A Vision of South Asia Dr. Akmal Hussain Presented at: SAFMA's South Asian Parliament, May 15-20, 2005

South Asia can lead the World
South Asia is at a historic moment of unprecedented potential for transforming their economic conditions and together with other Asian countries playing a key role not only in the global economy but also in the development of human civilisation in the 21st century. For the first time in the last 350 years, the global economy is undergoing a shift in its center of gravity from the continents of Europe and North America to Asia. If present trends in GDP growth in China, U.S. and India respectively continue, then in the next two decades China will be the largest economy in the world, U.S. the second largest and India the third largest economy. However, if South Asian countries develop an integrated economy, then South Asia can become the second largest economy in the world after China. Given the geographic proximity and economic complementarities between South Asia on the one hand and China on the other, this region could become the greatest economic powerhouse in human history. Yet the world cannot be sustained by economic growth alone. Human life is threatened with the environmental crisis and conflicts arising from the culture of greed, from endemic poverty and the egotistic projection of military power. Societies in this region have a rich cultural tradition of experiencing unity through transcending the ego, of creative growth through human solidarity and a harmony with nature. In bringing these aspects of their culture to bear in facing contemporary challenges, the people of this region could bring a new consciousness and institutions to the global market mechanism. In so doing South Asia and China can together take the 21st century world on to a new trajectory of sustainable development and human security. It can be an Asian century that enriches human civilisation.

South Asia and the New Paradigm of Policy
The policy paradigm underlying the last three centuries of economic growth within nation states and political relations between states has been characterised by two propositions that are rooted in conventional social science theory:

(a) Maximisation of individual gains in terms of continuous increases in production and consumption, within a competitive framework ensures the maximisation of social welfare at the national as well as global levels.
(b) The economic and political interests of a nation state are best achieved by translating economic gains into military power. The assumption here is that a state can enhance national welfare by initiating, or being part of an initiative for projecting imperial power over other states.

These propositions now need to be questioned because of the increased

interdependence of people and states on each other and on the ecology within which they function.

Let us briefly critique each of these propositions to lay the basis of proposing an alternative paradigm of policy, as this region develops a leadership role in the world:

(a) First, the idea that competition alone ensures an efficient outcome may not be necessarily true in all cases in view of the work by Nobel Prize winning economist John Nash, who proved mathematically that in some cases the equilibrium, which maximises individual gains, could be achieved through cooperation rather than competition.

The Nash Equilibrium solution may be particularly relevant in the context of India-Pakistan relations. Consider. India, if it is to sustain its high growth rate, will require sharply increased imports of oil, gas and industrial raw materials from West and Central Asia, for which Pakistan is the most feasible conduit. Similarly India's economic growth which has so far been based on the domestic market will in the immediate future require rapidly increasing exports for which Pakistan and other South Asian countries are an appropriate market. Thus the sustainability of India's economic growth requires close cooperation with Pakistan. Conversely, peace and cooperation with India is essential for Pakistan, if it is to achieve a GDP growth rate of 8 to 9 per cent, overcome poverty and build a democracy based on a tolerant and pluralistic society. It is clear therefore that governments in India and Pakistan will need to move out of the old mindset of a zero-sum game, where gains by one side are made at the expense of the other. Now the welfare of both countries can be maximised through joint gains within a framework of cooperation rather than conflict.

The missing dimension of the relationship between competition and welfare in conventional economic theory is that of institutions. The recent work of another Nobel Prize winning economist, Douglas North has shown that if competitive markets are to lead to efficacious outcomes, then they must be based on a set of underlying institutions. He defines institutions in terms of constraints to behaviour for achieving shared objectives within an appropriate combination of incentives and disincentives. We can apply Douglas North's principle to the role of new emerging economic powers for seeking a broad framework of cooperation for the efficient functioning of a competitive global economy.

Our proposed logic of locating competitive markets within broader institutional structures of cooperation at the regional and global levels is necessitated by the integrated ecology of the planet. Global cooperation in environmental protection, poverty reduction and defusing the flash points of social conflict and violence will become the essential underpinning of sustainable development and human security in this century.

