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Wanted! Your proposals on Regional Integration in South Asia

Sanjay Kathuria's picture
Wanted! Your proposals on Regional Integration in South Asia



Home to Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, South Asia is one of the fastest growing regions in the world and yet one of the least integrated. Intra-regional trade accounts for only 5% of South Asia’s GDP, compared to 25% of East Asia’s. Meanwhile, with a population of 1.6 billion, South Asia hosts one of the largest untapped talent pools.

To encourage young researchers in the region who aspire to use their research to inform policy making, the World Bank Group calls for research proposals on South Asia regional integration. Proposals will be carefully reviewed and the most suitable proposals (no more than five overall) will be awarded with a grant based on criteria listed below. An experienced researcher from the World Bank’s research department or an external academic will mentor and guide the young researcher in the implementation of the research.[1]
 

Will South Asia make the most of cheap oil?

Markus Kitzmuller's picture

The world economy today presents itself as a diverse canvas full of challenges and opportunities. Advanced economies continue to struggle towards recovery, with the US on its way to tighten monetary policy as the economy picks up while a still weak Eurozone awaits quantitative easing to kick in. At the same time, plunging oil prices have set in motion significant real income shifts from exporters to importers of oil. Astonishingly, amidst all this turmoil, South Asia has emerged as the fastest growing region in the world over the second half of 2014. Led by a strong India, South Asia is set to further accelerate from 7 percent real growth in 2015 to 7.6 percent by 2017, leaving behind a slowing East Asia gradually landed in second spot by China.



While bolstered by record low inflation and strong external positions across the region, the biggest question yet to be addressed by policy makers in South Asia will be how to make the most of cheap oil.
All countries are net oil importers as well as large providers of fuel and related food subsidies, therefore bound to benefit from low oil prices. However, the biggest oil price dividend to be cashed in by South Asia is one yet to be earned, and not one that will automatically transit through government or consumer accounts. The current constellation of macroeconomic tailwinds provides a unique opportunity for policy makers to rationalize energy prices and to improve fiscal policy. Decoupling external oil prices from fiscal deficits may decrease vulnerability to future oil price hikes – something that may very well happen in the medium term. Furthermore, cheap oil offers a great opportunity to introduce carbon taxation and address the negative externalities from the use of fossil fuels.

The World Bank’s latest South Asia Economic Focus (April 2015) titled “Making the most of cheap oil” provides deeper insights regarding South Asia’s diverse policy challenges and opportunities stemming from cheap oil.
A first major realization is that the pass through from oil prices to domestic South Asian economies is as diverse as the countries themselves, thanks to a variety of different policy environments across countries and oil products. This is also reflected in recent dynamics, seeing India taking determined action towards rationalizing fuel and energy prices, even introducing a de facto carbon tax and beginning to reap fiscal and environmental benefits. Other countries have so far shown less or no enthusiasm towards reform, in spite of significant and/or increasing oil dependency (particularly in electricity generation, one of the region’s weak spots). 

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