Enhancing Cooperation in South Asia | 19 Jan 2023

South Asia is the southern region of Asia, which is defined in both geographical and ethno-cultural terms. The region consists of the countries of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

India's vision of regional economic integration in South Asia is based on enhanced intra-regional trade, investment flows and regional transport and communication links in South Asia. South Asian Association for Regional Cooperation (SAARC) and India’s Neighbourhood First Policy are the two vehicles in this process.

Culturally, there are many similarities, but there are a number of cross-sub regional challenges like political and economic instability (Sri Lankan Crisis and Afghanistan Crisis) , high inflation, depleting foreign exchange reserves (Pak’s forex reserves have fallen to USD 4.3bn -its lowest since 2014) and domestic unrest that continue to simmer in the South Asian region, which hosts around a quarter of the world's population.

What is the Benefit of Regional Cooperation for South Asia?

• Economic Cooperation:
  • Regionalism can lead to increased trade and investment among countries in the region, which can lead to economic growth and development.
• Political Stability:
  • Regional cooperation can lead to greater stability and security in the region by promoting dialogue and understanding among countries.
• Cultural Exchange:
  • Regionalism can foster greater cultural exchange and understanding among the people of South Asia, which can lead to greater tolerance and harmony in the region.
• Infrastructure Development:
  • Regional cooperation can lead to greater investment in infrastructure, such as transportation and energy projects, which can improve connectivity and economic growth.
• Regional Integration:
  • Regionalism can help to integrate the economies of the countries in the region and make them more competitive in the global market.
• Shared vision:
  • Regionalism can help the countries of South Asia to develop a shared vision for their future and work together to achieve common goals.

What are the Challenges with Regional Cooperation in South Asia?

• Low Inter-Regional Trade:
  • South Asia’s intra-regional trade is the lowest globally, constituting only 5% of the region’s total trade. The current economic integration is just one-third of its potential with an annual estimated gap of 23 billion dollars.
• External Influence in South Asia:
  • Smaller neighboring countries are quite predictable in seeking to balance India's influence through closer relations with external powers, in the past this was the US at the moment it is China.
  • Recent Chinese actions and policies in South Asia as well as its maritime neighbours, including Indian Ocean island nations, have made it necessary for India to take its neighbours very seriously.
• Territorial Issues:
  • Territorial disputes in South Asia remain a challenge to the peace, stability, and prosperity of the region.
    • Of all interstate disputes, those over territory tend to be more likely to lead to armed conflict.
• Inefficient Management of Global Supply Chain:
  • South Asia’s international trade integration is lower than the global average, and it is way less integrated into global value chains compared to East Asia.
    • The countries have abysmally low exports due to the low productivity of many countries in this region.
• Political Tensions:
  • Historical conflicts, border disputes, and ongoing political tensions between countries in the region make it difficult to foster cooperation and regional integration.
• Economic Disparities:
  • Significant economic disparities between countries in the region make it difficult to establish a level playing field for trade and investment.
• Different levels of Economic Development:
  • South Asia is home to some of the world's most economically advanced countries as well as some of the least developed. This makes it difficult to establish a common economic agenda.
• Security Concerns:
  • The region is plagued by various security concerns, including terrorism, extremism, and separatist movements, which can make regional cooperation and integration difficult.
• Small Size of Markets:
  • Most of the countries in the region are small in terms of population, area, and GDP. This makes it difficult for businesses to operate and for regional trade to thrive.
• Lack of Trust:
  • Lack of trust between countries in the region is a major obstacle to regional cooperation and integration.

How India can Lead South Asia Development?

• Boosting Regional Trade: India can leverage regional trade, connectivity and investment, and strengthen the South Asian Free Trade Agreement as a game-changer for the region.
  • Galvanizing economic energies, which would lower barriers to intra-regional food trade and encourage regional supply chains.
• Providing Ecological Blueprint: South Asian countries can benefit from India's eco-blueprint by focusing on the protection of biodiversity and responding to the climate crisis. The linkage between effective governance and sustainable development also needs to be acknowledged in South Asian countries.
• Highlight the Need of Food Security: Regional food security is another area that India could take a major initiative in with an eye to the future and can be an integral facilitator and component to this economic bloc for food security.
  • Increasing the capacity of the SAARC Food Bank that currently stands at less than 500,000 MT.
• Promoting Sub-Regional Initiatives: India can increase the convening capacity of sub-regional initiatives such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.
  • The border regions can be effective partners in shaping India’s regional engagement by steering sectoral regional dialogues on cross-border trade, transport and health.
  • By extending necessary assistance, India can strengthen its position in the region and achieve both economic and strategic depth vis-à-vis China.
• Voice of South Asia in International Forums: To promote the interests of South Asian nations as a group, India can be the voice of South Asia in international forums. A secure regional environment will also help India reach its ambitious development goals.

What can be the Way Forward?

• Strengthening Existing Associations: Existing associations like South Asian Association for Regional Cooperation (SAARC) haven’t been able to significantly advance regional cooperation here.
  • Delinking domestic sentiments from the economic rationale, engaging in diplomacy to allay concerns should be the way forward for South Asian countries which do have qualms about the integration.
• Towards Self-Reliant South Asia: Self-reliance of South Asia range from offers of freer transit trade through the region, the development of supply and logistic chains, digital data interchange, single-window and digitized clearance systems, risk assessment and minimisation measures, wider use of trade lines of credit (presently abysmally low), denser connectivity, smoother cross-border inspections.
• People-to-people Connect: Priority should be given to people-to-people connections and deep cultural affinities for sustained cordiality and stability. Further, focus should be given to prompt delivery of multilateral commitments for the overall development of the region.
• Countering Terrorism: Countries in the region needs to improve their cooperation on intelligence sharing and law enforcement, in order to more effectively target terrorist networks and disrupt their operations.
  • Additionally, addressing poverty and inequality, and promoting economic development and opportunities for marginalized groups, can help to reduce the appeal of extremist ideologies.