(b) The second proposition from conventional social science theory and political practice, that the economic welfare and political influence of a nation state can be best achieved by translating economic gains into military power is also questionable. In the new world that is now taking shape, the influence of an

emerging power will be determined not by the magnitude of the destruction it can wreak on other countries but by its contribution to enhancing life in an inter-dependent world. Thus it is not the military muscle of a state that will be the emblem of status, but its contribution to meeting the challenge of peace, overcoming global poverty and protecting the planet from environmental disaster. Meeting these challenges will require a deeper understanding of the processes that shape nature and human societies, as well as a deeper awareness of our inner self and the shared wellsprings of human civilisation.

Concretising the Vision of South Asia: Some Specific Policy Actions
South Asia stands today at the cusp of history: Between a past, darkened by poverty, disease, illiteracy and conflict, and a bright future, when the great potential of its human and natural resources, and the shared humanity of its diverse cultures can be actualised. The global environment provides a historically unprecedented scale of private capital flows, trade opportunities, information and technology, which if utilised can dramatically transform the material conditions of life of the countries of South Asia.

A vision is efficacious to the extent that it can be concretised. This requires bringing to bear the new consciousness of South Asian cooperation to undertake specific policy actions. Apart from implementing the decision at the Islamabad SAARC Summit to establish a South Asian Free Trade Area, three broad areas for deepening economic cooperation can be identified for purposes of specific policy action:

1. Energy Cooperation within South Asia
2. Increased Investment for Accelerating Economic Growth
3. Restructuring Growth for Faster Poverty Reduction

Specific policy actions for each of the above three areas, are as follows:

Energy cooperation within South Asia
(a) In the context of developing energy markets of these resources, power trading in the region calls for establishment of high voltage interconnections between the national grids of the countries of the region. India, Pakistan and Bangladesh should, also cooperate closely in establishing gas pipelines in South Asia for transporting gas from Iran, Qatar and Turkmenistan and even Myanmar. Specifically the ongoing official negotiations on transporting oil and gas from Iran through Pakistan to India should be brought to an early and successful conclusion. To strengthen the mutual inter dependence between India and Pakistan the recent proposal by Mr. Mani Shankar Aiyar1 for transporting diesel fuel from Panipat to Lahore should also be taken up quickly.
(b) The precondition to create a competitive power market is to allow freedom to generators to produce electricity and distributors to sell in the market. In this context joint developing, trading and sharing of energy should be pursued.

Increasing investment within South Asia through joint venture projects
The key joint venture projects that can be undertaken to increase investment and growth in the region are as follows:

(a) Facilitating private sector joint projects in building a network of motorways and railways at international quality standards through out South Asia. These modern road and rail networks would connect all the major commercial centers, towns and cities of SAARC countries with each other and with the economies of Central Asia, West Asia and East Asia.
(b) Facilitating regional and global joint venture projects for developing new ports along both the western and eastern seaboard of South Asia, and at the same time up-grading existing ports to the highest international standards.
(c) Facilitating regional investment projects in building a network of airports, together with cold storages and warehouses that could stimulate not only tourism but also export of perishable commodities such as milk, meat, fish, fruits and vegetables.

Restructuring growth for rapid poverty reduction
(a) Generating Employment and Incomes for the Poor
Economic growth must not only be accelerated but restructured in such a way that its capacity to alleviate poverty is enhanced for given growth rates of GDP. In this context of achieving pro poor growth, three sets of measures can be undertaken at the country as well as the regional levels:

(i) Joint venture projects need to be undertaken to rapidly accelerate the growth of those sub sectors in agriculture and industry respectively which have relatively higher employment elasticities and which can increase the productivity and hence put more income into the hands of the poor. These sub sectors include production and regional export of high value added agricultural products such as milk, vegetables, fruits, flowers and marine fisheries.
(ii) Regional network of support institutions in the private sector can be facilitated for enabling small scale industries located in regional growth nodes, with specialised facilities such as heat treatment, forging, quality control systems and provision of skill training, credit and marketing facilities in both the country specific and regional economies.
(iii) A SAARC Fund for vocational training may be established. The purpose of this Fund would be to help establish a network of high quality vocational training institutes for the poor. Improved training in market demanded skills would enable a shift of the labour force from low skill sector to higher skill sectors and thereby increase the productivity and income earning capability of the poor. It would at the same time generate higher growth for given levels of investment by increasing factor productivity.

(b) SAARC Educational Foundation
A SAARC Educational Foundation in South Asia may be created on the basis of contributions by individual SAARC member countries and more substantially by multi lateral donor agencies. The purpose of this Foundation would be to create a network of high schools at an international standard in selected districts in each of the countries of South Asia. These SAARC schools could act as role models and set the standards for both the private sector and the individual governments to follow.

