Feb. 16, 2007 - South Asia's recent high growth has created a momentum for regional integration. South Asia is the least integrated region in the world. Closer integration can be an effective tool in addressing energy shortage, improve connectivity, and promote peace and stability.
Facts: - South Asia is the least integrated region in the world. - Intraregional trade is less than 2% of GDP, compared to more than 20% for East Asia. - The cost of trading across borders in South Asia is one of the highest in the world. - Energy trade in the region is low. Only India, Bhutan, and Nepal currently trade electricity. - Only 7% of international telephone calls are regional, compared to 71% for East Asia.
While there is a broad consensus on the key challenges that South Asia faces to sustain growth, there are differences in views on the role that regional integration should play in South Asia. This report looks at several aspects of South Asia’s growth and how regional integration can contribute to growth. The report, which is based on the First SAARC Business Leaders Conclave, is the outcome of a knowledge partnership between the World Bank and the Chamber of Commerce and Industry (SCCI), which is the apex business organization of South Asian Association for Regional Cooperation (SAARC).
Chapter 2: Economic Growth in South Asia: A Growth Accounting Perspective
South Asian economies have achieved impressive rates of economic growth since the 1980s. India, Pakistan, Bangladesh, and Sri Lanka have grown more rapidly since 1980 than any other region except East Asia. However, unlike East Asia, these countries have not seen particularly high rates of investment. This chapter argues that South Asia will need to increase rates of investment to achieve the desired growth. Strong, sustained growth also requires countries to increase the efficiency with which they use domestic factors to produce goods and services.
Chapter 3: Improving the Climate for Investment and Business in South Asia
Recent growth in the South Asia region has been impressive, although inconsistent across the region. To understand why growth is higher in some locations than others and to highlight ways to foster higher growth, this chapter looks into the region’s investment climate, and how the institutional, policy, and regulatory environment affects the ease of doing business.
Chapter 4: Property Rights Institutions, Contracting Institutions, and Growth in South Asia: Macro and Micro Evidence
This chapter examines how countries in the South Asia region fare in terms of their institutional quality and the consequent development impact. Despite recent rapid growth, countries in South Asia have not yet reached the per capita incomes typical of countries with similar levels of institutional quality.
Chapter 5: Improving Technology, Skills, and Innovation in South Asia
Higher education and innovation are becoming more critical for countries to be able to benefit from the increasingly globalized international environment. This chapter proposes some key actions that countries in South Asia need to take to strengthen technology and innovation capabilities to improve economic performance and welfare.
Chapter 6: Power Sector Reform, Private Investment, and Regional Cooperation
This chapter examines how modern infrastructure, particularly electricity, telecoms, and roads, is critical to economic development. If there is a surplus of infrastructure, more investment adds little to total output. But if there is a deficit, which is evident in South Asian countries, then shortages constrain total output. The return to reducing that deficit can be very high in South Asia.
This chapter looks into unilaterally and multilaterally trade liberalizing choices South Asian countries are faced with. It argues against expending scarce political capital on turning the South Asia region into a Free Trade Area. The chapter suggests that if the countries in the region want to pursue the option to form a trade bloc, they must look toward an Asia-wide bloc.
Chapter 8: The Role of Trade Facilitation in Export Growth and Inter-regional Trade
Trade facilitation encompasses a broad range of initiatives to improve the delivery of exports. This chapter argues that it is important to coordinate strategies for trade growth with initiatives to improve logistics. It explores the performance of trade corridors and highlights regulatory constraints to trade. The chapter also reviews roads, railways, ports, and shipping services in South Asia.
Chapter 9: Cutting Trade Costs and Improved Business Facilitation in South Asia: Estimating the Benefits of Reform
The overall trade performance of countries in South Asia since the 1980s has been poor relative to other regions, aside from increased exports of services. The low level of intraregional trade has contributed to weak export performance. This chapter suggests that collective and concrete action to lower trade barriers, advance domestic reform, and support capacity building is increasingly important. In particular, measures to facilitate trade and lower logistics costs in South Asia are among the most important steps to promote intraregional trade and economic integration.