CII Multilateral Newsletter, May 2014

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The BCIM (Bangladesh, China, India and Myanmar) corridor is perceived to have a potential to generate substantive economic benefits in the area of trade, investment, energy, transport and tourism. The corridor offers a wide range of opportunities for growth and development in the region. The BCIM forum is a long term mechanism aiming to enhance the economic cooperation in business communities and enterprises of the four BCIM regions. It is therefore vital to build a platform to realize business exchanges and help enterprises to make closer communication exchanges. The May 2014 edition of the Multilateral Newsletter explores the opportunities and the prospective areas which can act as a catalyst leading to positive growth in terms of trade and investment in the BCIM region. In addition, the newsletter gives an update of the major highlights from the Asian Development Bank, The World Bank, International Trade Center, World Trade Organization and groupings like B20 and OECD.
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  • 1. 1Multilateral Newsletter this IssueInside Focus Story BCIM-An Emerging Opportunity............................................2 ADB Highlights: 47th Annual Meeting - Rethinking Asia's Challenges at the Crossroads of the Silk Road........................5 The World bank New World Bank Group Strategy to Help India Achieve Its Vision...................................................................................6 Time for South Asia to Focus Attention on Domestic Risks: South Asia Economic Focus Report.........................................7 India displaces Japan to become third-largest world economy in terms of PPP:World Bank..................................................8 May 2014, Volume 2, Issue 5 Message from Mr Chandrajit Banerjee, Director General, CII India has become an important partner of the Southeast and East Asian countries since the inception of India’s “Look East” Policy in early 1990s. An important component of the policy, the BCIM (Bangladesh, China, India and Myanmar) Forum has been extensively working with the main focus on facilitating connectivity and trade in and through the countries in the region. The BCIM forum while focusing on economic cooperation, promotes the social and development cause of the bordering areas. While China and India have achieved remarkable economic growth in the last two decades, Western China, North - Eastern India, Myanmar and the adjoining area of Bangladesh, have not experienced the fruits of increasingly globalized economy. The regions under the grouping have a huge potential and there lies a strong need to explore and use the opportunities to boost up the growth of the region. The May Edition of the Multilateral Newsletter explores the opportunities and the prospective areas which can act as catalysts leading to a positive growth in terms of trade and investment in the BCIM region, in addition to major highlights from Asian development Bank, World Bank, International Trade Centre, World Trade organization and groupings like the B20 and OECD. Chandrajit Banerjee Multilateral World Trade Organization The trend towards increased regionalism could be reversed, newWTO research suggests....................................................9 International Trade Center Adaptation and knowledge sharing key to SME competitiveness.............................................................9 B 20 B20 Coalition Highlights Key Business Concerns......................10 OECD Global economy strengthening but significant risks remain: OECD Economic Outlook.......................................................11 NEWSLETTER
  • 2. 2 Multilateral Newsletter Focus Story BCIM-An Emerging Opportunity Over recent decades-the enunciation of India’s ‘Look East Policy’ from the early 1990s, positive changes in the regional geo-political environment and growing economic engagement with the ASEAN countries has put the spotlight on the BCIM (Bangladesh, China, India and Myanmar) grouping The BCIM cooperation includes the North-East India, Bangladesh, Myanmar and South West of China, the zone is perceived to have a potential to generate substantive economic benefits in the areas of trade, investment, energy, transport and tourism. The BCIM corridor covers 1.65 million square kilometers encompassing an estimated 440 million people in the regions of Yunnan, Bangladesh, Myanmar, West Bengal, Bihar and states in Northern India. The economic dynamism of India and China also offer wide range of opportunities for growth and development in the region. A long term cooperation mechanism aims to enhance the economic cooperation in business communities and enterprises of four BCIM countries, and to build a platform to realize business exchanges and help enterprises to make closer communication exchanges. Increasing Connectivity Transport is a natural area for cooperation in the region and a huge catalyst for trade and investment as it has an impact on the transaction cost. Excellent connectivity is the key to establish and stimulate deeper integration among the region. The four countries will come up with an ambitious proposal that includes developing