahman, M., Rahman, H. and Shadat, W. B. (2007). “BCIM Economic Cooperation: Prospects and Challenges”. Centre for Policy Dialogue, Bangladesh quoted in Aparna, Sharma and Rathore, Chetna K. (2015). “BIMSTEC and BCIM Initiatives and their Importance for India”. Discussion Paper, November 2015, CUTS International, p. 6. 13 Aparna, Sharma and Rathore, Chetna K. (2015). “BIMSTEC and BCIM Initiatives and Their Importance for India”. Discussion Paper, November 2015, CUTS International, p. 6. 14 Thant, Myint-U. (2011). Where China Meets India, London: Faber and Faber, p. 247. 15 Bahauddin, Foizee. (2016). “Boosting Trade Ties with Myanmar”. Financial Express, 7 October 2016. www.thefinancialexpress-bd. com/2016/10/07/48582/Boosting-trade-ties-with-Myanmar 16 Mukherji, Indra Nath and Behera, Subrata Kumar. (2015). “India’s Trade and Investment with BCIM Countries”. In Mishra, Rajiv and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: Pentagon Press, p. 25. 17 “ICWA report on BCIM-EC”. In Bhatia, Rajiv and Mishra, Rahul (eds), BCIM Economic Corridor The Road Ahead, New Delhi: Pentagon Press, p. 152. 18 Mishra, Rahul. (2015). “BBIN: A New Tool in India’s Sub-Regional Diplomacy”, ICWA Issue Brief, 8 July 2015. www.icwa.in/pdfs/ PB/2014/BBINNewToolinIndiasSubRegionalDiplomacyPB08072015. pdf 19 Ibid. 20 Bhaumik, Subir. (2015). “BCIM Key to Look East”. In Bhatia, Rajiv and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: Pentagon Press, p. 22.

Chapter 22

China’s two regional framework narratives

Haans J. FreddyChina’s two regional framework narratives

BCIM and CPEC – comparative viabilities Haans J. Freddy The study of regions, regionalism or regionalisation, which occupied a small and insignificant place in international relations theory has, today, come again to prominence, and there are books which argue that regions are central to understand world politics.1 With globalisation being the catch word among international relations scholars in interpreting the emerging world order, regionalism constitutes a set of mid-level alternatives in policy, practice and analysis.2 Over the past two decades, one of the most important developments in the discourse on world economy has been the rapid growth in the number of international economic integration agreements. Economic Integration Agreements (EIA), often appear in the form of treaties between economic units and in terms of international EIAs, they are between nations, aimed at reducing policy-controlled barriers to the flow of goods, services, capital, labour, etc. EIAs in most cases tend to be regional in scope and many are Free Trade Agreements (FTA). By the year 2006, the World Trade Organization (WTO), notified that there were about 300 regional trade agreements either planned, concluded negotiations or were in force. Of more than 250 such agreements which were notified to the General Agreement on Tariffs and Trade (GATT) and the WTO between 1947 and 2002, more than half of these agreements were notified after the year 1995 thus showcasing a virtual explosion in the number of EIAs over the past two decades – ‘New Regionalisms’.3 In the context of new regionalisms, some of its characteristics are important but apply at varying degrees in different regional agreements: (i) new regionalism generally involves the linking of one or more small countries with a large nation; (ii) it is common that small countries have recently made or are making significant and important unilateral reforms; (iii) new regionalisms only allow modest

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liberalisation; (iv) small countries achieve liberalisation and agreements are one sided; (v) regional agreements often involves deep integration where partnering countries rarely limit themselves to reducing or removing trade barriers but also complement and alter many economic policies which might be of interest to them; and (vi) regional agreements are often typically regional geographically and those countries which partner with each other are neighbours.4

Regionalism in the Asian context Asia has become one of the momentous regions which has been affected most through regional integration initiatives. Never has transport, communication, trade (both legal and illegal), been flourishing as it is now. There has been a significant increase in terms of cross-border trade, roads connecting mega cities, new suburbs and integrated production networks extending towards far-flung manufacturing hubs. Nowhere has this level of regional integration been noticed where integration is spontaneous and tangible.5 What does all these buzz direct towards – genuine political integration or just rhetoric? Asian regionalism is real and irreversible; although integration will remain loose and informal for a long time, the political resolve to form a meaningful community of some sort seems to be emerging. It is also noteworthy that Asian integration contributes to peace, prosperity and development. The integration initiatives in Asia seem to be signalling the rise of China as a major power to reckon with in the region.6 China as an emerging power in the South Asian region The rise of China and India is an often evoked term of reference since the nineties.7 Although, there may be debates over how far they have risen and also in terms of great power status, their geopolitical horizons have widened and both these nations strive to stamp their authority over the region.8 Furthermore, changes that have occurred in the Asian context are often directed towards the role that China has played in the region. For quite some time there has been a realisation both in China and in India that there is tremendous potential which can be beneficial for these two nations if economic relations between them are furthered. The characterisation of relations among nations in the Asian region has been significantly altered or affected due to the rise of China’s capabilities

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in terms of its military and economy, political influence, diplomatic voice and its increasing involvement in the region’s multilateral institutions.9 One of the key issues arising out of the rise of China and its implications in terms of international relations has been over whether this rise would progress peace or would be a disruptive force to the existing international order. The rise of China and its challenges has deep scholarly foundations where some of the fundamental concepts of international relations theories have been touched upon. Coupled with this is the fact that it has clear policy implications and tremendous influence over the US’ foreign policy and more particularly in terms of US policy towards China. While realism has a strong influence on examining the rise and fall of nations, classical realism and structural realism place their emphasis on balance of power.10 In the words of Kenneth N. Waltz,11 China’s steady but moderate efforts to enhance the quality of its armed forces is often seen by the Americans as a threat to their future and that of the others. Whatever the concerns and the feeling of threat that is felt by the United States, Japan has already felt them and has gradually reacted to them. China on the other hand is concerned over the airlift and sealift capabilities of Japan and the continued support provided by the United States towards the South Korean armed forces. Chinese, Japanese and South Korean actions and reaction in context, with or without the participation of the United States seems to be creating a new balance of power in East Asia, which is also becoming part of the new balance of power in the word. John Mearsheimer offers offensive realism in contrast to Waltz’s defensive realism where he states that it is a sad, ruthless and dangerous business in international politics which is likely to remain that way. Although the intensity of competition increases and decreases, great powers often fear each other and always compete for maintaining superiority which may be even at the expense of other states. If China emerges as an economic powerhouse (which it has achieved to a certain extent), it will look to translate its economic might into military might. He further argues that neither China’s neighbours nor the United States would idly watch over the rising increments of power; they would instead look to contain it by forming a balancing coalition which in turn might result in the fear of great power war looming large over them. In other words, China

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and the United States are destined to be adversaries given the fact that China is an ever growing power.12 Zbigniew Brzezinski, realist strategist, looks at the Chinese challenge in a completely different approach where he argues that conflict is not inevitable or even likely. However, his position in this context is that China would not want to challenge the United States militarily but rather emerge through economic development and receive acceptance as a great power. More importantly China is interested in sustaining its economic growth, attract maximum resources in terms of technology and strategic materials from the international system and reduce threats from external sources which would result in the depletion of its resources.13 The sudden emergence of China as a major player has created shockwaves in the international market for oil and other raw materials. The fact that China has become the world’s second largest oil consumer and third biggest importer should not be a surprise. However, the speed and magnitude of this transition has seemingly shattered the fragile balance of the global oil market. This shift in terms of exports to imports of oil by China has come over in just a period of ten years which also amounts to 35 percent of the growth in the global demand for oil between 2001 and 2004.14 This sudden rise as a consumer in the global oil market itself is posing serious challenges to China. While it cannot be attributed to China’s inability to pay, but it is because of the relative stability and division of the global oil market already made through investments in the oilfield development and transportation. Exports from the American hemisphere (Canada, Mexico and Venezuela) which go to the United States amount to about 76 percent, while Europe receives 83 percent of exports from Russia (Russia, Caspian Basin) and two thirds of oil produced in north African region goes to South Asia. Many of these challenges which are faced by China are long transportation routes, existing transportation infrastructure, the market coordinates of the companies which are involved in exploitation and traditional business relationships. One option which the Chinese have in this context is overpaying more than the market price, overbidding for companies and exploration and political manoeuvring.15 With the ever-increasing integration of China with the global economy, future energy demands will have a global impact not only economically but also in terms of political and geo-political aspects.16 The dramatic rise of China and its increased weight and influence in world affairs has generated a deep

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sense of insecurity and vulnerability partly caused by the increasing reliance on imported energy and maritime commercial routes. Thus emerging powers such as China highlight the dilemma while dealing with insecurities in terms of sustaining their growth.17 However, while China faces these strategic challenges in the Indian Ocean Region, it looks to overcome it through overland initiatives such as the China–Pakistan Economic Corridor (CPEC) and the Bangladesh–China–India–Myanmar Economic Corridor (BCIM-EC). While China faces these hurdles in terms of energy demands, it has initiated huge bilateral agreements of which the CPEC is one and the other is the BCIM in which it has considerable interest. The maritime and continental geo-politics of Chinese regional, transregional and global footprint in terms of its economic and strategic access are represented in the Silk Road and Economic Belt initiatives that are being built upon connectivity, trade, energy and the movement of its investments and capital.18 In March 2015, the Chinese introduced the idea of One Belt One Road (OBOR) (at an estimated cost of $890 billion) in which specific policies pertaining to the concept referred to the creation of six economic corridors of which the CPEC and the BCIM-EC are part of the OBOR.19 Ever since these ideas were elaborated by the Chinese, there have been numerous interpretations over China’s intentions behind this initiative. These interpretations can be broadly classified into two categories: (i) a political – geo-political diplomatic offensive though which China looks to extend its political power and influence through investments which will limit the policy choices that receiving countries will have; and (ii) an economic and commercial driver which could result in the establishment of new markets for Chinese companies and address those challenges which is being faced by the Chinese economy such as industrial overcapacity and the large holdings of US dollars.20 Overview of the BCIM-EC and the CPEC Bangladesh–China–India–Myanmar Economic Corridor (BCIM-EC) The BCIM is an initiative which was founded on the basis of Track II diplomacy (which has now moved into Track I diplomacy)21 aimed at creating a sub-regional cooperation zone linking the two countries’ backward regions of Southwest China and India’s

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Northeast through Myanmar and Bangladesh.22 Initially, it was assumed that after the groundwork was laid for the initiative, the project would be set in motion, first at the intergovernmental level which was aimed at achieving trade and connectivity between Kunming and Kolkata (K2K). However, this did not happen for over two decades of BCIM Forum meetings which was a result of the cautious approach adopted by the Indian government to engage with China at the multilateral regional cooperation initiatives and opening up of the Northeast region which was prone to insurgency. In this context, both China and India announced the Joint Statement which intended to explore the possibility of developing the Bangladesh–China–India–Myanmar-Economic Corridor (BCIMEC) in May 2013 which was also India’s first trans-border overland corridor. This also came to be known as the leap into the unknown.23 In May 2013, the BCIM Regional Cooperation initiative entered a new phase where the joint statement issued at the end of the official visit by the Chinese Premier Li Keqiang to India showcased the implications that both China and India would have in terms of the architecture for Asian regionalism or sub-regionalism. It is interesting to note, that terms such as growth zone, growth polygon, cooperation zone and others were often used to describe the scope and objectives of the BCIM Forum. However, the BCIM-EC was never used in its 14-year history. Until the joint statement of India and China issued in May 2013, which elevated the BCIM Regional Forum from Track II to Track I, the idea of an economic corridor was not prominent within the Indian government’s development planning, although it might have been estimated highly with the Chinese as the thrust to this initiative was adopted in the year 1998 by the Asian Development Bank which funded the Greater Mekong Sub-region project in which the Yunnan province was a member of the founding group in 1992. From the initiation of the BCIM Regional Forum, it has been relatively struggling to raise consistency in terms of quadrilateral engagement from Track II to Track I. Both China and Myanmar had been effectively focused on the Track I engagement in the Forum and with Bangladesh also joining the initiative at this (Track I) level, India continued to remain a foot-dragger.24 In contemporary international relations, regions are considered as political constructs which masquerade as geography. Conceding a constructivist principle, the BCIM may be seen as something that is inter-regional (one that links South, South East Asia and East

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Asia), shares a common set of objectives relating to development in the regional context, China and India are involved as sub-regional entities along with Myanmar and Bangladesh. India as we have noted earlier was reluctant in terms of the BCIM and if it were to be considered as a reluctant regionalist, it was even more reluctant as a sub-regionalist.25 However, the Indian government has clearly indicated that it is interested in placing regional integration high on its agenda on economic diplomacy. The BCIM in this context is particularly important in terms of the Act East Policy. If this engagement needs to be meaningful it is necessary to sensitise stakeholders in the North Eastern Region (NER) along with the members of the strategic community in terms of the benefits of regional connectivity and also laying emphasis on the development of the region26 (Vaid & Maini 2015). This is particularly important as the leadership in New Delhi has systematically ignored and discouraged the participation and representation of the political leadership of the North Eastern region.27 China–Pakistan Economic Corridor (CPEC) Expressing their determination to further elevate their all-weather friendship and strategic partnership, Pakistan and China have decided to deepen and broaden their strategic economic engagement to achieve common development and welfare of their peoples. The joint statement issued after the conclusion of Prime Minister Shaukat Aziz’s visit to China during 16–20 April 2007, implied that the traditional friendship between the two countries now included new objectives that would improve the economic content of the relationship which would comprise investment, trade and energy cooperation within the framework of a bilateral agreement whilst also ensuring that the relationship would bring prosperity and development to the countries in consonance with the overall regional framework and concerns of the WTO. By the year 2013, China was the second largest recipient of Pakistani exports which stood at 11 percent amounting to US$3.2 billion. At the same time, China was the second largest exporter to Pakistan at 16 percent of the total imports by the country which was valued at US$11.1 billion. The China–Pakistan relationship has been a defining feature in the geo-politics of South Asia since the 1960s. It also seemed reasonable for China to countervail India by expanding its relations with other states in South Asia neighbouring India and more particularly

