Economy of Bangladesh

Economic integration of South Asia

Economic integration of South Asia

Md. Joynal Abdin

The Independent on January 10, 2020

The term Economic Integration refers to an arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. Economic integration aims to reduce costs for both consumers and producers and to increase trade between the countries involved in the agreement. Economic integration is sometimes referred to as regional integration as it often occurs among neighboring countries. There are several stages of economic integration namely preferential trading area; free trade area; customs union; common market; economic union; monetary union; fiscal union; political union; and complete economic integration.

A complete economic integration can offer better standard of living with common trade policy, single currency, common monetary policy, together with a single fiscal policy, including common tax and benefit rates, complete harmonization of all policies, rates, and economic trade rules. Thus a group of countries can act as a single entity in terms of international trade and investment among themselves and with others. Major benefits of economic integration are minimum cost of international trade, development of regional value chain, reginal economies of scale, utilization of regional raw materials, international level of specialization, high standard production, skilled human capital development, expansion of employment opportunities, hassle free movement of goods and human among the participating countries. Thus political and security cooperation and common stands in international platforms are the cascade effect of economic integration.

South Asian countries namely the Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka are involved with (inter or intra) about 117 trade arrangements till date. The oldest preferential trade agreement between countries in the Asia-Pacific region titled the Asia Pacific Trade Agreement signed in 1975 by Bangladesh, China, India, Lao PDR, Mongolia, Republic of Korea, and Sri Lanka. Later on India-Sri Lanka Free Trade Agreement was signed in 2001. The South Asian Free Trade Area (SAFTA) between the Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka came into force on January 1, 2006. The Economic Cooperation Organization Trade Agreement (ECOTA) was signed by the Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan in 2003 and came into effect in the year 2008. D-8 Preferential Trade Agreement (PTA) was signed by the Turkey, Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, and Pakistan on 13th May, 2006 and came in effect in the year 2011. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area was signed by the Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand in 2004 and yet to be implemented. The Trade Preferential System among the Member States of the OIC was entered into force in 2014.

Among the 117 trade arrangements made by South Asian countries, the South Asian Free Trade Area (SAFTA) has the every potentials to be progressed further into a customs union, a common market, an economic union, a monetary union, a fiscal union, a political union and complete economic integration. SAFTA has geographic proximity, historical relationship among the people with social and cultural integration. But current political leadership of the major South Asian countries has misunderstanding among themselves. Some of the South Asian political leaders are trying to achieve political gain by using religious sympathy instead of moving forward with the South Asian economic integration process. As a result intra-regional trade between the SAFTA nations are not flourishing as it should be. Due to political crisis between the two major players of South Asia several sub-regional initiatives like BBIN, SASEC etc. were taken.

The Bangladesh, Bhutan, India, Nepal (BBIN) is a sub-regional initiative in Eastern South Asia. It meets through official representation of member states to formulate, implement and review quadrilateral agreements across areas such as water resources management, connectivity of power, transport, and infrastructure.

Similarly Bangladesh, Bhutan, India, and Nepal established SASEC in 2001 to strengthen sub-regional economic cooperation and address development challenges such as persistent poverty and demographic growth. Maldives and Sri Lanka joined in 2014, followed by Myanmar in 2017. The South Asia Sub-regional Economic Cooperation (SASEC) Program agreed to fund two transport connectivity projects in India and Nepal valued at $564.2 million to improve international trade corridors, along with a $20 million energy project in Nepal to raise power transmission capacity in 2018. Since 2001, ADB has helped finance 52 SASEC projects worth $11.36 billion, with about $6.52 billion in ADB financing. SASEC members are following the SASEC Operational Plan 2016–2025 to prioritize gaps in transport and energy networks across the sub-region.

Despite all of the above mentioned sub-regional, inter regional and intra-regional platforms still SAFTA i.e. SAARC is the most potential initiative in South Asia. To explore its full potentials South Asian political leaders have to rethink weather they wants short term political gain or they wats to ensure long term sustainable economic development of the entire region forever. Economic integration not only can offer higher trade volume but it is also one very effective tool of poverty alleviation, economic growth, higher standard of living for the mass people. South Asian Economic Integration could be analyzed in terms of Regional trade volume, share of intra-regional trade, cross boarder investment, inward FDI inflow towards the region, investment in regional projects, cross boarder investment by the private sector, access to regional funds, income from tourism sector, regional common policies, regional common stand in different international platforms, demographic dividend, regional human resource development, increased employment opportunities, easy movement of goods & people, regional value addition of products through intra-regional value chain development.

To achieve all of the above mentioned advantages of South Asian Economic Integration our political leaders shall ignore little political gains to ensure larger long term benefits for the mass people of the entire region instead of sub-regional or inter regional initiatives. Otherwise future will held them responsible for ignoring their concurrent responsibilities to achieve desired standard of living of the mass people through their in-time intervention.

One thing has to be remembered that, current digital movement and e-technological advantage will make it happened today or tomorrow. Amazon, Indiamart, Alibaba, AliExpress, Ajkerdeal or daraz etc. national, regional & international platforms will make it happened in tomorrow’s world. Then the political leaders will be bound to cope will the people’s desire by hook or by crook.

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