Economic prospect lies in South Asian Economic Union

Economic prospect lies in South Asian Economic Union

Md. Joynal Abdin

Financial Express on February 11, 2010

 South Asia is the only region of the World that has a unique historical background. People in this region used to share the diversified products among themselves for centuries. Statistics showed that intraregional trade among the SAARC nations was 19 percent in 1948 soon after the end of British colonial era.

 But due to protectionist mentality of the new emerging countries this intra regional trade has since declined to the lowest 2 percent in 1967. With the emergence of SAARC in 1985 South Asian people got a platform to get closer and renew their past shared trade. Measures have been taken to facilitate intraregional trade among the SAARC nations. The “SAARC Preferential Trading Arrangement (SAPTA, 1995)” got its maturity through implementation of “South Asian Free Trade Agreement (SAFTA, 2006).

 But, despite efforts the intraregional trade remained only above 6 percent though intraregional trade among the East Asian nations i.e. ASEAN+3 is 51%, EU 58%, Latin America 17% and even the poorest Sub Saharan countries it is 11%.

 In South Asia intraregional telephone calls is only 7% which is 71% in case of East Asian countries. It means we have lack of communications among ourselves in South Asia. Only for this reason intraregional trade is not increasing in South Asia after offering so many duty free facilities under or beyond SAFTA.

 A united South Asia can be more powerful than the EU, because we have a larger market than EU, massive workforce and fertile lands to produce anything we want. We have diversified products and favourable weather for cultivation. We have easy access to the markets of economic powerhouse China and integrated ASEAN. So, deeper integrated South Asia can be more powerful than that of integrated EU.

 But first step towards economic integration of South Asia will be to improve connectivity among the nations. It is mandatory to reduce the cost of doing business in this region, Bangladesh can offer transits to its neighbours by accepting such facilities from them. We will have to remove any misconception in this issue for better economic benefit and regional harmony.

 Intraregional trades among the SAARC nations have to be increased for self sufficiency of the region as well as reducing dependency on the US or EU countries. Regional policy reform committee can be formed to identify major policy barriers of this region to increase intra regional trade. Because of deeper integration is the only prerequisite for enhancing cross border investment in the region. Today Indian giant companies are investing in Singapore, Vietnam even in the EU countries but why they are not investing in Bangladesh, Pakistan or Sri Lanka? This is due to mistrust, lack of infrastructure and absence of investment friendly environment in South Asia. Bangladesh must have to execute required policy reform to get FDI in thrust sector.

 Cross border investment has to be increased to a substantial level. India and Pakistan have to take the lead. Recently, India has opened up is door for regional investors similarly, India has to take effective measures to increase its investment in neighboring countries for the sake of an integrated South Asia.

 An integrated South Asian market can provide economies of scale, diversified product, higher value addition to provide special strength in bargaining with other regions or in multilateral trade negotiation under the WTO regime.

 Recently, it has been forecast that India is replacing Japan as the third largest economy of the World by 2014. So, smaller neighboring economies may get some special benefit through integration with India. So, smaller countries like Bangladesh, Nepal and Bhutan can get the benefit from relocated investment of India.

 So, this is the time for south Asian smaller economies to make required policy reform and open their doors to welcome global investment. With these two upcoming key players of global economy South Asia has a greater prospect to grow if congenial investment climate can be created.

 Integrated South Asia has much more product in their basket of comparative advantage.

 For a deeper integration in South Asia initiatives can be taken to avoid political conflicts, ensure better connectivity, overcome power crisis and control terrorism. 

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Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

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