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with Pakistan which has positioned itself as India’s chief adversary both in terms of ideological and psychological reasons.28 In the context of the One Belt One Road (OBOR) initiative, it seeks to integrate China with economies of Asia as well as that of Africa and Middle East which would establish common interests between those countries who are engaged as China’s trading and investment partners. Trade and financial integration often tends to reduce conflict between states, raises opportunity costs in terms of forgone trade and access to capital which is associated with conflict and creating vested domestic interests which prefer peace over war.29 The China–Pakistan Economic Corridor (CPEC)30 initiative which would link Kashgar to the sea port of Gwadar in Pakistan traverses through the territories which are dominated by ethnic minorities such as the Balochs in Pakistan and the Uyghurs in the Xinjiang province in China. The proposed corridor also passes through the Pakistan Occupied Kashmir, already a site of competing territorial claims.31 The CPEC, which was visualised by Premier Li Keqiang during his visit to Pakistan in 2013, would cover over 1800 miles providing Pakistan with much needed economic infrastructure, more particularly power generation plants. This economic corridor is located where the Silk Road Economic Belt and the 21st century Maritime Silk Road meet. Thus, it forms a major project of the Belt and Road initiative. Threats and vulnerabilites Although the Pakistani Prime Minister Nawaz Shariff and the nation’s media refer to the CPEC as a game changer and the Chinese leadership calling it a flagship project aimed at achieving enhanced regional economic connectivity, the CPEC has fuelled several political controversies both within and outside Pakistan.32 Threats and vulnerabilities to the CPEC arise in the form of security concerns. In terms of threats the infrastructure and the attendant construction projects are very enticing targets for violent dissidents who are active in the region. Threats are both direct and indirect which China will have to bear much of the burden. Internal threats to the CPEC are present in the Xinjiang province. Xinjiang province is home to the ethnic Uyghurs who belong to a Turkic group with Islam as their religion. The CPEC connects through the Xinjiang province on the Chinese territory to the deep sea port in Gwadar in Pakistan. While

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it also passes through the Gilgit-Baltistan province, the Gwadar port which is close to Balochistan, those violent incidents which have occurred between 2014 and 2016 all suggest that the CPEC will have intricate political and insurgent challenges which have to be solved and which might prove costly. In the context of the CPEC, China’s worries are ever mounting as there has been a resurgence of the border dispute between Pakistan and Afghanistan. As China plans to extend the CPEC into Afghanistan, these clashes and disputes are a deterrent to the project, which China hopes that both the countries will resolve jointly and safeguard peace and stability in the region. Additionally the recent warning from Iran’s army head that it would strike military bases inside Pakistan if Pakistan did not control Sunni militants carrying out cross-border attacks has added to Chinese unease.33 On the political front, various issues seem to pose serious challenges to the CPEC. First, India’s position on the CPEC includes issues of sovereignty. The CPEC passes through Pakistan-occupied Kashmir to which India has raised serious concerns. In this context, India had abstained from participating from the Belt and Road Forum which was held in Beijing between 14 and 16 May 2017, stating that no country can accept a project that ignores another country’s sovereignty and territorial integrity. China on the other hand has repeatedly asserted that the CPEC has no direct link with the Kashmir issue and that it was only an economic venture. China has emphasised that economic activities in the region are not a direct result of the CPEC but that it has been providing support to Pakistan. It has also stated that these contributions are constructive in terms of the development of its neighbouring countries.34 China has also offered to rename the OBOR in this context.35 Second, in terms of the consequences of the CPEC for Pakistan and China, there have been various contending issues which should be of interest for both nations. The CPEC at this juncture does not seem an economically viable proposition due to a number of factors. First, the Pakistan economy itself does not have the capacity to provide immediate returns, and second, Chinese aid is not in the form of grants but of loans albeit at concessional rates. Third, most of the CPEC projects are energy-related and many of these are thermal plants which are based on coal and oil, which Pakistan does not have in surplus – which has to be imported, adding to the country’s import bill. The CPEC further will not be a viable option for Pakistan’s long-term economic development, which is going to be

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financed by Chinese loans or will be dependent on power projects functioning on imported fuel. How Pakistan would pay back these loans is not definitely clear given the fact that the country’s finances are already straitened.36 For China the benefits that would accrue out of the CPEC seem to be obvious. Much of its grand strategy is based upon avoiding the Malacca dilemma where much of its trade flows through the straits of Malacca, a narrow choke point which can be easily blocked by the US or India. This could be achieved by connecting the Gwadar port with the Xinjiang province through the overland economic corridor (CPEC). Such descriptions overlook many of the intricacies linked with the CPEC. The CPEC has already become tangled with quite a number of domestic politics in Pakistan. As already mentioned these are uncharted waters for the Chinese in which they will have to do the balancing act between the ruling elites in Islamabad and in Lahore and in Balochistan who are more than willing to violently disrupt the progress of the corridor. Is the BCIM-EC a viable alternative for the CPEC? The CPEC which is an important economic corridor for the Chinese is indeed facing significant challenges in the form of insurgency and violent contestations over territory in China, India and Pakistan. While the Uyghur insurgency poses significant threats in the Southwestern province of Xinjiang, the violent activities of Balochistan rebels pose serious challenges to the smooth functioning of the Gwadar port as well as the development of the CPEC. On the Indian front, the Kashmir issue has been a thorn in the flesh where both India and Pakistan have been in recent times engaged in attacking each other. The recent Uri Sector attacks seem to suggest that Pakistani involvement in the Kashmir issue is not going to go down so easily. However, responses from the Indian side towards the Uri attacks in the form of surgical strikes also seems to suggest that India has the capacity to counter such attacks in a much more efficient manner. However, the Chinese involvement in the entire gambit of the aggression by both countries and its stand that both nations work out a negotiated settlement seems to be of importance. While India and China can mutually contribute to each other, China can through such initiatives preserve its long-term interests in terms of the CPEC and also in terms of its energy security. Chinese leadership in late 2013 elaborated its government’s silk road initiatives and visions in terms of its land

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and maritime logistics and communications network which seeks to connect Asia, Africa and Europe now dominated by belt and road initiatives has in recent times received significant interest. Chinese policy and interpretations in this regard are twofold. For some it seems to be primarily in terms of geo-political and diplomatic offensive and see it as an extended effort made by China to exert its political power and influence which will constrain through investments the policy choices of receiving countries. Others interpret it as reflecting China’s economic and commercial drivers which would create new markets for Chinese companies or that would help in addressing the challenges faced by the Chinese economy such as industrial overcapacity.37 At this juncture it is important to note that China has sought to develop its relations with its neighbours amicably and one of the arguments it places to justify its actions in this regard is the promise of economic benefit.38 However, what is interesting to note is that the anticipated benefits which were expected through the China–Pakistan economic interactions have been less than satisfactory. The benefits as expected by Pakistan through the China–Pakistan Free Trade Agreement signed in the year 2006 did not produce as envisaged. During the first phase of the FTA between both the nations, it was agreed that it will reduce approximately 35 percent of tariff lines to zero duty. During the initial phase of the FTA between China and Pakistan, it can be noted that there has been an increase in terms of bilateral trade and much of it has been as a result of China’s exports to Pakistan which amounted to US$4,664.81 million and Pakistani exports amounted to US$915.61 million. By the year 2014 Chinese exports to Pakistan increased to US$14,573 million whereas Pakistan’s exports to China increased marginally at US$2,509.44 million. This however has raised Pakistani concerns over the development of its own economy and has not agreed on the modalities of implementing the second phase of the FTA. The second phase which was to be implemented by 1 January 2014, has still not been executed as both the countries have been engaged in negotiations. Both sides have had six rounds of negotiations; they seem to have failed to develop an understanding in terms of preferential concessions with each other. While Beijing demands zero duty on 90 percent duty on tradable products, Islamabad has refused to concede to the demand as it may pose a serious challenge to the local industries as Chinese products are cheaper. Thus, we can identify that there are not only problems related to the security issues in terms of the CPEC, it seems that

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there are significant challenges which China and Pakistan have to overcome in order to make the initiative a more viable and mutually beneficial exercise.39 In this line of argument, it seems that China might be working towards a more feasible overland initiative in the BCIM (where India too has engaged with the project to a certain extent but with caution). It also seems to be indicative that the challenges which are present in the CPEC might be pushing China to look for a more feasible option which will be less challenging and more importantly one that would support its ambitions in emerging as a dominant power in the world. Thus, while the CPEC which is facing significant challenges in terms of fulfilling its objectives, Chinese intent in extending its connectivity and trade through the OBOR seems to have initiated the BCIM-EC which would be more feasible and beneficial as the countries engaged with this initiative not only have the natural resources, but have all begun meaningful dialogues and cooperation with China. Thus in conclusion, will China engage more effectively in the BCIM-EC vis-à-vis the CPEC?

Notes 1 Acharya, Amitav. (2007). “Review Article: The Emerging Regional Architecture of World Politics”. World Politics, 59(4): 629–652. Breslin, Shaun, Higgot, Richard and Rosamond, Ben. (2002). “Regions in Comparative Perspective”. In Breslin, Shaun and Hughes, Christopher W., Phillips, Nicola and Rosamond, Ben (eds), New Regionalisms in the Global Political Economy, London: Routledge. pp. 1–19. 2 Soderbaum, Fredrik. (2003). “Introduction: Theories of New Regionalisms”. In Soderbaum, Fredrik and Shaw, Timothy M. (eds), Theories of New Regionalisms: A Palgrave Reader, New York: Palgrave Macmillan, pp. 1–21. Buzan, Barry and Weaver, Ole. (2003). Regions and Powers: The Structure of International Security, Cambridge: Cambridge University Press. 3 Baier, Scott L., Bergstrand, Jeffrey H. and Egger, Peter. (2006). “The New Regionalism: Causes and Consequences”, A Paper Written for the Inter-American Development Bank and the CEP II Conference: The New Regionalism: Progress, Setbacks and Challenges, 9–11 February 2006. 4 Ethier, Wilfred J. (1998). “The New Regionalism”. The Economic Journal, 108(449): 1149–1161. 5 Frost, Ellen. (2008). Asia’s New Regionalism, Boulder: Lynne Rienner Publishers. 6 Ibid, p. 3. 7 Xiaoqiang, Fu. (2000). “Proposals for Further Development of Trade and Economic Relations Between China and India”. China Report, 36(3): 391–396.

China’s two regional framework narratives 419 8 Scott, David. (2008). “The Great Power Game Between India and China: The Logic of Geography”. Geopolitics, 13(1): 1–26. 9 Shambaug, David. (2006). Power Shift: China and Asia’s New Dynamics, Berkeley, CA: University of California Press. 10 Zhao, Quenshang and Liu, Guoli. (2007). “The Challenges of a Rising China”. Journal of Strategic Studies, 30(45): 585–608. 11 Waltz, Kenneth. (2002). “Structural Realism After the Cold War”. In G John Ikenberry (ed.), America Unrivaled: The Future of the Balance of Power. Ithaca: Cornell University Press. pp. 29–67. 12 Mearsheimer, John. (2001). The Tragedy of Great Power Politics, New York: W.W. Norton and Company. 13 Brzenzski, Zbigniew. (2005). “Make Money, Not War”. Foreign Policy, 146 (January–February): 46. Zhao, Quenshang and Liu, Guoli. (2009). “China Rising: Theoretical Understanding and Global Response”. In Zhao, Quanshang and Liu, Guoli (eds), Managing the China Challenge: Global Perspectives, New York: Routledge, pp. 3–22. Lampton, David M. (2007). “The Faces of Chinese Power, Foreign Affairs”. www.foreignaffairs.com/articles/asia/2007-01-01/faces-chinese-power (accessed on 1 November 2016). 14 Muller, Friedemann. (2006). “China’s Energy Policies-Geopolitical Repercussions”. In Wacker, Gudrun (ed.), China’s Rise: The Return of Geopolitics? Berlin: Stiftung Wissenchaft und Politik, Research Paper, German Institute of International and Security Affairs, pp. 9–14. 15 Ibid, p. 12. 16 Sandklef, Kristina. (2007). Energy in China: Coping With Increasing Demand, Stockholm: Swedish Defence Research Agency. 17 Wang, Yong. (2016). “Offensive for Defensive: The Belt And Road Initiative And China’s New Grand Strategy”. The Pacific Review, doi 10.1080/09512748.2016.1154690 (accessed on 19 November 2016). 18 Prabhakar, Lawrence W. S. (2017). “China’s Maritime Silk-Road Economic and Strategic Access in Southern Asia-Indian Ocean: Implications for the Region”. In Sakhuja, Vijay (ed.), Pentagon Yearbook 2017: South Asia Defence and Strategic Perspective, New Delhi: Pentagon Press. pp. 76–88. 19 Aoyama, Rumi. (2016). “One Belt One Road: China’s New Global Strategy”. Journal of Contemporary East Asia Studies, 5(2): 3–22. Sidaway, James D. and Woon, Chih Yuan. (2017). “Chinese Narratives on One Belt One Road in Geopolitical and Imperial Contexts”. The Professional Geographer, 69(4): 591–603, doi:10.1080/00330124.20 17.1288576 20 Summers, Tim. (2016). “China’s ‘New Silk Road’: Sub-National Regions and Networks of Global Political Economy”. Third World Quarterly, doi:10.1080/1436597.2016.1153515 (accessed on 3 December 2016). 21 Uberoi, Patricia 2016. The BCIM Forum: Is it Sustainable? In Look East to Act East Policy: Implications for India’s North East, Edited by Gurudas Das and C. Joshua Thomas. New York: Routledge.

