Towards South Asia Economic Union Proceedings of the 7th South Asia Economic Summit (SAES) 5-7 November 2014 New Delhi, India Copyright © RIS ISBN: 81-7122-144-9 Published in 2015 by: Core IV-B, Fourth Floor, India Habitat Centre Lodhi Road, New Delhi-110 003, India Ph.: +91-11-24682177-80, Fax: +91-11-24682173-74 E-mail: [email protected] Website: www.ris.org.in Table of Contents Foreword by Ambassador Shyam Saran, Chairman, RIS ...........................................v Preface by Prof. Sachin Chaturvedi, Director General, RIS .....................................vii Acknowledgements .....................................................................................................ix List of Abbreviations ...................................................................................................xi Part I Summary and Recommendations ..........................................................................1 Part II Agenda......................................................................................................................17 Welcome Address by Prof. Sachin Chaturvedi, Director General, RIS ..........27 Opening Address by Amb. Shyam Saran, Chairman, RIS ...............................31 Inaugural Address by Hon’ble M. Hamid Ansari, ..........................................35 Vice-President of India Vote of Thanks by Prof. Prabir De, RIS ................................................................39 Part III South Asia Economic Union: Challenges and Tasks Ahead.............................43 Selim Raihan Challenges to Regional Services Integration in South Asia ..............................61 Rupa Chanda Services Trade in South Asia: An Assessment ....................................................83 Shahid Ahmed and Sushil Kumar Strengthening South Asia Value Chain: Prospects and Challenges ..............103 Vaqar Ahmed, Abid Q. Suleri and Asif Javed Potential and Prospects of Strengthening Transport Connectivity ..............123 for Regional Economic Integration in Southern Asia Nagesh Kumar Connectivity for the South Asia Economic Union ...........................................141 Prabir De Stimulating Intra-Regional Investment in SAARC: ........................................153 Is a Regional Investment Agreement the Way Forward? Raveen Ekanayake and Nipuni Perera Payment Systems to Facilitate South Asian Integration..................................181 Ashima Goyal Post-2015 Agenda and Regional Cooperation in South Asia .........................199 Sachin Chaturvedi and Sabyasachi Saha Regional Integration and the Post-2015 Framework: .....................................215 A South Asian Perspective Debapriya Bhattacharya Part IV Glimpses of the Summit .......................................................................................241 Foreword Ambassador Shyam Saran Chairman Research and Information System for Developing Countries (RIS) Research and Information System for Developing Countries (RIS) in association with the Institute for Policy Studies (IPS), Colombo; the Sustainable Development Policy Institute (SDPI), Islamabad; the South Asia Watch on Trade, Economics and Environment (SAWTEE), Kathmandu; the South Asia Centre for Policy Studies (SACEPS), Kathmandu; and the Centre for Policy Dialogue (CPD), Dhaka, with support of the Ministry of External Affairs (MEA), Government of India; the World Bank; the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP); and the Confederation of Indian Industry (CII), organised the 7th South Asia Economic Summit (SAES), in New Delhi on 5-7 November 2014. The Summit was inaugurated by Hon’ble Vice President, Shri Hamid Ansari. The theme of the 7th SAES was “Towards South Asia Economic Union”. Several eminent scholars from India and abroad presented research papers at this Summit, and discussed a number of key issues that are relevant from the point of view of deepening South Asian integration. What emerges out of the deliberations is that the creation of South Asian Economic Union (SAEU) would prove to be a milestone in the regional cooperation efforts. The selected papers of the Summit are now presented in a single volume which will become a valuable reference for scholars and researchers as well. The papers of this volume also provide important policy lessons. I gratefully acknowledge the efforts and contributions of RIS faculty and administration in organising the 7th SAES. I would like to record my appreciation of the efforts that have been put by my senior colleague, Prof. Prabir De and his team, in putting together this volume. I wish to thank my colleagues at RIS including Dr. V.S. Seshadri, Vice-Chairman and the Director General, Prof. Sachin Chaturvedi, for their constant support and