South Asia’s Commerce Ministers meet in Thimphu on July 24. Getting there would not have been easy for many of them, with no direct flights between Thimphu and four of the seven capitals. In June, when some of us convened for a regional meeting in Kathmandu, our Pakistani colleagues had to take a 20 hour flight from Karachi to Dubai in order to get to Kathmandu! This is symptomatic of the overall state of economic engagement within South Asia—in trade in goods and services, foreign direct investment and tourism.
South Asian countries’ trade policies remain inward-looking compared to other regions, and there are even bigger barriers to trade within the region. Today, South Asia today is less economically integrated than it was 50 years ago. Figure 1 below shows that intra-regional trade in South Asia accounts for less than 5 percent of total trade, lower than any other region.
A few weeks ago, I travelled to Gujarat to attend the project launch workshop for the second Gujarat State Highway Project (GSHP-II). It is a return visit to Gujarat after my last visit in 2008. I was the task team leader for the first Gujarat State Highway Project (GSHP) during 2005-2008, so I knew the state quite well and I expected to see a lot of changes during this new visit. But when I got there, I was still surprised.
Our team first went on a site visit first. We passed one road section which was improved in 2006 under the GSHP. The road will looked new. My colleague Arnab Bandyopadhyay, who is the Project Leader for GSHP-II, asked the engineers from the Roads and Buildings Department (R&BD) whether they have rehabilitated the road recently. The answer was no. “You must be kidding,” I said to them. “How can an 8-year old road still look so new?” But they were very firm. “No. We have not done any new works on those GSHP roads since they were constructed.”
“I wanted to become a doctor,” Thenmoli said. Her whisper echoed in the room which instantly fell silent. “There was no way even to get started when I was little.” Thenmoli pointed at her daughter, “Vijayalakshmi wants to become a doctor. She is only three. I will make sure she finishes school and goes to college.”
I was visiting a women’s group in Annathur village in Kanchipuram District, Tamil Nadu. This group had in the past been supported by the Pudhu Vaazhvu Project that also provided skills training for young people. I discovered that the group had mostly goat keepers, small dairy farmers, and vegetable growers. All women had managed to improve their lives with the support of the project. Yet our conversation was not about the women’s livelihoods. We only talked about how they could fulfil the dreams of their children.
“They choose computer training Sir…some of them nursing. All of them got a job after the training.” I was amazed, but then again Tamil Nadu is one of the fastest transforming states in India. “How about the boys?” I asked. “They chose driving, Sir, mostly light vehicles. The ambitious ones go for heavy trucks or forklifts.”
“So did any boy choose computer training?” I enquired. “No Sir, none of them did. But we did have one girl who chose driving. Girls are more ambitious!”
Buy a leather case for your wife’s smartphone on Amazon, select shipping from China with an estimated delivery time of 4-6 weeks, and then be pleasantly surprised when it turns up on your Virginia doorstep in 11 days. The marvels of the modern age – of technology, globalization, and shrinking distances.
Where does South Asia stand on export delivery? Figure 1 illustrates that compared to other economic units around the globe, it is a lot more difficult to trade with(in) SAFTA (South Asia Free Trade Agreement). It also shows that bureaucratic hurdles and the time it takes to trade go hand-in-hand. While the region does relatively well on trade with Europe or East Asia, intra-South Asian trade has remained low and costly. It costs South Asian countries more to trade with their immediate neighbors, compared to their costs to trade with distant Brazil (see below)! In fact, it is cheaper for South Asian countries to export to anywhere else in the world than to export to each other (Figure 3). In other words, South Asia has converted its proximity into a handicap.