420  Haans J. Freddy 22 Hussain, Zaara Zain. (2014). “Initiative for Southern Silk Road: Linking Bangladesh, China, India and Myanmar”, ISAS Working Paper No. 192–17, Singapore: National Univeristy of Singapore. 23 Uberoi, Patricia. (2016). “The BCIM Forum: Is It Sustainable?” In Das, Gurudas and Thomas, C. Joshua (eds), Look East to Act East Policy: Implications for India’s North East, New York: Routledge. 24 Uberoi, Patricia. (2016). “Problems and Prospects of the BCIM Corridor”. China Report, 52(1): 19–44. Mishra, Binoda Kumar. (2015). “BCIM-EU and the North East: Explaining India’s Reluctance”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM Economic Corridor: The Road Ahead, New Delhi: ICWA and Pentagon Press. 25 Rana, Kishan S. and Uberoi, Patricia. (2012). “India’s North East States”. The BCIM Forum and Regional Integration’, New Delhi: Institute of Chinese Studies. 26 Vaid, Manish and Maini, Tridivesh Singh. (2015). “BCIM: Can India be a Driving Force?” thediplomat.com/2015/01/bcim-can-india-be-adriving-force/ (accessed on 10 October 2016). 27 Innoue, Kyoko, Murayama, Mayumi and Rahmatullah, M. (2004). “Sub Regional Relations in the Eastern South Asia: With Special Focus on Bangladesh and Bhutan”. www.ide.go.jp/English/publish/Jrp/pdf/ jrp_32_sec1.pdf (accessed on 10 October 2016). 28 Kumar, Sumita. (2007). “The China-Pakistan Strategic Relationship: Trade, Investment, Energy and Infrastructure”. Strategic Analysis, 31(5): 757–790. Reeves, Jeffrey. (2016). Chinese Foreign Relations with Weak Peripheral States: Asymmetrical Economic Power and Insecurity, New York: Routledge. 29 Hendrix, Cullen. (2016). “Rough Patches on the Silk Road? Security Implications of China’s Belt and Road Initiative”. In Djankov, Simeon and Miner, Sean (eds), China;s Belt and Road Initiative: Motives, Scope and Challenges, Washington, DC: Institute for International Economics. 30 Dasgupta, Saibal 2017. CPEC at Stake: Af-Pak Flare Up Worries China’, Times of India 09/05/2017. Accessed: 18/05/2017. 31 Ibid. 32 Calabrese, John. (2016). “The China-Pakistan Economic Corri dor (CPEC): Underway and Under Threat”. www.mei.edu/content/ map/china-pakistan-economic-corridor-cpec-underway-under-threat (accessed on 10 May 2017). 33 Dasgupta, Saibal. (2017). “CPEC at Stake: Af-Pak Flare Up Worries China”. Times of India, 9 May 2017 (accessed on 18 May 2017). 34 Haydarian, Richard Javad. (2017). “China’s Silk Road Project: A Trap or Opportunity?” www.aljazeera.com/indepth/opinion/2017/05/chinasilk-road-project-trap-opportunity-170514142652061.html (accessed on 18 May 2017). 35 Haidar, Suhasini. (2017). “China Offers to Rename OBOR to Allay India’s Fears: Outlines a Four Point Solution to Manage Differences”. The Hindu, 9 May 2017 (accessed on 18 May 2017). 36 Jacob, Jabin T. (2017). “China in 2016: The Pursuit of Stabil ity and Power”. In Sakhuja, Vijay (ed.), Pentagon Yearbook: South

China’s two regional framework narratives 421 Asia Defence and Strategic Perspective, New Delhi: Pentagon Press, pp. 62–75. 37 Summers, “China’s ‘New Silk Road’: Sub-National Regions and Networks of Global Political Economy”, p. 1. 38 Holslag, Jonathan. (2015). “Unequal Partnerships and Open Doors: Probing China’s Economic Ambitions in Asia”. Third World Quarterly, 36(11): 2112–2119. http://dx.doi.org/10.1080/01436597.2015. 1077680 39 Pulipaka, Sanjay. (2016). “India Must Capitalise on Transnational Economic Corridors”. www.financialexpress.com/opinion/india-mustcapitalise-on-transnational-economic-corridors/211024/ (accessed on 3 December 2016). Khan, Mubarak Zeb. (2016). “Pakistan, China Yet to Strike a Deal on FTA Phase – II”. www.dawn.com/news/1269281 (accessed on 3 December 2016).

Conclusion

Gurudas DasConclusion

OBOR architecture and BCIM-EC: an interplay of geo-economics and geo-politics Gurudas Das

In pushing forward the case of BCIM-EC, as part of its global connectivity project called OBOR, consisting of Bangladesh, Southwestern China, India’s Northeast, and Myanmar, China has a number of geo-economic, geo-political and geo-strategic goals. Although OBOR was launched in order to counter USA’s proposed Trans-Pacific Partnership (TPP) and The Transatlantic Trade and Investment Partnership (TTIP), it also exhibits how China is leveraging its economic strength in order to harness geo-political gains for translating the grand Chinese dream of making China a superpower into reality. Besides strengthening China’s global outreach, it also addresses a number of internal development dilemmas like regional disparity, rising wage rate, raw material scarcity, capital accumulation and creation of excess capacity in some sectors of production within the Chinese economy. The objective of this chapter is to situate the BCIM-EC within the overall OBOR framework so that India and other South Asian stakeholders can arrive at an informed choice before framing their respective national response to it. This task is all the more important as the BCIM-EC sub-regional connectivity project would acquire an altogether different dimension once its implications are judged from a holistic perspective rather than the two-decade long legacy of Track II diplomacy for sub-regional cooperation under BCIM Forum would lead us to believe. The discourse shaped by the deliberations of scholars, members of think tanks, diplomats and government representatives from Yunnan, Dhaka, Naypyidaw and New Delhi has remained confined to the narrow domain of sub-regional cooperation and focused on the win-win situation from mobilising the cross-border synergies among the constituent regions.1 Although the idea of sub-regional cooperation among these

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four countries was nurtured and justified on economic grounds by the BCIM Forum since 1999, the proposed BCIM-EC as one of the overland pathways to Chinese Maritime Silk Road (MSR), except drawing a clue from the legacy, has nothing to do with the spirit of the discourse. In fact, the “BCIM” brand popularised by the Forum has conveniently been used to label the overland pathway to MSR as BCIM-EC having more geo-political significance rather than geoeconomic gains from sub-regional cooperation. The rest of the discussion is organised in three broad sections. The first section analyses internal economic drivers and the strategy of sub-regional cooperation for propelling spatial economic growth that have led to the formulation of OBOR in 2013. The second section deals with the interplay of geo-economic and geo-political ambitions of China in designing both the Silk Road Economic Belt (SREB) and Maritime Silk Road (MSR) and their significance for different countries and regions. The Third section focuses on the geo-political implications of BCIM for India. The fourth section concludes. Sub-regional cooperation as a strategy for spatial development As part of her geo-economic goals, China is using the bordering provinces and regions as bridgeheads to mobilise resources from the neighbourhood as well as to penetrate the cross-border markets as vents for surplus produced within. The sub-regional cooperation is used as a policy to develop the frontier and peripheral provinces/regions which otherwise remained backward. In fact, China has a long history of using sub-regional cooperation as an effective tool for the development of her bordering areas. Way back in early 1980s, the Southern China Growth Triangle was initiated comprising Hong Kong, Taiwan and the Guangdong and Fujian provinces of southern China following China’s opening up in 1978 and establishment of China’s first Special Economic Zone (SEZ) in 1980 in order to develop the southern coastal provinces. With the support of Taiwan’s manufacturing sector and Hong Kong’s service sector, Guandong and Fujian provinces experienced faster growth. Due to geographical proximity and linguistic affinities, capital moved from Hong Kong to Guandong and from Taiwan to Fujian. In spite of geo-political tensions between mainland China and Taiwan on the one hand and mainland China and Hong Kong during that time

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on the other, geo-economic logic got precedence and continued to drive regional integration. A number of such sub-regional cooperation programmes had been promoted during the 1990s to expand the sphere of the fast-growing Chinese economy as well as to address the problem of rising regional disparities particularly in the bordering peripheral regions. The Greater Mekong Sub-region (GMS) economic cooperation – an Asian Development Bank (ADB) led regional cooperation of six countries – was initiated in 1992 along with Cambodia, Laos, Myanmar, Thailand and Vietnam in order to develop the relatively backward Southwestern China. Yunnan Province in Southwestern China, having borders with Myanmar, Laos and Vietnam has developed as a transportation hub in the region by way of creation of multimodal transportation logistics connecting the neighbouring countries. As the markets in the neighbouring countries are far nearer than the main national markets, integration of Yunnan with the economies of the neighbouring countries is thought to be the best way to develop this landlocked peripheral area. Yunnan is developed to play the role of a bridgehead for GMS. Another sub-regional cooperation called the Quadrangle consisting of Yunnan Province of China, Laos, Thailand and Myanmar was formed in 1993 with the objective to formalise and develop existing cross-border trade, tourism and transport links among these countries.2 Like Southwestern region, a sub-regional cooperation called Greater Tumen Initiatives involving three Northeast provinces of China (Jilin, Heilongjiang, & Liaoning) and Inner Mongolia of China; the Eastern Provinces of Mongolia; the Eastern port cities of the Republic of Korea and the Primorsky Territory of the Russian Federation was launched in 1995 under the supervision of UNDP to mobilise the cross-border synergies for the development of Northeastern frontier of China. A similar initiative has been launched in 1997 centring Xinjiang Province in Northwestern region of China under Central Asia Regional Economic Cooperation (CAREC) Program along with Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Turkmenistan, Tajikistan and Uzbekistan in order to develop the Northwestern region of China. This approach had been institutionalised in 1999 with the adoption of Western Development Programme (WDP)3 that rests on a

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two-pronged strategy: first: develop the vast west by way of investing in infrastructure and human resources to create capabilities within and then, second, integrate the bordering and peripheral economies of the western provinces with that of regions across the borders through the promotion of sub-regional cooperation.4 In this scheme, attempts were made to transform the bordering regions into cores through their twin roles as the transit hub of resources procured from the neighbouring countries as well as trading hub of goods produced in the industrial zones in mainland. Connectivity-based sub-regional cooperation evidently leads to a stronger core-periphery architecture than the trade-led regional cooperation as the latter is embedded in overlapping core-periphery structure where one periphery might come under the influence of multiple cores as it happens in multilateral trading arrangements. Sub-regional to inter-continental connectivity for sustaining China’s national growth Unlike the Pan Beibu Gulf (PBG) Economic Cooperation Zone, founded in 2006 under China-ASEAN framework, consisting of China’s Guangxi Zhuang Autonomous Region, Guangdong and Hainan provinces, Vietnam, Malaysia, Singapore, Indonesia, the Philippines and Brunei, which aimed to upgrade industries, improve transportation and logistics, and promote the development of regional tourism,5 both BCIM-EC – an idea nurtured for too long by the Yunnan-based Chinese think tanks since 1999 – and China– Pakistan Economic Corridor (CPEC) – a 3,000 km-long road, rail and pipeline connecting Gwadar port in Pakistan to Kashgarh City in China’s Northwestern province of Xingjian6 – proposed in May, 2013, as part of China’s WDP – are meant to be trade corridors. As the Chinese economy needed more markets and more hinterlands to sustain the growth momentum at home, this geo-economic logic is then extended further to continental level under the project “One Belt, One Road” (OBOR) by the end of 2013 in order to reach out to Eurasian land mass through Silk Road Economic Belt (SREB) and South Asia, Middle East and Africa through Maritime Silk Road (MSR). Following the OBOR outline, both BCIM-EC and CPEC have become the two connectors between the Belt and the Road – revealing the grand design of an emerging Sino-centric global network.

