Promoting Economic Cooperation in South Asia
Wednesday, 29 September 2010
Dr. Mirza Azizul Islam
I had the unique privilege of having received the book earlier and therefore I could potentially say a lot but I will try to make my presentation short enough to raise curiosity and long enough to leave enough imagination. Well the title of the book is "Promoting Economic Cooperation in South Asia: Beyond SAFTA". There are three editors, lead editor is Dr. Sadiq Ahmed who is the Vice Chairman of Policy Research Institute, the other editor is Dr. Saman Kelegama who is the director of Institute of Policy Studies, and Dr. Ejaz Ghani, who is the Regional Advisor of the World Bank. The book has been divided into three parts, part one talks about the imperatives of regional cooperation, part two details come of the specific areas for cooperation, and part three provides private sector perspectives from Bangladesh, India, Pakistan and Sri Lanka, and a little portion in the end deals with some political economic issues relating to distribution of gains from cooperation but, of course, as expected, there is considerable overlaps among the parts and also among the papers which have been included. There are in fact as many as 17 papers of which there is a heavy concentration in part two with nine articles included in that part and within that part it seems to be that there is a heavy concentration on trade but as Sadiq has indicated that the topics covered go well beyond SAFTA I think they are well beyond economic cooperation partly because many of these other non-economic issues obviously in pinch on the potentials and the prospects of economic cooperation. Among the many topics dealt are security and peace, poverty alleviation, trade in goods and services, investment, climate change, food security, transport, labor migration, tourism, energy, governance, disparities between and within countries. I might have still left out quite a few.
My impression of the book is that it certainly makes a very useful addition to the growing literature on South Asian Regional Cooperation apart from those from multilateral organizations such as the World Bank, The Asian Development Bank and the Economic and Social Commission for Asia and the Pacific, with which I happen to have been associated at some point in my life. There are some national research bodies also which are making contributions to this topic. In Bangladesh, Centre for Policy Dialogue has done quite a bit of work; in fact one of their Independent Review of Bangladesh's economy popularly known as IRBD, was devoted to the theme of Regional Cooperation in South Asia. The RIS in India, based in Delhi, occasionally brings out a report on South Asian Development Cooperation. BIDS has also done some work in this area. Morgan Institute and Institute of Policy Studies in Sri Lanka also undertook work on South Asian Regional Cooperation.
Nevertheless, I think this book also makes a very important contribution. Many of the papers contain rich analysis, identify opportunities and constraints and suggest remedial policy measures. I will not certainly go into any of the individual papers but of course as expected in a volume like this, there are some papers, including Sadiq's own paper, are very illuminating. There are some other papers which left a lot of scope for more in-depth examination.
I think I will be failing in my duty as a reviewer if I don't point out some of the inadequacies that drew my attention. Firstly there are some papers which do not have regional cooperation content. One shortcoming that appeared to me is that there is not much of an examination of the implications of the various bilateral agreements that have been entered into by some South Asian countries as well as the implications of the membership of other regional groups by the South Asian countries. India has bilateral free trade agreements with Nepal, Bhutan, Sri Lanka; Pakistan has a free trade agreement with Sri Lanka. The other factor which I thought is missing is the cost of regional cooperation. Now obviously regional cooperation is not a set of fruits hanging from a tree that is given by nature. Human efforts have to be devoted to promote regional cooperation. There are associated costs but I did not see much examination of the cost of regional cooperation. Finally, because I mentioned and Sadiq also indicated, there are so many issues which have been examined but there appears to be no prioritization of areas of cooperation. Though no explicit prioritization has been made in the book, by looking simply at the number of articles included, one could get some feeling of six priority areas: trade, investment, energy, water resources, connectivity, and climate change.
With those few words about the book, I would like to bring to the attention of the audience some of my own thoughts on the subject based to a great extent from reading the book and to some extent on the little bit of my own personal involvement on with promoting regional cooperation in Asia generally, and specially in South Asia as well. To me it seems that there are six priority areas that I would consider for receiving very close attention. One is trade, which Sadiq has already mentioned. But certainly trade is not the only thing; second is investment of which I think there is considerable scope; third is energy; fourth is water resources; fifth is transport connectivity; and sixth is climate change. Please note that all these issues have been included in the book but I feel that given so many other things, these are the priority areas that require close attention of policy makers to promote regional cooperation.
