South Asia moved further on the path of free trade when it signed the BIMST-EC agreement in Phuket, Thailand. The agreement inked by the commerce ministers of the member countries except Bangladesh when implemented would include South Asia, which has a population of more than 1.3 billion and Southeast Asia, home to 500 million people. The pact would also link South Asia and ASEAN.

BIMST-EC was established in June 1997 and comprised India, Thailand, Myanmar, Sri Lanka and Bangladesh as its members. Nepal and Bhutan were recently accepted as new members. Its aim is to enhance regional cooperation by economic links between countries in South and Southeast Asia. The groundwork for a Free Trade Agreement (FTA) was completed in 2003 with the group identifying six high-priority areas for regional cooperation that include trade and investment, energy, fisheries, transport and communications, technology and tourism.   

Under the FTA, all products, except those included in the negative list, would have tariff reduced or eliminated on two tracks – fast and normal. India, Sri Lanka and Thailand, categorized in the pact as developing countries, plan to charge no tariffs on each other’s goods and services by July 2012, five years ahead of Bangladesh, Myanmar, Nepal and Bhutan, grouped as least developed countries.

The member countries have also agreed to prioritize cost reductions for sea shipping between regional ports, a regional energy network based on hydrocarbons and hydro-electricity, cooperation over fishing in the Bay of Bengal, open skies arrangements, and funding arrangements for completing a highway linking Thailand to India through Myanmar. India agreed to fund a feasibility study for the conversion of the Myanmar port of Dawei into a deep-sea anchorage. To ease travel by business visitors, a business travelers' card is planned on the lines of the APEC card. It would act as a multiple entry visa for certified business travelers. Thailand has agreed to fund a technical support centre for two years – essentially a secretariat – for BIMST-EC.

The special thrust of this regional grouping is on energy sector and transportation. Some member countries are endowed with rich hydrocarbon and hydropower potential, which could be developed for the benefit of the region. The grouping plans to work together for a Trans-BIMST-EC natural gas pipeline.

The agreement faced some problems from Bangladesh, which fears that lower tariffs may hurt its manufacturing. It wanted a clause to compensate Dhaka for the losses it would suffer due to lower import duties on manufacturing. This issue was similar to the one raised by Bangladesh during the SAARC negotiations. The compensation idea got little support from the other countries, who agreed nevertheless to work towards solving the problem before the group meets in Bangkok in July. The grouping has kept the door open for Bangladesh, which can join as soon as the compensation issue is sorted out and its cabinet approves the agreement.

The three relatively developed countries of the grouping are the driving force behind the potentially lucrative regional free trade area, with the two largest economies – India and Thailand – pledging to extend human resource development training to the others. The group has tried to remove the handicaps of SAFTA by adopting a 'three-plus' principle, whereby three members plus a fourth can go ahead with certain projects, even if the others are not willing. However, the larger policy issues would be decided by consensus.

Though the grouping is essentially for economic issues, it has tried to discuss the important security threats to the region. It touched upon threats of international militancy and infectious diseases. The member states agreed to collaborate actively to combat the rising threat to security arising from terrorism. They also agreed on the "need for an effective collective response" to tackle this menace.

The importance of BIMST-EC is manifold for India. Its association with this group strengthens its Look East policy. Last year, India signed a free trade agreement with the Association of Southeast Asian Nations (ASEAN) and one, separately with Thailand and benefits to India in trade and commerce are expected to flow sooner than earlier expected. The effective functioning of this group will help Indian efforts to contain the influence of China in this vital region where Myanmar has a very important geo-strategic location.

BIMST-EC has emerged as an important regional entity and signifies another major stride by South Asia towards free trade. Besides, strengthening economic relations it will also boost political and cultural relations between two important regions of Asia.