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In 2010, a slower growth of global economy was projected for 2011 and 2012. Though at that time South Asian economies were projected to grow at higher rates, there was caution that their growth prospect would depend to a great extent on how they would be able to address the emerging strains in their respective macro economy, while keeping up the public and private investment momentum.
From this perspective, issues relating to accommodative monetary policy, inflation control, fiscal consolidation, enhancing domestic resource mobilisation, improving effectiveness of public expenditures, exchange rate management, broadening of social security measures, etc., demand greater attention in the coming days.
A number of these domestic economic issues have been conditioned by developments in the international arena and global markets. A global projection suggests that South Asian countries will face increasing competition for export markets and also markets for remittance income. Foreign direct investment (FDI) might favour India, but not necessarily others.
Access to foreign aid is likely to be constrained. Rise of China in the post-crisis global economy may broaden business opportunities for the South Asian economies; however, at the same time, it is also apprehended that China's ascendancy may create new risks and challenges for the regional countries.
A rapid review of the 'Role of Regional Cooperation Towards an Inclusive Growth in South Asia' shows that despite the impressive economic growth, rise in production, employment and productivity, South Asia remains home to the largest concentration of income-poor people across the globe.
This has been compounded by the growth of inequality and the widening of social disparities in every country regardless of the pace of growth and poverty reduction. The success of poverty alleviation in South Asia through growth-sustaining policy reforms, complemented by safety nets for vulnerable groups, is still a bit limited. Attaining the goal of a truly inclusive growth in South Asia still remains as a challenge.
A number of initiatives have been undertaken under the South Asian Association of Regional Cooperation (SAARC) framework including establishment of three-tier mechanism to deal with poverty reduction at regional level, preparation of SAARC Plan of Action on Poverty Alleviation, declaration of 2006-2015 as the SAARC Decade for Poverty Alleviation, and preparation of regional poverty profile.
SAARC Secretariat was mandated to play a proactive role as the focal point for implementing various measures including strengthening SAARC institutions related to poverty alleviation. Thinking of alternate strategies and models for poverty reduction and income inequality in South Asia and the extent of national policies impede developing the much-needed regional approach.
The factual assessment of the role of SAARC in ameliorating poverty in the region, as well as charting of what should be done next, should have been an important agenda.
In fact, South Asian economies are relatively open in terms of trade and investment flows. Yet the sorry state of intra-regional trade and investment reflects the inability to maximise the gains from the South Asian Free Trade Area (SAFTA) which has been in operation since 2006.
The outcome of sub-regional initiatives such as the Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC) is yet to make any noticeable contribution to enhance trade. Rise of bilateralism bypassing SAFTA has become a growing trend among the South Asian countries.
Bilateral economic partnership/trade agreements between India-Sri Lanka, India-Bhutan and India-Nepal have been in place for quite some time. The signing of South Asian Framework Agreement on Services (SAFAS) is likely to open new avenues of trade, but concrete initiatives are required to realise the potential benefits of this agreement.
The bottlenecks for promotion of intra-regional flow of goods, services and capital are well known. Despite attempts to revisit the sensitive lists under the SAFTA accord, major products with export interest of member countries are still trading with non-preferential, Most Favoured Nation (MFN) duties.
Non-tariff barrier (NTB) in intra-regional trade is a major constraint but the progress to remove it is slow. Compliance with sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) requirements remains a thorny issue.
Agreement on service trade, signed during the 16th SAARC Summit, brought in new challenges. India-EU Economic Partnership Agreement, India-ASEAN free trade agreement (FTA), India-Mercusur Economic Partnership Agreement, etc., are likely to have important implications for other regional countries.
Market players as well as business communities in South Asia have been raising their concern with regard to bottlenecks in intra-regional trade and investment such as poor infrastructure for cross-border movement of goods, lack of appropriate trade facilitation, and bottlenecks that discourage intraregional investment.
A number of sectors have been identified (such as manufacturing textile machineries, gas exploration, fertiliser, electrical goods, newsprint, etc. between Bangladesh and India) where there are significant opportunities for intra-regional investment.
TRANSPORT CONNECTIVITY IN SOUTH ASIA AND BEYOND: Trade and investment in South Asia suffer because of high transaction costs which have been rising over time. Cross-border trading procedures are complex and create rent-seeking economies.
SAARC study on Regional Multimodal Transport Study (2007) and ADB study on BIMSTEC Transport Infrastructure and Logistic Study (2008) have identified a number of constraints in regional connectivity such as poor quality of roads for movement of high axel-load trucks, and poor rail connectivity within land-locked countries.
The Bhutan Summit in 2010 once again underscored the importance of development of transport connectivity and transit facilities, especially for land-locked countries. Bangladesh-India Joint Communique (2010) signalled opening up transport connectivity between Bangladesh, Bhutan, India and Nepal.
SAARC Regional Multimodal Transport Study (SRMTS), BIMSTEC Transport Infrastructure and Logistics (BTILS), the Asian Highway Network and the Trans-Asian Railway Network have been identified as strategically important key regional transport projects.
In November, 2014, Kathmandu Summit saw endorsement of an accord on land transport by regional states but one country's reservations causing it to fall through. The subsequent Summit declaration reiterated sub-regional steps as contributory to wider connectedness.
A framework for co-operation was subsequently drawn, with the first quaternary Joint Working Group (JWG) meeting in January 2015.Through regular JWG sessions, representatives explore avenues of co-operation, exchange experiences and best practices, review data sharing arrangements for disaster forecasts and mitigation, besides strengthening transit facilitation measures such as shared border stations on key routes and harmonised customs procedures.
The priority of "connectivity" further embodies seamless electrical grids, shared access to road, rail, air and port infrastructure, and ease of travel. To such ends, a sub-regional Motor Vehicle Agreement that garnered assent in Thimphu would allow buses and later private vehicles with BBIN permits to travel without obstruction across the borders.
Although manifestly of economic intent, the diplomatic weight accorded to this structure as opposed to alternatives in a region considered least-integrated, connote purpose beyond interwoven commerce.
Dr Muhammad Abdul Mazid is a former Secretary to GoB, and former chairman of the NBR.