South Asian Businesses In United Front

Trade chambers in the least integrated region in the world are coming together to collectively lobby governments for change

South Asian business leaders are warming up to the challenge that they need to do a lot more to promote trade and investments within the region, without having to wait for politicians to set the agenda. The first South Asian Economic Conclave was organised by the Confederation of Indian Industry (CII) in New Delhi last September together with the trade chambers of Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka represented by the Ceylon Chamber of Commerce. These countries comprise the South Asian Association for Regional Cooperation (SAARC).

The purpose of the conclave was to develop people-to-people ties and share ideas about how the private sector can develop regional trade. Economists and policy makers from the region also participated.

On the first day of the three-day conclave, economists appealed to private sector business leaders to stop complaining about how hard it was to do business in the region and to play a proactive role in fostering regional integration, because the opportunities were there. The debate seemed to be stuck at what comes first; political reconciliation in the region or trade integration.

“We shouldn’t leave regional integration with governments because narrow-minded politicians could quickly and completely demolish any hopes of integration. It is up to the private sector, to take the initiative,” Ishrat Hussain, Dean, Institute of Business Administration Pakistan said.

The World Bank’s South Asia Vice President Annette Dixon said plagued by distrust, the region, home to 40% of the world’s poor, is the least integrated in the world. “But the potential is great with India expected to lead the region to be the fastest growing in the world. Intraregional trade in goods and services will give consumers more choices and cheaper goods and services”.

Before WWII, South Asia accounted for over 25% of world trade. Today, despite India joining the big  boys’ economic club, intra-regional trade accounts for less than 5%

South East Asia’s intra-regional trade accounted for nearly 25% of its total trade. South Asia’s share is just 5% at $25 billion. According to the World Bank, trade within South Asia could be increased to $100 billion over  the next five years, helping South Asian consumers save $ 2 billion each year.

By the end of the of the three-day conclave, the Indian trade chamber said it was committed to do more together with its counterparts in the region. Chandrajit Banerjee, Director General of the CII said, it decided to set up five task forces around some of the problems to intraregional trade discussed at the conclave: promoting cross border investments, developing people-to-people connections and easing visa requirements, developing trade infrastructure, improving trade facilitation, and energy.

“These task forces will be set up with our partner chambers in the region to understand the opportunities and challenges around these areas and then lobby governments for change. This conclave won’t stop here. We will also make the conclave an annual event for the private sector where hosting the event will be rotated among the chambers,” Banerjee said.

Trade policy in the region is the most restrictive in the world. It costs 85% more to trade within South Asia than in East Asia, according to the World Bank, purely because of the non-tariff barriers that plague the region as result of deep-rooted political distrust. This is why trade facilitation is getting a task force in a bid to ironing out these barriers like complex customs rules and taxes, and the non-acceptance of standards and technical tests for goods of member countries. There is a strong indication that the five task forces will not be just talk: Indian and Pakistani businesses are already working on a similar programme to lobby their governments.

Trade policy in the region is the most restrictive in the world. It costs 85% more to trade within South Asia than in East Asia, according to the World Bank

India-Pakistan relations are fraught with distrust and dominate any forum concerning the region. India and Pakistan have fought four outright wars between 1947 and 1999. Contemporary geopolitics, terrorism and security concerns have only deepened the wedge further. But private sector businesses have taken the initiative.

The Pakistan India Joint Business Forum was formed in June 2013 and it set up ten task forces to look for opportunities and iron out policy challenges in agriculture, pharmaceuticals, automobiles, financial sector, textiles, energy, petroleum, trade facilitation and visa facilitation between India and Pakistan. Business leaders from both countries making up the taskforces met every six months.

It took a while for the two sides to understand and warm up to each other. They have formulated recommendations and are now preparing to lobby their respective governments.

“We hope both governments will consider them favourably. These recommendations are coming from the businesses themselves. Some businesses will have positive gains, others won’t, but we have agreed on the recommendations,” Sunil Kant Munjal, Joint Managing Director of Hero Motor Corp Ltd India and Past President Confederation of Indian Industry (CII) said.

“These are joint recommendations that industry from both countries developed. We have to push our own governments now, this will be the biggest challenge,” Syed Yawar Ali, Co-Chair Pakistan India Joint Business Forum and Chairman Nestle Pakistan Ltd said.

Some of the findings of the task forces of the Pakistan India Joint Business Forum were shared at the conclave.

On trade facilitation, it was found that India’s tariff regime was reasonable, but state-level tariffs and non-tariff barriers were overwhelming. “This is not right, we must address this issue head on,” India’s Munjal said. “Governments need to take a step-back and businesses must take the initiative, this is the only way to play the game to increase trade and investment and deepen relationships in South Asia. The opportunities are immense and now is the time to push through,” he said. The task force in agriculture found that India and Pakistan had different seasons for the same crops. “We can tackle problems of gluts and shortages of each country if we work together,” Ali said.

sAli said the two countries needed to harmonise their customs procedures and have common standards, which is true for the entire region. A single page customs document and automated processors were critical. “Lowering duties can also help businesses build relationships which will only benefit the peoples of the region,” he said. SAARC was formed s2thirty years ago and meeting at least once every two years, state-leaders have over the years announced a number of initiatives to draw people together and open borders to trade. But little has happened. Before WWII, South Asia accounted for over 25% of world trade. Today, despite India joining the big boys’ economic club, intra-regional trade accounts for less than 5%. Tensions over the borders between Bangladesh, India and Pakistan, a legacy of British colonial rule, have in part led to deep-rooted distrust among the SAARC nations.

Long before SAARC, the region’s economists have been working hard to convince policy makers and businesses that deeper integration was the best thing for the region. By 2008, some of these economists were losing hope. At the first South Asia Economic Summit in Colombo that year, some of these economists had lost their optimism and they voiced their disappointment and frustration. Decades of hard economic research work and cross-border collaboration was showing poor results; politicians and businesses were just not interested. The summit declared SAARC a failure. By the end of the three-day summit, despite the exposure of SAARC’s failures, they vowed to continue to lobby governments and market the dream of an integrated South Asia among businesses. Seven  years later, these economists have something to be happy about. Business leaders are now taking South Asian integration seriously.

Tariq Karim, former Bangladesh High Commissioner to India and advisor to the World Bank, said the biggest problem to regional integration was the mindsets of the people. “Citizens of SAARC countries must interact more amongst themselves and help demolish barriers put up by politicians. Businesses can lead the way by lobbying their respective governments”.

This is exactly the route the region’s trade chambers intend to take.