Nepali Times
Economic Sense
Big shark, little fish


People are getting aggressive. The Sri Lanka Investment Promotion Board has been advertising in Indian newspapers and magazines extolling the competitive advantages available to Indian industries that might want to set up shop in the island. How true is this, one wonders. Sure, there are competitive advantages for countries within South Asia, including Nepal, to woo Indian industries with, but how does that play with the rhetoric of South Asian cooperation-within all the restrictions we impose on each other?

The South Asian Association for Regional Cooperation (SAARC) comprises of a big shark and small fish, in terms of population, economic growth and GDP. In the context of the political issues that the region has to deal with, it is worth asking whether this association of supposedly equal partners makes economic sense or not. It is time for some introspection, and analysis of what the economic benefits of the association have been in the past fifteen years, and not simply endorsing or moving to endorse the supposedly brilliant idea of SAFTA. In a business environment where Indian domestic industries are crying foul over Nepali exports to India, and refusing to renew treaties, the Beed does wonder where that wretched spirit of co-operation is when you need, like when Nepali exports are still on the lower side of the decimal as far as the total volume of Indian imports is concerned. Are we simply going after SAFTA, blinkers on, because it has been adopted once and so \'ought to' continue? Do the numbers make sense? Does the economics of it pan out?

Economies cannot be interdependent and benefit from the desire (if not the fact) of close linkages until there is political will and co-operation. It is not possible, for instance, to have regional headquarters for multinational companies. The person who sits in Delhi may not be able to control Pakistan operations, and a person in Islamabad, similarly, will likely have no say in Indian operations. While a company that has regional headquarters in Bangkok can have full control of companies in South East Asia, this cannot be replicated in Kathmandu. How can we even begin to harp, as is our wont, on the NAFTA or ASEAN models of economic growth, when barbed wire fences, embankments and border posts are of perennial and prime importance?

Sure, the potential of this region is immense, and though we don't need to be told it again, the Beed will remind readers that a quarter of the world's population live here. Just consider even tourism, where loosening political boundaries and freeing up transportation-and allowing airlines freer use of each other's airspace-would mean immense gains for all nations. Allow easier and cheaper transportation, and then only will we know what free trade can do. The benefits of cheaper sources of energy cannot be harnessed for the benefit of the region if free flow of power between countries is impossible. If we wire the region-as a region, not as a collection of fiercely independent and self-sufficient countries-it can mean a cheaper source of power for all of us, whether from the waters of Nepal and Bhutan or the natural gas of Bangladesh. Similarly, the potential of free access to the educational institutions and health care systems of each other's countries would reduce the social costs of all our economies. Network the communication system, and global companies would find us almost irresistible.

Perhaps in trying to make the SAARC a success only within its limited political boundaries, we are limiting our thoughts on the economic potential of the region. The WTO and China's accession to it, together with a decade-and-a-half of economic reforms have changed the landscape of the regional economy. It is obvious: for survival, leave alone prosperity, there are few options for our economies than to band together under various arrangements. Whether SAARC and SAFTA are the best is debatable.

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(11 JAN 2013 - 17 JAN 2013)