Easing trade, investment barriers:

South Asia to reap benefits

Removing barriers to trade and investment will help advance integration efforts in South Asia and deliver sweeping benefits to the region, a new Asian Development Bank (ADB) study shows.

The study, Intraregional Trade and Investment in South Asia, prepared by the ADB, in partnership with the Australian Agency for International Development (AusAID), was one of four new publications on South Asia launched at ADB headquarters in Manila.

South Asia has taken several steps to strengthen regional economic ties, including the establishment of a South Asian Free Trade Area (SAFTA) in 2006. But it remains one of the least integrated regions in the world, with intra-regional trade still hamstrung by prohibitive tariffs and duties, cumbersome border regulations and other restrictions.

The study, which uses an updated econometric model and taps industry and country data,notes that cutting barriers to trade will deliver a broad range of economic and welfare benefits across the region. This includes an expansion of South Asia's key clothing and textiles sector, which is expected to increase women's employment and decrease the gender wage gap.To realize these gains, countries will need to put aside historical political grievances and take steps to remove impediments to trade, market access and foreign direct investment.

This should include reducing tariff and especially non tariff trade barriers, expanding the scope of SAFTA to include trade in services and investment, and focusing on major industries, such as textiles - where the region has a strong comparative advantage - to demonstrate the broader benefits of reform.

"In addition to reaping benefits of removing trade and investment barriers, South Asia must look toward the immense potential of regional cooperation and integration in other areas, including the financial sector," said Director General of ADB's South Asia Department, Kunio Senga. MANILA, PHILIPPINES `