Bellerbys Economics - Mr Stephenson

Thursday, September 20, 2007

Being Saarcastic

Hands up all those who have heard of SAARC? The truth is you are more likely to be able to name the manager of Alloa Athletic football club than be able to name the chief executive of this organisation.

Everyone knows of the EU and ASEAN - and yet SAARC has the potential to be even richer and more powerful - perhaps even within the next fifty years. SAARC, you see, is the South Asian Association for Regional Cooperation and it includes India, Pakistan, Bangladesh, Sri Lanka - and the Himalayan countries of Nepal and Bhutan and the tourist islands of the Maldives. That's about 22% of the world's population. Afghanistan has also been invited to join.

So far, nothing much has happened. There are differences linked to religion, politics, the environment and culture that have kept them apart. However, things are changing quickly. The area now has the fastest growing economy after East Asia; small businesses are booming - thanks to the pioneering work of Nobel prize Economics winner Amartya Sen on microcredit - and old political and cultural differences are slowly being put to one side - Bollywood movies have started playing in Pakistan once again. All the countries, except Pakistan, have agreed to reduce tariffs to 20% between all member countries in 2007. This is a good sign.

Of course, there are potential problems - recent American threats to invade Pakistan have not helped business confidence for example; and the democratic deficit in Pakistan is also keenly felt in the region. In Sri Lanka, there is continuing ethnic conflict - and in Bangladesh, if global warming continues, much of the country may simply disappear. In Nepal, where the SAARC headquarters are based, there is political dissent. Also, India has jumped from being an agricultural nation into a service-based nation (50% of GDP is from services) without taking the trouble to build up a manufacturing sector of small-to-medium sized businesses first. Consequently, it has to import much of what it consumes and has a current account deficit.
Education is valued and the Health professionals are first-class but inequality is high and amazingly 30% of Indians are still illiterate - mostly in rural communities and living in some degree of poverty.

But things are definitely moving. The potential is enormous - so much so that China has expressed an interest in joining (so it would be in the world's two biggest economic blocs!) and has been reaching more and more bilateral agreements with India over the last ten years - the most recent last week when the foreign ministers of both countries met.

Let's see what happens in the next five years!


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