6 South, Southeast Asian countries sign free trade framework agreement

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Last updated at: (Beijing Time) Monday, February 09, 2004

6 South, Southeast Asian countries sign free trade framework agreement

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India, Myanmar, Sri Lanka,Thailand,Nepal and Bhutan on Sunday evening signed a framework agreement on establishing free trade zone in the region, a movement believed to signal progress of economic integration in South and Southeast Asian region.

Under the framework agreement, three developing countries of India, Sri Lanka and Thailand would cut import tariffs on productson a "fast track" list to zero no later than June 30, 2009, while Myanmar, Nepal and Bhutan as the "least developed country" were given two more years to realize zero tariffs over products from the same category in the year of 2011.

For the remaining products on a list of "normal products", the three developing countries were scheduled to realize zero tariff no later than the year of 2012 and the other three member countries were expected to achieve the goal in 2017.

The agreement, signed after Nepal and Bhutan on Sunday joining the mechanism of Bangladesh, India, Myanmar, Sri Lanka and Thailand Economic Cooperation (BIMST-EC), was believed to be the most concrete progress of economic cooperation of BIMST-EC, which has witnessed ongoing cooperation projects in various fields of trade and investment, technology, energy, transportation and communications, tourism and fisheries.

Formed in 1997, BIMST-EC was aimed to promote social economic cooperation in the region but the progress of member nations' economic cooperation lagged on due to the financial crisis prevalent in Southeast Asia when the mechanism was first founded, said permanent secretary to Thailand's Foreign Affairs Ministry Tej Bunnag at an earlier related senior official meeting.

According to statistics from the Confederation of Indian Industry (CII), the intra-regional trade volume of BIMST-EC was less than 5 billion US dollars, far more than fully exploring development potential of the region, which has a combined population of more than 1.3 billion consumers from South and Southeast Asia and an aggregate GDP of around 800 billion dollars.

Current trade between Thailand and other BIMST-EC countries valued only some 3 billion dollars, representing approximately 2.2percent of total Thai trade with the world, with a growth rate of 17.8 percent annually, according to materials issued by the Thai Commerce Ministry.

As to other BIMST-EC countries, there were hardly any trade linkages between Bangladesh and Myanmar and Bangladesh and Sri Lanka and so on. According to the CII statistics, bilateral trade between Bangladesh and Myanmar in 2001 only yielded a total of 18 million dollars and that between Myanmar and Sri Lanka was only 1 million dollars.

Even between Thailand and India, the two largest economies in BIMST-EC having signed free trade agreement in last October, the bilateral trade in 2001 stayed at the volume of 1 billion dollars,a humble output compared with that of the 8.6-billion-dollar tradevolume between Thailand and China, which also launched free trade with the kingdom in the agricultural sector last year.

Besides the weak linkages at bilateral trade levels among member countries, BIMST-EC also face with the problem that balanceof trade was tilted entirely in favor of the better developed ones.

The concern was reflected by Bangladesh's withdrawal of framework agreement, a decision declared one day before the scheduled signing ceremony took place on Sunday.

Bangladesh might still have concern over the issue of compensation for revenue loss due to the implementation of tariff cut, said the Thai foreign spokesman Sihasak Phuangketkeow when declaring the news on Saturday.

Based on the consideration, the framework agreement suggested that negotiation to establish the BIMST-EC free trade agreement should include possibility of establishing a mechanism for compensation of possible revenue losses that may occur to least developed countries due to tariff preferences.

Even so, critics doubted the plausibility of the free trade plan in the region, referring to the extremely low intra-region trade volume as a major concern.

"Rather than coming up with new, more ambitious goals, including free trade or economic liberalization, the members woulddo better to review...what has prevented them from making progressover the past several years and what each of them can do to move the grouping's agenda forward," said an editorial published by Thailand's English newspaper The Nation on Sunday.

Despite of the pessimistic voice from the media, politicians ofBIMST-EC countries remained confident of the prospect of the Southand Southeast Asian cooperation mechanism.

Tej noted that the mechanism gained new dynamism in the recent two years when countries in South Asia have adopted a "Look East" policy to explore Southeast Asian market.

Taking the newly-inked free trade agreement between Thailand and India as an example, the Thai diplomat said the tariff-cut agreement covering some 84 products in the first stage was expected to double bilateral trade volume this year.

In earlier interviews with media, Indian Prime Minister Shri Atal Bihari Vajpayee indicated that free trade negotiation with Thailand and other Southeast Asian countries might be more successful than South Asia FTA and the South Asia Preferential Trading Arrangement, which haven't seen real progress solely because of the unstable South Asian political situation.

Vajpayee said that India's trade with ASEAN increased from 3.5 billion dollars in 1991 to 12.5 billion dollars in 2002 and was expected to exceed 15 billion dollars in the next two years.

In a bid to avoid inane plans and pledges, a joint statement issued at the end of Sunday's BIMST-EC ministerial meeting affirmed the cooperation priority as the following six areas: trade and investment, technology, transport and communication, tourism, energy and fisheries.

A couple of cooperation projects in the above sectors have alsobeen recommended in the statement and the organization also vowed to hold a postponed summit late this year in Bangkok.

In a word, the BIMST-EC developing process might be just as what Thai Foreign Minister Surakiat Sathirathai said in his speechat the ministerial meeting: "We are therefore on the right track, but we still need to do more."

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