(The
views expressed in this issue
are solely those of the authors)
Dr
Saman Kelegama,
Executive Director
of the Institute
of Policy Studies
of Sri Lanka,
unlike many enthusiasts
of the South Asian
Free Trade Area
(SAFTA) agreement
signed in Islamabad
earlier this year,
presents a thorough
critique showing
what is wrong
with this agreement.
He traces the
history of trade
agreements in
SAARC and shows
how it has been
very slow at developing
any substantive
agreement, except
SAPTA, although
this covered a
limited number
of commodities.
SAFTA has come
at a time when
the trading environment
in South Asia
has seen the emergence
of a number of
parallel regional
and pan-regional
initiatives involving
most South Asian
countries. He
is very critical
of the fact that
the Group of Eminent
Persons (GEP)
Report was not
sufficiently considered
when drawing up
SAFTA. He examines
many clauses in
both the GEP Report
as well as in
SAFTA to show
the weaknesses
in the latter.
He concludes by
saying that, under
the circumstances,
one should not
expect much from
SAFTA.
Professor
Rehman Sobhan,
Chairman of the
Centre for Policy
Dialogue (CPD),
Bangladesh, presents
a well-argued
paper which looks
at aid, donors
and governance-
all in the context
of political economy
where there is
unequal manifestation
and use of power
between donors
and aid recipients.
He presents a
historical account
of how aid allocation
has changed over
the decades, as
donor perspectives
have altered under
the influence
of worldwide market
reforms. 'Good
governance' has
been made a prerequisite
by donors for
aid recipients.
While countries
in South Asia
have moved towards
open-market economies,
he questions the
claims made by
the proponents
of liberalisation
who argue that
there have been
tremendous benefits
to reforming countries.
Sound economic
management (a
pseudonym for
good governance)
has been said
to be essential
for quality growth,
but he argues
that this is very
difficult to measure,
observe and quantify.
Prof. Sobhan argues
that the conceptual
link between governance
and economic performance
is quite unclear.
He also shows
how donors exercise
a considerable
degree of political
influence on some
of the countries
of South Asia
and uncovers the
duplicity of donors
who have never
shied away from
supporting military
regimes. He concludes
by saying that
the South Asian
countries should
be left to design
their own policy
agendas and articulate
their own needs
for aid.
Jayati
Ghosh, professor
of Economics at
Jawaharlal Nehru
University, New
Delhi, presents
a somewhat critical
view, different
from the conventional
wisdom, regarding
the successes
achieved in South
Asia as a consequence
of neo-liberal
reforms. While
South Asian economies,
including India's,
have been stable
in recent years
and not exposed
to the sort of
crisis that took
place in East
Asia, her contention
is that this picture
of improved performance
is illusory. She
argues that there
has been increasing
income inequality
in all the countries
of the region,
which is reflected
in inequalities
between regions,
classes, and urban
and rural areas.
Similarly, she
shows that employment
generation has
slowed down and,
at the same time,
poverty has either
increased or stagnated.
Along with this,
there has been
a decline in manufacturing
and casual and
part-time work
has increased
at the cost of
organised labour.
She examines the
nature of structural
adjustment and
liberal policies
and shows their
impact on these
economies. She
also shows why
neo-liberal policies
are in place.
By demonstrating
that there are
a large number
of beneficiaries
of such policies
and globalisation,
she explains how
these political
groups have been
able to capture
power and enforce
these policies,
resulting in prosperity
for some and impoverishment
for others.
Nisha
Taneja, Fellow
at the Indian
Council for Research
on International
Economic Relations
(ICRIER), New
Delhi, looks at
informal, rather
than formal, trade
in South Asia.
While recognising
that it is not
easy to quantify
illicit and informal
trade, her estimates
show that this
is usually official
trade. She presents
cases of trade
between different
sets of countries
in South Asia
explaining why
this trade takes
place and discusses
the nature of
this trade. Trade
policy distortions,
such as high tariffs,
encourage informal
trade in South
Asia, as do non-tariff
barriers. There
are also institutional
factors which
favour such trade
and include ethnic
ties, informal
money and exchange
markets allowing
trade to proceed
unhindered by
foreign exchange
regulations. There
is also the issue
of complicity
of many vested
interests who
benefit from informal
trade. She argues
that SAFTA and
other bilateral
trading agreements
will lead to a
reduction of informal
trade, although
it will not be
totally eliminated.
