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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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Introduction

Regional economic cooperation and integration has assumed a new urgency for countries in South Asia in the context of the adoption of the 2030 Agenda for Sustainable Development. The 2030 Agenda commits countries to pursing sustained and inclusive economic growth for elimination of poverty and hunger and to providing a life of dignity to all. The external economic environment has turned less benign following the global financial crisis, with the advanced economies, traditional locomotives of the world economy, facing a new normal of slowdown. With the emergence of Asian countries as new engines of global growth, regional and subregional economic integration becomes a more viable strategy for sustaining dynamism and generating resources for pursuing the Sustainable Development Goals (SDGs) in South Asia. Shared vulnerabilities of South Asian countries in terms of food and energy security, disaster risks and many different manifestations of climate change also call for regionally coordinated responses.

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