Lot to gain from South Asian connectivity: WB economist

Sanjay Kathuria

Bangladesh stands to gain substantially from greater economic integration with its South Asian neighbours, experts said yesterday.

“For Bangladesh, there are massive opportunities for trade and foreign direct investment,” Sanjay Kathuria, lead economist for the World Bank's South Asia region, said at the South Asia Economic Conclave in New Delhi.

The Confederation of Indian Industry (CII), a not-for-profit organisation, organised the first-of-its-kind three-day event with support from the Indian government and the WB, aiming to achieve inclusive growth through deeper economic integration in South Asia.

With the motor vehicle agreement among Bangladesh, Bhutan, India and Nepal, the country can increase its exports manifold, he said.

The reason is, the country has “very competitive” labour. No other country in South Asia does mass manufacturing as efficiently as Bangladesh, he said.

“You will not find factories of Bangladesh's size anywhere else in South Asia: 5,000 people under one roof? That's unique to Bangladesh.”

To best leverage that, focus needs to be put to the border areas such that goods can reach rapidly from the factories to the ports.

The agreement gives the country an opportunity to improve its own internal infrastructure as well.

“You can kill two birds with one stone,” Kathuria said, adding that connectivity is a big area for improvement in the region.

Generally, South Asia is very poor on logistics and lags behind its East Asian neighbours.               

Kathuria said FDI and trade go together: if Bangladesh can increase its trade, the other will follow.

The country can also team up with Bhutan, Nepal and the northeast of India to solve its own energy problems, he said.

Meanwhile, the event, which will wrap up on September 30, will see a public-private dialogue for the first time with all the key stakeholders -- policymakers from the region; multilateral organisations; diplomats and leading civil society and media leaders -- from South Asia on how integration can be enhanced.

According to CII, the conference will highlight how unshackling regional trade and investment opportunities could be one of the main sources of sustainable economic growth.

An official of the WB said the integration is a must for the development of South Asia, but which country will benefit how much would depend on the negotiation capacity of the respective country. But all countries will benefit from integration.

At present, trade amongst the Saarc countries is only 5 percent of the total trade by its member countries, according to CII.

By comparison, the EU countries do twice as much internal trade (over $800 billion in 2013) as exports.

The right policies could unleash at least $100 billion of trade annually in the short-term.

The CII said the desire to unite the region through economic policies has never been stronger.

The discussions will be beyond the usual political rhetoric of India-Pakistan political relations, which has been a key reason why this region is the least integrated in the world and home to the maximum number of impoverished people.

Investment has been the major driver in a number of successful regional economic integration. The EU is by far the best example of where intra-regional investment helped facilitate the deeper integration.

Intra-regional FDI in South Asia accounts for just 4 percent of total inward FDI, according to CII.

There is significant potential for enhancing regional cooperation in the area of direct investment, both for expanding intra-regional investments, and for attracting FDI from outside the region.

Besides investment, the roundtable will discuss ways to increase cooperation in power, education and health in the region.

Tofail Ahmed, Bangladesh's commerce minister; Nirmala Sitharaman, Indian minister for commerce and industry; Piyush Goyal, Indian minister of state for power, coal and industries, will take part in the discussions.