Economic Integration between South Asia and East Asia

Economic Integration between South Asia and East Asia: A Perception Survey of Opinion Leaders Pradumna B. Rana Associate Professor RSIS-NTU Chia Wai Mun Assistant Professor NTU Presentation at RIS, New Delhi 29 January 2014 Ponder the Improbable

Outline I. III. IV. V. VI. Introduction Objectives Trends in SA/EA Economic Linkages Initiatives to Promote SA/EA Linkages Economic Integration in South Asia Policy Implications Ponder the Improbable

I. Introduction • Perception Survey was supported by the Academic Research Fund of Nanyang Technological University provided by the Ministry of Education, Singapore • Survey will be a chapter of a book that we are co-authoring on “Jump-starting South Asia: Round Two of Reforms and Look East Policies” Ponder the Improbable

II. Objectives of the Study • Assess the views of stakeholders in South Asia and East Asia on integration between the two regions • Test the relative strengths of the findings of our various papers Ponder the Improbable

Our Papers • Francois, J, PB Rana and G. Wignaraja (eds) (2009). Pan-Asian Integration: Linking East and South Asia. Basingstoke: Palgrave Mac. Millan. • Rana, PB. 2012. Renaissance of Asia. World Scientific Publishers, Singapore. • Rana, PB and WM Chia (2013). South Asia Needs Phase 2 of Look East Policies. Economic and Political Weekly 48(35). • Rana, PB and WM Chia (2014). Perception Survey of Asian Opinion Leaders on Economic Linkages between South Asia and East Asia. Draft • Rana, PB and WM Chia (2014). The Revival of the Silk Roads (Land Connectivity) in Asia. Draft • Rana, PB and BKarmacharya (2013). A Connectivity-Driven Development Strategy for Nepal: From a Landlocked to a Land-linked State. Forthcoming ADBI Ponder the Improbable

Profile of Respondents SOUTH ASIA EAST ASIA Academia N % Business N % Government N % Others N % N Business Government N % N % N % Brunei Darussalam 0% 0% 1 100% 0 0% 1 100% Afghanistan 0% 0% 1 100% 0 0% 1 100% Cambodia 1 33% 0% 1 33% 3 100% Bangladesh 13 93% 0% 1 7% 0 0% 14 100% China 19 90% 0% 2 10% 0 0% 21 100% Bhutan India 1 65 20% 56% 2 9 40% 8% 2 18 40% 16% 0 24 0% 21% 5 116 100% Indonesia 12 46% 1 4% 9 35% 4 15% 26 100% Maldives 1 33% 0% 2 67% 0 0% 3 100% Japan 11 79% 0% 2 14% 1 7% 14 100% Nepal 15 58% 5 19% 4 15% 2 8% 26 100% Lao PDR 0% 0% 4 100% 0 0% 4 100% Pakistan 15 75% 2 10% 3 15% 0 0% 20 100% Malaysia 10 56% 2 11% 6 33% 0 0% 18 100% Sri Lanka 8 44% 2 11% 8 44% 0 0% 18 100% Myanmar 1 25% 2 50% 1 25% 0 0% 4 100% Philippines 15 58% 1 4% 10 38% 0 0% 26 100% Singapore 14 45% 6 19% 10 32% 1 3% 31 100% South Korea 2 50% 0% 2 50% 0 0% 4 100% Thailand 6 55% 1 9% 4 36% 0 0% 11 100% Vietnam 14 58% 3 13% 7 29% 0 0% 24 100% 32% 7 4% 187 100% East Asia 105 56% Total Respondents Sample 16 9% 59 390 5300 Ponder the Improbable 7% Response Rate Total % Academia South Asia 118 58% 20 10% 39 Academia Business Others Total 19% 26 13% 203 100% Govt Others Total N % N % N % TOTAL 223 57% 36 9% 98 25% 33 8% 390 100%

III. SA/ EA Linkages: Need for LEPII in South Asia Ponder the Improbable

Costs of Strengthening Economic Linkages Ponder the Improbable

Benefits of Strengthening Economic Linkages Ponder the Improbable

Modalities of Regional Cooperation Ponder the Improbable

Obstacles and Barriers to Economic Linkages Ponder the Improbable

Required Policy Actions in South Asia Ponder the Improbable

IV. Initiatives to Promote SA/EA Economic Integration Ponder the Improbable

Trade Ponder the Improbable

Macroeconomic Policy Coordination in EA and the Possible Role for SA Ponder the Improbable

Connectivity Issues: Northern and South-western Silk Road Source: Rana and Chia (2014) Ponder the Improbable

Factors That Have Revived the Case for Land Air Connectivity between SA and EA Ponder the Improbable

Connectivity Issues Ponder the Improbable

Connectivity Issues Ponder the Improbable

Proposed Corridors in South Asia Source: Rana and Karmacharya (2013) Ponder the Improbable

V. Economic Integration in South Asia Ponder the Improbable

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Income Effects of Alternative FTA Scenarios East Asia and South Asia and India FTA East Asia FTA Value % $ Mn change 3, 695 0. 33 (3, 620) (0. 32) 16, 199 1. 44 22, 423 1. 99 351 0. 31 (297) (0. 26) (355) (0. 31) 1, 874 1. 66 1, 138 0. 14 (2, 371) (0. 30) 17, 779 2. 23 18, 240 2. 29 335 1. 08 (117) (0. 38) (123) (0. 40) 631 2. 03 1, 246 3. 37 (12) (0. 03) (240) (0. 65) 1, 380 3. 73 (540) (0. 01) 226, 855 2. 17 239, 097 2. 29 241, 485 2. 31 361 0. 00 (9, 316) (0. 03) (3, 934) (0. 01) (3, 001) (0. 01) 3, 516 0. 01 213, 919 0. 45 251, 363 0. 52 260, 907 0. 54 South Asia FTA South Asia Bangladesh India Sri Lanka Others East Asia ROW World East Asia FTA Note: ROW is rest of the world. Changes are computed relative to 2017 baseline at constant 2001 prices. Source: Francois, Rana, and Wignaraja (2009) Ponder the Improbable

VI. Policy Implications • • Market-led approaches (including connectivity) should drive South Asia/ East Asia integration. ASEAN-India connectivity and BCIM Economic Corridor are strongly supported. SASEC and BIMSTEC have strong potential in promoting SA/EA integration. Efforts must also be made to promote South Asia/ Southern China/ ASEAN Connectivity or the SSR: Nepal has a role to play. The proposed economic corridors in South Asia would help connect CAREC and GMS corridors, making Asia truly seamless (ADB should note). Just as in the case of the EAS, ASEAN must invite India to join the ERDP and India could pledge funds to the CMIM. At some stage, most South Asia countries must be invited in negotiating the RCEP. Ponder the Improbable

Thank you Ponder the Improbable