'India takes it all' fear obstacle to greater regional integration: Aziz

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FE Report
Finance and planning adviser Mirza Azizul Islam said Sunday Bangladesh along with its peers in South Asia is reluctant to bolster regional cooperation, fearing India would snatch away the "absolute gains" of greater integration in the region.
"We're hesitant that India will take away all the benefits of (regional integration)," Islam told newsmen after a book launching ceremony at a city hotel.
"We don't get courage to proceed on … It's not only an issue of political prejudice, but also psychological," he added.
Islam was speaking as the chief guest at the launching ceremony of the book "South Asia: Growth and Regional Integration," co-authored by World Bank economists Sadiq Ahmed and Ejaj Ghani.
But despite the fear of "India takes all", the finance adviser said South Asian nations should strive for deepening regional integration, even if the relative gain is uneven.
"There's a strong case for regional cooperation," Islam quipped.
In his interventions, Sadiq Ahmed said South Asia remains the least-integrated region in the world, with intra-regional trade hovers at less than 10 per cent, including informal trade.
"Despite common geography, cultural affinity and historical relations, South Asia has not benefitted from regional dynamism," the World Bank economist told the audience.
Ahmed, who heads the bank's poverty reduction and economic management unit, noted that trade flows within the countries of East Asia and ASEAN (Association for South-East Asian Nations) accounted for more than 55 per cent.
"The East Asian experience shows that they not only deepened trade ties among them, even their productivity mechanism is integrated," he said.
The economic growth in the South Asian economies, including Bangladesh, has averaged 6.7 per cent in the 1990s, the rising inequality in the region has remained higher, a point raised by the finance adviser.
He warned the rising inequality in South Asia may threaten social stability.
He also pointed out that foreign direct investment rarely led to higher growth.
Referring to the examples of South Korea, Taiwan and Thailand, the finance adviser said although the FDI flows in proportion to the gross domestic capital formation were significantly lower in the fastest-growing economies in the region, they achieved higher growth.
"The link between growth and FDI remains at least undetermined," he said, adding that FDI could not solve all problems when national protection was high.
Despite the gains, South Asia's rapid growth may be fragile, thanks mainly to the high cost of doing business, weak institutions, weak knowledge economy and poor infrastructure, said Sadiq Ahmed.
"South Asia faces second-generation reforms," he said, noting that South Asia needed to invest 5.0-6.0 per cent of their GDP per annum if they wanted to meet the infrastructure needs.
But it would require private investment for improving infrastructure, given the scarce public resources, he added.
Akbar Ali Khan also shared the similar views, saying if South Asia wants to match the infrastructure developed by China, it would have to invest 12 per cent of its GDP per year.
"The enormity of resource gap underlines the fragility of South Asia's growth," he observed.
Past growth was helped by the implementation of first-generation policy reforms aimed at improving efficiency and private sector investment through trade openness and economic deregulation, financial sector liberalisation and macro-economic stabilisation, Sadiq Ahmed said.
"These reforms have spurred private investment and made South Asia more competitive, stable and adaptable," he added.
Moderated by president of Bangladesh Enterprise Institute Farooq Sobhan, the function was also addressed by former caretaker adviser Akbar Ali Khan and World Bank country director Xian Zhu.