Is Bangladesh Stuck on the Periphery of Asia Because of India?

India has self-isolated from the core of Asia, but Bangladesh cannot remain shivering in the cold outside, says one analyst.

Posted on 11/17/20
By Farid Erkizia Bakht | Via Dhaka Tribune
(Photo via video stream)

East Asia, Southeast Asia (ASEAN), Australia, and New Zealand have signed up to a new trade area. For the first time, Japan and South Korea have together signed up a trade deal with China. This trade alliance will be earth-shaking.

It accounts for more than a third of the planet’s entire output, in purchasing power parity (PPP) terms. Initiated by ASEAN, it covers services, investment, e-commerce, telecommunications, and intellectual property. The Regional Comprehensive Economic Partnership, or RCEP, did include India from when it was first broached in 2013. Hindutva Delhi pulled out this time last year.

Is India scared?

Does India’s not-so-dynamic economy need to permanently maintain protectionist barriers against Chinese products? Despite all the talk of India slated to become the world’s number three economic power in the medium term, it claims to be in fear of East Asian economic competition.

It tacitly admits that it is not an export-driven economy. In any case, much if its exports are raw materials or low tech. That accounts for most of its almost $50 billion trade deficit with China. Iron ore, cotton, and gems, not IT software, are its main exports to China.

However, two points come to mind. Firstly, Japan, the richest economy in the 17-state agglomeration, has negotiated several opt-outs, especially on agriculture and food. Secondly, poor countries such as Myanmar, Cambodia, and Laos are not renowned as world-beating economic powers. How is it they feel capable to withstand the manufacturing hurricane from Northeast Asia but the Indian elephant runs scared?

Certainly, Modi’s business cronies prefer to be big fish in a smaller pond, given their ability to navigate the corruption in India’s economic labyrinth. Three decades after liberalization, it seems unable to compete in steel, textiles, and dairy sectors. Its South Asian Free Trade Area is an irrelevance. There is another reason though for its retreat from RCEP.

Betting on America over China

India’s backing out at the last minute in 2019 has more to do with its tragic trajectory of following America’s lead from the back. So, it lost out in Iran by succumbing to American pressure. It has now done the same with RPEC.

India claims it wants to enhance trade links. It already has a free trade agreement with ASEAN. Fundamentally, it is driven by the desire to limit links with China. It seems almost petulant in not seeking to grow within the structures of Asian economic cooperation. Instead, America is encouraging India towards a disastrous slide into military face-offs with China.

The thing is that Japan and Australia are members of the QUAD (an anti-China grouping) but are also in the RCEP. India could have been too. Now it has exempted itself from benefitting from THE economic arena of the next 30 years of more.

Bangladesh?

Had India signed up to RCEP, then Bangladesh would have found itself surrounded by India and Myanmar, both operating within the area, with Dhaka dangerously out of the loop.

In that scenario, a case could have been made for Bangladesh to subsequently be invited in, given its growth and geography. Its similarity to both countries economically would mean it could have then been fast-tracked in. In dollar terms, it has surpassed India in terms of per capita income. While it lags behind Myanmar on that indicator, it does possess a larger industrial sector.

Had India joined RCEP then the group would have become a union of South Asia, Southeast Asia, and East Asia. Bangladesh would have been the edge-state on the border with Southeast Asia, as well as a gateway for South Asia towards China too.

The bottom line is that RCEP members will see shorter supply chains, deeper regional links, greater inward investment and more technology transfer. This will also be “Made in Asia for Asia”: The pre-eminent consumer and manufacturing growth markets are in Asia.

The questions for the strategic community in Bangladesh are: Should Dhaka not have a clear aim to eventually enter the RCEP, if it is ever opened up to further members? Should it not join ASEAN+1? In which direction will Bangladesh face in the early 2020s? How far will it go with the “strategic partnership” with China?

For the moment, we see smaller states in South Asia with their noses pressed to the window as the RCEP gets moving for those fortunate to be inside. Bangladesh cannot remain shivering in the cold outside forever.

Farid Erkizia Bakht is a political analyst.

This article first appeared in Dhaka Tribune. Click here to go to the original.

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