Future Regional Integration: Possible Trajectories

Economic Cooperation Between China and South Asia -Hari Roka

Consolidation of SAARC

• South Asian Association for Regional Cooperation (SAARC) was established in 1985 to enhance economic- cooperation and intra regional trade.

• There was a common purpose strengthening economic, social, cultural and scientific cooperation in the region.

• South Asia is a home to more than one-fifth of the world population, there are possibility of increase trade and enhance intra-regional exports.

SAPTA (South-Asian Preferential Trading Arrangements)

• SAPTA was signed on 11 April 1993 to give a boost to regional integration, which came in to operation in 1995.

• Four rounds of exchange of trade concession have taken place.

• South Asian Nations have also signed several trade agreements over the years.

• The intra-regional trade stands as low as 5 percent of the total trade.

weakness

• Lack of trade complementarities • The prevalence of sizeable informal trade.

• Weak governance • Hostile political climate • Limited effective concession • Low level of mutual trust and ethnic and religious conflicts and bilateral disputes • Lack of intra-investment climate

SAARC reality

• Bhutan and Nepal –which are contiguous with India remain strongly dependent on the Indian economy, and are much benefited having a bilateral trade agreement with India and huge large market both in proportion of the supply source and export destination.

• For Nepal and Bhutan India is the gateway to do business with other SAARC Countries.

• India and Pakistan are the largest economy in the region • If only India and Pakistan have the earnest desire to exploit each other’s potentiality wholly and unreservedly.

China’s relation according to Preference

South East Asia including Japan, US, Russian Federation (number one economic partner), Shanghai Cooperation Organization (SCO) of central Asian Countries, Africa, Latin America, EU and South Asia

India’s relation

• US, Middle East, South East Asia, European Union, Latin America then South Asian Countries

China and Investment

• Multinational investment based on its vast supply of Super exploitable labour but under strong state regulation • State regulates monetary and tax policy • State integrating foreign capital to domestic capital • The State Economic sector accounts for 35 percent of the China’s economy and after immediate global recession it is focusing and consolidating again in the state sector.

• China’s State sector is investing in extractive industries in their priority basis

India’s role

• Less focused on consolidating political relationship within SAARC countries • Less priority has given in investment in South Asia, especially in infrastructure building • State role in economy is weakening

Expected future role of India and China

• Confidence building within SAARC removing all kind of disputes especially should focus on settlement of the boundary issues • No interference in internal matter, strengthening mutual relationship • Aid and Investment should focus in infrastructure building • Environment protection • Tariff concession

Nepal’s expectation

• Nepal may be a transit /corridor point between India and China, opening various transit points in which India will have access not only china but Central Asia • Nepal can develop only after both nation will have cordial relationship • China and India can play a decisive role in world’s economic and political development if they move together