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Unlocking the Potential of Regional Economic Cooperation and Integration in South Asia

Potential, Challenges and The Way Forward

image of Unlocking the Potential of Regional Economic Cooperation and Integration in South Asia

In the wake of the adoption of the 2030 Agenda for Sustainable Development that commits all countries to pursue inclusive and sustainable development, regional economic cooperation and integration has gained new momentum in South Asia, as the broader Asian region is emerging as the new engine of global growth. Often referred to as the least integrated of Asian-Pacific sub-regions, South Asia’s intra-regional trade accounts for about 6 per cent of its total trade, in comparison with 26 per cent among South-East Asian countries. Despite its strategic location at the confluence of Central and South-East Asia, South Asia has also failed to harness the full potential of connectivity and economic integration with neighboring sub-regions. This report examines how countries in South Asia could capitalize on opportunities to cooperate for closer regional economic integration, in particular in the four broad areas of trade and market integration, regional connectivity, financial cooperation, and collective actions to address shared risks and vulnerabilities. It reveals that trade barriers, infrastructural deficits and political divergences have cost the sub-region direly in terms of lost opportunities for exports, in the amount of USD54 billion in 2014 for example. The report underscores the prospects available for South Asian countries to play a stronger role in broader regionalism in Asia-Pacific as well as discusses the unique role of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in facilitating that process.

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Executive summary

As the persistent slowdown becomes the new normal for advanced economies and as the centre of gravity of the world economy shifts eastwards, regionalism within and between subregions becomes a critical strategy for sustaining the Asia-Pacific region’s dynamism. With intraregional trade stagnating at around 6% of total trade of the subregion, the bulk of South Asia’s intraregional potential remains to be exploited. Broad-based regional economic cooperation could enable far more effective responses to the subregion’s developmental challenges. Under the framework of regional economic cooperation and integration, key priorities for the subregion are intraregional trade and investment flows, transport and information and communication technology (ICT) connectivity, and financial integration, as well as subregionally coordinated policies for addressing shared vulnerabilities such as food insecurity and disaster risks. Progress in these areas would help prepare the subregion to better participate in and benefit from broader regionalism in Asia and the Pacific.

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