Shahid Javed Burki,
a former World
Bank Vice-President,
argues as to why
there should be
greater cooperation
and trade between
countries in South
Asia, particularly
between India
and Pakistan.
His main argument
is that full and
unconstrained
resumption of
trade on the basis
of MFN (most favoured
nation) status
granted by both
Pakistan and India
to each other,
holds a lot of
promise for the
people of South
Asia. With empirical
evidence on why
there should be
regional trade
agreements, he
shows how such
agreements allow
for greater economies
of scale and better
use of resources.
He cites one study
to establish that
the free exchange
of goods and commodities
between India
and Pakistan would
have resulted
in a nine-fold
increase in the
flow of trade
between them over
a five to ten
year period. Identifying
the areas where
trade between
the two countries
would be most
beneficial, he
suggests that
the building of
trade ties between
the two countries,
rather than first
solving the Kashmir
problem, should
be at the centre
of the evolving
détente.
Dr Preet Rustagi,
Junior Fellow
at the Centre
for Women's Development
Studies in India,
writes about the
status and situation
of women in the
countries of South
Asia, warning
us about the problems
that exist in
making such comparisons
in a very diverse
environment. She
uses a number
of important social
and economic indicators
which highlight
the position of
women in these
societies. Women's
work, for example,
is explored despite
the fact that
their contribution
is not properly
recognised or
enumerated in
government statistics.
Nevertheless,
even the limited
formal contribution
to the economy
by women shows
that there is
increasing involvement
in economic participation
across the region.
The majority of
women work in
agriculture and
in the urban informal
sector. Looking
at health and
education indicators,
she shows how
cultural biases
and discriminatory
practices act
as a constraint
for women to access
such services.
Although there
has been some
improvement in
women's status,
including political
participation,
gender discrimination
is still pervasive
in South Asia.
S.
Akbar Zaidi, a
Karachi-based
independent social
scientist, argues
that there are
large trade-related
advantages to
governments and
consumers in both
India and Pakistan
if they start
trading, and many
positive externalities
are likely to
emerge as a result.
The most important
argument made
in this paper
is that given
Pakistan's state
of the economy,
especially compared
to India's, it
is in Pakistan's
interest more
than it is India's,
to have normal
trade relations
with each other.
He shows that,
despite an unfavourable
trade, economic
and political
environment, there
is already substantial
trade between
Pakistan and India
which has even
greater economic
possibilities.
Surprisingly,
India emerges
as Pakistan's
16th biggest trading
partner in terms
of imports and
Pakistan imports
more from India
than it does from
France, Canada,
Switzerland, the
Netherlands, Turkey,
Iran or even Thailand.
He argues that
there is no economic
rationale for
either country
not to trade with
each other, and
that trade between
the two is a win-win
situation for
both.
Dr
Rajesh Mehta,
Senior Fellow
at the Research
and Information
System for Non-Aligned
and other Developing
Countries (RIS)
in New Delhi,
looks at the
reform process
in India which
has led to phenomenal
growth rates
all through
the 1990s. Since
India's was
one of the most
closed economies
in South Asia,
the extent of
liberalisation
that has taken
place has been
quite extensive.
India's growth
rate has increased
to above 7 per
cent per annum,
and on average
was 6 per cent
for the decade
of 1990s. While
many analysts
think that India
has been 'shining'
for most of
the the 1990s,
it is a little
known fact that
India had already
started showing
high growth
rates in the
1980s as well
(the 1980-90
average was
6.8 per cent).
Mr. Mehta shows
that most of
India's social
and economic
indicators have
improved considerably
over the last
two decades
and poverty
levels have
fallen from
55 per cent
in 1973 to around
26 per cent
at present.
India continues
to set high
growth targets
of around 8
per cent for
the Tenth Plan
Period 2002-07,
but requires
additional reforms
in the fiscal
and trade sectors
to sustain current
growth rate.
A.R. Kemal, Director
of the Pakistan
Institute of Development
Economics (PIDE),
Islamabad, presents
a large degree
of data highlighting
the consequences
of Pakistan following
through reforms
that have taken
place since the
end of the 1980s.
He presents a
sector-wise analysis
looking at the
nature of the
reforms undertaken
and the consequences
for each sector
as a result of
the reforms. Despite
numerous interventions
in the fiscal
and monetary sector,
such as increased
taxation, changes
in the structure
of taxes, etc.,
he shows that
total revenues
have not increased
appreciably since
1987 and that
the tax revenue/GDP
ratio has not
moved from 13.8
per cent as it
stood in 1987.
