Regional Economic Integration in South Asia

By Innayatullah

Regional integration is a process in which neighboring states enter into an agreement in order to upgrade cooperation through common institutions and rules. When it comes to regional integration, it usually means that how states in a certain geographic area are economically integrated. There are four types of economic integration. First, the Free Trade Agreement. It is the most primitive type of economic integration. In this, there are reduced tariff rates among the member countries. Second, the Customs Union in which in addition to reduced tariffs rates among the member countries; there is common external rates with non-member countries. Third, the Common Market having both the characteristics of Free Trade Agreement and Customs Union with the free movement of capital and labor amongst the member states. Fourth, the Economic Union which has the same social, monetary, fiscal, industrial and agricultural policy among the member countries with the characteristics of the earlier three types of economic integration. To date, the European Union is the only example of Economic Union which has attained the highest level of regional economic integration. 

During the British Raj in India when the European continent was involved in different types of conflicts and opposing ideologies, South Asia was the most integrated region of the world. From Landi Kotal in Pakistan to Rangoon in Myanmar, there was one currency, one administrative system and one railway and communication system. When the Britishers left the Indian Sub-continent, South Asia started to disintegrate. Today, it is the least integrated region in the world. For example, if someone wants to fly from Karachi to Colombo or Khatmandu, he cannot get a direct flight. First he has to go to Dubai or Qatar and then back into another city of south Asia.

The regional trade in South Asia is also the least in the world which stands for about 5 percent of the Intra-South Asian trade. This is the reason which has led to decreased connectivity among the countries of South Asia. On the other hand, the Intra –EU trade is 63 pc. This increased trade among EU countries has led to unprecedented growth, prosperity and mobility in the European Union. The two main countries of South Asia are India and Pakistan with a population of more than 1.5 billion people. The hostility between these two countries has further led to regional disintegration.

The bone of contention between India and Pakistan is the Kashmir issue. This territorial dispute has caused the strain of relationship between the two countries at all levels. Trade has never been promoted between these countries due to these disputes. Those who call the shots in the country always argue that why to do trade with India? Why don’t we trade with U.S.A? The answer is, trade with India lowers our transportation cost and we have reciprocal demands for the goods of each other. Certain types of dresses and cuisines produced in Punjab may have a greater demand in Indian Punjab but not in the United States of America. Hence, mistrust and hasty decisions have greatly impeded regional trade in South Asia. 

Territorial disputes are not only the epitome of Pakistan-India relationship. Such disputes exist in all regional blocks of the world. Even there are territorial disputes of America with Canada and Mexico. Still, the North Atlantic Free Trade Agreement (NAFTA) has been a success in North America. With the establishment of South Asian Association for Regional Cooperation (SAARC) back in 1985, it was hoped that South Asia will move towards further integration. But, despite successive efforts, this organization has never been able to carve an economic integration more than a Free Trade Agreement. Presently, this organization seemed to be completely obsolete. It seems that South Asian leaders move one step forward and then two steps backward with the result of further alienation. This least regional integration has also led to the least development of the region.

From the above discussion, the fact stands established that South Asian leadership is less interested in regional cooperation and development. The region was once most integrated with a better transportation, communication and irrigation infrastructure built by the British Empire. With the process of decolonization, the region went into regional disintegration. It is necessary for the two great South Asian powers that they should start trading with each other and also with other regional countries so that they can benefit not only from the regional trade but also create common grounds for conflict resolution. The countries which are intertwined by trade and cooperation are more likely to come on the table for negotiations than countries which are completely isolated. It is hoped that intra-regional trade may lessen the hostility between Pakistan and India.

The writer is an MS scholars from University of Balochistan pursing his degree in Economics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s