Home to Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, South Asia is one of the most dynamic regions in the world, with a population of 1.67 billion people and economic growth of 7.1 percent over the last decade. But despite recent shifts, historical political tensions, trust deficit, cross-border conflicts and security concerns contribute to a low-level equilibrium.
At present, South Asia is one of the least integrated regions. Intra-regional trade accounts for only 5 percent of South Asia’s total trade, compared to 25 percent in ASEAN. Intra-regional investment is smaller than 1 percent of overall investment.
Due to limited transport connectivity, onerous logistics and regulatory impediments, and lack of trust, it costs more to trade within South Asia than between South Asia and world’s other regions.
Its ~20% cheaper for India to trade with Brazil than with its neighbor Pakistan!
Greater cooperation and regional economic integration can bring about gains in these areas and help tap into the proximity and demographic dividend, South Asian countries enjoy. But there are several factors restraining Regional Integration.
Factors restraining Regional Integration:
As these barriers get gradually removed, intra-regional trade in South Asia could increase from the current $23 billion to $67 billion.
The momentum of greater regional integration has been building in recent years. But meeting all the challenges requires more than business as usual. With regional integration, a key part of its strategy, the World Bank Group is supporting ‘One South Asia’ through a twofold program.
Twofold Program Objective:
The World Bank Group continues to support the building of One South Asia, facilitating high level and substantive dialogue to broaden stakeholder engagement, supporting key lending and technical assistance projects, and developing vital institutional arrangements. It requires joint assistance from both public and private sectors.
The risks are high but, for the countries of South Asia, so too are the rewards.
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