South Asia lacks in market integration

Md. Sahabuddin in the first of a two-part article on trade and investment in South Asia South Asia has a great potential to accelerate its trade and investment growth as the geographical location of the region gives it a good access to markets. The region accounts for only 3.0 per cent of the world's surface area and has the highest population density. The full benefit of its two real assets--demography and geography--has yet to be realised. If the potentials are fully tapped, South Asia could be a leading economy of the world. Due to a lack of market integration within and across countries, we cannot explore all these tremendous opportunities. PRESENT TRADE STATUS: South Asia averaged an annual gross domestic product (GDP) growth rate of around 5.7 per cent during 1980-2000. It was accelerated to 6.5 per cent during 2000-7 and it reached 7.0 per cent in 2010-2011. It is now the second fastest growing region in the world after East Asia. The GDP growth shows the strong recovery of economic meltdown in India, good performance in Bangladesh, post-conflict bounce in Sri Lanka, recovery in Pakistan, and a turnaround in other countries, including Afghanistan, Bhutan and the Maldives. It is possible because of rising domestic confidence and the factors like domestic versus external demand, consumption versus investment, and private demand versus reliance on stimulus. But the regional economic activities in terms of trade and investment within South Asia are not enough compared to the potentiality it has. Intra-regional trade among South Asian countries is about 5.0 per cent, although there is a great deal of opportunities at present. More regional connectivity through road, air and waterways will allow the industries to benefit from economies of scale.