BIMSTEC Trade Facilitation Strategic Framework 2030

BIMSTEC TRADE FACILITATION STRATEGIC FRAMEWORK 2030

DECEMBER 2022

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ISBN 978-92-9269-904-8 (print); 978-92-9269-905-5 electronic); 978-92-9269-906-2 (ebook)

Publication Stock No. TCS220542-2

DOI: http://dx.doi.org/10.22617/TCS220542-2

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Notes:

In this publication, $ refers to United States dollars.

The main work for the preparation of this report was undertaken in 2020 and 2021, while trade and trade facilitation activities were substantially curtailed in the BIMSTEC countries due to the pandemic. Periodic updates were made in 2022 based on inputs from the BIMSTEC member states. However, since updated data was not consistently available, it is recognized that some sections may not necessarily reflect the most current status of trade facilitation in the member states.

Cover design by Edith Creus.

CONTENTS

TABLES, FIGURES, AND BOX

FOREWORD

This year marks the 25th anniversary of the establishment of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), which was established on 6 June 1997 with the signing of the Bangkok Declaration. The founding leaders of BIMSTEC envisioned the promotion of free trade and increased cross-border investment which led to underscoring trade and investment as one of the key sectors of cooperation.

One of the primary objectives of the establishment of BIMSTEC was to promote intra-regional trade and investment in the Bay of Bengal region. Remaining faithful to this objective, BIMSTEC concluded the Framework Agreement on the BIMSTEC Free Trade Area in 2004. The Framework Agreement encouraged establishment of effective trade and investment facilitating measures, including simplification of customs procedures, and development of mutual recognition arrangements, among others. The Permanent Secretariat of BIMSTEC recognizes the importance of developing a long-term strategic framework for the sector identifying the specific requirements to enhance trade facilitation activities in the region under the framework of BIMSTEC.

The BIMSTEC Trade Facilitation Strategic Framework 2030, which has been conducted by the Asian Development Bank (ADB), is an important endeavor to advance trade facilitation among member states. It highlights the existing challenges of free trade among member states and identifies strategies to combat the challenges to achieve specific goals. This Strategic Framework suggests a structured pathway approach to enhancing the regional trade facilitation environment over the coming decade.

One of the core challenges to creating a regional trade facilitation framework has been the difference in members’ conditions and their capacities to foster trade facilitation. While some member states have significantly developed their trade facilitation arrangement, other member states are yet to perform many activities required. Keeping this divergence and geographic limitations, the BIMSTEC Trade Facilitation Strategic Framework 2030 provides general recommendations for the region at large.

This framework has precisely outlined various soft infrastructure, hard infrastructure, and other cooperation, and capacity-building strategies. It has also identified that the implementation of the BIMSTEC Trade Facilitation Strategy will be guided by seven principles namely, (i) country ownership, (ii) results-orientation combined with pragmatism, (iii) flexibility and responsiveness to country needs, (iv) reform and modernization, (v) active participation and involvement of the private sector, (iv)partnerships with development partners, and (vii) mutual cooperation. The study report also recommends that the implementation of the Trade Facilitation Strategy would be funded from the internal resources of the BIMSTEC member states, as well as from the external resources of bilateral and multilateral development partners of the member states.

With the publication of the BIMSTEC Trade Facilitation Strategic Framework 2030, I wish to convey my warm thanks to ADB for its dedication and support in successfully conducting this study. I also thank all BIMSTEC member states, in particular Bangladesh, the lead country for trade, investment and development, for their support and cooperation in successfully completing the BIMSTEC Trade Facilitation Strategic Framework 2030.

I strongly believe that the BIMSTEC Trade Facilitation Strategic Framework 2030 will be an effective guiding tool for all member states in achieving their goals towards increased trade facilitation in the region.

Tenzin Lekphell

Secretary General

BIMSTEC

PREFACE

Trade has been a key area of cooperation since the inception of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), and expanding trade has been a cornerstone of BIMSTEC’s efforts to deepen economic cooperation among member states. To expand trade, BIMSTEC is developing a free trade area and supporting trade facilitation initiatives aimed at eliminating or minimizing nontariff barriers.

Considerable progress on trade facilitation has been made across the region in recent years, but national performances in this area remain below most developed countries and market leaders. The current state of trade facilitation and the presence and impact of the nontariff barriers also varies significantly between BIMSTEC member states. These differences need to be taken into account in a common framework approach, which applies to all member states.

Hence, the BIMSTEC Trade Facilitation Strategic Framework 2030 has been developed to tackle nontariff barriers by providing a structured pathway to enhance the BIMSTEC region’s trade facilitation environment. It is based on a standard strategic planning structure that sets out BIMSTEC’s trade facilitation vision, how this is to be achieved, methods to be adopted, and the goals to be met through investment in hard and soft infrastructure, capacity building, and cooperation. While recognizing the trade facilitation arrangements that BIMSTEC member states have signed with other regional groupings and initiatives, this strategic framework responds to the specific trade facilitation needs of BIMSTEC member states and the supportive role it can play in achieving the goal of setting up a free trade area. Its comprehensive scope combines strategic and action planning to help enable its early implementation.