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Complementarity between connectivity-based spatial cooperation and industrialisation-based economic growth It may be noted that this policy of connectivity-based spatial cooperation complements China’s strategy of industrialisation-based economic growth. By way of establishing economic zones, export processing zones (EPZ), special economic zones, science park, science based industrial park, technology park, high technology and development zones, high-tech industries development zones, and hi tech park, China creates external economies for the firms. Export processing zones, manufacturing units and business processing firms – all are located in an industrial park. Thus creating external economies, the Chinese state helps the firms to locate in certain designated zones in which they can produce at mass scale for the global economy so that these firms can enjoy the internal economies of scale. With rising internal economies, firms also experience increasing returns to scale which provides them competitive cost advantage in production in the global economy. Besides least cost of production, competitive trading advantage of the firms was ensured by drastic reduction in transport cost by way of creating the world class infrastructure through which these special zones are connected with the ports. Geographical economics of corridors: new Asian regionalism China followed this geographical economics approach while developing initially its eastern coastal areas by way of creating positive externalities in special economic zones and then building world class infrastructure to reduce transportation costs along with appropriate internal labour migration policy. Cost reduction has made China a lucrative location for manufacturing companies across the globe. The principle of geographical economics is then applied for the development of China’s peripheries by way of building a network of regionalism which is often called ‘new Asian regionalism’. The features of new Asian regionalism are: first, reduction of transport cost by way of developing transport corridors and then transaction costs by way of enhancing the trade facilitation measures. This makes trade profitable between points joined by the corridor. Second, utilising resources in both sides of the transport corridor by

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way of establishing projects and production units. Third, establishing production value chain network along the corridor. Thus, while regional corridors play the arterial role towards integrating the regions across the borders, border provinces transform themselves as transit hubs of cross-border trade and investment. They facilitate marketing of goods produced in the special economic zones and supply them raw materials acquired from the cross-border neighbourhoods. Go Global policy and the emergence of sino-centric of global economic order As part of the China’s “Go Global” policy initiated since 1999,7 this module has been replicated by the Chinese entrepreneurs and firms even beyond China where they procure local resources and produce at mass scale to export to China to support its huge population and the industrial sector.8 Chinese state and private enterprises are heavily investing in resource extraction, low value manufacturing, textile, garment making, pharmaceuticals, food processing, fishing, footwear, oil exploration, and infrastructure sector like building roads, dams, power stations, markets, etc. While the resource-seeking Chinese companies have made enormous investment in Western Asia, Central Asia, Southeast Asia, Australia and Africa, marketseeking companies have penetrated into North America, South America, Europe and Africa in order to procure distribution channels by way of merger and acquisition of western firms. Chinese banks are offering substantial loans to governments and other public-sector entities in Africa, West Asia, South Eastern Asia, Central Asia and South America for the development of their infrastructure. It is estimated that the value of China’s overseas investment including construction contracts during 2005–2016 roughly amounts to $1.5 trillion.9 About 58 percent of this total investment is in the form of construction contracts. Of the total overseas Chinese investment in construction, about 30 percent has gone to Africa. This exhibits the depth of Chinese penetration in the ‘dark continent’ which has been bypassed by the western governments and global financial institutions alike. As a digression, one might notice that in its stride to become a global power, China has embraced those regimes and countries which were not firmly integrated with the western economies and cultures – more particularly American capital and culture. America being the global hegemon,

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China avoids any direct confrontation but seeks to out-compete it in order to create and expand its own domain by way of bringing more and more regimes into its own orbit so that in the process it can eventually replace America in favour of a Sino-centric world order. Besides Africa, Chinese resource-seeking companies are also heavily investing in West Asia, Middle East, and East Asia. The lion’s share of these Chinese investments have gone into the energy sector (43 percent), followed by transport (32 percent) and real estate (1 percent). The oil-rich countries in Africa like Algeria, Angola, Nigeria, Ethiopia, Sudan, Libya, Gabon, Egypt, Chand and Congo have received substantial Chinese investment. Being the second largest consumer of oil in the world next to USA, in 2011 China imported 1.23 million barrels per day (bpd) from the African countries which constituted 20 percent of its total oil import.10 In fact, Africa has become the third largest source following the Middle East and Russia which contribute 50 percent and 20 percent of China’s total oil import respectively.11 Besides the energy sector, Chinese firms are also engaged in a big way in infrastructure sector like roads, railways and telecom systems. While the Chinese firms invested in energy and other natural resources in Africa, Middle East, Australia, Central and South East Asia and South America, they look to acquire global brands, advance technology and advanced manufacturing assets, telecommunications, services and utilities like entertainment, infrastructure like ports, and non-conventional energy as well as marketing channels in the developed countries in Europe and North America mainly through merger and acquisitions (M&A). About US$858 billion Chinese outbound foreign direct investment (OFDI) that has taken place during 2005–2016, the largest share has gone into Europe (about 23 percent) followed by USA (17 percent), East Asia (11 percent), South America, West Asia and Australia (10 percent each). New Chinese industrial policy seeks to use M&A as a strategy for upgrading technology and in the process out-compete the foreign firms both at home and abroad. For example, in Germany, Chinese company Midea’s acquisition of German robotics maker KUKA (EUR 4.4 billion); Beijing Enterprises’ acquisition of waste incineration and power generation company EEW Energy (EUR 1.4 billion); CIC’s investment in German property group BGP (EUR 1 billion); and China National Chemical Corporation’s acquisition of industrial machinery maker Krauss Maffei Group (EUR

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925 million) exhibit the aggressive agenda of the Chinese firms to acquire stakes in high-tech manufacturing and critical sectors in the economies of Europe.12 Similarly, in UK, Aluminum Corp of China (+Alcoa) acquisitioned one of the world’s biggest metals and mining corporations Rio Tinto PLC (US$14.1 billion), China Development Bank acquired Barclays (US$3 billion), one of the biggest British multinational bank and financial services companies headquartered in London. Like Barclays, a number of other British financial companies like Apax Partners, UPP Group Holdings and FGP Top were also acquisitioned by Chinese firms. Plenty of such similar instances is also reported from other members of the European Union like Switzerland, Italy, Netherland, Norway, Spain, Greece, Portugal, Luxemburg, Belgium, Finland and Sweden.13 Thus, the dynamics of economic development and industrial growth has created an inexorable push for China to move from building regional to continental connectivity which has resulted the launching of OBOR in 2013 aiming to further ease out its overland access to markets in Central Asia, Middle East, Russia and Europe through the Belt and South East Asia, South Asia, Africa and Europe through the Road and two connectors – CPEC and BCIM-EC – between them. With national economic growth rate showing the signs of slowing down, overcapacity created in many of the key manufacturing sectors like steel, cement, etc., accumulation of capital in the hands of the banking and financial institutions as well as with the state-owned enterprises, growing wage rate – OBOR seems to be the panacea for all these worrying signs emanating from the Chinese economy. The geo-economic logic behind China’s hard push for OBOR in general and BCIM-EC in particular is largely explained by this trajectory of the growth of its national economy over the last four decades. Indeed, OBOR has now become the central focus of China’s global economic and political diplomacy.

OBOR architecture: making China a land and maritime power Although geo-economic gains is the primary goal behind designing the OBOR infrastructural architecture, it will certainly strengthen the geo-political reach of China manifold. In fact, the strength of the economic base of a nation determines the perimeter of its geo-political

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ambition. As the geo-political reach expands, it reinforces economic strength as the nation could reach out to the markets of others and mobilise more resources to sustain domestic growth dynamics. Four decades of sustained growth and trade surplus with most of the major trading countries in the world have enabled China to accumulate a huge capital in the hands of her banks, state-owned enterprises (SOEs) and private firms enabling the state to practice investment-infrastructure-trade-technology diplomacy in order to expand its sphere of influence. China seeks to build a Sino-centric world system backed by economic-political-financial-military institutions in order to gradually replace United States of America – the current global hegemon – initially in Asia and then to extend its sphere of influence in Africa, Europe and Latin America and in the process bottling up USA in North American continent. Although all the contours of OBOR are not yet known as it is evolving since its inception in 2013, the main two wings of this great transformative project consist of Silk Road Economic Belt (SREB) and Maritime Silk Road (MSR). While SREB is the overland connectivity project that seeks to facilitate to-and-fro movement of man, material and energy from China to Europe through the construction of multi-modal transport corridors – high speed railways, roads, airports – energy stations, industrial parks, technology parks, etc., MSR is its maritime counterpart that seeks to traverse through South China Sea, Indian Ocean, Red Sea, and Mediterranean Sea to join with its overland twin in Europe. OBOR involves participation of 60 countries and investment of trillions of dollars in ports, highways, bridges, tunnels, communications grids, and rail links along these two pathways. Silk Road Economic Belt (SREB): interplay of geo-economics and geo-politics The architecture of SREB is designed to integrate Central Asia, Russia, Middle East and Europe – the so called Mackinderian Eurasian heartland – with China. Although the countries in Central Asia viz., Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan had long been under Russian influence as the erstwhile members of USSR, they have largely been physically integrated with the provinces of Western China through rail, road and pipeline connectivity through which oil, gas and other natural resources are being sent. Chinese investment is seen to be critical for their development. It is evident

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from the comments of Liu Yazhou, a People’s Liberation Army (PLA) General – “Central Asia is the thickest piece of cake given to the modern Chinese by the heavens” – that Central Asia has become China’s domain of investment and influence for which the region is often referred as China’s “inadvertent empire”.14 Since the demise of the Soviet empire in early 1990s, China gradually filled in the power vacuum created in Central Asia due to the weakness of Russia and engagement of USA in Afghanistan and Middle East and viewed the control of this region as key towards the stabilisation of its Western Region in general and Xinxiang in particular – the hotbed of indigenous ethnic Uyghur insurgency. Except Turkmenistan, China, in 1996, has brought all the states in Central Asia along with Russia under a security platform called Shanghai Five which has been re-christened later as Shanghai Cooperation Organization (SCO) in 2001. By way of acceleration of the physical integration of the Central Asian states with China’s Western urban centres of Urumqi, Kashgar and Tashkurgan by road, rail, air and pipeline, their economies were drawn into the Chinese growth dynamics. Although both China and Russia compete with the West to become a global power, their relations started taking a positive turn since the Ukraine crisis in March 2014. Following the imposition of Western sanctions, China embraced Russia and indirectly helped in legitimising her annexation of Crimea and in turn received Russian recognition in favour of Chinese occupation of South China Sea. Bilateral Sino-Russian relations started deepening as they began to synergise their complementarity – rising economy of China and vast deposits of energy resources and military hardware of Russia. Russia needed money to avert economic collapse arising out of Western sanctions as her economy was geared towards the markets in European Union and China needed energy and military hardware to supplement her economic rise – this complementarity has facilitated their joint coordination in Eurasia.15 Interlinking the Russian-led Eurasian Economic Union (EAEU) – a post-Soviet EU-like platform formed in 2014 and consisting of the erstwhile Soviet states in Central Asia – and Chinese-led SREB project in 2015,16 China has brought Russia on board in its OBOR project.17 Although sceptical about the economic content of OBOR for Russia, both Moscow and Beijing value the visibility of their friendship to ward off the influence of American domination in Eurasia and lay down a new continental order in which both can write the rules of the game in their sphere of domination.18

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Although there are some reservations on Russia playing the role of a ‘security firm’ to guard Chinese economic expansion,19 she has little option other than to cooperate with China in the face of western hostility and also while the countries in Central Asia welcome China to ingress into the traditional domain of Russia’s political influence as it provides them the required elbow room for hedging one against the other. Besides Central Asia, China has also made significant inroads in engaging the countries in Middle East. Following the discovery of shale gas, as the demand for energy resources from Middle East in USA is on the wane, China has become the principal importer of oil and natural gas from this region. While the Chinese companies are heavily investing in the oil exploration and production activities in Iran, Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain and other Persian Gulf countries, companies from these countries are also investing in Chinese oil refineries and petrochemical industries and thereby creating a mutual upstream-downstream interdependence between them.20 In fact, the Chinese search for energy security matches with Middle Eastern countries’ ambition to diversify in other lines of manufacturing. They find OBOR to be instrumental in creating a synergy where Chinese capital, technology and manufacturing experiences might facilitate in modernising their economies. While the countries in Middle East, particularly the members of Saudi Arabia-led Gulf Cooperation Council (GCC) intend greater coordination with China partly to redirect her association with their arch rival Iran and partly to hedge them against USA – the dominant hegemon who writes the regional political order by way of providing security umbrella, China’s Middle East policy is firmly rooted in her objective of maximising the national interest by way of ensuring energy security, trading and investment interest rather than playing the role of an alternative security provider. Instead of meddling into regional conflicts, China wants to be “a friend to all and an opponent to none”21 and steadfastly focuses on economic and developmental projects in countries across rival blocks allowing other powers to bear the cost of maintaining regional political stability. In line with the Forum on China-Africa Cooperation (FOCAC), established in 2000, the China-Arab States Cooperation Forum (CASCF) was also established in 2004 in order to develop a comprehensive bilateral relationship. In the sixth ministerial

Conclusion 433

meeting of the CASCF in 2014, attended by the prime ministers of Kuwait and 20 ministers from the Arab states, China declared her 1 + 2 + 3 strategy for cooperation with the Arab states where 1 refers to energy cooperation, 2 to improving trade and investment and 3 to cooperation in new sectors including nuclear energy, aerospace technology, and new energy. China has also set a target to increase bilateral trade from US$240 billion in 2013 to US$6,000 billion by 2024 and pledged to expand nonfinancial investment in Arab states from US$10 billion to US$600 billion during the same period.22 As China is not currently capable to play the role of a countervailing power vis-à-vis USA, the GCC and other countries in the region seek to embrace China for their economic development while remaining under the security umbrella of either USA or Russia – another military power having significant influence in Middle East. However, incorporation of the GCC countries into Asian Infrastructure Investment Bank (AIIB) as members, and establishment of a strong economic interdependence by way of trade and investment will certainly pave the way for China to scale up her power projection in future. Like East, South East and Central Asia, as the hegemony of USA goes on the wane due to her declining growth, China might extend the SCO blanket to the Middle Eastern countries to take them under her security cover and in the process acquire the capability to write the rules of the power game in the region. Although Europe, being the terminal point for both the Belt and Road, occupies a special place in OBOR map, a concrete ChinaEU structured framework in this regard is yet to evolve. In spite of the fact that Europe’s response to OBOR at EU level has not yet been formalised, most of the countries in Central and Eastern Europe (CEE) have found in OBOR an opportunity to scale up their infrastructure gap to catch up with the countries in Western Europe using Chinese capital, technology and initiatives. The 16 + 1 framework of China-CEE cooperation began in 2012 in which China intended to engage with 11 EU member states and 5 Balkan countries23 for mutual economic cooperation has been further intensified following the articulation of the idea of OBOR.24 Apart from the members of the 16 + 1, China has shown interest in investing in the infrastructure sector like railways, ports, airports, nuclear power generation, telecommunication, etc., in other European countries in general and countries around the

