Model Answer
0 min readIntroduction
South Asia, home to over one-fifth of the world’s population, possesses significant economic potential. However, intra-regional trade remains remarkably low, estimated at around 6% of total trade, significantly less than other regional blocs like ASEAN (25%) or the EU (60%). This underperformance stems from a complex interplay of political mistrust, historical baggage, and structural impediments. Realizing greater economic cooperation among South Asian nations – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka – is vital for fostering inclusive growth, enhancing regional stability, and improving the livelihoods of millions. This requires a concerted effort to address existing challenges and leverage emerging opportunities.
Enhancing Trade Facilitation
South Asian Free Trade Area (SAFTA), established in 2006, has faced limitations due to non-tariff barriers (NTBs) and sensitive lists. Revitalizing SAFTA requires:
- Reducing NTBs: Streamlining customs procedures, harmonizing standards, and addressing issues related to rules of origin.
- Expanding Sensitive Lists: Gradually reducing the number of products on sensitive lists to promote greater trade liberalization.
- Digital Trade: Promoting cross-border digital trade through standardized regulations and infrastructure development.
Boosting Investment Flows
Attracting both Foreign Direct Investment (FDI) and intra-regional investment is crucial. Key strategies include:
- Investment Treaties: Negotiating and implementing bilateral investment treaties (BITs) to provide legal protection and promote investor confidence.
- Ease of Doing Business: Improving the ease of doing business rankings in each country through regulatory reforms and simplified procedures.
- Regional Investment Funds: Establishing regional investment funds to finance infrastructure projects and promote entrepreneurship.
Improving Connectivity
Enhanced connectivity is vital for facilitating trade and investment. This includes:
- Infrastructure Development: Investing in cross-border infrastructure projects, such as roads, railways, and ports. The India-Myanmar-Thailand Trilateral Highway is a good example.
- Transit Agreements: Negotiating transit agreements to allow goods to move freely across borders.
- Digital Connectivity: Expanding digital connectivity through the development of regional digital infrastructure and the promotion of e-commerce.
Energy Cooperation
South Asia faces significant energy challenges. Regional cooperation can address these challenges through:
- Cross-Border Energy Trade: Developing cross-border energy transmission infrastructure to facilitate the trade of electricity. The India-Bangladesh power exchange is a successful example.
- Joint Hydroelectric Projects: Undertaking joint hydroelectric projects to harness the region’s abundant hydropower potential.
- Renewable Energy Cooperation: Promoting the development and deployment of renewable energy technologies through knowledge sharing and technology transfer.
Financial Cooperation
Strengthening financial cooperation can enhance regional stability and promote economic integration:
- Regional Currency Swap Agreements: Establishing regional currency swap agreements to provide liquidity support during times of economic stress.
- Asian Clearing Union (ACU): Strengthening the role of the ACU in facilitating regional payments.
- Regional Financial Institutions: Exploring the possibility of establishing regional financial institutions to provide financing for development projects.
Addressing Political and Trust Deficits
Perhaps the most significant impediment to economic cooperation is the lack of political trust. Building trust requires:
- Dialogue and Diplomacy: Promoting regular dialogue and diplomacy at all levels.
- Confidence-Building Measures: Implementing confidence-building measures to reduce tensions and promote cooperation.
- People-to-People Exchanges: Encouraging people-to-people exchanges to foster understanding and build relationships.
Conclusion
Realizing greater economic cooperation in South Asia requires a sustained and concerted effort from all member states. While challenges related to political trust and structural impediments are significant, the potential benefits of enhanced regional integration are immense. Focusing on pragmatic initiatives in areas like trade facilitation, connectivity, and energy cooperation, alongside a commitment to dialogue and confidence-building, can pave the way for a more prosperous and stable South Asia. The increasing role of BIMSTEC as a more functional regional grouping also presents an opportunity to complement SAARC’s efforts.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.