Regional Integration - Can South Asia succeed?
SAARC REGION: South Asia is the least integrated region in the world,
where integration is measured by intra-regional trade in goods, capital
and ideas. It was even less than Sub-Saharan African region.
This was revealed at a regional seminar held recently (June 27, 2007)
through video conferencing at the Distance Learning Centre Ltd, Colombo.
The regional seminar was attended by representatives from India,
Pakistan, Bangladesh, Sri Lanka, Bhutan and Afghanistan.
REGIONAL INTEGRATION: The City of Colombo
This article looks at how the region could be integrated for us to
benefit from it, taking clues from the discussion. It contains certain
issues transpired in the discussion as well as the authorâ€™s personal
perspectives on the theme.
Making the closer more distant
Dr Ejaz Ghani from World Bank commenting on the World Bank report on
South Asia: Growth and Regional Integration further said that South
Asiaâ€™s cost of doing business is one of the highest in the world.
It was also revealed that the cost of trading across borders in South
Asian is one of the highest in the world.
As an example, it requires 12 documents, 46 copies and 138 signatures
to pass a consignment from India to Nepal, while it required 14
documents, 50 copies and 200 signatures to pass the same from Nepal to
India. No wonder that the trade between the countries had been less.
Regional cooperation provides the geographical proximity to be used
to the maximum. However if there are tariff and non tariff barriers the
geographical proximity will have no value. Distance that is created by
these barriers nullifies the geographical closeness.
Benefits of Regional Integration
South Asian regional cooperation can bring different benefits to
different countries, because of the dissimilarities. Large countries
could achieve a cost-advantage due to economy of scale that they could
enjoy having a larger local market, which could give a price-advantage
to the smaller countries for their imported goods.
Small countries that currently are restricted by their small local
markets could get a larger market to their products and gain economy of
scale in production as a result. South Asian region still having lower
labour costs also could give and get cost and price advantages doing
If one takes this in to account you expect that it would be cheaper
to buy, for example books, from India than UK or USA. But if you go to
bookshops in Sri Lanka you still find books published and printed in the
UK and the USA.
Not that there are no Indian editions of the same book, but the
hidden costs in importing books from India is higher, in spite the less
publisher prices. So, Sri Lankan customers donâ€™t get any
price-advantage, though having a big brother (with low labour cost and
large market that enable him to achieve economy of scale) in proximity.
Putting the Individual Houses in Order
So the message was very clear, all member countries have to put their
houses in order if they want higher integration in the region. Otherwise
all countries in the region would see the rest of the world as better
partners and turn their back to the neighbours. None of the countries
will be benefited by the geographical proximity.
But that would not be the only action one could initiate for better
regional integration. Every member country would be benefited by the
development in their neighbouring countries as then they would be able
to get inputs or markets, for their products, within the region itself.
Classic example was the simultaneous development achieved within the
ASEAN block. We saw the countries in the region emerging as economically
powerful countries almost simultaneously. Other was the Far East, again
after Japan, Korea and China following.
Hence it would be the responsibility of each member country to help
the other countries to develop. This could be done by giving special
concessionary rates for â€śdevelopment driversâ€ť. This could be undertaken
by countries which already have achieved heights in development.
Most of the countries have discriminatory pricing policies,
especially in the service sector. For examples, Indian education
institutes have a different fees structure for international and
Education being a â€śdevelopment driverâ€ť, could these institutes offer
the domestic fees for SAARC students? This way India can help the
neighbours to develop.
This is being practised by Japan in the Far East region and Japanese
concessions even flows beyond the Far East region, sometimes to include
whole of Asia.
Benefits of Exposure
The concessions also exposes a country in a business sense and
developed countries get a competitive edge on business as a result of
this exposure. The concessions of that nature could be good ambassadors
in certain markets.
Once established, they can assure a country, a continuous revenue
stream. So apart from benefiting from trickling effects of regional
development, these concessions could also act as business promotion
India and even Pakistan can play this role of the Big brother in the
region similar to what had been assumed by Japan in Far East and even to
some extent in whole of Asia, investing largely on the Asian Development
Bank and similar endeavours.
It will be too late for India if it waits until Japan (and even
China) entering the region closing down the curtain for India.
Role of Centre and Periphery
In most of the regional integrations you find a center and periphery.
Center is occupied by large or developed countries and the periphery by
the rest. Japan in Far East, Singapore and Malaysia in ASEAN, USA in
Latin America, UK, Germany and France in Europe, Australia in Asia
Pacific are the centres.
The relationship between the center and periphery had been to the
advantage of both, center gaining more, though it looks the other way
around on the surface. Remember during exam times we had similar unions
(study groups). Tutor student representing the center and the recipient
students assuming the periphery.
Though it appeared the recipients were benefited more, the truth was
the tutor student learnt more in the process while the recipient also
learnt to some extent.
However study groups succeeded when there was this center periphery
relationship within (Someone to offer and others ready to accept).
If South Asia needs to look for a more fruitful regional integration
probably India has to play the role of the centre and all member
countries have to put their houses in order. But are we in South Asia
ready to assume our parts of the play? Regional integration will depend
on our readiness to assume the respective roles.