Then I intend to offer 10 proposals as suggestions to accelerate regional cooperation. Dr. Masihur Rahman (Adviser to the Prime Minister on Economic Affairs) is perceived as the "point man" for bilateral cooperation between Bangladesh and India and I think he can also make a dash to promote regional cooperation in South Asia. I am suggesting a dash approach to accelerate regional cooperation. Now in this Dash, I have five "D"s, one "A", two "S" and two "H". Let me elaborate them a little bit. Again I must add that many of these are in fact are reflected in the book itself.
D1: Firstly we must 'de-link' economic issues from political and security issues. Political and security issues have to be dealt with in their own right but the economic issues should not be held hostage to political and security considerations.
D2: Second, South Asian countries need to 'de-link' regional cooperation from domestic politics. I think this is something crucially important, particularly in Bangladesh, also in Pakistan, and perhaps to an extent in Sri Lanka as well.
D3: Third, we need to 'de-link' specific areas of cooperation from an all-embracing approach. What I mean is that we should not take a position that either we cooperate in everything or we cooperate in nothing. If that is an approach then in will never work. This in fact follows partly from the first one that I mentioned which is 'de-linking' economic issues from political and security issues.
D4: Fourth, I feel that 'de-linking' sub-regional cooperation from all-embracing SAARC cooperation. That means that if there are areas where more than two countries or four countries can cooperate, that should go ahead even if all SAARC countries cannot join. I think in one summit some decision to that effect was taken but I don't think any implementation took place thereafter.
D5: Now, more specifically, we need to deal with the barriers to trade- both tariff and non-tariff barriers- and Sadiq has very rightly mentioned that it should not include merely goods but also services. So those are all the "D"s.
A1: Regarding one "A", I think it is also important that we 'apply' cost-benefit approach to each discrete element of cooperation. Whether it is transport connectivity by road, rail or whatever, any particular activity should have detailed cost-benefit analysis without which you cannot really make a very convincing case for cooperation. Here I would also like to suggest that we must get away from the mentality that the distribution of the gains has to be equal across all countries. That is something impossible especially given the size of India. In many instances it is seen that the size of the gain for India would be much larger than any other country. So what is important is that benefit-cost ratio is greater than one. As long as the benefits exceed costs, we should go for it. Now say, for one country, B by C ratio is 1.5 and for another 3 then the one with the 1.5 should not say that I'm not going to get into it because the other countries are getting 3. So I think that is important and also it is important that these findings are made available in the public domain which in fact is I think what Sadiq's paper specifically mentions. Otherwise there are a lot of controversies and lot of dispute. I think some of the recent initiatives that Bangladesh has taken in the area of transit and in the area of import of electricity and so forth have become unduly controversial largely because the benefits and costs are not known to most people. So I think it is important that we make these findings available in the public domain.
S1: Now I have two "S". One is 'strengthening' domestic institutional capacity to facilitate intra-regional investment. I think here we have a bit of a problem because of our own inadequacy in the institutions to evaluate and assess projects which may remain undecided and as a result investment proposals do not go through. I think it is important to strengthen domestic institutional capacity to facilitate intra-regional investment.
S2: Then we need to 'strengthen' cooperation in energy, transport, water resources and climate changes which Sadiq has made reference to in his book.
H1: One is 'harmonizing' country positions on global issues such as Doha Round, Climate Change, etc. I think that could also be an instrument through which regional cooperation could be promoted if we can develop common positions on some of these globalised issues.
H2: Another 'H" is 'harmonizing' domestic regulations impinging on cooperation in various sectors such as in trade or climate change or transport or whatever. We need harmonization of domestic regulations.
Now obviously this is a tall order. To implement this will require a lot of political will, lot of analytical work and a lot of administrative commitment. Nevertheless, we should not probably give up hope because without such efforts it would be hard to expect that the future will see greater acceleration of regional cooperation in South Asia.
