Dr Atiur Rahman :
We are living in an uncertain global political economy scenario wherein benefits of trade and liberalisation are being increasingly questioned by some people. Others, of course, value the positive impact of the integration of trade and investment.
Also, persons of different ethnicities and culture are viewed with suspicion. Fortunately, countries in the Bay of Bengal region share a common history and culture, and thus, do not face much of those challenges.
However, we are faced with our unique set of issues. Certainly we have been making progress in our macro-economic transformation. Yet, we still have persistent challenges like poverty, income inequality, under-employment. Also, there are significant infrastructure constraints and regulatory bottlenecks. While the challenges vary in different parts of the region, we should not leave anyone behind. This is what I mean shared prosperity.
Therefore, it is time for countries in this region to invoke their glorious past and design strategies to collectively deal with these challenges. This is the only way to go forward, and none of us can afford to race ahead leaving others behind. It must be a positive-sum game of sharing prosperity in future.This again cannot be a fast hundred metres sprint. It has to be a steady long journey like a caravan.
In this context, let me say that we have begun to realise the challenges and opportunities in this region and initiatives for regional cooperation, like the BBIN (Bangladesh, Bhutan, India and Nepal) initiative and the BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation), which are already in place.
These initiatives are focused on regional cooperation in areas like water resources management, power, transport, infrastructure, investment, technology, tourism, human resource development, among others. There are signs that BIMSTEC and ASEAN are coming closer in respect to trade and economic cooperation, with expected positive spill-over effects on other areas of cooperation leading to greater peace, security (including maritime security) and stability in the Indo-Pacific region. However, much more needs to be done.
This brings me to the themes of this Kolkata Summit. Over the course of two days, we will discuss strategies and mechanisms to deepen cooperation in the Bay of Bengal region in particular and the Indo-Pacific region in general, which will come out with concrete policy and practice recommendations to push to intra- and inter-regional trade, investment, knowledge-sharing and people-to-people connectivity.
As you know, over the next two days we will discuss trade and investment opportunities in the Bay of Bengal with particular focus on maritime and energy connectivity. Let me quickly touch upon each of these.
Talking about energy connectivity, we have to make note of the fact that the electricity demand in the BBIN region is growing at an exponential rate as the region is experiencing one of the fastest economic growth trajectory. We are also aware that the benefits of enhanced and well-coordinated regional electricity trade in BBIN are much larger than the efforts needed.
For instance,if the hydropower capacity in Bhutan and Nepal be developed effectively, then the same can be easily exported to the other countries in the BBIN region. With a total of 1,425.9 million population in India and Bangladesh taken together, important market is available for the electricity imported from Nepal and Bhutan. I believe there is a potential to create regional energy exchange following the Nord Pool market example. I will speak more on this theme during the Track 2 discussions later in the day today.
In case of maritime connectivity and inland waterways, today, seaborne and riverine trade and investment connectivity between South and Southeast Asia is lagging well behind world standards. Overcoming current constraints would add up to significant opportunities. Streamlining port procedures, rationalizing cross-border river traffic, and harmonizing regulations can create jobs, boost incomes, reduce migration, and help foster stability.
Therefore, there is tremendous potential for increasing trade between South and Southeast Asia, which would provide substantial economic benefits for both regions. Although total FDI flows into the BIMSTEC countries have increased from $8 billion in 2000 to $46 billion in 2013, after reaching a peak of $58 billion in 2008, intra-BIMSTEC investment remains low. Lack of connectivity, which may be a central factor in this outcome, also discourages investment by investors from outside the region.
Let me also point out that while these subjects are key to move towards greater integration in the Bay of Bengal region, there is an underlying theme which cuts across all these areas. That is financial connectivity, without which trade and investment connectivity cannot flourish and be effective for generating prosperity. Money certainly matters.
As you are aware, financial connectivity comprises access to finance and investment opportunities by all sections of the society. For example, it includes designing models to facilitate investment in green energy generation as well as transfer of subsidies to poor for make such energy affordable.
It is thus essential to ensure growth and prosperity within and across generations, thus facilitating truly inclusive and sustainable growth. Here in comes the pro-active role of the government and the regulators. I am aware of the potential role of a regulator – that is the central bank and its developmental and facilitating role must be fully harnessed.
In short, financial connectivity is both the enabler as well as the result of other forms of connectivity. Greater the exchange of ideas, knowledge, and people, greater will be exchange of capital ensuring its access and affordability. It is also a great equalizer, as access to affordable finance has several positive spin-offs. It enables access to quality education, health, etc., thus providing equal opportunity for human development and growth.
Like in other themes of connectivity, we are witnessing lot of innovation in this region in the area of financial connectivity. For instance, India has built an impressive digital payments infrastructure. Bhutan has built expertise on sustainable financing of infrastructure projects and public interest partnership. Bangladesh has pioneered a model to enable financial access to last mile and created social safety nets. Also, the Central Bank of Bangladesh has rolled out a medium to long-term green transformation fund to help textile and leather sectors to become environment-friendly. Relevant entrepreneurs have welcomed this pro-active role of conservative regulator called the central bank. Other countries can take lessons from such a facilitating role of central banking.
Therefore, in order to efficiently and effectively exploit the opportunities available in the Bay of Bengal region, there is a need to the build a common strategy to work towards sustainable economic growth for the benefit of poor and future generations. This is not just a concept. It must be a reality. I believe it is for this we must stay together and build a common platform for engagement.
To ensure sustainable and inclusive growth we must think beyond the box. We should develop common infrastructure in terms of energy, transportation and communication. Some countries in the Bay of Bengal region have already witnessed the benefits that project-based cooperation can bring to their economies and their people. They are also part of the Greater Mekong Sub-region, which is one of the most successful examples of regional cooperation.
Thus, initiatives like this Kolkata Summit are crucial to exchange evidence, ideas and thoughts on regional cooperation and get on all stakeholders on board to develop a common strategy. I am happy to see the presence of diverse stakeholders in this meeting – both policy as well as business community.
My recommendation will be to adopt a gradual yet time bound approach to enhance regional connectivity with the implementation of specific projects where it is not necessary that all member countries of the BBIN or the BIMSTEC region need to be always on board. Let there be bilateral, trilateral as well as plurilateral cooperation initiatives.
We could start by exchanging ideas on small projects, develop and execute them with stakeholder support, gain experience and then expand and deepen on complicated areas of regional cooperation. Let us experiment, learn and replicate.
There is also a need to customise the regional cooperation strategy in the Bay of Bengal region according to a country’s context and priorities and work within those boundaries. Development of a stakeholder alliance to document and share different country practices and building a common platform over time are necessary to design and execute this strategy, which is essential to achieve the goal of shared prosperity.
Here comes the role of the BIMSTEC Secretariat and its members who should put more political capital and other resources to make it an effective institution for regional cooperation.
(Dr Atiur Rahman is Professor, Dhaka University, Bangladesh; Founder Chairman, Unnayan Shamannay, Dhaka and Former Governor, Central Bank of Bangladesh.)
