Editor in Chief: Moh. Reza Huwaida Monday, May 27th, 2019

South Asia Economic Integration: Challenges and Opportunities

A review of economic history will show that Asia has been an open region fully involved in the world economic system as far back as pre-modern times. Even when China and Japan, during the 15th and 17th centuries, respectively, ostensibly closed their borders to outsiders and external trade, evidence shows that the closure was not complete. It is clear that, over time, Asia had an instrumental role in the global division of labor and its conduct in the world economy was open and outreaching.
Recent global trends have been characterized by an increasing tendency to trade on preferential basis in a bilateral or regional grouping rather than on an MFN basis. Realizing the importance of intra-regional trade, the South Asian region has also embarked upon various processes of regional economic integration. This is evident from their increased economic engagements, bilaterally and regionally both with countries within the region and outside. However, the South Asian regional integration process is fraught with difficulties.
Main challenges
The first is Political instability and war; The second is how to build regional blocs that go beyond trade to include industrial policy, a shared agricultural policy, macroeconomic coordination, and technology sharing. The third is how to ensure that building complementarity among economies does not reproduce the old, unequal division of labor between stronger and weaker economies. The fourth is how to promote a development process that does not reproduce social inequalities at the regional and national levels in the name of capital accumulation. The fifth is how to promote a development process that is sustainable, that is, one that is built on ecologically benign technologies and is not based on ever-rising material consumption per capita, though of course the spreading of material wealth via income redistribution is necessary to bring people out of poverty. The sixth is how to avoid a technocrat-led process and promote instead the democratization of decision-making in all areas of the economy. The seventh, related to the previous point, is how to move away from a statist process and institutionalize civil society participation in all key areas of economic decision making. Civil society must not only provide a check to both the state and the market, but it must be the leading force in the new economics. Finally, these are compounded by some of the structural economic weaknesses within the region. In order to augment the level and scope of South Asian economic cooperation, all these need to be approached in an objective manner. Ultimately, such an exercise would help articulating adequate policy-responses to address these different levels of difficulties.
Main Opportunities
On the other hand the South Asian regional integration process has unique opportunities.
The first is strengthened position for negotiating with other trading blocs; -The second is gradual liberalization’ through a slow increase in levels of competition that allows domestic sectors to adjust and build some comparative advantage before facing global competition;  The third is ease in addressing difficult issues   within a small group of countries compared to a multilateral setting. The fourth is proponents of “regionalism” propose creating “circles of free trade that expand until they finally converge”
Overall, the potentials of regional integration in South Asia are still largely untapped, despite the rapid developments in the last ten years. Leveraging these exchanges to promote economic diversification should feature as one of the strategic priorities for Asian governments, particularly in the context of a fragile global recovery.