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Promoting balanced globalisation of regional economies
Shahiduzzaman Khan
11/13/2005
Regional cooperation in South Asia today is not only necessary to safeguard the South Asian interests in an intensely competitive globalised world, but also to address the internal challenges of South Asia. There is a need for collective actions to address the internal challenges of regional dimensions. The leaders of the SAARC countries must give a fresh look at the comprehensive SAARC agenda and to initiate actions for tangible improvement in the life of 1.5 billion South Asian people.
The long-awaited 13th SAARC Summit in Dhaka is expected to dwell on how to inject impetus to poverty alleviation, promote regional cooperation in hard core economic areas and combat terrorism. Combating terrorism is a task that South Asia needs to pursue relentlessly. This issue has been in the international and regional spotlight for compelling reasons. It is expected that the Dhaka summit will finalise the modality for implementing the additional protocol to combat terrorism being faced by the South Asian nations.
Act of terrorism can never be tackled unless serious collective efforts are made at the highest level of the SAARC countries to examine the causes and to destabilise terrorism. A SAARC security force is deemed necessary to tackle terrorism. The summit is also expected to concentrate on how to increase the capability of dealing with natural disasters and their aftermath as well as address social issues like education, empowerment of women, and child and key health issues.
Some outstanding issues still need to be sorted out in the Dhaka summit in order to implement the South Asian Free Trade Area (SAFTA) signed at the 12th summit in Islamabad last year. The SAARC commerce ministers are expected to submit their reports to the SAARC Council of Ministers, which will seek recommendations from the heads of government to resolve the issues. The implementation of SAFTA is set to begin from January 1, 2006.
The current negotiations in the SAFTA will be an acid test of whether the SAARC countries would like to move along the dotted route. In order to do that the relatively developed SAARC countries must be ready to take cognisance of the needs of the relatively less developed countries.
In the context of the current negotiations, this has to be reflected in the design of the negative list, formulation of rules of origin, removal of non-tariff barriers and steps to mitigate the potential implications in terms of revenue losses of the major importing countries of the region such as Bangladesh.
The SAFTA framework agreement explicitly recognises a two-track approach between the LDCs and non-LDCs of the SAARC. This needs to be implemented in letter and spirit. As it appears, the current negotiations as of now have not been able to arrive at agreed positions with regard to the negative list, rules of origin and revenue compensation mechanism. Identification of non-tariff barriers, institutional measures and trade-related capacity building and trade facilitation to foster regional cooperation still remain the tasks that need to be tackled in the near future.
Indeed, there are substantial potentials for making economic cooperation more effective among the SAARC countries and this will not only help enhance intra-regional trade but also contribute to strengthening global integration of SAARC in the medium to long term perspective.
Poverty remains a major concern in varying degrees in all SAARC countries. Nothing could be more poverty alleviating than creation of employments. Greater economic cooperation targeting the $1.5 billion strong regional market could be crucial avenue in this collective effort. The SAARC has to progress through a number of phases in economic cooperation before embarking on an economic union. Emergence of such a regional entity is expected to accelerate the national growth process and promote balanced globalisation of the South Asian economies.
However, the outcome in economic cooperation in South Asia to date is disappointing. In 2004, intra-SAARC trade remained as low as 4.5 percent of the total trade of these countries. Similarly, intra-SAARC investment that year remained less than 1.0 percent of the total inflow of foreign direct investment to South Asia.
Various rounds of negotiations under SAFTA have yielded very little regional trade-enhancing results. Now SAARC needs a perceptible political push for higher results and it is good to see that the leaders of the region are talking of high ambitions, such as creation of a regional economic union. However, chasing such an enticing target requires systematic policy and institutional reforms, brought about by a strong political will.
The launching of an economic union is a desirable but challenging target, particularly in view of the slow pace of SAARC's evolution. As it took two decades for SAARC to reach a point where it can negotiate the SAFTA, to think of establishing an economic union within the next 15 to 20 years will be a very far-reaching target.
The economic union is beneficial to regional countries like Bangladesh. One needs to take into cognisance the differential levels of economic development among these countries. What will be important is to have a built-in structural support mechanism for the low-income countries to bring them at par with others so that all members can share the benefits equitably.
As of now, the SAARC countries are trying to deal with poverty either through national or extra-regional strategies. Regional cooperation as an effective tool for generating trade, investment and employment is largely missing -- an absence which makes the regional countries unable to create a synergy of their national and global anti-poverty strategies. The South Asian countries have been failing to leverage foreign investment and trade flows because of a lack of adequate institutional framework and policy instruments geared towards regional cooperation.
Over the last two decades, income inequality in all the SAARC countries increased and has been further exacerbated by growing disparity in asset base as well as unfavourable access of the poor to public resources. Today there are about 500 million poor in South Asia with an income of less than $1.0 a day. It means one in every three persons in South Asia is poor.
There is a need for political will and statesmanship in the leadership of SAARC to narrow the differences in views in the future. The political will should be supported by the statesmanship of the participating countries in order to rise above narrow national perspective and work out arrangements on give-and-take basis for mutual benefit.
Though the SAARC was established two decades back, the regional co-operation in economic sector or inter-state trade in the region did not expand.
Bangladesh has a trade deficit with all other SAARC member countries. The trade gap should be minimised through reducing tariff and para-tariff barriers as the country does not have enough commodity to export. For reducing the huge trade gap with India, joint venture investment industries should be set up in Bangladesh keeping Indian market in mind. Such investment would also generate employment and help reducing the trade gap. Also, a unified approach among India, Bangladesh, Nepal and Bhutan involving the Ganges, Brahmaputra and Meghna, can help meet the power demand in Bangladesh and India. The SAARC can take an initiative to help Nepal and Bhutan in developing power generation capacity. Under the programme, Nepal and Bhutan will produce hydro-electricity and Bangladesh and India will buy it to meet their power shortages.
Local experts are stressing on creation of a SAARC parliament. All efforts to strengthen the regional cooperation and development could work under the directives of such parliament. It will be able to address overall aspects of improvement for the people in the region. It can also remove the lingering doubts, suspicions and fears among the SAARC countries and its people.
Lack of confidence and conflicts amongst the SAARC member countries should be resolved to gear up meaningful economic cooperation. Above all, unilateral free trade facilities to LDCs by stronger SAARC economies and cooperation in the area of investment, technology transfer, technical assistance, and trade promotion of the LDCs should be taken immediately to level up the current inequalities. Once greater equality and equilibrium is established, SAFTA would be the immediate means to strengthen regional trade cooperation.
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