The collective opportunity of economic integration

Over the past decade, globalisation and Asia's impressive economic performance, driven mainly by strong GDP growth in China and India, have created an unprecedented environment for the growth of intra-regional trade. Pakistan and Bangladesh have also registered impressively high growth rates, accompanied by significant reduction in poverty levels in both countries. All countries of Southasia have attempted – and, in some cases, succeeded – in concluding free trade agreements (FTAs) with each other. Significantly, the Southasian Free Trade Agreement (SAFTA) also took effect last year. Southasia is the world's fastest-growing region; over the past decade, its GDP growth has exceeded 7.5 percent. The political environment for regional cooperation and integration has improved markedly, and is reflected in SAARC's Islamabad and Dhaka Summit declarations. In addition, political pronouncements by Southasian leaders, coupled particularly with events of the past year, have raised expectations that the region could finally, to borrow a term from cricket, 'go for a six'.  

While such are the expectations based on realistic appreciation of economic and political trends, there is no doubt that for the moment the economic advance does not touch all, nor is the trade scenario very rosy. While Southasia accounts for 23 percent of the world's population, its share of global GDP is only around two percent. In 2005, Southasia's share in world trade was only 1.5 percent, one quarter of Southeast Asia's share. Exports of goods and services accounted for only 19 percent of the region's GDP in 2005. Of this, only 6.7 percent was due to services, while the services sector as a whole accounted for more than half of Southasia's GDP. Foreign direct investment (FDI), meanwhile, is still only one percent of region-wide GDP.