(The review was presented by Dr Mirza Azizul Islam, former adviser to caretaker government, at the launch of the book in question, held at the Policy Research Institute (PRI) on September 26, 2010)
I had the unique privilege of having received the book earlier and therefore I could potentially say a lot but I will try to make my presentation short enough to raise curiosity and long enough to leave enough imagination. Well the title of the book is "Promoting Economic Cooperation in South Asia: Beyond SAFTA". There are three editors, lead editor is Dr. Sadiq Ahmed who is the Vice Chairman of Policy Research Institute, the other editor is Dr. Saman Kelegama who is the director of Institute of Policy Studies, and Dr. Ejaz Ghani, who is the Regional Advisor of the World Bank. The book has been divided into three parts, part one talks about the imperatives of regional cooperation, part two details come of the specific areas for cooperation, and part three provides private sector perspectives from Bangladesh, India, Pakistan and Sri Lanka, and a little portion in the end deals with some political economic issues relating to distribution of gains from cooperation but, of course, as expected, there is considerable overlaps among the parts and also among the papers which have been included. There are in fact as many as 17 papers of which there is a heavy concentration in part two with nine articles included in that part and within that part it seems to be that there is a heavy concentration on trade but as Sadiq has indicated that the topics covered go well beyond SAFTA I think they are well beyond economic cooperation partly because many of these other non-economic issues obviously in pinch on the potentials and the prospects of economic cooperation. Among the many topics dealt are security and peace, poverty alleviation, trade in goods and services, investment, climate change, food security, transport, labor migration, tourism, energy, governance, disparities between and within countries. I might have still left out quite a few.
My impression of the book is that it certainly makes a very useful addition to the growing literature on South Asian Regional Cooperation apart from those from multilateral organizations such as the World Bank, The Asian Development Bank and the Economic and Social Commission for Asia and the Pacific, with which I happen to have been associated at some point in my life. There are some national research bodies also which are making contributions to this topic. In Bangladesh, Centre for Policy Dialogue has done quite a bit of work; in fact one of their Independent Review of Bangladesh's economy popularly known as IRBD, was devoted to the theme of Regional Cooperation in South Asia. The RIS in India, based in Delhi, occasionally brings out a report on South Asian Development Cooperation. BIDS has also done some work in this area. Morgan Institute and Institute of Policy Studies in Sri Lanka also undertook work on South Asian Regional Cooperation.
Nevertheless, I think this book also makes a very important contribution. Many of the papers contain rich analysis, identify opportunities and constraints and suggest remedial policy measures. I will not certainly go into any of the individual papers but of course as expected in a volume like this, there are some papers, including Sadiq's own paper, are very illuminating. There are some other papers which left a lot of scope for more in-depth examination.
I think I will be failing in my duty as a reviewer if I don't point out some of the inadequacies that drew my attention. Firstly there are some papers which do not have regional cooperation content. One shortcoming that appeared to me is that there is not much of an examination of the implications of the various bilateral agreements that have been entered into by some South Asian countries as well as the implications of the membership of other regional groups by the South Asian countries. India has bilateral free trade agreements with Nepal, Bhutan, Sri Lanka; Pakistan has a free trade agreement with Sri Lanka. The other factor which I thought is missing is the cost of regional cooperation. Now obviously regional cooperation is not a set of fruits hanging from a tree that is given by nature. Human efforts have to be devoted to promote regional cooperation. There are associated costs but I did not see much examination of the cost of regional cooperation. Finally, because I mentioned and Sadiq also indicated, there are so many issues which have been examined but there appears to be no prioritization of areas of cooperation. Though no explicit prioritization has been made in the book, by looking simply at the number of articles included, one could get some feeling of six priority areas: trade, investment, energy, water resources, connectivity, and climate change.
With those few words about the book, I would like to bring to the attention of the audience some of my own thoughts on the subject based to a great extent from reading the book and to some extent on the little bit of my own personal involvement on with promoting regional cooperation in Asia generally, and specially in South Asia as well. To me it seems that there are six priority areas that I would consider for receiving very close attention. One is trade, which Sadiq has already mentioned. But certainly trade is not the only thing; second is investment of which I think there is considerable scope; third is energy; fourth is water resources; fifth is transport connectivity; and sixth is climate change. Please note that all these issues have been included in the book but I feel that given so many other things, these are the priority areas that require close attention of policy makers to promote regional cooperation.