The intraregional and external trade of BIMSTEC member states has been disrupted by COVID-19. Thus, progress in implementing more advanced trade facilitation techniques has been severely constrained. That said, the temporary downturn in trade volume is also an opportunity—a window of change, so to speak—to embrace new approaches and technologies as the economies of BIMSTEC member states recover from the pandemic and discussions make progress on creating a free trade area.

Although BIMSTEC member states are facing challenging economic times, the resumption of trade growth will be critical for a return to stability. And because of this, increasing trade and enhancing trade facilitation are BIMSTEC priorities. To this end, the strategic framework shows how improvements in trade facilitation processes and procedures can be strengthened to support the implementation of BIMSTEC free trade area and ensure the region remains competitive in both regional and global trade.

ADB is pleased to support BIMSTEC in preparing this important report. I would like to acknowledge the extensive efforts of the study team from the Regional Cooperation and Operations Coordination Division, South Asia Department. I would also like to thank officials in the BIMSTEC Secretariat and member states, staff from ADB resident missions, the Southeast Asia Department, the Department of Communications, and the Regional Cooperation and Integration Thematic Group, and other stakeholders for providing substantial comments to improve the report. All their contributions are gratefully acknowledged.

Kenichi Yokoyama

Director General

South Asia Department

Asian Development Bank

ABBREVIATIONS

EXECUTIVE SUMMARY

Introduction and Background

One of the core functions of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is promoting free trade and increasing cross-border investments. Trade was identified as one of the six sectors of BIMSTEC cooperation at the grouping’s inception in 1997 in recognition of the important role trade can play in national and regional economic growth. The expansion of intraregional trade between member states can become the cornerstone of their economic cooperation.

BIMSTEC has adopted a twin approach in tackling regional trade constraints. The BIMSTEC Free Trade Area initiative has been specifically planned to help eliminate or minimize the tariff barriers that adversely affect intraregional trade, whereas the parallel trade facilitation program is designed to tackle the nontariff barriers (NTBs) affecting trade in general. The BIMSTEC Trade Facilitation Strategic Framework 2030 provides a structured pathway approach for enhancing the environment for trade facilitation until 2030. The main constraints to improving trade facilitation have been the NTBs that have resulted in higher costs for the trading communities in the member states.

The trade facilitation environment differs significantly among BIMSTEC member countries. Various international trade facilitation performance indicators suggest India and Thailand have the most advanced facilitation environment in the region, followed by Bangladesh, Myanmar, and Sri Lanka. Landlocked Bhutan and Nepal are seen as having the least advanced trade facilitation environment at this stage. These differences need to be acknowledged within a common framework approach, whereby proposed strategies apply to all member states to a greater or lesser extent, but with national variations and situations being also taken into account. Despite significant progress in trade facilitation being made in the region over the last decade, national trade facilitation environments remain substantially below those of most developed countries and the market leaders in adjacent regions.

The coronavirus disease (COVID-19) has had a significant impact on the BIMSTEC region. The pandemic has resulted in a temporary downturn in trade and an increased reliance on automated systems (process distancing) for customs clearances in some member states. Although the pandemic is expected to continue affecting the Strategic Framework’s implementation in the short-to medium-term, it also offers a window of change opportunity to embrace new approaches and technologies to enhance performance in an evolving trade environment.

Expanding the Scope of Trade Facilitation

The most common definition of trade facilitation is the streamlining of customs and border procedures to enable imports and exports to flow more rapidly across borders. Trade facilitation in the BIMSTEC region under the various initiatives adopted by international financial institutions (IFIs) and member state governments since 2000 has tended to concentrate on modernizing border infrastructure, advancing automated customs processing systems, and establishing customs cooperation mechanisms.

Because of the successful implementation of trade facilitation in these three areas in recent years, these institutions have gradually broadened their assistance to include other border agencies, including those responsible for sanitary, phytosanitary, and trading standards. They have also addressed the need for more so-called behind-the-border reforms in response to the overall need to reduce trade costs. This suggests a gradual change of emphasis from trade facilitation predominantly being driven by the needs of border authorities to one that is more orientated toward satisfying the growing demands of the wider trading community.

The Asia-Pacific Economic Cooperation has adopted an even broader interpretation of trade facilitation, called the new generation. This approach reinforces the change from the physical movement of goods through borders to the demands created by changes in the logistics environment, whereby border transit merely represents an individual link within the overall international logistics chain. This more advanced interpretation is focused on improving the time, cost, and reliability of trade facilitation activities.

Against this backdrop, the scope of BIMSTEC trade facilitation needs to be broader than its traditional approach when creating a strategic framework for the future. Core challenges that require addressing include improved compliance, the needs of both border control agencies and the wider trading community (stakeholders) regarding investments in hard and soft infrastructure, enhanced processing approaches to be able to increase the use of automated technologies, additional behind-the-border facilities and procedures, and the enabling of member states to use more advanced trading and logistical applications.

Free Trade Agreements

In planning framework strategies to tackle NTBs, it is important to be mindful of parallel actions to address tariff barriers. These tariff restraints principally affect trade already taking place within the region. The