SAARC can benefit from regional investment and supply chain strategy

MTI Consulting, the only strategy consultancy with its own operations in the four main SAARC capitals of India, Pakistan, Sri Lanka and Bangladesh, have in recent times taken the thought leadership role for how countries strategise in an increasingly globalised trading environment.

Last year, President Musharraf of Pakistan awarded MTI the competitively bid task of developing the Country’s export strategy and trade development structure to MTI Consulting, as part of which MTI has undertaken extensive research into Country Strategies.

On the eve of the SAARC Conference in Sri Lanka, MTI has continued its thought leadership role into the optimising regional co-operation, thus sharing with the regional media their research findings and strategic thoughts on this economically critical subject.

Q: What is the attractiveness of SAARC to global markets?

MTI: The rapid economic growth in Asia will bring about a historic shift in the core of the world economy.

The catastrophes of World War 1, the Great Depression, and World War 2 did not shake the dominance of the North Atlantic economies, though they did shift the balance of geopolitical influence away from Europe to the United States.

The American century is predicted to end sometime in the second quarter of the twenty-first century, when Asia becomes the hub of the world economy, in the sense of producing more than half of the world’s income.

The end of the American century will not be the result of any collapse of America’s well being but rather the rise of Asia’s economic power. Within this South Asia plays a predominant role accounting for 1.5 billion of the world’s population and $1.4 trillion worth of output.

The end of the American century will not be the result of any collapse of America’s well being but rather the rise of Asia’s economic power.

Q: Given the opportunity, should individual SAARC countries pursue individual strategies or have a collaborative approach?

MTI: Individual countries will always have (and should) pursue their individual country strategies, however there is a compelling case for regional co-operation (SAARC in this case) as regards developing a regional strategy to attract investments, tourism and as a supply chain hub.

Despite obstacles such as conflict, corruption and high fiscal deficits in some countries, South Asia has achieved impressive economic growth and poverty reduction in the past decade. If this growth accelerates to 10 percent a year, the region could see single-digit poverty rates by 2015.

A comparison with East Asia’s sustained 7-10% growth rates - shows that South Asia’s export-orientation, inflows of foreign direct investment, workers skill levels, infrastructure and ease of doing business are also substantially less advanced than East Asia’s. South Asia’s savings, investment and productivity are also lower.

These challenges suggest a set of policy choices for South Asian countries aimed at increasing investment, productivity and the quality of labor, while addressing the problem of lagging regions and poor service delivery.

Although the least integrated region in the world, South Asia can benefit from regional cooperation in trade, water and energy, among other things.

The enthusiasm and sincerity that characterizes South Asia today makes us optimistic that some, if not all, of these challenges can be met and the region will achieve sustainable economic growth leading to a significant reduction in poverty.

A compelling case for a regional strategy to attract investments, tourism and as a supply chain hub

Q: Why and what benefits will SAARC receive from such co-operation?

MTI: There are many reasons why such a strategy will benefit SAARC: On the economic front a collaborative approach will help poorer countries like Nepal, Bhutan, Bangladesh and Maldives.

The South Asian Free Trade Area (SAFTA) agreement can facilitate zero customs duty on the trade of practically all products in the region. In addition, exporters can benefit with regard to tariff concessions, especially the manufacturing sector.

With the exception of India and Pakistan (to some extent), the other countries lack the critical mass needed by the global market, be it in terms supply chain capabilities or consuming markets.

With the exception of India (with due respect to other SAARC member countries), the other SAARC countries are yet to establish a strong brand with a global appeal (of course there are niche exceptions like Bangladesh Apparel, Sri Lanka Tea, Maldives Tourism).

Increasingly, our Global Customers (be it multi-nationals or national majors) are looking for a holistic, integrated supply chain solution that needs to cut across conventional geographical boundaries.

Even at a consumer market level, most long-haul tourists would first select a region and then pick the micro destinations.

The cost of creating global awareness is increasing and is prohibitive in some cases.

Some of the regional countries may have severe country brand image issues, which may be partially overcome by a regional positioning.

These reasons, we believe, are sufficiently compelling to support the concept.

Country-brand image issues may be partially overcome by a regional positioning.

MTI Consulting CEO Hilmy Cader