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Mediterranean Sea – where the Road will converge with the Belt – in particular. Among the port projects, besides Piraeus in Greece where Chinese logistics giant COSCO has acquired the controlling share in the Piraeus Port Authority in 2016, other Chinese logistics companies have either invested or have expressed an interest in doing so in sea ports in Belgium, the Netherlands, Croatia, Slovenia, Italy, Portugal, Spain, Latvia and Lithuania.25 Several Chinese local governments and companies are involved in improving the China–Europe rail services that connect various cities in China with destinations in Poland, Germany, the Netherlands, Belgium, France and Spain. Although many of these initiatives date back to preOBOR bilateral cooperation, these were repackaged with OBOR stamp. Besides these initiatives, China has aligned its OBOR with EU’s ‘Juncker Plan’ – a European Commission’s Investment Plan for Europe (2014) named after the European Commission President Jean-Claude Juncker that aims to invest at least € 315 billion over a three years period (2015–2017) in EU economy. In spite of any EU level decision, 14 EU member states – including the major powers like United Kingdom, France, Germany, Spain, Portugal and Italy – have become the founder members of the China-led Asian Infrastructure Investment Bank (AIIB) launched in 2014 that now forms one of the pillars of the OBOR financial architecture. Unlike CEE, China has no formal regional framework for cooperation with southern European countries particularly with the Mediterranean littoral states, but China has shown interest in developing maritime cooperation with Greece, Malta, Cyprus, Italy, Spain and Portugal. The Chinese government has shown an interest in cooperating with the Western European countries, such as the United Kingdom, France, Portugal and Spain, on OBOR projects in ‘third countries’ – that is, countries in Asia, Africa and even Latin America. In fact, China is willing to cooperate with France in francophone Africa, with Spain in Spanish-speaking countries in Latin America, and with Portugal in Portuguese-speaking countries in Africa and Brazil.26 Besides these goals, China also has a keen interest in United Kingdom’s role in the internationalisation of its currency, the Renminbi (RMB). China’s march towards West serves EU’s renewed interest in the East – as her West is disappearing into nationalistic den under the presidency of Trump who assumed the office in 2016. Most of the EU members feel OBOR will be a win-win proposition as

Conclusion 435

besides bringing China closer, it will also enable the European countries to reach out to the Middle East and Central Asia. Besides the benefits of huge Chinese investments which the European countries needed most as they are passing through a severe crisis of economic recession, rise of China as an economic power might also help in neutralising Russia in Eurasia where EU also wishes to be counted as a benign power. In order to set the rules of the game on the global stage, it is of Europe’s interest that Russia – the political and military hegemon – and China – the economic hegemon – compete with each other instead of coming to collusion to reorder the Eurasian political and economic space. European countries seem to prefer embracing Chinese economic hegemony while being governed by the rule-based EU framework instead of joining in the Russian block even if Russia dreams of reorganising the post-Soviet space by way of military invasion.27 Thus, both geo-economic and geo-political interests of China and Europe seem to converge in OBOR and hence in spite of suspicions from some quarters, particularly on the divide and rule strategy of China behind the formation of 16 + 1 group instead of dealing directly with EU format, an “EU-China 2020 Strategic Agenda for Cooperation” was signed in 2013 in order to work together in areas like infrastructure, investment and connectivity.28 China is also accepted as a member in the European Bank for Reconstruction and Development (EBRD) since January 2016 and European Investment Bank (EIB) has also opened an office in Beijing indicating larger EU-China financial cooperation.29 The politico-economic environment for rolling the Belt is thus ready across Central Asia, Russia, Middle East and Europe to extend Chinese economic hegemony all over the so called Mackinderian ‘heartland’ enabling her to play an increasingly greater role in global governance.30 So long as China’s economic hegemony grows in complementarity with Russian and American political and military hegemony in Central Asia and Middle East respectively, these three powers appear to be co-existing and accommodating each other in re-shaping the world order. In the long run, as and when any of the two powers – Russia and/or America – withdraw from their sphere of influence, maybe due to their weakening economy, China will no doubt step into their shoes to make Mackinderian prediction31 come true – one who rules the heartland, rules the world.

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The Maritime Silk Road (MSR): interplay of geo-economics and geo-politics Besides the Belt, the other wing of OBOR, formally labelled as the 21st century Maritime Silk Road (MSR), aims at overhauling the maritime trade route along South China Sea, Indian Ocean, Red Sea, and then culminating into the Mediterranean Sea where the Road will meet the Belt at Venice, Italy. The MSR intends to strengthen China’s maritime power through investing in existing ports and building new ports, airports and associated infrastructure in countries in South East Asia, Indian Ocean Region (IOR), Eastern and Northeastern Africa, West Asia and Southern Europe. Being the world’s largest exporter and second largest importer, maritime routes are extremely important for China’s trade with the rest of the world. In 2015, China alone shared 14.2 percent of global export and 10.3 percent of global imports (WTO.org). While USA, Hong Kong, Japan, Germany and South Korea are the top export destinations of China, her top import origins are South Korea, United States, Japan, Germany and the Middle East Region.32 Products made in China are shipped to the rest of the world mainly using three different maritime routes via the Pacific, the Atlantic, and the Indian Ocean. Ships taking the Pacific Route move northward through the East China Sea to cross the Sea of Japan and then Sea of Okhotsk to enter into the North Pacific Ocean to reach the western coasts of USA, Canada and Latin America. The same route is also used to reach New Zealand and Australia. The vessels taking the Atlantic Route move in a southern direction through the South China Sea to enter into Indian Ocean via Malacca Straits. They then sail via Cape of Good Hope to enter into Atlantic Ocean to reach the east coasts of North and South America and Western Europe. The Indian Ocean Route takes the outbound ships along the South China Sea to cross the Malacca Straits to enter into Indian Ocean. Sailing westward the vessels reach Arabian Sea and then Red Sea to cross the Suez canal to reach Mediterranean Sea and finally to Atlantic Ocean. This route is used to reach out to South Asia, Middle East, West Asia, South Europe, North and East Africa and Western Europe and eastern coast of USA.33 Of the three major shipping routes, except the Pacific route, Indian Ocean plays a vital role in China’s maritime trade with the rest of the world. What is more important is that the Indian Ocean Route is the key to China’s global imports from Europe, Middle East, Africa,

Conclusion 437

South Asia and Eastern coasts of North and South America. Oil constitutes about 10 percent of the total import of China and, in 2014, much of which originated in the Middle Eastern and African countries of Saudi Arabia (16 percent), Angola (13 percent), Oman (10 percent), Iraq (9 percent), Iran (9 percent), United Arab Emirates (4 percent), Kuwait (3 percent) and Congo (2 percent) and shipped through the Indian Ocean Route that passes through the strategic choke point of Malacca Strait.34 In fact, about 85 percent of China’s imports and between 70 and 85 percent of her energy supplies pass through this route. Although Chinese shipping companies and port operators have already emerged as the global leaders, the strategic vulnerability of this route where choke points are being controlled by USA and where India wields a significant power has long been a geo-strategic concern for China.35 In spite of the fact that China leads the world in terms of shipping logistics and merchant fleet as she owns 12 out of the top 50 container ports in the world, according to the ranking of the World Shipping Council, and 7 out of the top 10 ports – Shanghai being the world’s biggest container port followed by Shenzhen (3rd), Ningbo-Zhoushan (4th), Hong Kong (5th), Qingdao (7th) Guangzhou Harbour (8th), and Tianjin (10th) – she does not enjoy command over the sea lanes of communications (SLOCs).36 Besides owning leading shipping and logistics services supplier companies like Hutchison Ports Holdings (Hong Kong), China Merchants Port Holdings (Hong Kong), Cosco Group, Chinese port operators, as part of MSR initiatives, also acquired strong positions in several such leading companies including PSA International (Singapore), DP World (UAE), APM Terminals (Netherlands), Terminal Investment (Netherlands), Evergreen (Taiwan), and Eurogate (Germany). In order to gain control over the SLOCs and to protect her commercial and business interests, China invested to acquire control over a number of strategically important ports like Gwadar (Pakistan) which can oversee Chinese oil imports from the Middle East countries and choke point at Strait of Hormuz on the Persian Gulf, Djibouti at the horn of Africa where, like other maritime powers, China has established a naval base, the first of its kind outside the country, which can oversee both the choke points of Bab al Mandeb Straits and Suez Canal as well as oil routes from North and East Africa, and Piraeus (Greece) which is being converted into China’s maritime gateway to Europe. Using economic power and strategy of debt trap, China constrained Sri Lanka to provide access to

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Colombo and Hambantota ports and enticed Maldives to accept Chinese investment in Male airport and allow her to build a port on Gadhoo Island, at a close distance from US naval base in Diego Garcia37 in order to chock both India’s strategic depth and American hegemony in Indian Ocean. To the east of Colombo, China is engaged in building deep sea ports at Maday Island in Mynamar and Pyra Deep38 in Bangladesh. These ports provide China access to the Bay of Bengal and strengthen her energy security. Already Maday port is linked with Yunnan through an oil pipeline which shortens the distance by 700 miles vis-à-vis the maritime route.39 These ports will provide China the much needed alternative to Malacca choke point and simultaneously help to keep an eye on Indian naval base at Andaman. To the further east, China is swiftly moving to acquire controlling power in South East Asian countries’ ports of Laem Chabang (Thailand), Sihanoukville (Cambodia), Batam and Kuala Tanjung (Indonesia).40 China has also entered into a ‘port alliance’ with Malaysia wherein 10 Chinese ports will develop close cooperation with six Malaysian ports. Moreover, China is building a US$10 billion deep sea port at Malacca, which, on completion in 2025,41 will be the biggest port in the region and, no doubt, help her to police the oil choke point of Malacca Strait. This Chinese move bears tremendous geo-political significance as it will rob the strategic advantage of US navy which operates from the Sembawang naval base, Singapore, and acts as the sole security provider in the Malacca Strait – the “Gibraltar of the East” to use the phraseology of Winston Churchill. Moving further east, China has also invested in the port at Darwin in northern Australia which is a strong naval base of USA and acts as a node for American strategy of ‘pivot’ to the Asia-Pacific region.42 Besides Australia, control over Darwin would enable China to advance her maritime interests in Indonesia, New Zealand and Papua New Guinea. More important implication of this Chinese move is that it rings the death knell to American hegemony as Darwin has been the last outpost of US Marines in the South Pacific. Thus, besides the establishment of ownership of South China Sea, expansion of China’s maritime footprint in Indian Ocean, the third largest water body on the earth, aims to severely contest the notion of centrality of India in Indian Ocean Region (IOR). Initiatives unleashed under MSR will vastly increase Chinese access to Indian Ocean at multiple entry points, her control over the global

Conclusion 439

sea lanes of communication (SLOC), influence over the countries in IOR region, docking, refuelling and berthing facilities for Chinese merchant ships during peacetime and warships and submarines during the time of war. This will make China an invincible sea power ready to replace American hegemony as and when the latter chooses to withdraw from Indian Ocean á la the policies of “Pivot to Asia” due to her crumbling economy. With MSR, China appears to be heading towards realising the Mahanian dictum – whatever power rules the sea also rules the world – through a strategy of denying the rights of navigation and over flight to others in its sphere of influence in East and South China seas and strengthening her maritime prowess elsewhere where she is not a resident power. BCIM-EC: an overland pathway to MSR Out of the six overland land corridors included in OBOR,43 China views BCIM-EC as one of the overland pathways to reach out to Indian Ocean besides China–Pakistan Economic Corridor (CPEC). While BCIM-EC is to connect the Chinese bridgehead of Yunnan to the Bay of Bengal via Myanmar and Bangladesh, CPEC is designed to connect Northwestern province of Xinjiang to Arabian Sea via Pakistan. These overland pathways, besides shortening the shipping distance to the markets in South Asia and other countries in IOR, will also reconfigure the geo-strategic character of the northern Indian Ocean region in favour of China. As part of the bridgehead strategy, as articulated by Jinxin,44 the Director of the Pan-Asia Transportation and Logistics Research Centre, a Chinese government think tank that reports to the National Development and Reform Commission, and the chief designer of the BCIM corridor, both Yunnan and Xinjiang are being developed so that they are capable of defending the country’s borders, take active part in cross-border partial war, act as the storehouse of the country’s energy resources and act as a node for regional trade and connectivity. Both the overland pathways will provide China alternative routes for importing oil from Middle East and African countries bypassing the Malacca Straits. This will enormously strengthen China’s energy security in case of any interdiction of Chinese SLOC in the event of any conflict or other contingencies.45 Moreover, these overland pathways as connectors to Chinese controlled ports in Pakistan, Myanmar and Bangladesh will enable China, an outside power, to claim the status of a resident power in Indian Ocean region (IOR) making her

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a two-ocean nation á la USA. By building these overland pathways, China aims to achieve a long cherished goal of the Eurasian powers to get access to the Indian Ocean which was denied to them by the imperial British power who had exercised hegemony over it till the middle of the 20th century. Thereafter, following the withdrawal of the British to the east of Suez, USA filled in the vacuum and established her hegemony over the global SLOC.46 Being inheritor of British geo-political legacy, India inculcates a special attachment to the northern Indian Ocean where she also wields a substantial maritime power. To thwart USA and Indian domination, even well before the conceptualisation of MSR, China sought access to Indian Ocean by way of penetrating into the Indian strategic space among the littoral countries in IOR. An effort which is often termed as “String of Pearls” strategy aims to encircle India by way of building ports in her neighbourhood and counter USA maritime hegemony in SLOC in Indian Ocean. With Russia aligning her interest in Central Asia with Chinese OBOR, China is persuading Russia to join in the CPEC project in order to tone down the fast growing perception of “China threat” among other nations as well as enhancing her power projection deriving from Russian hard power in completing and operating the project that runs through a number of conflict zones.47 Although Russia has not yet consented to such idea, nor has it denied the possibility of joining it in future. Perhaps, Russia is keeping the option open so that if required, in the event of growing Indo-USA relationship, she might exercise it. BCIM-EC: China vs Bangladesh, India and Myanmar Unlike China, which will be getting access to Indian Ocean, what will be the gain of Bangladesh, Myanmar and India out of BCIMEC? Being a resident of Indian Ocean, obviously, their gain depends on their capability to use these overland pathways to reach out to Chinese and Eurasian markets. But none of them is a manufacturing power. Except readymade garments, largely exported to USA and EU through maritime route, which constitutes more than 80 percent of total export, Bangladesh hardly has any other globally competitive product.48 Myanmar mainly exports oil, natural gas, precious stones and other natural resources which constitute about 80 percent of its total exports mainly to the neighbouring countries of China and Thailand which are well-connected across the border.49

