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Global Economy

Why do smaller countries benefit from greater trade with their neighbors?

Sanjay Kathuria's picture
Quay cranes on docks Sri Lanka. Dominic Sansoni/World Bank

The real end winner of NAFTA (North American Free Trade Agreement) is going to be Mexico […]” said then Mexican president Vicente Fox, in 2001. He was referring to Mexico’s gains from trade integration with the USA through NAFTA.

Vicente Fox was right. Mexico has continued to make sustained gains in trade over a 20 year period after signing NAFTA in 1994 with the US, its much larger partner (figure 1).

​Opening up trade is not easy because losses can be immediate, while gains, despite being potentially much larger and more widespread, are often dispersed over time. Producers that may sustain losses from more open imports are often well organized and can hold up reforms quite effectively. Moreover, when one of the countries involved in mutual trade liberalization is disproportionately large, it enables the smaller country lobbies to raise the specter of being swamped by imports from its larger partner.

In the case of South Asia, a history of political differences further complicates deeper trade and economic cooperation within the region. Under these circumstances, opening up trade to neighbors requires strong leadership and a bold vision about the role of trade and regional integration in economic development.

9 New Year Wishes from South Asian Youth

Delilah Liu's picture
Students from Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka in Bhutan expressed their wish for a more integrated South Asia. 
Photo by: Rubaiya Murshed

After the New Year arrives, most of us have the habit of making New Year resolutions. Whether it is a higher salary, a promotion, world travel or even weight loss, some wishes are similar among us and our friends. This year, after meeting the students attending the 11th South Asia Economic Students Summit (SAESM), I realized how New Year wishes can be vastly different from one corner of the world to another. 
Here’s a sample of New Year “wish lists” of the South Asian students who attended the 11th SAESM in Thimphu, Bhutan held between Dec. 23-28, 2014. 
“I hope South Asia can have a similar program to ERASMUS in Europe, where students are allowed to spend one year or a semester working or interning in a different South Asian country."
- Phalguni, Kirorimal College, India

Strengthening the Ecosystem to Mainstream Inclusive Businesses

Pallavi Shrivastava's picture

“Intelligence and capability are not enough; there must also be the joy of doing something beautiful.”
These words by Dr. Venkataswamy tower over us as we enter the flagship Aravind Eye Hospital in Madurai, India, and continue to reflect in the staff’s philosophy during our short visit.

The Aravind Eye Hospital needs no introduction. Tucked in the remote south of India, it is the result of its founder’s vision of eliminating needless blindness. Started in 1976 by Dr. Venkataswamy, the hospital provides accessible, affordable and quality eye care to all sections of the society through cross-subsidization, which creates a commercially viable and sustainable business model.

Aravind Eye Care is an example of a business model innovation, also referred to as an ‘inclusive business model’. IFC defines inclusive business models as those offering goods, services and livelihoods to the poor in financially sustainable and scalable ways. Globally, inclusive businesses are being recognized as important players for development. More entrepreneurs are realizing the bottom of the pyramid (BoP) market as an opportunity to design and implement innovative solutions. As per an IFC study, the BoP represents a potential market of $5 trillion globally - the largest slice of this lies in South Asia, particularly India, given the size of BoP population in the region.

However, inclusive businesses continue to face several barriers in scaling and replicating their success such as lack of access to finance, absence of trained human resources, weak supply chain linkages etc. and above all, an underdeveloped support ecosystem to overcome critical market gaps. Addressing these barriers will not only help capitalize on the growth potential but also mainstream the sector.

World Bank Group is playing a catalytic role in unlocking opportunities for innovative, impact focused businesses. The South Asia Inclusive Business Program has been working towards enhancing private sector participation and inclusive business activity in the region. While working on the high level through systemic interventions, the team is also connecting with organizations on the ground by supporting them to scale sustainably and/or replicate across borders.

Open India: New Interactive App Features State-level Sectoral Data

Vilas Mandlekar's picture
What is the World Bank Group (WBG) doing to help address India's development challenges? And how is the Bank doing in implementing its programs in India's low-income states?  These are some of the questions that are addressed via Open India (, a new web-based app that lays out the WBG's Country Partnership Strategy (CPS), operational projects, and knowledge products in India.

What makes the Open India site unique?
This web app takes a new and different approach in presenting the WBG's partnership strategy and current projects, by doing so in a transparent, interactive, and easy-to-use web platform. It features data visualizations that connect the main engagement areas  ̶   Economic Integration, Spatial Transformation, and Social Inclusion  ̶   with the underlying challenges that are being addressed through the WBG's operations and knowledge products in India.  An essential component of the new Open India web app is sectoral data that quantifies India's development challenges. For example, the range of India's infrastructure and transportation gaps is presented as a data visualization below.

Source: Open India

Bangladesh and Cambodia Collaborate on Higher Education Development

Shiro Nakata's picture
The Cambodian Delegation Visiting the Veterinary and Animals Science University in Chittagong on September 2, 2014

Global partnerships often inspire higher education development. Partnerships were traditionally formed between universities in developed and developing countries. Increasingly important, however, are university partnerships across emerging economies where the common challenges of increasing access and ensuring quality are shared. Tested solutions and good practices may be applicable to address similar challenges in another country. Against this backdrop, there has been a close cross-country collaboration between the Higher Education Quality and Capacity Improvement Project (HEQCIP) in Cambodia and the Higher Education Quality Enhancement Project (HEQEP) in Bangladesh since 2010. Inspired by the success stories of HEQEP in recent years, a Cambodian delegation working for HEQCIP visited Bangladesh from August 30 to September 4, 2014 to learn from the experience of the HEQEP, which has had a few years head-start on implementing a competitive research grant program for universities.