Experts discuss how South Asia can exploit intra-regional potential

Intra-regional trade within the South Asian Association for Regional Cooperation (Saarc) countries grew from $6 billion in 2003 to $40 billion in 2022. While this represents a significant increase, it remains modest compared to the region's overall trade volume.

For example, imports by Saarc countries from the region constituted only 4% of their total imports, and exports within Saarc accounted for merely 7% of their total exports.

Researchers, academics, and policymakers say that this data indicates that despite steady growth in regional trade, it is still limited compared to the region's total trade.

They came up with the remarks at the inaugural session of the 14th round of the South Asia Economic Summit in Dhaka yesterday. The Centre for Policy Dialogue (CPD) in collaboration with other South Asian think tanks organised the two-day summit at a hotel in the capital.

Jatiya Sangsad Speaker Shirin Sharmin Chaudhury spoke as chief guest while Professor Rehman Sobhan, chairman of the CPD, presided over the opening session of the summit attended by think tanks, researchers and policymakers of South Asia. Dr Fahmida Khatun, executive director of the CPD, presented an overview of the event.

P Nandalal Weerasinghe, governor of the Central Bank of Sri Lanka, emphasised the importance of intraregional trade among Saarc nations for promoting economic growth and reducing poverty in the region. However, he noted that trade within Saarc has historically been limited due to various factors, including political tensions, restrictive tariffs and duties, import restraints, protracted customs requirements, and excessive documentation.

Weerasinghe also highlighted several measures taken over time to improve intraregional trade through preferential trade agreements such as the Saarc Preferential Trade Arrangement (Sapta) from 1995 and the South Asian Free Trade Area (Safta) since 2006. He acknowledged that these agreements could have been partially responsible for the steady growth in regional exports, but that obstacles remain to further improving trade.

Nandalal emphasised the importance of regionalism in maintaining South Asia's dynamism, highlighting the untapped potential of intraregional collaboration in a region with one of the world's largest markets and neighbouring superpower, India.

Despite the diversity among member states in terms of infrastructure, population, technology, political influence, and military power, Nandalal urged the region's nations to embrace their shared cultural, ethnic, and religious ties and adopt a "South Asian" identity.

Nandalal argued that this common identity could drive intraregional trade, investment, connectivity, and cooperation on issues like food security and climate change, benefiting member nations and enhancing their participation in broader regionalism in the Asia-Pacific region.

"Another welcome initiative has been India's recent rupee trade scheme, which is expected to create more avenues for trade and integration within the region by reducing exposure to the US dollar and other reserve currencies," said the governor of the Sri Lankan central bank, who spearheaded the recovery of the Sri Lankan economy that almost collapsed in 2021.

P Nandalal Weerasinghe said has immensely benefited from financial support by the Saarc countries, particularly Bangladesh and India.

He said that the assistance extended during the crisis provided immense relief to Sri Lanka as it struggled with a socioeconomic quagmire.

Rehman Sobhan said the notable progress witnessed in South Asia over the past couple of decades can be attributed to the advancements made by individual countries.

"Most cooperation in the region is bilateral, and we are discussing ways to interact more closely at a time when South Asia is largely inactive as a region," he said.

Noting that South Asia has changed significantly in the past 30 years, Rehman Sobhan said, "At the same time, GDP growth, macroeconomic management, poverty reduction, and human development have undergone transformational changes."

He also said that the changes in infrastructure and logistics between India and Bangladesh have been transformative in recent years.

He said the benefits of these changes are yet to come fully and when these come, they will have significant impacts on bilateral ties.

Planning Minister MA Mannan said that Bangladesh's exports to India are rising rapidly compared to other destinations. He also said that there is untapped potential for regional trade in South Asia, as only 8% of the region's international trade takes place within the region itself.

A large number of people from India, Pakistan, Sri Lanka, and other South Asian countries work in Bangladesh, the minister said, adding that professionals from Bangladesh are also working in other South Asian countries.

He also emphasised the need to reduce trade and non-trade barriers, such as visa, passport, and countervailing duties.

The minister expressed his regrets as some efforts like Safta, Saarc, BBIN, Bimstec and Sasec failed to ensure an integrated South Asia. "These initiatives were launched with a lot of high hopes, but did not take off," he commented.

For example, the minister said that there was an agreement between Bangladesh, Bhutan, India, and Nepal for the free movement of vehicles, but the agreement is yet to see the light even after six years of signing.

Dr Dushni Weerakoon, executive director, Institute of Policy Studies of Sri Lanka (IPS), said the economic policies are being fundamentally changed globally while many advanced countries are aiming to cultivate strategically important sectors in semiconductors, renewable energy and advanced technologies, artificial intelligence, etc.

Dr Paras Kharel, executive director of South Asia Watch on Trade, Economics and Environment (SAWTEE) in Nepal, noted that South Asia is a poor region with vast potential for collaboration among the private sector, policymakers, lawmakers, politicians, researchers, and civil societies.

However, he cautioned that bilateral tensions among South Asian countries and the spillover of shifting global geopolitical moods and alignments must now also be factored into discussions on regional cooperation.

Dr Abid Qaiyum Suleri, executive director of the Sustainable Development Policy Institute (SDPI), Pakistan, said the Russia-Ukraine conflict reminds us that despite the European and Russian economic interdependence, peace and stability depend not only on the economy.

Professor Sachin Chaturvedi, director general, Research and Information System for Developing Countries (RIS), India, said the economic growth of South Asia in the last two decades is over 6%. The share of South Asia in global production increased to 4.2% in 2022 from 2.4% in 2002.

Addressing the event as chief guest, Dr Shirin Sharmin Chaudhury urged the private sector and corporations to increase investments to achieve the targets set under the Sustainable Development Goals (SDGs).