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Although India has a diversified industrial base, services – particularly information technology, banking, insurance, health, audit and accounting – play the driving role in the dynamics of its economic growth with a share of more than 63 percent in total Gross Value Added during 2015–2016.50 While India is experiencing negative balance of trade perpetually in case of her goods trade, the trend is just opposite in case of trade in services. In fact, India largely relies on the services sector in bringing balance in its trade in merchandise. Moreover, much of the information technology related services – the most promising and fast growing – is exported to the developed countries in America and Europe. Thus, internal growth dynamics hardly plays any role in Bangladesh, India and Myanmar to go for BCIM-EC. Not only the fact that manufacturing base and structure of trade in Bangladesh, India and Myanmar do not warrant the construction of BCIM-EC, it has already been pointed out that each of these three countries is having deficit balance of trade vis-à-vis China as their bilateral imports are far higher than exports.51 One cannot be certain whether availability of logistics and easing out of trade facilitation will reverse this trend unless the productive bases are transformed in them. It has also been examined that given the current spatial structure of trade between India and China, BCIM-EC would neither prove to be cost-effective vis-à-vis the maritime trade route.52 Although improvement in regional infrastructure, both hard (like roads, railways, ports) and soft (like harmonisation of customs, testing), is found to be trade enhancing as it reduces trade costs due to decrease in transport and transaction costs and increase in transport reliability,53 however there is no guarantee that this tradeled growth would result into income convergence so that the gains from trade are equally shared by the constituent stakeholders across the border. As the new economic geography suggests, trade facilitation may reinforce initial advantages or disadvantages of a region leading to divergence rather than convergence between regions.54 As the trade flows based on the cross-border price differentials, the structure of trade is determined by the productive capacity of the regions. If a region, say A, is endowed with higher manufacturing capacity and higher efficiency, it will be capable of producing goods at lower costs. Traders in region B, with lower manufacturing capacity, across the borders on other side will find it beneficial

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to import goods from A. Traders in A will find it beneficial to import those raw materials which are either not available locally or are short in supply from region B. Thus while region A is producing and trading in those goods where it has competitive advantage, region B will be trading in those goods which are scarce in A. As manufacturing adds value and is subject to increasing returns, region A will be the gainer while trading with the primary products of region B. If the primary products that region B is exporting to A are non-renewable natural resources like oil, gas, minerals, precious stones, etc., then it will be detrimental for the region to trade in resources with A in the long run instead of acquiring the required skill and technology to use them for further value addition. Thus, one cannot be sure whether creation of logistics and promoting market integration will create a win-win situation for all the stakeholders or not. BCIM-EC: why are Bangladesh and Myanmar enthusiastic about BCIM-EC? Both Bangladesh and Myanmar, being capital scarce, feel that a massive Chinese investment in building multimodal transport networks, special economic zones, industrial parks, export processing zones, business hubs and development of various other economic activities along the corridor would benefit them to a large extent. Both the countries intend to reap dividends of their geo-strategic locational advantages as the gateways to global connectivity of the landlocked Southwest China and Northeast India through their sea ports in the Bay of Bengal. Southwest Chinese province of Yunnan accesses ports in South China Sea which is nearly 2,000 km away and similarly India’s Northeast accesses ports in Bay of Bengal located in the state of West Bengal which is about 1,500 km away. Both the regions could economise on transport costs were they to use Chittagong port in Bangladesh or Sittwe and Kyaukphyu ports in Myanmar. Moreover, the BCIMEC would make it possible for both – Bangladesh and Myanmar – to emerge as transit and trade hubs and open up new vistas to earn huge revenue as transit fees if the trade route of the two of the biggest economies – China and India – passes through them. Both Bangladesh and Myanmar have realised the fact that lack of physical connectivity has been the main deterrence for which they

Conclusion 443

have failed to benefit from their geographical locations as bridge between South East and South Asia which would have unleashed immense opportunities not only for them but other members of these two regions as well.55 Moreover, in spite of being neighbour, cross-border trade, investment and cooperation between them are negligible. Had there been neighbourly cooperation, Bangladesh would have been much benefited from the immense energy resources of Myanmar. Both the countries will be able to synergise their complementary resource bases while connected through BCIM-EC. As the corridor will connect South Asia, South East Asia and East Asia – both Bangladesh and Myanmar would have access to a huge market. A study conducted jointly by ADB and ADBI has projected that integration between South Asia and South East Asia through the development of multi-modal physical connectivity, free trade agreement, and reduction in non-tariff barriers (NTBs) will enable Bangladesh to make a gain in real income by 6.9 percent of GDP and export, from baseline, will increase by 86.7 percent by 2030. The similar gains in real income for Myanmar would be 2.3 percent and for export 7.3 percent.56 Moreover, both Bangladesh and Myanmar hope that BCIM-EC is likely to impact upon their tourism sector positively. Tourists from both China and India will find it easier to move into these two countries which will boost the respective economies. However, these are only broad perspectives expressed in descriptive terms without any hard causal analysis. In fact, it is extremely difficult to assess the impact of infrastructure on economic growth as has already been suggested earlier. The expounders of perceived economic benefits assume contrary to the fact, as evidenced,57 that it will be beneficial for both India and China to trade along the BCIM-EC rather than the exiting maritime route. Moreover, expectation for the flow of OFDI from China to other stakeholders is also uncritical as it does not take into account the associated risks to national interest á la US$3.6 billion Myitsone dam in the Kachin state and US$1 billion Letpadaung copper mine controversies in the Sagaing region of Myanmar where Chinese companies were accused of having completely ignored the people’s interest and following large-scale resistance President Thein Sein had to postpone the dam in 2011.58 Thus, gains from BCIM-EC for Bangladesh, Myanmar and India, are largely illusory.

444  Gurudas Das

Conclusion: BCIM-EC: the final nail in the coffin of Chinese strategy of encirclement of India Viewed from this overall OBOR geo-strategic architecture, the proposed BCIM-EC, as it appears, intended or not, would be playing an instrumental role in completing China’s goal towards strategic encirclement of India. In the north, China has heavily invested in defence infrastructure and armed herself to the teeth along the Line of Actual Control (LAC), the Sino-Indian border in the Himalayas. In the South, China is relentlessly working for the string of pearls strategy – investing heavily for building Chinese control ports and airports in countries in the Indian Ocean region (IOR). In the west China is heavily investing in CPEC that passes through disputed territories of Gilgit-Baltistan, a part of Jammu and Kashmir under Pakistan Occupied Kashmir (POK) claimed by India. In the east, BCIM-EC, if it materialises, will complete China’s task of strategic encirclement of India. Although China does not spell out her geo-political ambition and only focuses on the mutual geoeconomic benefits of this inter-continental connectivity project, however, its creation, management and maintenance across the 60 countries involving trillions of dollars investment would automatically require her to play a much bigger role in global governance and expansion of her combating capacity across the globe in order to protect the Chinese companies, assets and citizens working in foreign lands. It is only natural that China is becoming more and more assertive with every passing day as her hegemony in the global economy is deepening over time. As China’s territorial ambition is ever expanding, increasing use of her military power projection to settle claims ex parte with the neighbours – be it Japan, India, Vietnam or Philippines – has already become a matter of great concern. It has snowballed a process of realignment of the strategic space in the Asia-Pacific region. Overlooking this emerging geo-political reality and interpreting OBOR only through geo-economic lens would pose a serious threat to the balance of power in post-American global security architecture in general and in the Asia-Pacific region in particular. It is thus important to look beyond the economic benefits of Chinese OBOR while aligning national interests by the countries in Asia, Europe and Africa. An uncritical acceptance of OBOR without its geo-political implications might squeeze the manoeuvring space of

Conclusion 445

the nations leading to compromise with the core values they intend to nurture for their people. The interest of the countries in South Asia, Southeast Asia and more broadly Asia-pacific region will be better served if India plays the role of a regional power rather than become a second fiddle to China. If India acts as one of the poles in the emerging multi-polar world order, small nations will be able to use India as a counterweight against China in order to negotiate their sovereign strategic space for their respective national development. If this strategic space is lost in the event India plays second fiddle, they will be constrained to become a vassal state like Pakistan.

Notes 1 Cuiping, Zhu. (2017). “BCIM Economic Corridor: Building Future from Shared Past”. In Singh, Swaran and Singh, Cuiping (eds), BCIM Economic Corridor: Chinese and Indian Perspectives, New Delhi: Adroit Publishers. Sobhan, Rehman. (1999). Transforming Eastern South Asia: Building Growth Zones for Economic Cooperation, Dhaka: Centre for Policy Dialogue. Rana, Kishan S. and Uberoi, Patricia. (2012). “India’s North East States, the BCIM Forum and Regional Integration”. Institute of Chinese Studies, Monograph No. 1, New Delhi. De, Prabir. (2013). “Cooperation in the Areas of Trade, Investment and Finance: Challenges, Prospects and the Next Agenda”. Paper presented at the Eleventh International Conference on Regional Economic Cooperation among Bangladesh, China, India and Myanmar (BCIM), Dhaka, 23–24 February 2013. Mishra, Binoda Kumar. (2016). “BCIM-EC and the Northeast”. In Bhaumik, Subir (ed.), The Agartala Doctrine: A Proactive Northeast in Indian Foreign Policy, New Delhi: Oxford University Press. Das, Gurudas, Paul, Ujjwal K. and Mathur, Tanuj. (2015). “ Sub-Regional Cooperation for the Development of Landlocked Peripheral Areas: The Case of BCIM”. In Bhatia, Rajiv K. and Mishra, Rahul (eds), BCIM-Economic Corridor: The Road Ahead, New Delhi: Indian Council of World Affairs and Pentagon Press. Yanfang, Li. (2017). “Analysis of Trade Relations in BCIM Sub-Regional Cooperation”. In Singh, Swaran and Cuiping, Zhu (eds), BCIM Economic Corridor: Chinese and Indian Perspectives, New Delhi: Adroit Publishers. Xiaowen, Hu, “BCIM in OBOR”. In Kondapalli, Srikanth and Xiaowen, Hu (eds), One Belt One Road: China’s Global Outreach, New Delhi: Pentagon Press. Che, Zhimin. (1998). “Proposition on Formation of Sub-Regional Cooperation Zone of China, India, Myanmar and Bangladesh”. Institute of Chinese Studies, New Delhi, (Mimeo). 2 Than, Mya. (2007). “China and CLMV Countries: Relations in the Context of the Mekong Sub-Region”. In Swee-Hock, Saw (ed.), ASEAN-China Economic Relations, Singapore: Institute of Southeast Asian Studies.

446  Gurudas Das 3 Lai, Hongyi Harry. (2002). “China’s Western Development Program: Its Rationale, Implementation, and Prospects”. Modern China, 28(4): 432–466. 4 Jiabao, Wen. (2009). “Towards Greater Development and Opening-Up of Western China”. Address at the Second Western China International Cooperation Forum, held on 16 October 2009. http://np.chinaembassy.org/eng/zgwj/t621406.htm 5 Chheang, Vannarith. (2013). “Sub-Regional Cooperation in East Asia: Present and Future”. Working Paper No 52, Cambodian Institute for Cooperation and Peace (CICP). www.cicp.org.kh/sub/Publications/4/25 6 Malhotra, Aditi. (2015). “CPEC and China’s Western Development Strategy”. South Asian Voices, 8 June 2015. https://goo.gl/GdEuqY 7 Wang, Hongying. (2016). “A Deeper Look at China’s ‘Going Out’ Policy”. Centre for International Governance Innovation (CIGI), Canada. https://goo.gl/FNqp1X (accessed on 30 December 2016). 8 French, Howard W. (2014). China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa, New York: Alfred A. Knopf 9 China in Central Asia. http://chinaincentralasia.com/about/ (accessed on 23 July 2017). 10 Zhenxing, Luo. (2013). “Perspectives on China-Africa Oil Ties”. Conference Paper 4, presented in a conference on A Trilateral Dialogue on the United States, Africa and China, co-organized by the Brookings Institution, the Institute for Statistical, Social, and Economic Research and the Chinese Academy of Social Sciences, 2013. https://goo.gl/ kFKNiW (accessed on 22 June 2017). 11 Ibid. 12 Hanemann, Thilo and Huotari, Mikko. (2017). “Record Flows and Growing Imbalances: Chinese Investment in Europe in 2016”. Merics Papers on China, No 3, Berlin: Mercator Institute of China Studies. https://goo.gl/ucxoHT (Accessed on 20 June 2017). 13 Hellström, Jerker. (2016). “China’s Acquisitions in Europe: European Perceptions of Chinese Investments and Their Strategic Implications”, Report No: FOI-R—4384 – SE, Ministry of Defence, Government of Sweden. https://goo.gl/m1JuBo (accessed on 23 June 2017). 14 Alexandros Petersen. (2013). “China Is Pivoting to Central Asia – But Is Washington Paying Attention?” The Atlantic, 28 October 2013. https://goo.gl/FsrEBd (accessed on 6 July 2017). 15 Stent, Angela. (2016). “Russia, China, and the West after Crimea, 2015–16”. Paper Series, No. 8, Transatlantic Academy. https://goo.gl/ H4P3VW (accessed on 10 July 2017). 16 Wilson, Jeanne L. (2016). “The Eurasian Economic Union and China’s Silk Road: Implications for the Russian – Chinese relationship”, European Politics and Society, (online). https://goo.gl/a8EgPa (accessed on 10 July 2017). 17 Fallon, Theresa. (2015). “The New Silk Road: Xi Jinping’s Grand Strategy for Eurasia”. American Foreign Policy Interests, 37: 140–147. https://goo.gl/5E26hG (accessed on 7 July 2017).