Then I intend to offer 10 proposals as suggestions to accelerate regional cooperation. Dr. Masihur Rahman (Adviser to the Prime Minister on Economic Affairs) is perceived as the "point man" for bilateral cooperation between Bangladesh and India and I think he can also make a dash to promote regional cooperation in South Asia. I am suggesting a dash approach to accelerate regional cooperation. Now in this Dash, I have five "D"s, one "A", two "S" and two "H". Let me elaborate them a little bit. Again I must add that many of these are in fact are reflected in the book itself.
D1: Firstly we must 'de-link' economic issues from political and security issues. Political and security issues have to be dealt with in their own right but the economic issues should not be held hostage to political and security considerations.
D2: Second, South Asian countries need to 'de-link' regional cooperation from domestic politics. I think this is something crucially important, particularly in Bangladesh, also in Pakistan, and perhaps to an extent in Sri Lanka as well.
D3: Third, we need to 'de-link' specific areas of cooperation from an all-embracing approach. What I mean is that we should not take a position that either we cooperate in everything or we cooperate in nothing. If that is an approach then in will never work. This in fact follows partly from the first one that I mentioned which is 'de-linking' economic issues from political and security issues.
D4: Fourth, I feel that 'de-linking' sub-regional cooperation from all-embracing SAARC cooperation. That means that if there are areas where more than two countries or four countries can cooperate, that should go ahead even if all SAARC countries cannot join. I think in one summit some decision to that effect was taken but I don't think any implementation took place thereafter.
D5: Now, more specifically, we need to deal with the barriers to trade- both tariff and non-tariff barriers- and Sadiq has very rightly mentioned that it should not include merely goods but also services. So those are all the "D"s.
A1: Regarding one "A", I think it is also important that we 'apply' cost-benefit approach to each discrete element of cooperation. Whether it is transport connectivity by road, rail or whatever, any particular activity should have detailed cost-benefit analysis without which you cannot really make a very convincing case for cooperation. Here I would also like to suggest that we must get away from the mentality that the distribution of the gains has to be equal across all countries. That is something impossible especially given the size of India. In many instances it is seen that the size of the gain for India would be much larger than any other country. So what is important is that benefit-cost ratio is greater than one. As long as the benefits exceed costs, we should go for it. Now say, for one country, B by C ratio is 1.5 and for another 3 then the one with the 1.5 should not say that I'm not going to get into it because the other countries are getting 3. So I think that is important and also it is important that these findings are made available in the public domain which in fact is I think what Sadiq's paper specifically mentions. Otherwise there are a lot of controversies and lot of dispute. I think some of the recent initiatives that Bangladesh has taken in the area of transit and in the area of import of electricity and so forth have become unduly controversial largely because the benefits and costs are not known to most people. So I think it is important that we make these findings available in the public domain.
S1: Now I have two "S". One is 'strengthening' domestic institutional capacity to facilitate intra-regional investment. I think here we have a bit of a problem because of our own inadequacy in the institutions to evaluate and assess projects which may remain undecided and as a result investment proposals do not go through. I think it is important to strengthen domestic institutional capacity to facilitate intra-regional investment.
S2: Then we need to 'strengthen' cooperation in energy, transport, water resources and climate changes which Sadiq has made reference to in his book.
H1: One is 'harmonizing' country positions on global issues such as Doha Round, Climate Change, etc. I think that could also be an instrument through which regional cooperation could be promoted if we can develop common positions on some of these globalised issues.
H2: Another 'H" is 'harmonizing' domestic regulations impinging on cooperation in various sectors such as in trade or climate change or transport or whatever. We need harmonization of domestic regulations.
Now obviously this is a tall order. To implement this will require a lot of political will, lot of analytical work and a lot of administrative commitment. Nevertheless, we should not probably give up hope because without such efforts it would be hard to expect that the future will see greater acceleration of regional cooperation in South Asia.
(The review was presented by Dr Mirza Azizul Islam, former adviser to caretaker government, at the launch of the book in question, held at the Policy Research Institute (PRI) on September 26, 2010)