June 9, 2015 Sujeev Shakya

Building Blocs

When I wrote an article (‘Look East,’ February 18, 2014) on the potential of East South Asia, I never expected it to reflect reality within the next 16 months. The election of Narendra Modi as the prime minister of  India with a thumping majority and the priority he placed on India’s neighbors has made this possible.

In a recent two-day visit to Bangladesh, Modi took a risk and settled a 45-year-old dispute over territories in an attempt to bury past differences to focus on future synergies. His regional tour began in Bhutan, which was the first country he visited after assuming power in May 2014. Then, he visited Nepal in August 2014, making reference to quelling doubts on certain sensitive issues relating to Nepal’s pseudo-nationalism and signing a host of economic agreements. He repeated this feat again in Sri Lanka in March 2015 and now, in Bangladesh, he announced a series of agreements on investment and connectivity.

Interestingly, the Indian prime minister had the Chief Minister of West Bengal, Mamata Banerjee, a political foe, with him in Bangladesh when the historic agreements were signed.  Until now, India’s engagement with its past has been Delhi-centric, even though key bilateral issues with other countries, like Bangladesh, is linked to the Indian states that border other countries. Post 1984, since the rise of coalition and regional parties in India, many a time, the federal and state governments were run by parties at loggerheads, making regional engagement a complete non-agenda. The future of India’s bilateral relationships with other countries in the region will now depend on how Gangtok, Guwahati, and Kolkata engage with Thimpu, or how Dehradun, Kolkata, Lucknow, and Patna engage with Kathmandu, or how Agartala, Guwahati, and Kolkata engage with Dhaka.

Slow progress

The images of a soap-opera like scene at the 18th Saarc guthi meeting in November 2014—when the world waited for the Indian prime minister to shake hands with his Pakistani counterpart—are still fresh. Therefore, many continue to wonder what a regional cooperation platform can do when the focus is constantly on whether the leaders of two countries shook hands or spoke to each other or not? When can the potential of a common currency, common market, or a common connectivity platform be unleashed? Even 30 years after its formation, Saarc continues to limp from one conference to another, pretty much like how many organisations move from one Annual General Meeting to another.

Still, in January 2015, the second meeting of the Joint Working Group on sub-regional cooperation discussed water resource management, energy, connectivity, and transit. This could be a good start, as bilateral arrangements on these issues already exist between India and Bangladesh and Bhutan and Nepal separately.

Further, the opening of the roads that pass through Bangladesh and connect Indian cities will be a landmark event for the two countries. A trip from Kolkata to Agartala in Tripura will be cut short from 1,650 kilometres to 500 kilometres and will also open up new avenues to access markets and services. With better road infrastructure in the region, along with a rise in the middle-class that can afford private vehicles, there could be a boom in regional tourism. Just prior to the quake in Nepal, there had been a tremendous rise in the number of Indian license plate vehicles in Nepal and Nepali licence plate vehicles in the border towns of India.

Market for electricity

The key to the growth of this region is energy and grid connectivity between the four countries—Bangladesh, Bhutan, India, and Nepal. This could help ensure an electricity market that can push economic growth. Bhutan, which is a major producer of hydropower, faces the challenge of having only a single bilateral buyer, India. A regional market could ensure that Bhutan has the option of selling its power to Bangladesh or Nepal too. Water continues to play a major role

in integrating the region, as the same rivers flow through different countries. If the Teesta issue gets resolved, it will surely send a powerful message across the region on how India perceives this regional economic bloc.

A new bloc

Economic integration will also depend on the extent to which countries are willing to open up. The fall of the Soviet Union gave rise to many sub-regional groups in Europe. A regional block consisting of Bangladesh, Bhutan, India, and Nepal (BBIN) could be an important one, as Myanmar opens up and provides an opportunity to engage with South East Asian economies.

In Africa, while the discourse on the African Union continues, West African countries and East African countries are creating their own sub-regional groups to foster connectivity and push economic growth. Uganda, Kenya, and Rwanda have launched an East Africa Tourist Visa to facilitate tourism. Similarly, eight West African countries have a currency union that uses the Western African CFA Franc.

In BBIN, Bhutan can have an equal parity with the Indian Rupee and Nepal has a fixed exchange rate with India, which has not changed in the past 25 years. Bangladesh’s currency also fluctuates more in line with the Indian rupee. So rather than waiting for a Saarc monetary union, these four countries could start with a common currency. If India makes its currency completely convertible, it makes more sense to have a common currency rather than peg with a fully-convertible Indian rupee.

As Nepal seeks to rebuild post the earthquake, it must also look into how it can work towards leveraging sub-regional blocs rather than wait for the next Saarc Summit.

Leave a Reply

Your email address will not be published. Required fields are marked *