Conclusion 447 18 Spivak, Vita. (2017). “How Putin Plans to Cash in on the One Belt One Road Initiative’, Russia Beyond the Headlines”. 16 May 2017. https:// goo.gl/TDp5PW (accessed on 10 July 2017). 19 Mathieu, Duchâtel, Godement, François, Liik, Kadri, Shapiro, Jeremy, Slavkova, Louisa, Stanzel, Angela and Tcherneva, Vessela. (2016). Absorb and Conquer: An EU Approach to Russian and Chinese Integration in Eurasia, London: European Council on Foreign Relations. 20 Cheng, Joseph Y. S. (2016). “China’s Relations with the Gulf Cooperation Council States: Multilevel Diplomacy in a Divided Arab World”. China Review, 16(1). https://goo.gl/4tEKxP (accessed on 11 July 2017). 21 Payne, Jeffrey S. (2016). “The G.C.C. and China’s One Belt, One Road: Risk or Opportunity?” Middle East Institute. www.mei.edu/content/ gcc-and-china-s-one-belt-one-road-risk-or-opportunity (accessed on 18 December 2017). 22 Cheng, Joseph Y S, 2016, op cit 23 These 16 countries are: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Macedonia. 24 Mathieu et al., 2016, op cit 25 van der Putten, Frans-Paul, Seaman, John, Huotari, Mikko, Ekman, Alice and Otero-Iglesias, Miguel (eds). (2016). “Europe and China’s New Silk Roads”. The European Think-tank Network on China (ETNC) Report. https://goo.gl/sCNpZo (accessed on 10 July 2017). 26 Ibid. 27 Mathieu et.al, 2016, op cit. 28 Ibid. 29 Grieger, Gisela. (2016). “One Belt, One Road (OBOR): China’s Regional Integration Initiative”. Briefing, European Parliament, European Parliamentary Research Service (EPRS). https://goo.gl/Kw9pba (accessed on 10 July 2017). 30 Ghiasy, Richard and Zhou, Jiayi. (2017). “The Silk Road Economic Belt: Considering Security Implications and EU – China Cooperation Prospects”, Sweden: Stockholm International Peace Research Institute. https://goo.gl/4h99Lm (accessed on 26 July 2017). 31 Mackinder, H. J. (1996). “Democratic Ideals and Reality: A Study in the Politics of Reconstruction”, National Defence University Press. https://goo.gl/jLiHz2 (accessed on 16 July 2017). 32 “The Observatory of Economic Complexity”. https://goo.gl/19hvqe, (accessed on 19 July 2017). 33 Cargo from China. https://cargofromchina.com/shipping-routes/ (accessed on 22 July 2017). 34 Statista.com. https://goo.gl/pPTjBG (accessed on 15 July 2017). 35 Gisela Grieger, 2016, op cit. 36 World Shipping Council. https://goo.gl/VrTTC (accessed on 21 July 2017). 37 Patrick, Anjelina. (2016). China Overtaking India in Maldives, New Delhi: Institute of Peace and Conflict Studies. https://goo.gl/UofHDG (accessed on 12 June 2017).

448  Gurudas Das 38 Mamun, Shohel. (2017). “Bangladesh Signs MoU with China on Payra Deep-Sea Port Construction”, Dhaka Tribune, 26 July 2017. https:// goo.gl/X8BLN8 (accessed on 22 June 2017). 39 Meyer, Eric. (2015). “With Oil and Gas Pipelines, China Takes a Shortcut Through Myanmar”. Forbes, 9 February 2015. https://goo.gl/ WV2uaM (accessed on 24 June 2017). 40 Wade, Geoff. (2015). “Port of Darwin: This Is About More Than China’s Economic Interest”, 24 November 2015, Australian Broadcasting Corporation. https://goo.gl/6CKngF (accessed on 24 June 2017). 41 Port strategy. “China and Malaysia Moot Port Alliance”. 14 April 2016. https://goo.gl/hKFzac (accessed on 12 July 2017). 42 Renolds, Emma. (2016). “US Military Bases in Australia: Protecting Us or Putting Us at Risk?” news.com.au, 2 October 2016. https://goo. gl/4KC5Jn (accessed on 18 May 2017). 43 National Development and Reform Commission (NDRC). “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”. People’s Republic of China, First Edition, 28 March 2015. https://goo.gl/JXkWhV (accessed on 26 May 2017). 44 Jinxin, Liu. (2013). “China’s Bridgehead Strategy and Yunnan Province”. East by Southeast, 16 November 2013. https://goo.gl/VTizPD (accessed on 10 July 2017). 45 Brewster, David. (2017). “Silk Roads and Strings of Pearls: The Strategic Geography of China’s New Pathways in the Indian Ocean”. Geopolitics, 22(2): 269–291. 46 Ibid. 47 Xing, Li. (2017). “Russia Can Be a Welcoming Presence at CPEC”. Global Times, 5 January 2017. https://goo.gl/cN8R45 (accessed on 10 July 2017). 48 As in endnote 3 (accessed on 19 July 2017). 49 As in endnote 3 (accessed on 22 July 2017). 50 CSO. https://goo.gl/xnrvH5 (accessed on 22 July 2017). 51 Das, Gurudas, Mathur, Tanuj, Paul, Ujjwal and Das, Subodh. “BCIM: What Should Be the Basis for Sub-Regional Cooperation?” this volume. 52 Das, Gurudas and Kanti Paul, Ujjwal. “Is BCIM-EC beneficial for India?” this volume. 53 Jouanjean, Marie-Agnes, Gachassin, Marie and Willem teVelde, Dirk. (2015). “Regional Infrastructure for Trade Facilitation – Impact on Growth and Poverty Reduction: A Literature Survey”. UK Aid Report, London: Overseas Development Institute. https://goo.gl/JW9LsR (accessed on 18 June 2017). 54 Krugman, Paul. (1991). Geography and Trade, Leuven: Leuven University Press. Krugman, Paul. (1995). Development, Geography, and Economic Theory, Cambridge, MA: MIT Press. 55 Asian Development Bank (ADB) and Asian Development Bank Institute (ADBI). (2015). “Connecting South Asia and Southeast Asia”, Tokyo. https://goo.gl/LDUuDf (accessed on 30 June 2017). 56 Das and Kanti Paul. “Is BCIM-EC beneficial for India?” op cit.

Conclusion 449 57 Transnational Institute (TNI). (2016). “China’s Engagement in Myanmar: From Malacca Dilemma to Transition Dilemm”, Myanmar Policy Briefing 19 July, 2016. https://goo.gl/zLQG5Z (accessed on 1 July 2017). 58 Ibid.

Index

Page numbers in italic indicate a figure and page numbers in bold indicate a table on the corresponding page. Act East Policy (AEP) 236 – 240, 377 – 378; BCIM as fillip to 312 – 315, 317 – 318 agro-based industries 50, 52, 60, 157, 216 ASEAN Regional Forum (ARF) 83, 94 Asian Development Bank (ADB) 68 – 71, 73 – 74, 180 – 182, 307 – 308, 336 – 337; and transport corridors 297 – 298 Asian Infrastructure Investment Bank (AIIB) 91, 216, 233, 279, 394 – 395, 402, 433 – 434 Association of Southeast Asian Nations (ASEAN) 209, 233, 338 – 339, 347, 366, 399; and Act East Policy 237, 250 – 253; and BCIM-EC 175 – 177, 198n40; and BCIM integration 274, 277, 279; and BCIM sub-regional economic corridor 292 – 293; and geo-economic prospects 309, 312 – 313; and inclusive development 256, 259, 261, 266; and institutional arrangements for BCIM 77 – 86, 91 – 94; and the road ahead for BCIM 68, 71, 73 – 74; and trade and investment along BCIM-EC 157, 159

Asia-Pacific Countries Trade Agreement (APTA) 159, 338 Bangladesh: BCIM-EC gains of 440 – 442; as crucial to India’s look east 246 – 250, 248; enthusiasm about BCIM-EC 442 – 443; potential for trade and investment in 155 – 156; trade between China and 136 – 137; trade between Yunnan and 140 – 141, 141 Bangladesh, Bhutan, India, and Nepal (BBIN) 194n20, 297, 365, 400; and China’s Silk Road 367 – 368 Bangladesh–China–India– Myanmar Economic Corridor (BCIM-EC) 112 – 117, 112, 209 – 210, 215 – 217; as alternative for CPEC 416 – 418; and the BCIM Regional Cooperation Forum 169 – 172, 187 – 191; BCIM sub-regional economic corridor 284 – 285, 316 – 319; benefits for India 125, 132 – 133, 133; current state of affairs in 285 – 287; geo-economic prospects for 305 – 310; impact on trade by building of 141 – 142; irritants

Index 451 in developing the 298 – 301; Northeast India in 256 – 257, 263 – 266, 263, 264, 268 – 269; obstacles for 212; opportunities for 210 – 211; options for 212 – 214; as overland pathway to MSR 439 – 440; overview of 411 – 413; proposed transport corridor in 293 – 298; prospect model of 326 – 327; the road ahead for 214 – 215; trade and investment along 146 – 148, 160 – 166, 161 – 166; as tradeled initiative 135 – 136; see also Greater Mekong Sub-region (GMS); trade; specific countries Bangladesh–China–India– Myanmar (BCIM) Regional Cooperation: assessing 274 – 280; the BCIM sub-region 63 – 64; and the BIMSTEC 310 – 312; and China’s OBOR 386 – 387; as fillip to India’s Act East Policy 312 – 313; and IndiaChina relations 396 – 403; institutional arrangements for 76 – 77, 86 – 87, 91 – 95; and Myanmar 273 – 274, 281 – 282; and new regionalism 380 – 386; in perspective 375 – 380; political context of 361 – 364; potential of BCIM growth area 44 – 45; as project-led cooperation 37 – 41, 37, 39, 40; regional frameworks for 364 – 365; significance of Northeast India in 48 – 49, 49; as trade-led cooperation 32 – 36, 33, 33, 34, 35; uneven development across 83; see also Bangladesh–China–India– Myanmar Economic Corridor (BCIM-EC); Bangladesh– China–India–Myanmar (BCIM) Regional Cooperation Forum; sub-regional cooperation; specific countries Bangladesh–China–India– Myanmar (BCIM) Regional Cooperation Forum: and the

BCIM Economic Corridor 169 – 172, 187 – 191; historical basis for 98 – 101, 117 – 118; see also specific countries Bay of Bengal Industrial Growth Belt (BIG-B) 17, 366 Bay of Bengal Initiative for MultiSectoral Economic Cooperation (BIMSTEC) 146, 209, 274, 342, 365 – 367, 383; BCIM and 308, 310 – 312, 314 – 315, 317 – 318; and the geo-political dynamic 365 – 368; and India-China relations 400, 406 Belt and Road Initiative (BRI) 171 – 175, 190 – 191, 195 – 196n28, 318, 402 Border Roads Organisation (BRO) 244, 264, 294 Brazil, Russia, India, China, South Africa (BRICS) 91, 135, 393 – 394 Cambodia, Laos, Myanmar, Vietnam (CLMV) 67, 83, 177 capacity building 116, 181, 342, 350 – 351; BCIM sub-regional economic corridor and 289, 298; challenges to 346 – 347; Myanmar and 279; Northeast India and 256, 262, 266 – 267 Central and Eastern Europe (CEE) 433 – 434 Central Asia Regional Economic Cooperation (CAREC) 1 – 2, 86, 265, 424; and the basis for subregional cooperation 24 – 25, 26, 32, 41 China: BCIM-EC and 172 – 176, 440 – 442; as emerging power 408 – 411; encirclement of India by 444 – 445; Go Global policy 427 – 429; India-China relations 393 – 396, 395, 403 – 405; OBOR 386 – 387, 429 – 430; potential for trade and investment in 156 – 157; regional framework narratives of 407 – 408; sustaining national growth of

452 Index 425; trade between Bangladesh and 136 – 137; trade between India and 137 – 139, 138, 139; trade between Myanmar and 139 – 140, 140 China-Arab States Cooperation Forum (CASCF) 432 – 433 China-Pakistan Economic Corridor (CPEC) 383 – 387, 411, 413 – 418; BCIM-EC as alternative for 416 – 418; and the BCIM regional cooperation forum 170 – 171, 173 – 174, 195n27, 196n33; and the geopolitical dynamic 367 – 368; India and 132, 133; India-China relations and 402, 404; OBOR architecture and 425, 429, 439 – 440, 444 community 26, 116, 180, 189, 287, 408; and sub-regionalism 344, 348 – 351 competitiveness 23, 126, 267 – 268; GMS and 26, 71, 85, 257, 287, 289 connectivity 328, 411 – 412; and the BCIM regional cooperation forum 169 – 174, 178 – 182, 189 – 190, 198n40, 201n59, 208n123; and BCIM subregional economic corridor 286 – 287, 296 – 299; and geoeconomic prospects 305 – 315, 320 – 321n20; and the geopolitical dynamic 367 – 368; and economic sustainability 146 – 147, 157 – 160, 425; and India-China relations 398 – 399, 401 – 402; and industrialisation 426; and institutional arrangements for BCIM 84 – 87, 92 – 95; and Myanmar 275 – 276, 278 – 280; and new contexts of Asia’s regionalism 373 – 374, 376 – 377, 381 – 387; and Northeast India 256 – 257, 259 – 263, 268 – 269; and OBOR architecture 429 – 430, 442 – 444; and the road ahead for BCIM

