Domestic politics ‘major obstacle to economic reforms’ in S Asian countries

FE REPORT | Published: February 21, 2025 23:55:06

Domestic politics remains a major obstacle to economic reforms in South Asian countries including Bangladesh, particularly in trade liberalisation, according to an international trade expert.
Dr. Shanta Devarajan, a professor at Georgetown University, said that vested interest groups often resist trade liberalisation efforts, hindering progress in the region (SAARC region).
Dr. Devarajan, who was born in Sri Lanka and previously served as the World Bank's Chief Economist for the Middle East and North Africa, said Sri Lanka's success happened due to trade reforms in late 1970s.
He also noted that Bangladesh took similar steps in the 1990s and benefited significantly.
He made these remarks at a programme organised by the South Asian Network on Economic Modeling (SANEM) on Friday afternoon.
This year's SANEM conference, themed "Restoring Stability in the Economic and Political Landscapes: Navigating Fragility to Resilience," brought together leading economists, policymakers, researchers, and development practitioners from across the region.
Dr. Franziska Ohnsorge, Chief Economist for South Asia at the World Bank (WB), delivered the keynote address at the conference took place through online platform.
Panelists included Dr. Shanta Devarajan of Georgetown University, Dr. Deepak Mishra from the Indian Council for Research on International Economic Relations (ICRIER), and Dr. Debapriya Bhattacharya of the Centre for Policy Dialogue (CPD).
Dr. Selim Raihan, Executive Director of SANEM, moderated the discussion.
Dr. Devarajan emphasised that South Asian economies should open up to each other and the rest of the world to maximize trade benefits.
He mentioned his one exercise indicating that trade between India and Pakistan could increase tenfold if barriers were removed.
As an example, he said that Pakistan manufactures high-quality surgical instruments, yet Indian hospitals import similar products from Germany instead.
Dr. Deepak Mishra of ICRIER noted that South Asian economies share common economic characteristics that could serve as a basis for greater collaboration.
However, he observed that the region operates in the opposite manner to East Asia, where geopolitical concerns often overshadow economic cooperation.
He recommended a more flexible and nimble policy approach for South Asia to harness the benefits of regional trade.
He said that multilateralism is dying, while bilateral and regional trade agreements are gaining momentum.
He pointed to Vietnam as a successful example of regional economic integration.
Dr. Debapriya Bhattacharya of CPD emphasised that Bangladesh's economy remains heavily reliant on remittance inflows and development financing.
In her keynote speech, Dr. Franziska Ohnsorge highlighted that intra-regional trade in South Asia remains significantly lower than trade with the rest of the world.
She advocated for greater openness to boost economic integration.
Analyzing 2023 export data, she demonstrated that South Asian countries export far more to markets outside the region than within it.
She showed that foreign direct investment (FDI) liabilities within SAARC economies were close to zero in 2022, with nearly all FDI coming from outside the region.
jasimharoon@yahoo.com