cooperation. The SAES has provided us new ideas and suggestions in deepening the South Asian integration. I am certain that the Proceedings of the Summit will be welcomed by all those who have an interest in the regional cooperation and integration. New Delhi December 2015 Shyam Saran v Preface Prof. Sachin Chaturvedi Director General Research and Information System for Developing Countries (RIS) RIS has made pioneering contribution to the South Asia integration process. There are several important Studies that have been conducted by RIS independently and at the regional level and also in collaboration with other institutions which have fed into policies undertaken by the respective countries in South Asia. RIS recently brought out its flagship publication “South Asia Development and Cooperation Report (SADCR) 2015” focusing on the theme “Economic Integration for Peace-Creating Prosperity”. The SADCR argues that prosperity achieved through economic integration could prove to be “peace- creating”. Presently, the challenges before the South Asian countries are to identify the ways and means of achieving regional integration on a fast track basis. Our move from SAPTA to SAFTA and now the proposal for South Asia Economic Union is a pragmatic move towards the next stage of cooperation. South Asian countries need to move further from trade liberalization measures alone to regional investment cooperation strategy, production integration, and technology cooperation. In the economic union and common market, macro- economic coordination also assumes greater significance. South Asia Economic Union is going to happen, and shall take its own course. There are definite advantages of moving towards an economic union, but the roadmap has to be well thought out and a strategy has to be in place, which is ambitious but realistic. However, as the deliberations of the 7th SAES indicated, the level of cooperation between the countries would determine the possibility of South Asia community and economic union. Research and Information System for Developing Countries (RIS) organised the 7th South Asia Economic Summit (SAES) at New Delhi on 5-7 November 2014. The Summit was organised in association with the Institute for Policy Studies (IPS), Colombo; the Sustainable Development Policy Institute (SDPI), Islamabad; the South Asia Watch on Trade, Economics and Environment (SAWTEE), Kathmandu; the South Asia Centre for Policy Studies (SACEPS), Kathmandu; and the Centre for Policy Dialogue (CPD), Dhaka, with support of the Ministry of External Affairs (MEA), Government of India; the World Bank; the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP); and the Confederation of Indian Industry (CII). The theme Towards South Asia Economic Union of the 7th SAES was “Towards South Asia Economic Union”. The Summit was inaugurated by the Hon’ble Vice President of India and his speech had set the tone for the 7th SAES. Several scholars from South Asian countries presented their papers at this Summit. The selected papers of the Summit are now presented in the form of Proceedings. I gratefully acknowledge the efforts and contributions of RIS faculty and administration in organizing the 7th SAES. I wish to thank RIS Chairman, Ambassador Shyam Saran for his guidance and support. I would also like to thank Dr. Ajay M. Gondane, Additional Secretary, MEA for the support and encouragement that he very kindly extended. My colleague Prof. Prabir De played an important role in organizing the SAES and this publication. We also thank Mr. M.C. Arora, Director (F&A) and Mr. Tish Malhotra of the RIS Publication Unit for arranging the printing of the volume well in time. I am sure that the Proceedings of the 7th SAES will be a valuable resource to the scholars, practitioners and business community. December 2015 Sachin Chaturvedi viii Acknowledgements The Proceedings of the 7th South Asia Economic Summit (SAES) 2014 on “Towards South Asia Economic Union” has been edited by Prof. Prabir De, Research and Information System for Developing Countries (RIS), who had also coordinated the 7th SAES under the overall guidance of Ambassador Shyam Saran, Chairman, RIS. Editorial assistance has been received from Ms. Sreya Pan, Research Associate, RIS. RIS faculty and administration extended great support in organizing the 7th SAES. We are grateful to Ambassador Shyam Saran, Chairman, RIS; Ambassador V.S. Seshadri, Vice Chairman, RIS; and Prof. Sachin Chaturvedi, Director General, RIS for their guidance and encouragement. We are equally thankful to Prof. S K Mohanty and Prof. Ram Updendra Das for their valuable contributions. We are grateful to the Ministry of External Affairs (MEA), Government of India; the World Bank; the United Nations Economic