Date: 17/03/2023

Relevance: GS-2: Bilateral, regional, and global groupings and agreements involving India and/or affecting India’s interests.

Key Phrases: BIMSTEC intra-regional trade, BIMSTEC, Fragmented markets, Internal Integration, agri-food sector, people-to-people contacts.

Context:

• There have long been Indian voices calling for strengthened agricultural cooperation among the countries of South and Southeast Asia in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), which was founded in 1997.
• However, trade and market integration is an area where the performance of BIMSTEC countries has been subpar.

Key Highlights:

• Trade and investment are major instruments to attain food security across the BIMSTEC member-states, particularly in a climate-affected, post-pandemic world.
• The share of all BIMSTEC countries — that include two ASEAN member-states, namely, Thailand and Myanmar — in world trade is less than 4 per cent.
• The BIMSTEC intra-regional trade was at $70 billion in 2021, significantly lower than ASEAN’s $600 billion, where exports were over $111 billion.
• Home to 1.8 billion people (22 percent of the global population, with a combined GDP of $3.6 trillion), the level of agri-food trade among BIMSTEC countries has been strikingly below potential.

What are the challenges associated?

• Fragmented markets:
  • The agri-food sector in BIMSTEC member-states is characterized by fragmented markets.
  • This makes it difficult for small farmers to participate in the value chain and access markets.
• Limited Infrastructure:
  • Limited infrastructure such as roads, storage facilities, and refrigeration units are major impediments to the agri-food sector's development.
  • This leads to significant post-harvest losses, which adversely affects farmers' incomes.
• Lack of Investment:
  • The agri-food sector in BIMSTEC member-states suffers from a lack of investment, both in terms of financial and human capital.
  • This has resulted in a lack of innovation, which is essential for value chain integration.
• Poor supply chain management:
  • Inefficient supply chain management has resulted in high transaction costs, which makes it difficult for small farmers to access markets.
• Internal Integration:
  • BIMSTEC’s progress is hindered by a lack of internal integration; countries adjacent to the Bay of Bengal are less integrated today than they were 50 years ago.
• Competition with proliferating regional trading arrangements:
  • BIMSTEC agri-food trade is getting more challenging due to competition with proliferating regional trading arrangements, such as the
    • Regional Comprehensive Economic Partnership (RCEP),
    • and bilateral arrangements like the India-Australia free trade agreement (India is a party to no less than 28 bilateral or regional arrangements while Thailand is part of 23 arrangements).
• Lack of product standardization and testing:
  • BIMSTEC countries still do not have a shared system for product standardisation and testing.
  • Lack of such arrangements significantly increases the time and costs of trade that disproportionally affect the agri-food sector.

Measures that can be taken:

• Improve infrastructure:
  • Investments in rural infrastructure such as roads, storage facilities, and refrigeration units can reduce post-harvest losses and increase farmers' incomes.
• Encourage value chain integration:
  • Public-private partnerships can be promoted to encourage value chain integration.
  • This will help to improve supply chain management and reduce transaction costs.
• Provide access to finance:
  • Small farmers need access to finance to invest in their farms and participate in the value chain.
  • Microfinance institutions can be established to provide this support.
• Promote Innovation:
  • Research and development can be promoted to encourage innovation in the agri-food sector.
  • This will lead to the development of new products, processes, and services that can increase productivity and profitability.
• Provide training and education:
  • Education and training programs can be established to improve farmers' skills and knowledge of best practices in farming, marketing, and value chain integration.
• Institutional changes:
  • BIMSTEC needs institutional changes in order to enhance food safety and health attributes, which should be driven by mutual recognition and risk-based decision systems and standards that are recognized and credible across member states.

Conclusion:

• By implementing these measures, the agri-food sector in BIMSTEC member-states can be transformed into a dynamic and thriving sector that contributes significantly to the region's economic growth and development.
• A complete overhaul of thinking about agri-food trade within the global value chain framework — that includes an openness on both sides (importing and exporting) and scaling up on attributes like quality, safety, and health as product differentiators — is an essential precondition for BIMSTEC to become an effective platform for successful cooperation among the Bay of Bengal countries.

Source: The Hindu BL

Mains Question:

Q. The agri-food sector in BIMSTEC member-states has been characterized by a lack of specialization and value chain integration. Analyze the reasons behind this trend, and suggest measures. (250 Words).