multi-modal transport, such as road, rail, waterways and airways, joint power projects and telecommunication networks. As a first step, the four countries will identify realistic and achievable infrastructure projects to boost physical connectivity. The linking of all four countries by road has further strengthened the notion that this corridor would subsequently open up the whole of the northeastern region of India to Southeast Asia and China and turn it into a significant channel of trade. The construction of industrial zones will have a twofold benefit • Firstly, it will lead to industrial transfer boosting industries such as processing, manufacturing and commerce logistics. • Secondly, as labor costs rise in China, labor-intensive industries such as textile and agro-processing will eventually be shifted out of China. These industries will need to be transferred to new regions with lower labor costs One of the major benefits of linking the four countries of Bangladesh, China, India and Myanmar (BCIM) through a land route would be to unleash the trading potential of landlocked areas. However, much of the route needs to be reconstructed and rebuilt. India has taken on the task of the developing the Kaladan transport corridor that connects its north east with ports in Myanmar. On the China side too, much progress has been made in road sector. With further connectivity, we would see a vibrant and dynamic boost to over-land trade. Presently, there are many plans to link India with this region through Myanmar, like Kaladan Multimodal Transit Transport Project, India-Myanmar-Thailand trilateral highway, Mekong-India economic corridor, Delhi-Hanoi Rail link among others.
  • 3. 3Multilateral Newsletter The Mekong-India Economic Corridor, which will connect the industrial and freight corridors in India with the production networks in the Mekong region through the Chennai - Dawei sea link and the land connectivity to India’s Northeast, will have a beneficial effect on all economies of the region. Multiple effective cross border and national transport projects would help unlock the tremendous potential of the region by removing constraints and bottlenecks to growth. An integrated connectivity would provide substantial benefits to landlocked countries and areas of the region by giving them low-cost access to world market. Regional Tourism Tourism plays a critical role in generating substantial revenue for all the member countries. Destinations of particularly Myanmar and Yunnan with beautiful landscape, rich biological resources, age old history, and a wide range of cultural diversity attract tourists from around the world. The sub-regional grouping plays a critical role in developing ecotourism and religious tourism by fostering connectivity among the region and facilitating travel to these regions. Cooperation in Natural Resources The BCIM region is one of the richest in the world in terms of natural, mineral and other resources. Cooperation in the fields of water resources, development of hydro-electric energy and hydrocarbon resources and development of port facilities are an important instrument in expediting the pace of growth in the region. This will also ensure a higher standard of living for the people. Combing the resources of the region would help in gaining a competitive edge in attracting both domestic and foreign investment and also help in promoting export leading to mutual benefits of the regions involved. International mobility of capital coupled with low cost of labour and geographical proximity helps to make the region attractive and increases the competitiveness to the investors. India and China- the two giant regions play significant role in promoting investments in Bangladesh and Myanmar that in turn target the Indian and Chinese markets through preferential market access initiatives. While, the regions under the grouping have a huge potential there also lies a strong need to explore and use the opportunities to boost up the growth of the region. Over the years, all the four countries have supported regional economic cooperation and the industry is optimistic about the prospects that exist in the BCIM region. Recommendations • To ensure success it is vital that regions proactively engage themselves by fulfilling the basic infrastructure need necessary for the region. Improving the state of connectivity within the region, and mobilizing the required resources to build the necessary infrastructure as long term developmental strategy. In addition there is a need to promote the participation of private sector in development of road transport infrastructure project as well as formulate common guidelines and procedures for transportation of goods and services • An improved infrastructure will be insufficient to foster the regional integration until and unless it is widely complemented by appropriate policies and regulations as well as participation of the private sector. We need policies and regulations to foster an effective cross-border movement of goods, services, and people. Harmonizing and simplifying the customs procedures, information sharing, customs modernization, establishing transparent transit rules, and improving logistics in general are also critical to infrastructure expansion. Enhancing the connectivity also requires stronger regional institutions to build and manage the cross-border infrastructure. Focus Story
