Politicians in South Asian countries must break regional barriers, especially with India, in order to create opportunities for regional trade, renowned economist and Institute of Policy Studies Chairman Professor Razeen Sally said recently.
Prof. Sally pointed out that “huge opportunities” would arise within the region and mostly with India if the existing and emerging barriers are actively addressed and brought down.
“So far it has been paid lip service by politicians in South Asia. It is not going to be a success unless there is a serious Indian lead, given how overwhelming India is in the region,” Prof. Sally observed during his keynote address at the first South Asian Islamic Finance Forum held in Colombo recently.
He added that South Asia is the least integrated region in the world, restricting its economic promise.
While breaking barriers would require attention and investment across the Palk Strait, Prof. Sally said it is yet to receive due attention from the region’s political fraternity.
According to the economist, whose research and teaching focuses on global trade policy and Asia in the world economy, the political obstacle is that it has never been a top priority.
Furthermore, it was pointed out that despite increased number of bilateral trade agreement inked, those in the region are considered “trade lightest”.
The Indo-Lanka Free Trade Agreement (FTA) is considered the strongest, but still weak in global standards.
Sri Lanka is going to address the weaknesses of the FTA by following up with the Economic and Technological Cooperation Agreement with India, which will include trade and investments.
Prof. Sally said that cross border infrastructure in South Asia is amongst the worst in the world, with intra-regional trade standing at 4 percent of overall trade when compared with East Asia and the Pacific, which accounts for about 50 percent.
While South Asia’s trade accounts for only 5 percent of Asia’s overall trade, in terms of gross domestic product (GDP), intraregional trade is of approximately 2 percent of the region’s GDP, he added.
According to the World Bank, South Asia remains disconnected, as trading across neighbouring nations costs more than trading outside the region, even with those thousands of miles away.
A recent report of the World Bank that explored the potential of intra-regional trade for South Asia had revealed that it is 20 percent cheaper for India to trade with Brazil than trade with its neighbour Pakistan.
It pointed out that inadequate trade agreements, congested border crossing, lack of transportation infrastructure and circuitous routes to markets have been observed as key reasons for the restrictions.
Reduced trade friction between India and Pakistan alone can increase trade from US $ 3 billion to US $ 20 billion, the report stated.(SAA)