In terms of trade,
he shows that
the degree of
openness of Pakistan's
economy measured
by its trade exposure
has increased
from around 28.3
per cent of GDP
in 1987 to 32.4
per cent now.
His paper has
details about
Pakistan's debt
profile, rates
of investment,
trends in savings,
foreign investment,
employment generation,
poverty, and a
host of other
indicators. He
concludes his
paper by arguing
that if investment
were to take place,
there might be
hope for better
living standards
for most Pakistanis.
Dr Qazi Kholiquzzaman
Ahmad, Chairman
of the research
organisation Bangladesh
Unnayan Parishad
(BUP), looks at
Bangladesh's economic
achievements and
failures over
the last decade
with the initiation
of economic reforms.
He shows that
Bangladesh's growth
rate has increased
in recent years,
although it is
still around 5
per cent at present.
An important reason
for the stagnation
of the growth
rate is a lack
of increase in
investment which
has been around
23 per cent. The
domestic savings
ratio has also
been stagnant,
while Bangladesh's
export regime
is fairly narrow
with five groups
constituting 80
per cent of all
exports. Bangladesh
also suffers from
the same problems
which afflict
other countries,
such as corruption,
inefficient choice
of investment,
and capital flight-
all explaining
low growth. Nevertheless,
since 1999, the
growth rate has
been above 5 per
cent in all but
one year, although
the poverty rate
still stands at
50 per cent- classified
as poor and 30
per cent as 'extremely
poor'. In addition,
income disparities
have also been
increasing.
Dushni Weerakoon,
Fellow at the
Institute of Policy
Studies of Sri
Lanka, presents
a political economy
perspective of
the economic reforms
that have taken
place in Sri Lanka
since the late
1970s. He shows
that there has
been a great deal
of structural
transformation
of the Sri Lankan
economy over the
years and that,
as in the case
of many other
countries, the
services and industrial
sectors have replaced
agriculture as
the main contributor
to the economy.
Sri Lanka saw
two generations
of reforms which
were very typical
and mirror those
that have taken
place in Pakistan.
While the results
under such reforms
tend to be 'mixed',
the more interesting
factor which distinguishes
Sri Lankan economy
from other countries
has been its domestic
war and longstanding
ethnic conflict.
Weerakoon shows
that the costs
of this domestic
war have been
quite severe,
and only after
the peace initiative
and cease-fire
in early 2001
did the economy
pick up some steam.
However, in recent
months, the political
system in Sri
Lanka has suffered
a serious shock
from differences
between the Prime
Minister and the
President, which
have had an adverse
impact on the
economy. With
this impasse likely
to persist, it
seems that the
gains made by
Sri Lanka in the
last three years
may not be sustained.
Dr Gunanidhi Sharma,
professor of Economics
at Tribhuvan University,
Kathmandu, traces
the history of
developments in
Nepal which have
had an impact
on the economy
of that country.
He elaborates
on the relationship
Nepal has had
with its neighbours,
particularly India,
and shows how
this has affected
Nepal's development.
Nepal's economy
has not been doing
very well in recent
years, with growth
rates low or negative,
and with poverty
in excess of 42
per cent of the
population. With
87 per cent of
the population
in rural areas,
agriculture (and
tourism) dominate
the economy. Due
to deteriorating
political conditions
and the ongoing
Maoist insurgency,
there has been
a destruction
of infrastructure,
which has had
a negative impact
on agriculture,
tourism and economy.
Professor Sharma
argues that Nepal's
economic policies
have been India
and urban-centric
which have made
the situation
worse.
Aditya Nigam,
Fellow at the
Centre for the
Study of Developing
Societies (CSDS),
New Delhi, looks
into the caste
factor in defining
social agendas,
both by the proponents
of deprived Other
Backward Classes
(OBCs) and the
modernists who
reject it for
being casteist
and archaic, especially
after the implementation
of the recommendations
of the Mandal
Commission. He
shows how dominant
castes continue
to resist the
inclusion of Dalits
and OBCs into
the mainstream
and alleviation
of their suffering
in the name of
modernity. Similarly,
the author analyses
the inner conflict
between the Dalits
(untouchables)
and the relatively
well-off but deprived
OBCs, and its
ramifications
on political alliances.
