South and South-West Asia remains one of the fastest growing subregions in the Economic and Social Commission for Asia and the Pacific world even though its economic growth has slowed down in 2012 due to a South and South-West Asia Office deteriorating global economic environment. Although the subregion continues to push the world's economic centre of gravity to the East, as India is on track to become the world's second largest economy by 2050, it faces many challenges to making the development process more inclusive and sustainable. These include widespread poverty and hunger, poor levels of human development, wide infrastructure gaps, food and energy insecurity and the threat of natural disasters. In addition, the subregion's least developed and landlocked developing South and South- countries face unusual obstacles. Regional Cooperation The South and South-West Asia Development Report argues that regional cooperation can help solve many of the subregion's challenges and help secure a for Inclusive and more sustainable future. In the decade ahead, the subregion's member States have a chance to cooperate amongst themselves to ensure that their dynamism Sustainable Development and development success are sustained, and that the subregion re-emerges as the hub of East–West trade that it once was. As a development partner of South and South-West Asia, now with a new Office South and South-West Asia dedicated to the subregion, ESCAP in this Report highlights elements of a regional W est Asia Development R policy agenda for harnessing the potential of cooperation in select areas. Development Report 2012–13 The South and South-West Asia Development Report will be an essential resource for policymakers, development professionals, economists, as well as those concerned with development in South and South-West Asia and beyond. eport 2012–13 `695 ISBN 978-0-415-82774-4 9 780415 827744 For sale in South Asia only Printed in New Delhi C-2 Qutab Institutional Area, ST/ESCAP/2644 New Delhi 110 016, India October 2012 http://sswa.unescap.org ESCAP is the regional development arm of the United Nations and serves as the main economic and social development centre for the United Nations in Asia and the Pacific. Its mandate is to foster cooperation between its 53 members and 9 associate members. ESCAP provides the strategic link between global and country-level programmes and issues. It supports governments of countries in the region in consolidating regional positions and advocates regional approaches to meeting the region’s unique socio-economic challenges in a globalizing world. The ESCAP office is located in Bangkok, Thailand. Please visit the ESCAP website at www.unescap.org for further information. The darker areas of the map represent the members and associate members of ESCAP. Regional Cooperation for Inclusive and Sustainable Development Regional Cooperation for Inclusive and Sustainable Development South and South-West Asia Development Report 2012–13 LONDON NEW YORK NEW DELHI First published in October 2012 in association with United Nations for United Nations Economic and Social Commission for Asia and the Pacific, South and South-West Asia Office by Routledge 912 Tolstoy House, 15–17 Tolstoy Marg, Connaught Place, New Delhi 110 001 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 United Nations Economic and Social Commission for Asia and the Pacific, South and South-West Asia Office For sale in South and South-West-Asia only (Afghanistan, Bangladesh, Bhutan, India, Islamic Republic of Iran, Maldives, Nepal, Pakistan, Sri Lanka and Turkey). Available from United Nations Publications in other countries. Typeset by Solution Graphics A-10, Indira Puri Extension, Loni Road Ghaziabad 201 102 Uttar Pradesh Printed and bound in India by All rights reserved. No part of this book may be reproduced or utilized in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system without permission in writing from the publishers. British Library Cataloguing-in-Publication Data A catalogue record of this book is available from the British Library ISBN: 978-0-415-82774-4 UN Publications number: ST/ESCAP/2644 Foreword South and South-West Asia has made large development gains over the past decade, yet remains home to the world’s largest concentration of poor and hungry people, and lags behind in achieving the Millennium Development Goals. Slowing growth in the subregion, and uncertain prospects in developed countries, are exposing the subregion’s structural challenges. Amongst these are the need for more inclusive development, closing wide infrastructure gaps, strengthening food and energy security, diversifying and moving up the value chain in industrial and export structures, and reducing the risks and costs of disasters. In addition, the least developed countries and landlocked developing countries of the subregion face special challenges closing their development gaps and promoting inclusive growth. Regional cooperation in South and South-West Asia can be an important strategy to