Relevance: GS-2: India and its Neighbourhood- Relations.

Key phrases: South Asia, economic cooperation, integration, SAFTA, covid-19, socio- economic issues, infrastructure.

Why in News?

• Home to one-quarter of the world’s population, South Asia has been severely impacted by the Covid-19 pandemic. The magnitude has been particularly acute due to the vast proportion of the population living at the margins, fragmented coverage of social protection, pervasive informality in economic activities and employment, and wide gaps in public health infrastructure.

Covid -19 impact on South Asia Region:

• In South Asia, the pandemic is estimated to have led to 62-71 million new poor in 2020 and 48-59 million new poor in 2021.
• Tourism, an important sector in all South Asian economies, particularly for the Maldives, has been severely hit too, destroying the livelihoods of millions dependent on it and related activities.
• The pandemic also severely impacted small and medium enterprises, which are the backbones of South Asian economies and make a substantial contribution to GDP, employment and exports.
• The crisis has accentuated historic inequalities and vulnerabilities, and is likely to reverse years, if not decades, of gains in poverty reduction, undermining the progress made by South Asian nations towards achieving the Sustainable Development Goals.

Why there is Lack of integration in South Asia Region?

• Political crises. Unfortunately, in South Asian region, after-effects of political dynamics with respect to intra-state remains too discouraging. These effects show that undesirable external interference in domestic affairs may cause non-cohesive prepositions not only for a country but also for the region itself.
• Security conditions and conflicts in the region. South Asian region is besieged with manifold regional, interstate as well as domestic clashes either based on territorial reasons or factors entailing faith, ethnicity, or parochial outlook. Historically, such issues cumulatively form a barrier in growing any worthwhile integration in SAARC.
• Social Uprisings & Unrest in the Region. In South Asia, almost all the countries are combatting serious security challenges; be it civil violence, insurgency, separatist movements, extremism or ethno-religious conflicts.
• Lack of comparative advantage: South Asian states have been observed to prioritize extra-regional trade over intra-regional trade. The region’s priority for trade with North America or Europe significantly outweighs its priority for intraregional trade. It is important to note that the exports of South Asian states to other regions consist of relatively similar products: textile, readymade garments, leather, and agricultural products.
• Power asymmetry and geography: One major challenge to regional cooperation is power asymmetry existing within a region. There is a significant power imbalance in South Asia. This has been the cause of tension, mistrust, and a lack of openness among states.

How South Asia can build greener future post-Covid?

Enhanced regional cooperation:

• Among other unfolding opportunities, enhanced regional cooperation provides a platform upon which South Asia can build unique clout.
• Despite the advantages of proximity, structural and cultural familiarities, shared developmental priorities and multiple institutional frameworks for regional cooperation, South Asia is among the world’s least economically integrated regions.
• It has an opportunity to reinvent itself and emerge as an integrated regional economy with improved trade, supply chain and other economic exchanges such as shared infrastructure and cross-border movement of human and capital resources across the region.

Regional Trade Agreement:

• With the ongoing redistribution of global supply chains, a regional supply chain could have significant payoffs. In particular, regional economies must collaborate to implement in full the South Asian Free Trade Area (SAFTA).
• A concerted and shared approach to advancing economic integration can facilitate efficiency-seeking industry restructuring throughout the region to promote economies of scale, specialisation and competitiveness.

New services economy:

• Historic opportunities arising in today’s moments of crisis will not be available once old patterns take root again. For South Asia, one such opportunity can be the emergence of the new services economy.
• Services play an important role in raising export revenues, boosting productivity and generating jobs. Digital technologies such as 5G, robotics, 3-D printing and virtual reality have made services more tradable. The pandemic also boosted the region’s e-commerce sector, which typifies South Asia’s new digital platform economy.
• The new services economy can drive development in South Asia. Market-oriented training programmes to improve the quality of technical skills needed for these sectors will be critical.

A green recovery can strengthen competitiveness:

• South Asian countries have another unique opportunity – to place green recovery at the heart of post-pandemic economic planning and build greener and more sustainable cities. Pursuing a green recovery can strengthen South Asia’s long-term economic competitiveness while helping ensure an environmentally resilient future. Green recovery planning can also foster new collaborations and public-private partnerships within and between South Asian nations.
• South Asian nations can leverage multiple opportunities for cross-country collaboration in their green transition, such as sharing lessons and best practices, joint capacity-building exercises and regional emissions reduction strategies.

Way Forward:

• Going forward, nations need to explore concrete opportunities to integrate green, inclusive and resilient Covid-19 recovery packages into national development plans.
• However, key reforms will be critical for South Asia to pursue a green recovery and growth future, including access to clean energy, green infrastructure and green financing, fossil fuel subsidy reform and pricing, risk-informed urban planning, sustainable infrastructure and transport systems, and local community participation.
• By working with and supporting each other, South Asian countries can enhance global progress on climate action while unlocking new investments and partnerships for their own green transition.
• South Asia has a rare opportunity to not only address the short-term public health challenge but also become an important axis of power and influence in the new global order. The World Economic Forum stands to partner with the region to help shape the contours of a new world order with a better, brighter and more sustainable future for all.

Source: The Print

Mains Question:

Q. Discuss the economic and financial impact of the COVID-19 pandemic in South Asia Region? How South Asia countries can build greener future post-Covid? Critically Examine.