An empirical analysis on prospects and challenges of BIMSTEC-Japan trade integration

Seven-nation Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC), comprising Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand is emerging as one of the major subregional groups in Asia. Japan is the second largest trading partner for BIMSTEC countries. The paper discusses prospects and challenges for strengthening BIMSTEC countries and Japan's trade integration. It analyzes the trends and patterns of BIMSTEC-Japan trade. Further, it examines empirically whether BIMSTEC-Japan economic cooperation will increase intraregional trade using a gravity model. Japan-BIMSTEC cooperation will increase intraregional trade but not uniformly for all countries. The potential losses on trade for some countries will be compensated by gains in other areas, such as, stepped-up resource transfer, foreign direct investment flows, technology transfer, and market access to services. This integration will strengthen the trade link between South Asian and Southeast Asian countries and will contribute towards a pan-Asian integration.