North Eastern region's cooperation in BCIM economic corridor

Marchang Reimeingam *

Map of North East region, India :: Pix - TSE

North Eastern Region's cooperation and integration in Bangladesh-China-India-Myanmar (BCIM) Economic Corridor for cooperation of physical connectivity, trade etc is inevitable as the corridor passes through the region although limited to Manipur and Assam. The corridor is still on multilateral discussion for regional cooperation and integration. It connects Kunming the capital of the Yunnan province in China, Mandalay and Lashio in Myanmar, Manipur and Silchar (Assam) in North East India, Sylhet and Dhaka in Bangladesh and finally Kolkata in India for cooperation of physical connectivity, trade, environmentally sustainable development and people to people contacts.

Centre for Environment Social and Policy Research studies highlighted that BCIM has the potential to generate enormous economic activities to benefit the economy of North Eastern Region (NER). Despite of the region's endowment with huge economic base the region is often described as economically backward areas in terms of infrastructure such as industries, roads, power, and communication systems and so on.

The 1991 economic reforms in India created severe economic contraction in India as well as in the region. An average economic growth rate of NER from the 1980s till 2012/13 is about five percent that was below the national level of 5.89 percent. The region's economy was growing at modest rate with a CAGR of 6.49 percent during 2007/08-2012/13. The region's economy is increasingly driven by the non-agricultural sectors especially service sector.

In 2012-13 about 55 percent of the NER's income was contributed from service sector. Income from transport etc, trade etc, public administration and other services formed the main source of service sector income. BCIM economic corridor would incite the impetus to further generate more employment and income in service sector. Nevertheless, agriculture continues to occupy a significant share in income contribution and most importantly in employment. NER economy is often described as underdeveloped agrarian economy, weak industrial sectors and inflated service sectors.

With the proposed BCIM economic corridor the region's surplus rural agricultural labours are expected to migrate towards industrial or urban areas to participate in building the economic corridor infrastructures. Inadequate investment in the growth of infrastructure is held responsible for the sluggish growth of industries in the region. Income from service sector increases with an increase participation of private players in the market and improve in productivity due to improvement in information, communication and technology. Moreover, it increases despite of the downsizing of the organised sector employment in the government machinery in the post liberalisation, privatisation and globalisation.

At this juncture establishment of BCIM economic corridor would likely intervene substantially in industrial development that would possibly reduce India's trade deficit with China. China is India's largest trading partner and yet India has been facing a trade deficit with China due to China's tariff liberalization. In 2011-12, India's trade with China deficit crosses over 12 billion USD. India and China have a limited cooperation in terms of trade relation.

India's amicable trade relation with China will ultimately be benefited to the neighbouring countries especially Myanmar and Bangladesh which forms the BCIM network. India's and China's economic dynamism, potential market, geographical proximity and bilateral trade relation – yet political rivalry – signify enormous trade potential between the two countries. China's trade with India is largely manufacturing goods; similar is the case for India. China's economy is driven by manufacturing sector while India's economy is driven by service sector.

BCIM economic corridor is a process of market expansion mainly by China. It is envisaged to strengthen and improve the bilateral trade between India and China. India is likely to be reluctant in leading the BCIM economic cooperation as India-China trade deficit surged, keeping aside India's Sino-phobia for territorial disputes. The proposed BCIM from Kunming (China) to Kolkata (India) will play a key role in the economic belt i.e. Silk road. Silk Road economic belt attempts to promote integration and build China's relation with neighbouring countries.

There is a need to build an appropriate trade policy measures (such as tariff and non-tariff), political environment (border disputes) for economic cooperation as well as provide information to the people of NER on economic opportunities through BCIM economic corridor. BCIM is likely to address human security issues such as drugs and weapon smuggling, insurgency issues etc with multilateral discussion. The issues of border, insurgency and financing the infrastructure development need to be concerted multilaterally.

NER in particular could tap the economic potential from BCIM in general and from China in particular by creating NER a centre of development activity rather than transit points. NER, which have unstable political situation, insurgency problems, poor industrialized economy among others, could mutually benefit from China's Yunnan provinces which have stable political condition, expertise in manufacturing goods, larger scale of economy and even controlled wage structure. NER have the potential and advantages in tourism, service sectors such as IT and health care or in non-timber forest produces. Moreover, BCIM is envisaging seeking for cooperation in energy sector for hydel and mineral resources from NER.

The corridor passes through NER but limited to Manipur and Assam that necessitates to build a proper connectivity with the rest of the NE states of India for fuller cooperation of physical connectivity, trade, environmentally sustainable development and people to people contacts between NER and the rest of BCIM region. The economies of NER, although considerably weaker than Yunnan, are very keen to open up with BCIM economies. It's because BCIM economic cooperation has an immense potential to generate tremendous economic activities to benefit NER, unlike the existing others multilateral economic corridors or Look East Policy that are hardly implemented and hardly involved by NER, provided NER is actively participated considering the region's proximity with the bigger economies like Yunnan.

However, a complementary trade, cooperation or interaction is envisaged among the BCIM economies for successful implementation of BCIMEC.

It requires strengthening of industries by establishing Special Economic Zones (SEZs) in NER. As of July 2015, NER has three (one in Manipur and two in Nagaland) approved SEZs out of 416 SEZs in India. During the same period, 202 SEZs were operational however none of the three SEZs in NER that are approved and notified as SEZs were operational (see details at http://sezindia.nic.in). It shows the apathy of India to invest and develop the region despite of NER's rich natural resources endowment. It is also possible that industrial investors and developers are averting risk from insurgency problems, poor transportation system, narrow market etc. in establishing SEZ in the region.

The success of establishing the corridor requires ensuring effective building and development of infrastructure by each BCIMEC participating country within their respective geographical boundary; ensuring local participation and decision-making power in the establishment, development and operation of the corridor; and securing the corridor by solving the undesirable elements like strike/bandh, road blockage or insurgencies that are common in NER through multilateral cooperation and effort. Establishment of amicable political relationship through political consensus is critical for enduring economic cooperation.

For NER in particular, it is crucial to ensure a "binary" infrastructural connectivity and participation as an instrument of all NE states in BCIMEC to benefit NER as a whole. NER should not be a mere transit points in the corridor. It necessitates a liberalized trade policy measures including both tariff and non-tariff by establishing a regional, rather than national, Free Trade Agreement. Hence, the agglomeration economies depending on the nature and extent of inter-regional participation and competition through trade liberalization would boost economic growth besides international exposure, peace and prosperity such as in NER.