First year presentation at Department of Economics, University of Dhaka. Topic Regional Integration in South Asia Team: Trio94 Members (In order of appearance): Naowar Mohiuddin, Avinno Faruk, and Sadman Shafiq. We uploaded the text heavy version since a live presentation is not possible on Slide Share. There was a slide limit of 18 but we included a credit slide for resources and a solution slide was later added since we took down the subsection intros. Bibliography can be provided on request: avinnofaruk@gmail.com

1. Regional
Integration in
South Asia
Trio94
PART ONE:
A CASE FOR REGIONAL INTEGRATION
PRESENTER: NAOWAR MOHIUDDIN

2. The Region That is South Asia
▷ South Asia is a term used to
represent the southern region of
the Asian continent, namely
Afghanistan, Bangladesh, Bhutan,
India, Maldives, Nepal, Pakistan
and Sri Lanka.
▷ S outh Asia Vs Rest of the World:
Population
GDP
2.2%
GlobalTrade
1.7%
=SouthAsia
Sources:Wikipedia;Ali,E.,&Talukder,D.K.(2009).Preferential
tradeamongtheSAARCcountries:prospectsandchallengesof
regionalintegrationinSouthAsia.JOAAG,4(1),47-59.

3. What is Regional Integration?
Economic
Growth
By improvement in
efficiency through
exploitation of
comparative
advantage.
Economies
of Scale
By gaining access to
larger markets, firms
can raise output and
thus lower their
LRACs.
▷ Regional integration is a process in which
neighboring states enter into an agreement in
order to upgrade cooperation through common
institutions and rules, e.g. EU, ASEAN, NAFTA etc.
▷ Benefits of Regional Integration:
Standard
of Living
Via wider consumer
choice and higher
quality products
due to increased
competition.
Sources:Wikipedia;EBRDTransitionReport2012,
Chapter4.

4. The Theory of Comparative
Advantage
▷ Comparative advantage is the ability to produce a good
at a lower opportunity cost than another producer.
▷ A hypothetical example:
Country
Opportunity Cost (OC) of:
Cotton Textile Fibres
Bangladesh 4 ¼
India 2
½
▷ Here, Bangladesh
has a lower OC of
producing textile
fibres and India has
a lower OC of
producing cotton.
Thus they should
specialize in those.

5. Economies of Scale
▷ Economies of scale occur when its Long Run Average Costs
(LRAC) fall with increasing output, as fixed costs are spread out
over more units of output.
▷Therefore increasing production leads to increasing returns to
scale and there is greater efficiency.
▷ Larger population (22%)
creates larger markets,
allowing firms to lower
LRACS and charge lower
prices to consumers.
▷Higher output also
translates into a rise in GDP.
UnitCosts
Level of Output
Eco. of
Scale
Constant
Returns
to Scale
Diseco. of
Scale
Long-Run
ATC

6. Standard of Living (SoL)
▷SoL refers to the level of wealth, comfort, material goods and
necessities available to a certain socioeconomic class in a certain
geographic area. It is closely related to quality of life.
▷ The baseline measure is real national output per head of
population or real GDP per capita.
▷ Consumers benefit from cheaper imports, wider choice of
products and higher quality output, due to greater competition
and if LRAC cost savings are used for product development.

7. Analysing the affects to Mexico
as a projected resemblance to
Bangladesh.
▷Maquiladors (Mexican assembly plants
that take in imports components and
produce goods for exports) sector have
increased by 15.5% after the
implementation of NAFTA in 1994.
▷From 1994 to 2001, exports
increased by 9.4% and imports
increased by 6.9%.
▷According to Economic Policy
Institute, 700,000 jobs have been
created in Mexico due to NAFTA.
▷FDI has increased manifolds.
A real life comparison
with a similar FTA deal -
NAFTA
Source:Wikipedia.

