Bimstec will mark 25 years of its establishment next year, but it is yet to establish a free trade area (FTA) that can boost intra-regional trade by removing all tariff and para tariff barriers.
The organisation has hosted 21 rounds of meetings to accelerate regional cooperation in 14 areas, but most of the discussions have remained as unfinished agenda.
Experts and economists at a panel discussion on Thursday recommended reducing trade barriers and geopolitical stress, and establishing proper connectivity to boost trade in goods and services in the region.
The South Asian Network on Economic Modelling (Sanem) virtually organised the event, titled "Global Trends and Bay of Bengal Integration", on Thursday, the last day of the two-day Bay of Bengal regional trade and connectivity capacity building programme.
Presenting a paper on regional cooperation and integration in the Covid-19 era, and on going forward, Dr Sanjay Kathuria, former chief economist of the World Bank, said the clout of Bimstec has been growing globally.
Intra-regional trade in the region increased to $45.9 billion in 2019, which was $4.8 billion in 2000. The volume increased nearly 10-fold in two decades. The share of intra-regional trade compared to global trade increased to 7.2% from 3.8%.
Regional trade does not only depend on FTA but also on insurmountable political issues, especially between larger economies, he pointed out.
The trend of global trade is changing rapidly because of Brexit, the US-China trade war, Australia-China spat, India's attempt to decouple from China, "China plus one" approach of Japan and other countries, Dr Kathuria said.
However, he noted that while Vietnam and some other countries have established free trade areas, the Bimstec FTA has not been implemented even in 17 years.
Regional FTA will not be enough to enhance value chains; a reduction of tariff and para tariff barriers and regional connectivity are needed to increase the trade volume, the former World Bank chief economist added.
Tariff rates are very high in South Asia. Nepal imposed a 20.2% tariff on regional products, while the rate is 16.4% in Sri Lanka, 12.2% in Bangladesh, and 10.2% in India. The rate is only 3.7% in Myanmar.
"Despite years of setting goalposts, connectivity between Thailand and Myanmar, on the one hand, and India, Nepal, Bhutan and Bangladesh, on the other, remains poor. The priorities for the region are a completion of the Bimstec coastal shipping agreement, Bimstec connectivity master plan and expediting the India-Myanmar-Thailand Corridor, which will enable overland connectivity," he said.
Connectivity between the eastern part of Bimstec with the western part is very poor, he pointed out.
"Bangladesh-India connectivity progress shows what can be achieved: coastal shipping agreement 2015; recognition of BSTI certification for a list of food products; significant progress in transit arrangements," he added.
Digitising trade processing is highly required to boost trade in the region and Covid-19 has helped in that field, he said, stressing an implementation of paperless trade agreements to minimise gaps in digitisation.
The economist identified pharmaceuticals, automobiles, plastics, garments, rubber and digitally-enabled services, such as health, education, as potential areas to boost trade in the region.
Sumith Nakandala, director of the Pathfinder Foundation of Sri Lanka, said, "Some 21 rounds of trade negotiation meetings were held. But we do not see the implementation of Bimstec goals. Apart from goods trade, services trade, customs cooperation and investment chapters have remained as unfinished agenda."
Dr Indrajit Coomaraswamy, distinguished fellow at the Pathfinder Foundation, said in terms of macroeconomic stress of Covid-19 and its recovery, unprecedented policies have been taken by central banks and governments in the region.
CMSMEs, women and children in education have been hit hardest by Covid-19, but they did not receive the required support to face the drastic impacts of the pandemic.
Dr Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, said Covid-19 has impacted all types of connectivity, from transport to investment connectivity to logistics to trade facilitation.
Imports of goods in the region dropped by 19% in 2020, while exports of goods dropped by 15%.
Regional service trade was disrupted to a great extent, he added.
The absence of synchronisation between the demand side and supply side increased difficulties among Bimstec countries, Dr Mustafizur Rahman said.
The economist said the rising trend of fuel price increased transport cost. Regional trade will help reduce transport cost.
Dr Selim Raihan, an economics professor at the University of Dhaka and executive director of Sanem, moderated the event.