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Regional co-operation could generate billions in trade; curb energy shortages - World Bank

WASHINGTON, DC,: South Asia's unprecedented growth, averaging close to six percent per year since the 1990s, has created a new momentum for closer regional integration, Praful Patel, World Bank Vice-President for the South Asia region, said at a press briefing in Washington yesterday.

CO-OPERATION: Sri Lankan President Mahinda Rajapaksa, right, reaches out to shake hands with Nepalese Prime Minister Girija Prasad Koirala, as Pakistan Prime Minister Shaukat Aziz looks on, during the inaugural session of the 14th SAARC Summit in New Delhi, India, Tuesday, April 3. (AFP)

Speaking ahead of the SAARC Summit in New Delhi on April 3-4, where India will takeover the rotating chairmanship, Patel said there are clear signs that policy-makers and the private sector in the region are pushing for closer integration.

Regional co-operation, he said "can be a very effective tool in increasing trade, relieving energy shortages, improving connectivity, increasing investment, and promoting peace and stability."

According to a recent World Bank study - South Asia: Growth and Regional Integration - South Asia is the least integrated region in the world.

Interregional trade is less than two per cent of GDP, compared to more than 20 per cent for East Asia.

Annual trade between India and Pakistan, the bulk of which is routed through Dubai, is currently estimated at US$1 billion, but could be as great as US$9 billion.

In addition, cross-border investments, and the flow of ideas, crudely measured by the cross-border movement of people or the number of telephone calls, are all low for South Asia.

World Bank Chief Economist for the South Asia region Shantayanan Devarajan said regional co-operation will play a crucial role in meeting the infrastructure needs of the region. "Better trade facilitation would reduce substantially the transaction costs of interregional trade.

But streamlining transport and trade systems is also needed to facilitate interregional trade. Many of the region's competitors have dramatically reduced customs and port clearance items.

South Asia risks being left behind."

Firm level surveys of the investment climate have identified infrastructure, particularly power, as a major constraint to growth in South Asia.

In Pakistan, the typical business estimates that it losses 5.6 per cent in annual sales revenue owing to power outages against a reported loss of two per cent by its Chinese counterparts.

In Bangladesh, the most frequent common complaint is the constraint imposed by the poor electricity system.

Regional co-operation can play an important role in addressing the region's energy needs, he said.


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