8. Regional
Integration in
South Asia
Trio94
PART TWO:
THE JOURNEY SO FAR...
PRESENTER: AVINNO FARUK

9. 8 members
Afghanistan, Bangladesh,
Bhutan, India, Maldives, Nepal,
Pakistan & Sri Lanka
SAFTA TLP
A commitment towards a top-
down reduction of tariffs.
SAFTA
South Asian Free Trade
Agreement (2006); Key Features:
Trade Liberalization Programme
(TLP), Treatment of Sensitive
Goods & Rules of Origin (ROO).
South Asian Association
for Regional Cooperation
(SAARC)
▷SAFTA TLP Overview:
Country
Category
1st Stage 2nd Stage
LDCs
(BGD,BTN,
MDV, NPL)
From
existing
tariff to 30%
over 2 years
(By 2008)
From 30% or
below to 0-
5%
over 8 years
(By 2016)
Non-LDCs
(IND,PAK,
LKA)
From
existing
tariff to 20%
over 2 years
(By 2008)
From 20% or
below to 0-
5%
over 5 years
(By 2013)
▷Lack of explicit commitment
regarding negative lists & Non-
Trade Barriers (NTBs), unlike
ASEAN.
▷Confined only to trade in goods,
need to incorporate trade in
services and investment.
Sources: Weerakoon, D. (2010). SAFTA: Current status and
prospects. Promoting Economic Cooperation in South Asia:
Beyond SAFTA. Washington, DC: World Bank and New Delhi:
Sage Publications India Ltd; Raihan, S. (2008). SAFTA and the
Bangladesh Economy: Assessments of Potential Implications.
Dhaka, Bangladesh: South Asian Network on Economic
Modeling (SANEM), SANEM Discussion Paper, (3).

10. Key Feature
Around 49 per cent of the
SAARC intra-region trade is
BBIN intra-region trade.
The Deal
Any member nation will be
allowed to use roads of other
members to transport goods
and passengers paying fees and
charges to be fixed later.
BBIN MVA
Motor Vehicles Agreement for
the Regulation of Passenger,
Personal and Cargo Vehicular
Traffic Between Bangladesh,
Bhutan, India, and Nepal.
Bangladesh, Bhutan,
India, Nepal (BBIN)
Initiative
▷A six-month action plan,July’15-
Dec’15.Takes effect from Jan’16.
▷30 economic corridors (7 in
Bangladesh).
▷This will potentially increase
intraregional trade within South
Asia by almost 60% & with the rest
of the world by over 30%.
▷Expected to help land-locked
Nepal and Bhutan to get access to
Chittagong, Mongla and Kolkata
sea ports.
▷Bangladesh’s strategic location
could make it a land bridge
between South Asia and
economically vibrant Southeast
Asia.
▷Large amount of investments in
infrastructural development will
shift PPC curve outward.
Sources:TheFinancialExpress;TheIndependent;TheDailyStar;Bdnews24.com
BBIN MVA Overview

11. 7 members
Bangladesh, Bhutan, India,
Myanmar, Nepal, Sri Lanka &
Thailand.
Big Numbers
▷ A market of 1.6 billion people,
about a fifth of the global
population.
▷ Intra-BIMSTEC trade was US$
74.63 bn (2013), up from US$
25.16 bn (2005).
Origin
It stemmed from India’s Look
East policy and Thailand’s Look
West policy.
Bay of Bengal Initiative for
Multi-Sectoral Technical
and Economic Cooperation
(BIMSTEC)
▷Effective Implementation of
BIMSTEC FTA will make trade go
up by US$43 bn to US$59 bn.
▷65 projects to be implemented
costing around US$15 Billion(16 in
Bangladesh).
▷Roads are a priority in the
BIMSTEC region as 70% of trade
here moves by road and the roads
are bad. Railways need to be
standardized & deep waters ports
need to be constructed.
▷Urging reduction or elimination of
NTBs.
▷Economic and nationalistic
considerations still prevent trade
relations from blossoming.
Sources:BIMSTECwebsite;NewIndianExpress.
Key Features & Scope

12. 6 members
Bangladesh, Bhutan, India,
Maldives, Nepal & Sri Lanka.
Priorities
▷ Energy, Transport & Trade
Facilitation.
▷ Also supports regional initiatives
in ICT.
Secratariat
Asian Development Bank (ADB)
South Asia Subregional
Economic Cooperation
(SASEC) Program
▷34 regional projects.
▷SASEC investment since 2001
amount to more than US$6 Billion.
▷Under SASEC program funded by
ADB, Chittagong port has
improved its container handling
facility.
▷Freight movement to Kolkata and
Haldia ports in West Bengal has
been eased.
▷US$100 Million SASEC assistance
to improve airports.
▷However, lacks sub-regional
characteristics in many ways. For
instance, two island countries are
there who couldn't be connected
through land or rail links.
Sources:Wikipedia;TheFinancialExpress.
Major Achievements

13. Regional
Integration in
South Asia
Trio94
PART THREE:
WHAT’S NEXT?
PRESENTER: SADMAN SHAFIQ

14. Outlook
▷In the last quarter of 2014 South Asia was already the
fastest-growing region in the world.
▷Regional growth is projected to steadily increase from
7% in 2015 to 7.6% by 2017 through maintaining strong
consumption and increasing investment.
▷Largest concentration of youth (aged 15-24, as defined
by the UN),representing 45% of the population.
Sources:WorldBank;TheHuffingtonPost.

