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by Sunil Abhayawardhane

South Asia today, though advanced in certain field of technology, remains one of the poorest regions of the world with approximately 1/5th of the worlds population, out of which almost half live in poverty. The countries of South Asia thus face the challenge of overcoming this situation, probably making it the largest project the world has encountered as yet. Individually, the countries of the region have tried various methods as a response, though with little success.

Globalisation was welcomed a decade ago with great euphoria as if it was some form of magic that would lead us to the promised land. Today the reality of the situation is slowly sinking into the minds of those every people, who expected magic.

There is no doubt that globalisation has benefits which could be reaped, depending on the manner one fears to face the challenge. Experience has shown, what common sense should have made one realise, that it is not for the weak and backward. Global players require strength and clout, in order to make it a two way street. Unfortunately for the developing and third world countries it has been an expensive one way street.

Therefore if South Asia is to overcome the immense challenges it faces, it would require a common strategy to do so. This means a common vision for the region, to be developed with imagination, dynamism, drive and daring, making use of the regions capabilities and noting its weaknesses.

Today, with the wealth of experience that lie before us, it is clear that free markets by themselves do not offer deliverance. One should therefore not follow blindly but be able to lead, where required.

Regional Groupings

The developed economies, which have the ability to trade globally individually, are seeking regional groupings to enhance its position as well as to become more competitive, while creating free trade areas within its own regions.

Therefore the future challenge from globalisation would be more intense than in the past decade. It is extremely unlikely that the countries of South Asia would have the ability to face the global onslaught individually, except perhaps India.

Even though the idea of South Asian cooperation was developed sometime ago, resulting in the birth of the South Asian Association for Regional Cooperation, the pace of movement has been frustratingly slow. This was evident from the expression of the leaders of member states at the recently concluded summit in Kathmandu.

Economic Union

The Kathmandu summit also saw a call for South Asian economic union, which even though late, should be welcomed.

Economic union amongst the SAARC region would make it the single largest market in the world, in terms of population/consumers. The growth potential of this market is enormous, as at present income levels of almost half are at rock bottom. Therefore, if development takes path and pattern to include the hitherto unincluded, South Asia has the potential of becoming an economic powerhouse within a relatively short span of time.

At present the combined GDP of South Asia is approximately 600 billion dollars out of which Sri Lanka's contribution is approximately 16 billion dollars.

Just as much as economic union opens up the doors to the vast market of South Asia, the countries themselves need to gear up to draw benefits from such opportunity, for otherwise the exercise would not result in the positive possibilities.

Though the SAPTA and SAFTA agreements were signed very little headway has been made to face up to the tremendous opportunities that lie ahead.

SAARC has been slow to respond to global challenges and requires a better mechanism to make it more in line with reality, current issues, problems, challenges and responses.

South Asian economic union, if brought about in an appropriate manner, could lay the groundwork for a better and brighter future.

Even bilateral issues such as Kashmir, for so long a dispute between India and Pakistan could, perhaps find a solution within a broader framework of an economic union, within a single South Asian market.

North East Conflict

Sri Lanka's own North East conflict requires a deep sustainable solution. Such a solution could only be worked out within a new framework that is initiated for the purpose, which hopefully would be forward looking and positive in character.

Economic interests are not the only aspects that would make up the desired, but would become the vital element in South Asia within the next decade.

Very often negotiations fail as one side underestimates its task while the other overestimates its capabilities. We could only hope that both sides are clearly focused on what is required for a long lasting peace.

Single Currency

A single South Asian market in such a diverse geo-social context would require some mechanism to harmonise the differences so as to function within a single market.

One way of doing so would be the creation of a single South Asian currency.

A common currency would have its positive and negative aspects. The positive aspects however outweigh the negatives by far. If the idea of economic union, amongst our countries is seriously and genuinely desired, then the move to such should be done in the spirit required to achieve success. The single currency would be the expression of desire to go all the way, without any doubts.

Radical reforms

South Asia's problems in general and Sri Lanka's in particular would not be solved by mere economic union or a single currency. It should be realised that these problems run deep and are of a fundamental nature. Therefore without radical reforms that would re-structure the economy, the chances of moving towards 'rapid development' is extremely remote.

The path of economic growth that we have been following, at the best of times resulted in 6% growth rate, while neglecting the pattern of growth.

"Growth with equity" is by itself a radical change from the traditional "trickle down" effect of growth.

In the past half century the experiences of East Asia led by Japan, if it was able to show the world a new dimension to growth, it was the success of the concept of "growth with equity."

Most do not realize the multiplication effect that fair distribution of the benefits of growth has on an economy. East Asia's success was based on common sense and simple logic rather than high ideology.

The simple argument is that if the benefits of growth finds its way to be spread amongst the people, the market expands with strong consumers who in turn increases demand, resulting in higher production which increases the GDP.

A look at Japans economy proves that point. It exports only approximately 8% out of a 4000 billion dollar GDP. The size of its internal market could be thus gauged.

The Chinese have performed even better in the last few years with growth rates in excess of 10%. They have developed the concept of growth with equity which falls within it's ideological framework, creating opportunity for the people to take up to enterprise under the slogan "poverty is not socialism".

The industrial structure is the mechanism that was used by Japan, East Asia and now the Chinese to promote the concept of growth with equity. The Chinese effort has proved extremely successful but at present is limited to ceratin areas only.

The linkages, both horizontal and vertical between Large, Medium, Small and Micro enterprises used to the maximum brings about the desired results. Such restructuring in South Asia has the potential of bringing about the desire development. This however requires to be preceded by Banking reform that would be geared to meet development needs of the nation.

Economic reforms would therefore have to be made in order to bring about rapid development that would be sustainable. In the past and present the economy was and is geared to make available the benefits of development without development, which is a menu for disaster, from which we are not very far.

Therefore if Sri Lanka is not to follow the Argentine experience, major reforms are needed soon. If it is decided to continue on the traditional path of growth, the economy would certainly grow, but not as desired or at the rates required, that would put us on a better and brighter path.

Political will

Re-structuring the economy requires a tremendous effort that should come from the combined political will to do so. In the absence of such, not much would change.

It should also be mentioned that if the interests of Sri Lanka are not placed above all else, no amount of action or reforms would be sufficient to overcome the challenges faced. We have been witness to action with good intention being hijacked by the undesirable, who find themselves into that gap between intention and result, taking away the glory and success that would have been Sri Lanka's.

The concept of growth with equity makes economic sense, simply because it increases the consumer power which drives the consumption driven economy. In short it means that the UN-included be included. Traditional political ideology should be over ridden by the desire to bring the peoples of South Asia out of poverty so that Sri Lanka and the region could meet the needs of its peoples much more than any other country.

Public-Private cooperation should bring about progress without discarding core humane values.

It should also be realized well in advance that whatever is done within the framework of the global capitalist system, as it is today, there would be inevitably residual problems, which have not found answers as yet due to the limits and flaws of the system.

As John Kennath Galbrith pointed out "We have perhaps the most brutal from of social discrimination; some as a matter of course, are awarded the full enjoyment of life, many are not."

At present we are able to look at the best possible options only. Hopefully the thinkers of our time and perhaps of the future would find answers and solutions that would enhance the chances of humanities progress and concern for the planet and limited resources. 

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