South Asia is one of the least integrated regions of the world. It accounts for just 2.0 per cent of the world trade and 1.7 per cent of the world's foreign direct investment (FDI). Its intra-regional trade is less than 6.0 per cent of its total trade and accounts for less than 2.0 per cent of its Gross Development Product (GDP).
Efforts to build an effective economic cooperation model have been going on ever since the SAARC (South Asian Association for Regional Cooperation) was established as a regional group in 1985. However, it is only recently that there has been a greater emphasis on achieving a deeper regional economic integration.
Both the governments and businesses in South Asia have started recognising the benefits of greater economic ties in the region. They are trying to improve their business environment, facilitate cross-border trade and accelerate regional economic relations. The most noteworthy development is the rising interest of the private sector in a strong and explicit manner.
In order to help regional trade and investment achieve desired potential, private sector firms seek more viable policies and infrastructural support from the government. They feel that timely additional support and facilitation by government is necessary in order to achieve deeper regional cooperation and maximise its impact on regional and national development levels.
To configure these requests for support, the private sector is organising itself to strengthen dialogue between business leaders across the region, exchange ideas with government bodies, and explore exciting new avenues for promoting regional cooperation, trade and investment. However, these business-to-business dialogues are happening more at a bilateral level rather than at a regional level.
South Asia has all relevant ingredients to emerge as one of the more successful examples of regional economic integration - a geographically contiguous region with a market of 1.5 billion people with rising incomes, consistent economic growth of 5.0 to 6.0 per cent for two decades, significant development of their macro-economic policies and adoption of a similar approach towards diversifying their respective economies.
Another way to promote regional integration is by way of investment. This strategy has worked for other economic blocs such as the EU or NAFTA. There is potential for enhancing regional cooperation in the area of investment, both for expanding intra-SAARC investments, and for attracting FDI from outside the South Asian region.
Creating regional value chains holds importance in any economic integration process. However, poor trade facilitation infrastructure has become the main obstacle in intra-regional trade and investment. Airports and maritime ports in South Asia are less advanced, resulting in longer waiting time in clearing shipments. Weak land networks across the region pose a formidable obstruction to intra-regional trade. The region is also characterised by inefficient Customs procedures and excessive paperwork requirements.
South Asia has the world's largest working-age population and a quarter of middle-class consumers. With greater regional integration, smooth connectivity and removal of trade and investment hurdles, the region has the potential to break out.
© 2024 - All Rights with The Financial Express