address many of these challenges, and to ensure the sustainable future of the subregion as a whole. Cooperation can help spur more inclusive growth and drive the elimination of poverty in the subregion. Greater regional integration not only increases intraregional trade, but also promotes investment in the subregion’s supply chain and production networks. This creates more and better jobs and builds productive capacity, particularly in the subregion’s least developed countries. Greater intraregional cooperation can also improve food and energy security, as well as help reduce disaster risk. Through a focus on inclusive growth and regional cooperation, South and South-West Asia can harness its many advantages, including its youth bulge, to grow, within a generation, into the world’s largest centre of consumption — driving global growth and filling the global skills deficit, if the path from education to employment is facilitated, and if better quality, decent work opportunities can be generated by the subregion’s growth. Finally, better connectivity, across the subregion and beyond, can help leverage the subregion’s strategic location at the crossroads of Asia and the Pacific to re-emerge as the hub of East– West trade that it once was. South and South-West Asia Development Report presents an analysis of the development challenges facing the subregion and the ways to turn them into opportunities. It presents a policy agenda for the subregion to emerge as an economic powerhouse and as a model of inclusive and sustainable development. Helping South and South-West Asia sustain this dynamism to meet the development challenges facing the subregion is a crucial endeavour, and is a priority for ESCAP. As a development partner of the subregion, now with a new office dedicated to it, ESCAP stands ready to assist its member States implement this agenda. I am happy to commend this Report, the first major publication of ESCAP’s South and South-West Asia Office to the policymakers and development community at large in the region. Dr. Noeleen Heyzer United Nations Under-Secretary-General and Executive Secretary of the Economic and Social Commission for Asia and the Pacific Preface The South and South-West Asia Office of the Economic and Social Commission for Asia and the Pacific was established in December 2011 inN ew Delhi to serve 10 ESCAP member States: Afghanistan, Bangladesh, Bhutan, the Islamic Republic of Iran, India, Maldives, Nepal, Pakistan, Sri Lanka and Turkey. Guided by the ESCAP programme of work, the ESCAP South and South- West Asia Office focuses on closing development gaps, fostering inclusive development, assisting the subregion’s least developed and landlocked developing countries, as well as strengthening connectivity, transit and trade facilitation, for enhancing regional economic integration. The Office also focuses on regional cooperation for food and energy security, and disaster risk reduction in the subregion. As a part of its work, ESCAP-SSWA has organized regular policy dialogues in the subregion, including the inaugural High-level Policy Dialogue on Development Challenges Facing the Subregion in December 2011, the High-level South Asian Forum on Accelerating Achievement on the Millennium Development Goals in February 2012, Policy Dialogue on Global Economic Turmoil and Asia-Pacific’sE conomic Prospects: Implications for Nepal, organized in Kathmandu in July 2012 and the Expert Group Meeting on Regional Cooperation and Inclusive Development, held in New Delhi in July 2012. ESCAP-SSWA also supported the organization of the Fifth South Asia Economic Summit in Islamabad in September 2012 by hosting a couple of sessions. In addition, the ESCAP- SSWA has also begun offering capacity-building support to the least developed countries of the subregion, the first of which was a technical capacity-building session on Afghanistan’s World Trade Organization Accession held for representatives of the Government of Afghanistan and the private sector in August 2012. ESCAP-SSWA has also initiated a number of knowledge products designed to stimulate discussion among policymakers and analysts in the subregion. These include a monthly newsletter Development Monitor, a Development Paper series, and a Policy Brief series which are all disseminated online through the Office’s webpage, http://sswa.unescap.org. The South and South-West Asia Development Report 2012–13 is the first in a series of biennial reports. Designed as resource for development specialists across South and South-West Asia, the Report presents contemporary thinking and new analysis on select critical development challenges the subregion faces included in the programme of work of ESCAP-SSWA. The Report will be used for policy advocacy purposes across the subregion over the next two years especially in relation to some of the proposals included herein. The Report draws upon the work undertaken by ESCAP-SSWA but also at the ESCAP headquarters in Bangkok as well as within the development community at large.