(c) SAARC Health Foundation2
In South Asia as much as 43 per cent of the population lives in absolute poverty3. The majority of the poor suffer from diseases requiring urgent medical care but are unable to afford it. The high costs of medical care for those on the poverty line that somehow manage to access it, push them further into debt. Others, who cannot access health care, suffer an income loss due to reduced productivity or loss of livelihood resulting from illness. Indeed illness in South Asia is a major factor that pushes people into poverty, and those already poor into deeper poverty4. Therefore provision of preventive and curative health facilities would be a strategic intervention for poverty reduction, human development and economic growth in the region. In this context I have proposed that a SAARC health foundation may be instituted as a private-public partnership with the following objectives. It can be financed primarily by the private sector, with contributions by regional governments and multi lateral donor agencies:

(i) SAHF District Hospitals: To start with, SAHF would establish 25 general hospitals located in the relatively low income regions (districts) and distributed across each of the countries of South Asia, according to an agreed criterion5. Each hospital in terms of the professional standard of medical care and the quality of humanity with which it is given, would set standards for others in the private/public sector to follow. The doctors, nurses, medical technicians and some of the administrative staff of the SAHF hospitals in a particular country could be drawn from other South Asian countries to signify the commitment of the South Asian community, to the people of each country in the region. The healing and humanity in these hospitals would stand as a living symbol of both the promise and fulfillment of South Asian cooperation.
(ii) SAHF Community Based Preventive Health Care: Each SAHF district hospital would initiate community-based campaigns for preventive health care. These would include facilitating community-based campaigns for hygienic drinking water, sanitation and inoculation campaigns. They would also design and disseminate information packages on disease control during periods of epidemics, and also vital information regarding hygiene and health measures at the household level.
(iii) SAHF Network of Basic Health Units: Each hospital would have a network of 10 Basic Health Units (BHUs) to give maximum coverage of population and convenience of access over a modest sized but flexible health care system. The basic health units in the hinterland of the SAHF district hospital would provide initial assessment of the nature of the disease and filter out patients who have minor illnesses treatable at the BHU level, while referring those with more serious medical problems for treatment at the SAHF district hospital. The BHUs would also act as conduits for SAHF district hospital initiatives in community action and information dissemination for preventive health care. The BHUs inspite of the limited scope of their medical service would, like the SAHF hospitals, set new standards of professionalism and humanity in their medical care.
(iv) SAHF Mother and Child Health Clinics: Each hospital would also have a

network of 10 Mother and Child Health Clinics in its hinterland region. These clinics would provide reproductive health care, pre natal and post natal care to mothers and basic pediatric services to infants.

Conclusion
If South Asia is to play a leadership role in the new world that is taking shape, then it must undertake specific initiatives within a new policy paradigm for pursuing peace, overcoming poverty and protecting the life support systems of the planet. However this requires that governments move out of a mindset that regards an adversarial relationship with a neighbouring country as the emblem of patriotism, affluence of the few at the expense of the many, as the hallmark of development, individual greed as the basis of public action, and mutual demonisation as the basis of inter state relations. We have arrived at the end of the epoch when we could hope to conduct our social, economic and political life on the basis of such a mindset.
This is a historic moment when the people of South Asia have recognised that they have a new tryst with destiny. They are affirming that their security and well being lies not in inter-state conflict but in peace and cooperation. Let the governments hearken to the call of their people.

End Notes
1. This proposal was made by H.E. Mr. Mani Shankar Aiyar, during his key note address at the SACEPS seminar on Regional Cooperation in South Asia in New Delhi, 31st August 2004. Also see Akmal Hussain, ‘A New Beginning in the Peace Process’, Daily Times, September 28, 2004.
2. For a more detailed discussion of this concept see, Akmal Hussain, ‘South Asia Health Foundation’, A Concept Note, 8th November 2004. Note presented to the South Asia Centre for Policy Studies.
3. Mahbub ul Haq, Human Development in South Asia, Oxford University Press, Karachi, 1997.
4. Akmal Hussain, Pakistan National Human Development Report 2003, UNDP, Karachi: Oxford University Press, 2003).
5. This could be either in terms of the proportion a particular country has of the total poor population of South Asia, or the prevalence of disease as a percentage of the national population, or in terms of a broad inter country balance in the distribution of the hospitals, or a combination of the above.