Unlocking South Asia’s Potential Small Steps, Big Impact
You have seen them going at each other’s throat so often that to think of something constructive happening among them appears near impossible. If boundaries can get them to have an 24×7 eyeball-to-eyeball confrontation, business is something that can bring about a paradigm change in the way they look at each other. So would an exclusive report developed by Asian Development Bank (ADB) and India’s apex chamber, the Federation of Indian Chambers of Commerce and Industry (FICCI) have us believe.
The report advocating for unlocking the enormous business potential between various countries in South Asia makes the plea that if not for anything else but for the millions of poverty-stricken people there, these countries should come together to take a business-like approach and tap the multitude of opportunities that ultimately would redeem the economic plight of these nations, so often at odds with one another over one pretext or the other.
“Unlocking South Asia’s potential lays in the ‘god of small things’ – small steps that can have an enormous impact. The FICCI-ADB report outlines small, actionable steps in eliminating trade and investment barriers that will go a long way in deepening South Asian economic integration and bettering the business environment,” says Mr Srinivasa Madhur, Senior Director of ADB’s Office of Regional Economic Integration, in a statement issued by the chamber.
The FICCI-ADB report notes that while South Asia countries have made steady progress in cutting tariff barriers, it still needs to address non-tariff issues such as inconsistencies in regulations, and the imposition of product quotas.
Says Dr Amit Mitra, Secretary General, FICCI, “The South Asian region is affected by various barriers to outward oriented private sector led development and regional integration. It is therefore imperative that there is a strong accent on building a robust infrastructure and enhancing connectivity.”
The report, entitled Key Proposals for Harnessing Business Opportunities in South Asia, follows a conference held in New Delhi in November 2009, which looked at challenges to increased trade and investment links in the region, along with possible solutions. The conference was co-organised by FICCI, ADB, Ministry of External Affairs, and the South Asian Association for Regional Cooperation (SAARC).
South Asia, with a potential market of 1.5 billion people, has significant comparative advantages in industries ranging from textiles and garments, to tourism, pharmaceuticals and information technology. But it is also home to half of the world’s extreme poor, with 40 per cent of its total population living on less than $1.25 a day. Intra-regional trade remains modest compared to other parts of the world, and numerous impediments prevent the private sector from taking a bigger economic role.
Cutting non-physical barriers to trade and improving the climate for investment across borders will
encourage greater private sector activity, lifting growth, cutting poverty and strengthening regional integration, the report says. Among the steps it suggests are liberalising a South Asia visa exemption scheme, adopting a regional motor vehicular agreement to speed up the passage of goods vehicles across borders, and streamlining procedures at land customs stations.
The ADB report notes that South Asia has made notable economic progress over the last quarter of century and the private sector has played a pivotal role in the process of transformation. South Asia’s export growth increased five fold from 4.3 per cent to 20.1 per cent between 1990 and 2008. The region also witnessed an average annual GDP growth rate of 5.9 per cent from 1980 to 2008. A host of factor-falling trade barriers, reduced logistics costs, implementation of economic reforms, investment in infrastructure and modernisation of agriculture have contributed to the region’s rapid growth and exports.
Alongside progress in global markets, South Asia has also begun a process of regional cooperation and integration. The SAARC process is also advancing with discussion of a services agreement as a second stage of SAFTA. The report says nonetheless, levels of intra-regional trade remain modest at 4.8 per cent in 2008 compared with other regions. Residual issues relating to business travel, transit infrastructure, non-tariff barriers and intra-regional investment remain impediments to private sector led development in South Asia.
While broad, long-term hurdles exist for countries in the region to consider (e.g., poor physical connectivity, cumbersome behind-the border procedures), there are also specific strategic issues that can be addressed in the short and medium-terms.
The report identified five key focus and action areas to scale the untapped potential. These are: Expanding the SAARC visa exemption scheme; adopting a SAARC regional motor vehicular agreement; dealing with non-tariff barriers; improving land customs stations; and promoting intra-regional investment.
In regard to expanding the SAARC visa exemption, the report observed that the entitled persons list does not include business travelers and other professional groups, quota on visa stickers leads to delays, period of validity and scope of travel permitted was too narrow, and political restrictions impede scheme. It therefore suggested that to enable business to procure visa exemptions more easily, expand the entitled list, increase the number of visa exemptions issued, increase validity terms of visa exemptions and remove restrictions on travel destinations, move from a sticker scheme to an electronic “business travel card” and install electronic readers at airports.
Recommending adopting a SAARC regional motor vehicular agreement, the report observed that there were different standards for acceptable vehicles, cumbersome procedures and lack of knowledgeable staff, cross-border movement was often restricted to border areas only. It recommended establishment of special stations or “fast lanes”, designated for goods transport vehicles, harmonised transit vehicle standards and creation of “vehicle transit cards”, and low-cost financing options to help business upgrade truck fleets, and establishment of joint trucking ventures between countries.
Talking of dealing with non-tariff barriers, the ADB report said regulatory measures were often inconsistent and not mutually recognised among SAARC members; quotas control the quantity of certain imports. It recommended marshal consensus on classifying non tariff barriers (NTBs) for better regulatory cooperation, creation of NTB notification systems and build online inventories for better monitoring, strengthen human and institutional capacities for collection and analysis of data on NTBs, provide technical assistance to firms to help meet technical standards, and establish a dispute settlement mechanism.
As regards improving land customs stations, the report observed that the inadequate roads to land customs stations restricted traffic flow; parking facilities at land customs stations lacked capacity, lack of warehouse and testing facilities for perishable and non-perishable goods delayed shipments. It sought customs procedures at land customs stations not be paper based, building a designate bypass roads into land customs stations, expand size of customs stations, including parking and warehouses and provide basic amenities, establishment of multi-agency testing laboratories (international standard) at major custom stations, where feasible, or authorise nearby laboratories to conduct testing, and promotion of public-private partnerships to fund upgrades.
By K Anjna