South Asia has the world’s largest concentration of poor people, but, for the first time, eliminating poverty within a generation is no longer a dream. It is hoped that the South Asian leaders who meet in the SAARC Summit in Delhi on 3rd and 4th April, will provide directions for inclusive growth to pick up the pace of human development. Through several analytical works on various regional issues such as South Asia growth and regional integration, transportation and trade facilitation and regional energy trade, the World Bank has identified the following key observations that essentially show that everyone can win from regional cooperation in South Asia. • There are currently two South Asias in our region. One has high growth and great dynamism. In the other, there is tremendous poverty and conflict. The two South Asias need to be integrated into one, and this makes regional cooperation an important priority for us. • South Asia has a good chance of accelerating growth from 6 percent to 8 percent because it has two under-exploited resources that can, if tapped, launch it into an era of prosperity for all. One of these is its geography. South Asia, the largest region in the world, with a population of 1.5 billion people, is also the least integrated region in the world. South Asian countries that have opened up with the rest of the world remain closed to each other. Trade integration is a major opportunity for South Asia. The Second SAARC Business Conclave has estimated that, with appropriate reforms, intra-regional trade in South Asia could increase to $20 billion by 2010. • South Asia’s untapped resource is its people – particularly the young people who will enter the labor force in the next two decades. South Asia can accelerate growth by employing its surging labor force in productive jobs. But to realize this, two things must change. First, the manufacturing sector must become more competitive and grow more rapidly. Second, more jobs would need to be created in South Asia’s manufacturing and services sector. But this will require improving the region’s infrastructure, improving governance, reducing regulatory red-tape, and mobilizing support for politically-sensitive but growth-enhancing and poverty-reducing reforms. • There is a need to improve governance if South Asia is to take advantage of global integration and access to international finance. This calls for improving corporate governance, auditing and accounting standards, rule of law, transparency in procedures, and eliminating corruption. People should be made aware of the adverse effects of corruption on growth process. The cost of doing business in South Asia should be reduced. Regional cooperation could produce huge gains for South Asia. Trade within South Asia can be more than doubled if appropriate regional agreements on roads, rail, air, and shipping are put in place. It is suggested that the instrumentality of South Asian Association for Regional Cooperation (SAARC) be deployed not in promoting South Asia Free Trade Agreement (SAFTA) but project by project cooperation in areas of mutual interest. Projects in areas of infrastructure, energy and trade facilitation are good candidates for such cooperation.
There is an abundance of clean energy resources within the region and its immediate neighbors in the west and in the east. Cross-border management of water resources could help control flooding and improve the availability of water. South Asian countries would benefit from expanding the scope of cross border water cooperation from water sharing to benefit sharing. Improved transport linkages and trade facilitation could have multiple benefits and could also improve inter-regional trade. South Asian countries could consider implementing a Regional Motor Vehicle Transport Agreement. Policy reforms are needed. Protective policies, poor infrastructure and red tape have hampered trade and growth in South Asia. Though considerable unilateral trade liberalization has occurred in member countries over the past decade, tariff and non-tariff barriers persist, with the result that trade flows in South Asian countries are biased in favor of the rest of the world. The fact that much trade integration and resultant growth can be achieved by policy reforms should encourage leaders in South Asia, as things can be changed without the need for large investment. Everyone stands to gain from regional cooperation if inclusive growth policies are implemented to benefit the larger number of people. April 2007
Contacts:
S.M. Rezwan Ul Alam, (8802) 815-9015, Ext 4242
e-mail: salam3@worldbank.org
For more information on South Asia: Growth and Regional Integration, please visit:
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