73 – 74, 209 – 211, 213 – 214; and trade 141 – 143 cooperative competitive federalism 172, 183 – 187, 318 Delhi-Mumbai Industrial Corridor (DMIC) 265, 307 development gap 23, 68 East Asian Production Network (EAPN) 80, 93 – 94 Economic and Social Commission for Asia and the Pacific 115, 288, 290, 337 Economic Cooperation Forum (ECF) 182, 317 – 318 economic corridor 2, 9, 15, 212, 279, 416; and the basis for subregional cooperation 32, 41; and the BCIM regional cooperation forum 171 – 172, 180 – 181, 185, 188, 191, 204n81; as development strategy 180 – 183; and geo-economic prospects 306 – 308, 310 – 311, 313, 316; and the geo-political dynamic 359, 361, 366 – 368; and institutional platforms 326 – 327, 333 – 336, 340; Northeast India and 222, 224, 263, 265, 268 – 269, 270n2; and the road ahead for BCIM 72 – 73; and trade and investment 146 – 147, 159 – 160; see also specific corridors Economic Integration Agreements (EIA) 373, 407 energy 291 – 292, 410 – 411, 430 – 433, 437 – 439; and the basis for sub-regional cooperation 24 – 27, 30 – 32, 37 – 41, 39 – 40; and institutional arrangements for BCIM 76 – 77; and the road ahead for BCIM 67 – 68; and trade and investment 158 – 160 environment 26, 67 – 69, 147 – 148, 275 – 276, 360 – 361; and capacity building 342 – 343, 347 – 350

Index 453 European Union (EU) 77, 79 – 81, 84, 86, 274, 433 – 435, 440 flexibility 15, 48, 226, 325 – 326 food processing 5, 50, 52 – 53, 157, 427 forest resources 50, 360 fragmentation 50 – 52, 52, 256, 349 Free Trade Agreements (FTA) 144, 146, 157 – 158, 256, 338, 407, 417 Free Trade Zone 336, 338 – 339 General Agreement on Tariffs and Trade (GATT) 507 geo-economics 117, 430 – 431, 436 – 439 geo-politics 117, 357, 368, 374, 411, 413; history and overview of 357 – 359; Maritime Silk Road and 436 – 439; the Myanmar experience and 359 – 361; Silk Road Economic Belt (SREB) and 430 – 431 globalisation 44, 52, 65, 101, 136, 305, 373 Greater Mekong Sub-region (GMS) 25 – 30, 26, 27, 28, 29; and BCIM growth area 46 – 47; and BCIM regional cooperation forum 180 – 182; China’s role in 70 – 72; and geo-economic prospects 307 – 308, 317 – 318; and India-China relations 399 – 400; and institutional arrangements for BCIM 85 – 86; organisational framework of 288; overview of 68 – 70; rationale of 287 – 288; and the road ahead for BCIM 63 – 64, 73 – 74; and sub-regional cooperation 336 – 338; strategic framework in 288 – 293 Greater Tumen Initiative (GTI) 30 – 32, 41 Gulf Cooperation Council (GCC) 432 – 433 India: and Bangladesh 246 – 250; BCIM-EC benefits for 125,

132 – 133, 133, 440 – 442; Chinese encirclement of 444 – 445; cooperative competitive federalism and 183 – 187; India-China relations 393 – 396, 395, 403 – 405; India-China trade 125 – 129, 126, 127, 128; and Myanmar 250 – 255; trade between China and 137 – 139, 138, 139; trade between Yunnan and 140 – 141, 141; see also Northeast India India-Myanmar-Thailand (IMT) 46 – 47, 400 Indian Ocean Region (IOR) 436, 438 – 440, 444 industrialisation 23, 73, 210, 265, 359, 426 infrastructure 67, 88 – 89, 114 – 116, 159 – 160, 278 – 280; and Act East Policy 237 – 239, 253 – 254; and the basis for sub-regional cooperation 25 – 26, 30 – 32; and BCIM growth area 45 – 46, 54 – 56; and BCIM regional cooperation forum 173 – 174, 176 – 181; and BCIM sub-regional economic corridor 289 – 290, 296 – 299; and geo-economic prospects 306 – 308, 311 – 312; and India-China relations 398 – 399; and new contexts of Asia’s regionalism 373 – 374, 381 – 383, 385 – 387; and Northeast India 256 – 258, 258, 265 – 267; and OBOR architecture 425 – 430 institutions: design of 86 – 87, 91 – 93; for early harvest projects 87 – 91; institutional arrangements for BCIM 76 – 77, 94 – 95; institutional mechanism in BCIM-EC; and market forces 93 – 94; political challenges to 81 – 82; and regionalism 78 – 82; see also under trade International Production Network 50 – 52, 52

454 Index investment 413 – 414, 430 – 435, 442 – 444; and the basis for sub-regional cooperation 23 – 26, 30 – 32, 37 – 38, 211 – 213; in the BCIM countries 152 – 155; and BCIM-EC as trade-led initiative 135 – 137; and BCIM growth area 50 – 51; and BCIM regional cooperation forum 184 – 186; and BCIM sub-regional economic corridor 286 – 287, 289 – 292; and geo-economic prospects 311 – 312; and IndiaChina relations 398 – 399; and institutional arrangements for BCIM 76 – 77, 80 – 81, 83 – 85, 88 – 93; and Myanmar 275 – 276; and new contexts of Asia’s regionalism 377 – 378, 381 – 383; and Northeast India 230 – 232, 231, 259 – 261; policy options for 158 – 160; potential for 155 – 158; and the road ahead for BCIM 68 – 69, 71 – 73; trade and 146 – 148; see also Northeast Industrial and Investment Promotion Policy (NEIIPP) Kolkata to Kunming (K2K) 125, 294, 318, 358, 376, 412; and BCIM-EC 170, 172, 175, 180, 185, 188, 191; and institutional arrangements for BCIM 85, 87, 95 Line of Actual Control (LAC) 362, 368, 444 Look East Policy 177, 179, 256 – 257, 293, 320n18; see also Act East Policy market forces 23, 77, 79, 93 – 95, 232 Maritime Silk Road (MSR) 174, 386, 423, 425, 430; BCIMEC as overland pathway to 439 – 440; OBOR and 436 – 439 Mekong Ganga Cooperation (MGC) 314, 342, 400

Mekong-India Economic Corridor (MIEC) 177, 261, 265, 295, 313, 366 Ministry of Development of North Eastern Region (DoNER) 55 – 56, 226 Motor Vehicle Agreement (MVA) 266, 268 – 269, 297, 367, 400 – 401 Myanmar: in BCIM 281 – 282; BCIM-EC gains of 440 – 442; challenges for development of 280 – 281; enthusiasm about BCIM-EC 442 – 443; and geo-politics 359 – 361; as key to India’s look east 250 – 255; potential for trade and investment in 157 – 158; reform in 273 – 274; trade between China and 139 – 140, 140; trade between Yunnan and 140 – 141, 141 National Democratic Alliance (NDA) 172, 183 National Socialist Council of Nagaland (NSCN) 244 – 245 network approach 342, 347 – 351 New Development Bank (NDB) 91, 195, 216, 394 new regionalism 1 – 2, 65, 233, 373 – 375, 387, 407 – 408; strategic gambits in 380 – 381, 384 Non-Lapsable Central Pool of Resources (NLCPR) 54 – 55 North American Free Trade Agreement (NAFTA) 79 – 80, 84, 86 North Eastern Council (NEC) 55, 176, 179 North Eastern Development Finance Corporation (NEDFi) 55 – 56, 176 Northeast Industrial and Investment Promotion Policy (NEIIPP) 55 – 56 Northeast Region (NER) of India 60 – 61; Act East Policy 236 – 240;

Index 455 BCIM Corridor as hope for 313 – 315; BCIM-EC and 176 – 180, 221 – 223, 263 – 266, 263, 264, 268 – 269; Central Government and development of 54 – 55; changing neighbours of 223 – 226; development agenda for 256 – 257; and economic regionalism 232 – 234; and IndiaChina trade 56 – 60, 57, 58, 59, 60; institutional mechanism in 267 – 268; and International Production Network 50 – 52, 52; and its market 226 – 232, 229, 231; Northeast Industrial and Investment Promotion Policy (NEIIPP) 55 – 56; overview of transportation network in 257 – 263, 258; and petroleum sector 53 – 54; potential areas of 49 – 50; potential for trade and investment in 157; significance in BCIM 48 – 49, 49; and small and medium enterprises (SME) sector 52 – 53; trade facilitation in 266 – 267; troubled periphery of 240 – 246 Nuclear Suppliers Group (NSG) 301, 362 One Belt One Road (OBOR) 301, 313, 411, 414 – 415, 418, 444; ambitious scope of 386 – 387; architecture of 422 – 423, 429 – 430; and BCIM-EC 209, 211, 213, 215 – 216, 422 – 423; and BCIM regional cooperation forum 171, 182, 184, 188, 190 – 191, 196n28; connectivity and 425; and India-China relations 394, 402 – 404; and the MSR 436 – 440; and new contexts of Asia’s regionalism 374, 383 – 384; and Russia 431 – 435; and SREB 430 – 431; see also Belt and Road Initiative (BRI) openness 15, 77, 80, 141, 174, 326

Pan Beibu Gulf (PBG) Economic Cooperation Zone 425 petroleum sector 49 – 50, 53 – 54, 58, 157, 254 poverty 230 – 231, 231, 280; see also poverty alleviation poverty alleviation 71, 336 – 337, 345, 388n5, 393; and BCIM regional cooperation forum 181, 189; and BCIM sub-regional economic corridor 291 – 292; and institutional arrangements for BCIM 76, 92; and Myanmar 273 – 274; and Northeast India 260, 263 pragmatic way 226, 339 – 341 production blocks (PB) 51 – 52, 52 production network 44, 84 – 85, 93 – 95, 366; see also International Production Network regionalism 373 – 375; in the Asian context 408 – 418; the demand and supply side of 79 – 81; and geographical economics of corridors 426 – 427; guiding principles of 84 – 85; institutions and 78 – 79; internal and centreperiphery differences on 82; strategic gambits in 380 – 386; see also new regionalism; subregionalism Russia 30 – 31, 174, 292, 410, 424, 428 – 435 sea lanes of communications (SLOC) 19,196n28, 439 – 440 security concerns 91, 94, 212, 237, 249, 414; and economic issues 66, 83 – 84 service links (SL) 51 – 52, 52 Shanghai Cooperation Organization (SCO) 16, 431, 433 Singapore-Johor-Riau (SIJORI) 46 – 47 Silk Road 101 – 102, 146, 174, 276, 295, 357; BBIN and

456 Index 367 – 368; Chinese sources on 101 – 104; early European accounts of 104 – 107; Indian perspectives on 107 – 112; see also Maritime Silk Road (MSR); One Belt One Road (OBOR); Silk Road Economic Belt (SREB) Silk Road Economic Belt (SREB) 19, 423, 425, 430 – 431 silk route see Silk Road small and medium enterprises (SME) sector 52 – 53, 182 South Asian Association for Regional Cooperation (SAARC) 146, 209, 266, 309, 385; and BCIM-EC 188, 194n20; and the geo-political dynamic 361, 365, 367; and institutional arrangements for BCIM 79, 81, 86, 91, 95, 338 – 339 South Asia Subregional Economic Cooperation (SASEC) 85, 91, 194n20, 297 – 298 Special Economic Zone (SEZ) 89, 265, 423 sub-regional cooperation: attitudes of countries towards 330 – 335, 332; basis for 23 – 24, 41; and development course of BCIM 323 – 325; and institutional platform for BCIM 322 – 323; policy options to improve 335 – 341; stages of development in 73 – 74; as strategy for spatial development 423 – 425; strengths and weaknesses of 325 – 330 sub-regionalism 64 – 67, 66; the BCIM sub-region 63 – 64; in Southeast Asia 67 – 68; as valuable level of analysis 342 – 344; see also sub-regional cooperation; specific sub-regions sustainability 343, 345 – 351

tourism 31 – 32, 68 – 69, 89 – 90, 115 – 116, 189 – 190, 398 – 399, 424 – 425 trade: BCIM-EC impact on 141 – 142; cooperation among BCIM 136 – 141; IndiaChina trade 56 – 60, 57 – 58, 59 – 60, 125 – 129, 126 – 128; and investment 146 – 148, 160 – 166, 161 – 166; policy options for 158 – 160; policy recommendations for 142 – 145; potential for 155 – 158; transit and facilitation of 266 – 267; and transportation costs 129 – 132, 130, 131; type of traded products 149 – 155, 150, 153, 154; volume and share of 148 – 149 Trans-Border Growth Areas (TBGA) 45 – 48 transportation 25 – 26, 276 – 278, 424 – 426; and BCIM growth area 46 – 47, 59 – 60; and BCIM regional cooperation forum 181 – 182, 186 – 187; costs of 129 – 132, 130, 131; in Northeast Region of India 257 – 263, 269; proposed corridor in BCIM-EC 293 – 300; trade facilitation and 266 – 267 Trilateral Highway (TH) 264 – 265 United Nations 30, 114, 358, 362 – 363, 424; United Nations Economic and Social Commission for Asia and the Pacific 91, 285, 298 Western Development Programme (WDP) 424 – 425 World Trade Organisation (WTO) 79, 305, 339, 375, 380, 407, 413; Trade Facilitation Agreement (TFA) 266