15. Barriers:
1. Traditional Trade Regime
2. Investment Climate is
behind Border Issue
3. Connectivity
Inference: Lack of concrete
achievements, points to the
need for greater political will
and clarity of purpose.
Barriers & Challenges
“Trade potential of the four
countries has been limited by
inadequate trade
infrastructure, dearth of
supply chain network, tariff
and non-tariff barriers and
absence of regional
cooperation.”
Important Arguments Against Integration:
SAARC is neither integrated, nor do the economies complement one
another. In many areas, in fact, they compete in global markets.
For instance, Bangladesh’s apparent lack of comparative advantage viz
a viz India.
Sources:WorldBank;DhakaTribune;TheWallStreetJournal.
̶ As per Philippe Le Houérou, Vice
President for the World Bank’s
South Asia Region
̶ DCCI President Hossain Khaled

16. Some Future Prospects I:
South Asia’s Currency Union
Reduced
risks
Low
Transact
ion costs
Disciplin
e &
Transpar
ency
Macroec
onomic
stability
Boost
for trade
FDI &
Jobs
SoL will
improve
for over
a billion
people.
Benefits
However, apart from loss of policy autonomy, having a common
currency does not necessarily promote greater economic
integration, nor does not having one prevent integration.
Sources: The Wall Street Journal; Saxena, S. C. (2005). Can South Asia adopt a common currency?. Journal of Asian Economics, 16(4),
635-662; Bdnews24.com.

17. Some Future Prospects II:
Jt Venture Power for BBIN
▷Nepal and Bhutan have significant untapped hydropower
potential, while Bangladesh and India are two energy starved
countries.
▷Bangladesh can import 8,000-megawatt (MW) power,
especially hydropower, from three BBIN countries ̶ Bhutan,
India, and Nepal ̶̶ by 2035.
0
5000
10000
2020 2025 2030 2035
Power(MW)
Year
BD’s Power Import
Potentials from BBIN
▷JICA has proposed and offered
support to Bangladesh for joint
venture investment in power
production in BBIN.
▷If the JICA helps, it will be easy
for Bangladesh to invest in the
BBIN countries for generating
power aimed to ensure energy
security of the country.
Sources:WBBIN:Sub-RegionalismintheSAARCbyDr.Amit
Kumar,ICWA;TheFinancialExpress.

18. Few Proposed Solutions
▷Proactive participation of Pakistan
▷Enhance connectivity to exploit supply chain
potentials
▷Enhance opportunities in investment & service
sectors
▷Explicit agreement to lower NTBs
▷Appointing influential observer states

19. Conclusions
▷South Asia’s intra-regional trade accounts for just 5% of total trade,
compared to 25% in ASEAN.
▷Regional integration could enhance stability in this volatile region -- which is
home to 44% of the world’s poor.
▷Reducing intra-regional trade costs (85% higher than those in East Asia) can
lead to a 250% increase in intra-regional trade.
▷Comparative advantage is not static and is changing all the time.
▷From SAFTA, the region can achieve considerable gains due to enhanced
bargaining powers.
▷In reality, the progress is very slow.
▷Overall, we believe, although integration might bring few drawbacks for
Bangladesh, it can be inferred from the data provided that the benefits are
even greater.
Sources: World Bank; The Huffington Post; Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement: Unlocking the
Potential for Vibrant Regional Road Freight Connectivity by Pritam Banerjee, CUTS International; Ali, E., & Talukder, D. K.
(2009). Preferential trade among the SAARC countries: prospects and challenges of regional integration in South Asia.
JOAAG, 4(1), 47-59; Weerakoon, D. (2010). SAFTA: Current status and prospects. Promoting Economic Cooperation in
South Asia: Beyond SAFTA. Washington, DC: World Bank and New Delhi: Sage Publications India Ltd.

20. Credits
Special thanks to all the people who made and
released these awesome resources for free:
▷ Presentation template by SlidesCarnival
▷ Photographs by Unsplash
▷ Map of South Asia with Countries - Single
Color by FreeVectorMaps.com