Regional cooperation can be the key instrument to promote increased market integration in South Asia through greater flow of goods, services, capital, and ideas. This is appropriate for a region which is the least integrated region in the world, although many countries share analogous cultures and histories, as well as a passion for cricket and curry.
It is also very timely given the global downturn and the slowdown in global trade. Increased regional trade could more than compensate for the potential loss in global trade. It is estimated that increased intra-regional trade could add two percentage points to South Asia's GDP growth. This could raise South Asia's real GDP growth from 6 % to 8 % in 2010. Unlike fiscal stimulus, increased market integration and regional trade could add to GDP growth, without increasing public debt. It is the most efficient and cost effective instrument for South Asia to cope with the global downturn.
It is lagging regions and the small, land locked countries, like Afghanistan, Bhutan, and Nepal, which will benefit most from improved access to the markets of others.
More by Ejaz Ghani here. My take on the gains from regional integration for Nepal here.