  • 4. 4 Multilateral Newsletter Focus Story • Beyond building the physical infrastructure, cross-border movement of both cargo and people is also a major challenge for the region. For easing up cross border movement and establishing greater connectivity the existing trans-border formalities, vehicular movement and custom procedures need to be simplified. Presently, there are many plans to link India with this region through Myanmar, like Kaladan Multimodal Transit Transport Project, India-Myanmar-Thailand trilateral highway, Mekong-India economic corridor, Delhi-Hanoi Rail link among others. The Mekong-India Economic Corridor, which will connect the industrial and freight corridors in India with the production networks in the Mekong region through the Chennai - Dawei sea link and the land connectivity to India’s Northeast, will have a beneficial effect on all economies of the region. Multiple effective cross border and national transport projects would help unlock the tremendous potential of the region by removing constraints and bottlenecks to growth. An integrated connectivity would provide substantial benefits to landlocked countries and areas of the region by giving them low-cost access to world market. With greater connectivity, North Eastern Region of India will be better integrated with the markets of neighboring countries. Cross-border trade and investment flow and cross-border development cooperation will open up new avenues for growth and development. Bangladesh and India are already members of SAFTA, Bangladesh and Myanmar and India are members of BIMSTEC and Bangladesh, India and China are members of APTA. India is promoting regional connectivity for balanced economic and infrastructure development within our country and accelerated integration with our neighborhood, including with Southeast Asia. India believes that the BCIM Economic Corridor can potentially reinforce India’s existing connectivity initiatives INITIATIVES TO PROMOTE BCIM COOPERATION BCIM Car Rally CII with support from the government of India was the organizer from Indian side of the first historic 3000 km Kolkata-Kunming BCIM (Bangladesh, China, India and Bangladesh) Car Rally. The Car Rally was flagged off in Kolkata on 22 February 2013 and reached Kunming on 5 March 2013. BCIM car rally was aimed at retracing the lost trails and reviving commercial trade in this trade route. It demonstrated symbolically the ancient connection between China and South Asia. BCIM Business Council To strengthen friendly relationship and cooperation in economic trade and investment based on the principles of friendliness, equality and mutual benefit the BCIM countries established a BCIM Business Council as a cooperation mechanism to promote the cooperation among the regions and CII (Eastern Region) is the secretariat from the Indian side. The objective of the business forum is to jointly build cooperation mechanism to provide business related information services, create and develop commercial opportunities for better cooperation and interaction between business circles among the four regions. Stakeholders’ Consultative Workshops A collaborative initiative of CII (Eastern), MAKAIAS, and ICS, this workshop acts as a critical input into the production of BCIM-EC Joint Study Group Report, is conceived as a dialogue with stakeholders and experts in the Eastern and North East Region to assess the backward linkages of the BCIM-EC Project from the stakeholder perspective. The emphasis is laid on the ways and means to translate the BCIM-EC vision into an instrument of inclusive economic, social and human development of the region.
  • 5. 5Multilateral Newsletter Highlights: 47th Annual Meeting - Rethinking Asia's Challenges at the Crossroads of the Silk Road The 47th Annual Meeting held in Astana from 2 to 5 May, saw much discussion on connectivity, innovation and the need to keep up with demands of a changing Asia and Pacific. The Annual Meeting saw participation of almost 3000 participants from ADB’s 67 member countries and beyond, from government ministries and central banks, from business and finance, media, civil society, academia, and youth, cutting across professional, national, regional, and generational boundaries. The overall theme: “The Silk Road-Connecting Asia and the Changing World.” The theme was apt as the host location; Kazakhstan indeed stands at a crossroads connecting the manufacturers in the People’s Republic of China and Southeast Asia with potential markets in the West, and vice-versa. Looking beyond the host and the Central Asian region, the Annual Meeting was about rethinking the poverty challenge facing the region, rethinking how best to increase ADB’s resources, and clarifying ADB’s strategy in response to the region’s challenges. With 700 million people below the poverty line, Asia is still home to more than 60%of the world’s poor. Using this measure $1.25 a day, the region is likely to see an end to poverty in the region within the next decade. But more than 1.6 billion people living on less than $2 a day remain highly vulnerable to job loss, health