Regional integration

Economists, trade analysts, researchers and many others keep on harping on the need for regional integration as an urgent need. Experts also quote the success story of ASEAN whose success has been such that developed countries want a share of the pie in the shape of Free Trade Agreements or Comprehensive Economic Partnerships with this regional association.

Why then hasn’t the South Asian region shown such dynamism? Here is a region so rich in resources. It is not only in natural resources that the region is rich. The region is rich in human resources. South Asia has 22 per cent of the entire world population. The region has a healthy demographic profile which will last well into the 21st century and the growing young population will continue to provide the region with the markets and the demand to maintain a very healthy growth momentum.

Cultural and other affinities which should bind the South Asian region are many, even much more than such ties within the ASEAN. Under normal circumstances, this should provide a magnet for gluing the region together. Despite these plus factors, the region has only about six to seven per cent of the global gross domestic product. Intra regional trade hovers around six per cent of its total foreign trade. But it is also considered as one of the fastest growing sub regions in the world with an average growth rate sustained over the past few years.

Unfortunately political differences between the largest members have been a major obstacle to the growth of the region and the price to pay for these differences has been that unofficial trade thrived and instead of direct trading, some of the countries in the region have been trading their products to each other through third parties adding to the costs.

As the region, with the exception of Sri Lanka and the Maldives, is landlocked together, unofficial trade thrives easily. It is said that the actual trade figures for Indo-Pakistan trade would be almost three times greater than the official figure of almost three billion dollars if the unofficial trade was taken into account.

It is widely known that at times of strict surveillance, when such trade is reduced, the prices of meats, etc. tend to rise in some of the countries in the region. If this be the case, there is sufficient scope for official trade to increase if tariffs are lowered and the non-tariff obstacles are removed.

Regional integration is not only limited to intra-regional trade. It also encompasses investment in each others’ countries so as to make it a single production base, The ASEAN Economic Community goals spell out the areas possible for economic integration in the region which could be applicable to our region. They include human resources development and capacity building, recognition of professional qualifications, closer consultation on macro economic and financial policies, trade financing measures, enhanced infrastructure and communication connectivity ,development of electronic transactions through e-ASEAN, integrating industries across the region to promote regional sourcing and enhancing into one production base.

When looking at the SAARC region, there are many areas for cooperation. There are a number of products where the supply chain can be marked along the region. Garments is one such area as the region manufactures fabrics, accessories and high-end finished products. Such collaboration also allows duty free access to the EU market under SAARC cumulative Rules of Origin. Food processing, particularly in fruits and vegetables, rubber products, plastics, pharmaceuticals and light engineering goods are some of the other such products with potential for intra regional collaboration.

Some may argue that since intra regional growth has been insufficient in the past, we should not spend much energy in promoting the region, but should look outside the region to collaborate with other emerging economies. We should definitely look outside the region, but we should not give up on our region. We need to study the growth of ASEAN and learn lessons from it and put them into practice. They have successfully turned their competiveness into complementarities.

South Asia is on the rise and in this globalised environment, we need to grow together if we are to seize the opportunities that this moment in time has given us.



(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)