One South Asia

Home to AfghanistanBangladeshBhutanIndiaMaldivesNepalPakistan, and Sri LankaSouth 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. 

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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:

  • High trade costs and investment restrictions 
  • Insufficient policy-relevant analytical work on gains of Regional Integration in both trade and investment, to make informed policy decisions
  • Skeptical mindset from previous failures in regional cooperation, misinformation, and lack of vocal champions for regional cooperation
  • Relative asymmetry in size among the South Asian countries
  • Historical political tensions, mistrust, cross-border conflicts and security concerns
  • Limited transport connectivity, logistics and regulatory impediments

As these barriers get gradually removed, intra-regional trade in South Asia could increase from the current USD 28 billion to USD 100 billion.

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More economic exchange and people-to-people interaction can increase trust and drive regional economic integration even further.

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:

  • Lending and Technical Assistance: Create opportunities that would help enhance trade and investment linkages in South Asia towards ASEAN levels
  • Shaping the Narrative: Support a more informed policy debate and dialogue on specific regional trade and investment themes in South Asia - cross-cutting pillar of South Asia regional integration strategy

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A long history of mutual mistrust and negative stereotypes cast a shadow over cooperation efforts. Limited access to accurate information about neighboring countries perpetuates damaging myths. However, recent successes in implementing cross-border projects and increasing (though still infrequent) people-to-people contacts have created a potential opening to begin turning around long-standing negative attitudes.

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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