Published in The Financial Express on Sunday, 31 August 2014.
Trust deficit major hurdle to regional integration
Experts say at SANEI annual confce
FE Report
Integration of regional economies that can help attain inclusive growth in South Asia largely depends on the political will of the respective governments, experts told a regional conference in Dhaka.
They said regional connectivity is vital for ensuring food security, job creation, better nutrition, education, skill development and sanitation.
Noted economists, academicians and policymakers of the region made these observations at the 13th annual South Asia Network of Economic Research Institute (SANEI) conference at a city hotel Saturday.
The theme of the two-day conference is ‘Regional integration in South Asia’.
The Bangladesh Institute of Development Studies (BIDS) organised the conference with the financial support of the Bangladesh Bank and the Ford Foundation.
Finance Minister AMA Muhith attended the programme as the chief guest while Dr Mashiur Rahman, economic affairs adviser to the Prime Minister, was special guest at the inauguration programme. T N Srinivasan, emeritus professor of Yale University, the USA, chaired the inaugural session.
Mustafa K Mujeri, coordinator of SANEI and BIDS director general (DG) and Annie Soriot, deputy director of programmes, Global Development Network (GDN), India also spoke at the programme.
A book on ‘Adjusting to Global Economic Volatility: the case of South Asia’ published by Academic Foundation, New Delhi in association with SANEI was released in the session.
Speaking at the programme, Finance Minister AMA Muhith said the country has been experiencing peace during the last eight months despite the fact some threats are still there.
He described the country’s success in the development of communication sector and openness of its economy as facilitators of regional economic integration.
Mr Mujeri said the regional initiative aims at establishing strong linkages between the South Asian countries.
“Bilateral research would also be carried out under the initiative to help the countries,” he said.
Ms Annie underscored the need for building research capacity and better global governance for regional economic development.
She said research will not solve problems but can show the right path to the policy-makers.
Professor Srinivasan said knowledge integration has no regional boundary.
“Multilateral integration is also necessary with regional integration,” he said.
The two-day conference will have a series of sessions including public lecture on ‘Regional integration for inclusive growth in South Asia’, panel discussion on its key policy issues, technical session on intra-regional trade in South Asia, SAFTA and cross-border trade in South Asia.
The plenary session of the SANEI focused experts’ views on prospects of regional integration.
Experts said, trust deficit and inward-looking political compulsions along with a similar institutional deficit in the South Asian countries are the key reasons blocking efforts towards attaining a meaningful regional cooperation.
Asoka Gunawardena, Executive Governor of Marga Institute, Sri Lanka said there is a common perception at the national political level in all South Asian countries that economic integration may bring risks and threat to the nations’ political sovereignty.
But in doing so, they forget the benefit of ‘subsidiarity’ of such integration which has led to the rise of the European Union (EU) as an economic power. He said the SAARC has signed many agreements to expedite regional integration but has not followed up those for implementation.
He highlighted conflict between subsidiarity and national interest and said only national dialogue in democratic environment may remove the fear, taking up non-contentious issues at first on the table.
Dr M Ali Khan, Abram Hutzler Prof of Political Economy at John Hopkins University, USA also spoke on the occasion. BIDS Director General and Coordinator of the seminar Mustafa K Majeri coordinated the discussion.
Prof Emeritus TN Srinivasan of Yale University said, “India and Pakistan are lavishly trading with Dubai but they are avoiding each other. Regional trade is also at its low. Bilateral trading could help the countries achieve even faster GDP growth.”
Radika Kumar from India said the region could gain much more from integration and it should therefore put ‘economic consideration above political compulsion’. The region needs more jobs and spurt to poverty reduction activities. There should be common strategy on developing trade and industries to achieve these goals, he said.
But Rathin Roy, director of National Institute of Public Finance and Policy, India believed inequality among the regional countries is working critically against achieving a meaningful formal integration. But informally people are trading across the border, he said.
He said big countries like India have no permanent friends and enemies; it largely goes by its own economic interest. It partly explains why trade between India and China is overlapping and why the Teesta water sharing agreement is not taking place. He expressed the hope that the deal would be inked soon.
Bishnu Dey Pant, Executive Director of Institute for Integrated Development Studies, Nepal wondered why Nepalese living in India should pay Rs 16 on their per-minute mobile phone call to their homes while it cost Rs 1.0 to make a phone call to the USA. It showed the need for closer integration to benefit the common people, he said.
Prof Mustafizur Rahman of CPD said northeastern Indian states of India are very close to Bangladesh and yet those are not opening up to the country.
Rathin Roy said India is spending several times higher to reach goods and services to the area and its integration with Bangladesh’s market could enormously benefit the two countries.
In the SANEI lecture paper, Mr Pasha gave some possible explanations on not boosting intra-regional trade within South Asia despite the presence of a regional trade agreement and many FTAs.
Trade barriers between India-Pakistan, sensitive list of India that is not benefiting Least Developed Countries (LDCs) and persisting non-tariff barriers in the region are pointed out in the paper.
In 2013-14, Bangladesh and Nepal’s exports to India have actually fallen by 17 per cent and 4.0 per cent respectively, it said.
The striking conclusion is that there has been a sharp increase in inequality between the two groups of countries, it said.
In 1980, the difference was 21 per cent to 28 per cent, depending upon the measure of per capita income used. By 2012, the per income of the low middle income countries was over 102 per cent of that of the low income countries and the gap was over 50 per cent.
“This sharp increase in regional disparities within South Asia has seldom been highlighted,” the paper said.
It also said Pakistan reduced the number of poor by 53 per cent between 1990 and 2012, the corresponding figure for Bangladesh is 17 per cent and for India 14 per cent.
In the second session a paper on ‘Regional integration for inclusive growth in South Asia’ by Professor emeritus of Lahore School of Economics, Hafiz A Pasha, was presented presented by M Ali Khan, Abram Hutzler professor of political economy of Johns Hopkins University, USA.
The paper has placed an eight-point proposal for greater global integration including regional connectivity, cross-border trade in energy and trade in services and goods.
It also suggested overcoming bilateral tensions to bridge the trade gap within the region and global economy.
M Syeduzzaman, former finance minister, chaired the session.
He said political economy plays a significant role in success of regional agreements concerning South Asian countries.
“Country-specific programme is needed to ensure food security, nutrition, employment and other issues,” he said.