problems, prolonged recession, inflation, crop failure and environmental dangers. Acknowledging these challenges, ADB has undertaken a midterm review of its long-term program-Strategy 2020. The report reconfirms that ADB will continue to focus on infrastructure development, but will also double its investments in health and education, given the wide benefits that can accrue from all these sectors. Away from the official business of the Annual Meeting, participants deliberated on the weighty issues faced by the region through a variety of knowledgeable and partnership events. These included a Governors’ seminar exploring lessons from past financial crisis; seminars on the Millennium Development Goals, development effectiveness, and fiscal policy. President Nakao stressed that it is crucial to pursue prudent macroeconomic management and bold structural reforms. With the conclusion of 47th Annual Meeting in Astana, ADB now turns its attention to implementing its mid-term strategy and looks forward to reporting progress next year at the 48th Annual Meeting in Baku, Azerbaijan. For more information, visit: http://www.adb.org/features/47th-annual-meeting-rethinking-asias-challenges- crossroads-silk-road The challenge for ADB is to help developing member countries eradicate remaining poverty, and support greater inclusiveness to address inequalities. There are other challenges: a huge infrastructure gap, environmental degradation and climate change. There is also the question of how to tap the full potential of regional cooperation and integration. Takehiko Nakao, ADB President ADB
  • 6. 6 Multilateral Newsletter THE WORLD BANK New World Bank Group Strategy to Help India Achieve Its Vision India stands at an unprecedented moment in its history. In the six and half decades since independence, the country has brought about a landmark agricultural revolution that has transformed the nation from chronic dependence on food imports into a global agricultural powerhouse that is not only a net exporter of food but also the world’s largest producer of milk, legumes, and spices. Life expectancy has more than doubled, literacy rates have quadrupled, health conditions have improved, and a sizeable middle class has emerged. India is now home to globally recognized companies in pharmaceuticals and steel, as well as in information and space technologies. The country is in the midst of an enormous wave of urbanization. Urban centers are growing exponentially as legions of people flock to towns and cities in search of a better life. This unparalleled movement of the population calls for massive investments in the creation of jobs, housing, and infrastructure to meet the people’s soaring aspirations. Strategy reflects India’s historic changes In keeping with recent changes, the World Bank Group’s new Country Partnership Strategy will guide its support to India over the next five years (2013-2017). The strategy aims to help the country lay the foundations for achieving its longer-term vision of “faster, more inclusive growth.” The new strategy proposes a lending program of $3 billion to $5 billion each year over the next five years. Sixty percent of the financing will go to state government-backed projects. Half of this, or 30% of total lending, will go to low-income or special category states, up from 18% of lending under the previous strategy. The Bank’s India strategy outlines a scenario in which India improves the inclusiveness of the economic growth to that achieved by its best-performing states. This would cut poverty to 5.5% of the population by 2030 from 29.8% in 2010 and increase the share of people living above the threshold where they are at risk of falling back into poverty to 41.3% from 19.1%. If India were to grow as it did from 2005 to 2010 without making that growth more inclusive, poverty would fall to only 12.3% while 33.6% would remain above the vulnerability threshold by 2030. Key focus areas In the next five years the CPS will focus on three key areas: integration, transformation, and inclusion. A common theme across these areas will be improved governance, environmental sustainability, and gender equality. Integration: Clearly, India’s massive infrastructure needs cannot be addressed through public investments alone. The strategy will accordingly focus on improving both public and private investments in infrastructure. Better integration would result in more-balanced growth among Indian states, helping low-income states converge more quickly with their faster-growing neighbors. STORY HIGHLIGHTS India has a historic opportunity to lift its remaining 400 million poor people out of poverty and ensure that the sizeable numbers who have recently escaped poverty are not vulnerable to falling back. The World Bank Group’s new Country Partnership Strategy will guide its support to India from 2013 through 2017. The strategy aims to help the country lay the foundations for achieving its longer-term vision of “faster, more inclusive growth.” A key feature of the new strategy is the significant shift in support toward low-income states, where many of India’s poor and disadvantaged live.
  • 7. 7Multilateral Newsletter THE WORLD BANK Time for South Asia
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