A unified South Asian economy

A unified South Asian economy

 Md. Joynal Abdin

The Daily Star, Tuesday, February 16, 2010

SOUTH Asia is the only region of the world that has our unique historical background. People in this region used to share the diversified products among themselves for centuries. Statistics showed that intra-regional 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 intra-regional 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 intra-regional trade remained only above 6 percent though intra-regional trade among the East Asian nations, i.e. Asean+3 is 51 percent, EU 58 percent, Latin America 17 percent and even for the poorest Sub Saharan countries it is 11 percent.

In South Asia, intra-regional telephone calls is only 7 percent, which is 71 percent in case of East Asian countries. It means we have a lack of communication among ourselves in South Asia. Only for this reason, intra-regional trade is not increasing in South Asia even 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.

Intra-regional 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, it is the only prerequisite for enhancing cross-border investment in the region. Today Indian giant companies are investing in Singapore, Vietnam and 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 an investment friendly environment in South Asia. Bangladesh needs 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 will have to take the lead. Recently, India has opened up its door for regional investors. Similarly, India has to take effective measures to increase its investment in neighbouring countries for the sake of an integrated South Asia.

An integrated South Asian market can provide economies of scale, diversified product, and higher value addition to provide special strength in bargaining with other regions or in multilateral trade negotiations 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 neighbouring economies may get some special benefit through integration with India. Thus, smaller countries like Bangladesh, Nepal and Bhutan can get the benefit from relocated Indian investment.

Moreover, 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 the global economy, South Asia has a greater prospect to grow if a 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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