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Breaking Barriers, Crossing Borders: Cooperation in South Asia

April 16, 2012

Regional Cooperation in South Asia

There are signs that South Asia, long the least integrated of the world’s regions, is beginning to see the advantages of greater regional cooperation and openness to trade. Deals are being signed to build power transmission lines across borders, and Pakistan has even granted most-favored-nation status to its neighbor India.

These and other exciting recent developments will be the focus of a roundtable discussion on Thursday, April 19, during the World Bank Group-IMF spring meetings. Titled “Breaking Down Barriers: A New Dawn in Trade and Regional Cooperation in South Asia,” the event will bring together representatives of think tanks, civil society, and the media from across the region.

Why now? Why are South Asia’s disparate countries, which share so much in terms of culture and yet have such a long history of conflict and discord, coming together?

There’s been talk of cooperation in the region for at least 15 years,” noted Kalpana Kochhar (right), the World Bank’s chief economist for South Asia. “But in practice, not much progress was made until about two years ago, when you started to see much more significant movement,” between India on the one hand and Bangladesh, Nepal, Sri Lanka, and Pakistan on the other.

Kochhar says there are several possible explanations for the recent developments:

  • The weakened economies of the United States and Europe, traditional trading partners with South Asia, have led countries in the region to look for markets closer to home.
  • The demographic transition, during which young people will come into the labor market at the rate of a million or more per month, means that South Asian countries must find ways to create more jobs, and increased trade can help do that.
  • Most countries in the region have chronic electricity shortages and are recognizing that cross-border power transmission can be a solution.

Poverty in South Asia is concentrated in the so-called “lagging regions,” which tend to be landlocked and near country borders. “If you connect these lagging regions across borders, they can benefit from trade,” Kochhar said, and this will help a significant dent in poverty levels.

Salman Zaheer, program director for South Asia regional intregration, added: “Expanding regional trade from the current low level of about 5 percent of total trade to the levels of East Asia (about 40 percent) can potentially boost South Asia's incomes by 2 to 3 percentage points, create more and better jobs for the 1 million young people entering the work force each month, relieve energy shortages which have hamstrung businesses and social development in all of the countries, and re-position South Asia as a reliable land bridge between Europe and the rest of Asia. “

Barriers to trade include not only long-standing political disputes and tariffs, but also non-tariff regulations ranging from import limits or overly stringent sanitary regulations, Kochhar said.

“Those kinds of barriers are actually very difficult to deal with because they’re not documented anywhere; they just take place by practice,” she said. But as a result of Pakistan granting most-favored-nation status to India late last year, India has agreed to examine its non-tariff barriers, “a development, which we find very encouraging,” Kochhar added.

Zaheer called “the prevailing dominant mindset of suspicion and distrust” one of the most significant barriers to cooperation in South Asia, manifesting in the low levels of economic relations among the countries as well as the low level of people-to-people contact and a heavy emphasis on security and territorial issues.

“On the positive side, a shared sense of culture and history offers much of the promise for changing the dominant mindset,” he added. “Over the last 12-18 months, countries have accelerated their efforts to foster cultural and people-to-people exchanges and to reduce trade barriers, while continuing parallel efforts to diffuse security threats and resolve territorial disputes.”

In response, the World Bank is stepping up its knowledge and analytical work in the region, trying to quantify the benefits of cooperation and the costs of not cooperating. In addition, the Bank is keeping alert for opportunities to invest funding and expertise in transport and power infrastructure, biodiversity and environmental initiatives, and other areas.

“We basically are standing ready and able to assist these countries when they ask us,” Kochhar said.

One good example is a power transmission line between India and Nepal, which the Bank’s Board approved last year. At first the line will carry power from India to Nepal, but in the future it may be a vehicle for making use of Nepal’s huge hydroelectric potential, Kochhar said.

This week’s panel will include members from Nepal, Pakistan, and India, as well as a former U.S. ambassador to Sri Lanka. In addition to Kochhar, the panelists are (pictured left to right):

  • Kanak Mani Dixit, a longtime journalist and civil rights activist based in Kathmandu, Nepal;
  • Shuja Nawaz, a native of Pakistan who is director of the South Asia Center at the Atlantic Council;
  • Gowher Rizvi, director of the Ash Institute for Democratic Governance and Innovation, and the author of numerous books on South Asia;
  • Teresita C. Schaffer, former U.S. ambassador to Sri Lanka, who also served in the embassies in Pakistan, India, and Bangladesh during her 30-year career in the Foreign Service; and
  • David Thompson (not pictured), CEO of Rapids Wireless, a company that is distributing Datawind’s $35 Android tablet in the United States. The tablet is also getting wide distribution and attention in India.

“Our purpose in putting this together Barkha Dutt was to highlight first that there is movement happening, and second that there are huge opportunities,” Kochhar said. With such a diverse range of voices, “you’re going to get a real, rich flavor of what’s going on in the region.”

World Bank Vice President for South Asia Isabel Guerrero will introduce the panel, which will be moderated by prominent Indian TV journalist Barkha Dutt (right).

“Dutt is well-known on Indian television to be a provocative moderator, so we’re looking forward to a lively session,” Kochhar said.