Source: http://www.criterion-quarterly.com/corridors-competition-cooperation-perspectives-southern-asia/
Timestamp: 2019-04-25 04:49:46+00:00

Document:
Economic Aid: Boon or Bane?
US plans for its presence in Southern Asia have been fast changing. However, one observes a declining physical footprint of the US in the region – compared to pre-2014, when the war in Afghanistan was mainly led by the US troops. The US Silk Road Strategy Act, announced well before China’s Belt and Road Initiative, lacked proper execution. It aimed at building projects that, in turn, would create regional interdependencies and, thereby, ensure stability in the region. 4 It was envisaged that such projects would strengthen the strategic influence of the United States in the region. This, however, could not culminate and today China and Russia stand as the key players in the region with the ability to also influence political, economic and security issues facing the region (Rumer 2016).
The exit of the US as the leading player in pursuit of regional economic integration in Southern Asia provided space for China and Russia to pursue their own plans for the region. These include, for example, the Russian-led Eurasian Economic Union (EAEU), Shanghai Cooperation Organization, and the Chinese-led belt and road initiative. The sustainability of these regional arrangements may have greater probability given the close cooperation between China and Russia on plans for Central and South Asia. In fact, at one point in the recent past, particularly around 2009 and 2010, Russian dependence on China’s support in energy and the economy in general was unprecedented (Kim and Indeo 2013).
A key development in the region was the collapse of the South Asian Association for Regional Cooperation (SAARC). This is perhaps the only arrangement that brings together Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka – comprising of almost a quarter of the global population. SAARC was crucial for keeping India-Pakistan dialogue process on track and for the promotion of deeper trade, investment and infrastructure cooperation between the eight member countries. On the insistence of India, three other SAARC member countries also pulled out of the planned Heads of States SAARC meeting in Islamabad in 2016. This development has temporarily shut any negotiations that could have resulted in an integrated Asian Highway Network (UNESCAP 2016).
The United States’ own calculus around trying to increase India’s profile in the region did not render promising results. The former had increased its civil and military support for India during 2015 and 2016. It thought that India might, overtime, balance the regional presence of China and Russia. This, of course, did not suit China, Russia and Pakistan. With the income of a quarter of India’s population being below USD 1.25 a day, India is a relatively smaller power in the region. It still, however, felt tempted to have regional expansion plans of its own and increased its investments towards pursuing, for example, the International North South Transport Corridor with Iran and Russia; Bangladesh, Bhutan, India and Nepal (BBIN) motor vehicle agreement; and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) – some members of which are also part of the Trilateral Maritime Security Cooperation. The US-India alliance and India’s increased engagement in Afghanistan prompted China, Russia and Pakistan to closely cooperate in security and economic issues. The urgency to complete early harvest projects under China – Pakistan Economic Corridor (CPEC) is one example of this cooperation.
Just as SAARC remained dormant due to the political issues between the member states, ECO – an inter-governmental regional organization comprising of Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyz Republic, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan – too could not establish itself as a strong economic bloc. The achievement has been slow and mixed. It is only recently that Iran, Pakistan and Turkey have shown intent to work closely on promoting transit trade ties.
South Asia is home to around 25 percent of the global world population and almost 40 percent of Asia’s total population. Around 40% of the world’s poor (i.e. people having USD 1.25 per day) live in this region. The good news is that, according to the World Bank Group, South Asia is one of the fastest growing regions in the world. 9 This growth is fueled by a large domestic demand, remittances of workers’ abroad, running high fiscal deficits due to increased public investment, success in attracting investment from abroad, and low oil prices. The sustainability of some of these factors seems unlikely in the longer run.
Furthermore, as the economies of South Asia expand, it will be increasingly important to secure energy, water and natural resource requirements. The region faces uncertain oil and gas supplies in the future. Most of these countries are increasingly getting water stressed. This, in turn, also forebodes a food security crisis under the business-as-usual scenario (Rasul 2014).
Regional cooperation may be an answer to energy, water and food deficits in the region. For example, Ahmed (2014) and Singh et al. (2016) explain that the region can meet the fast increasing electricity demand through cross-border electricity trade. While there has been some progress on this, however, most countries have still not reformed domestic energy markets and addressed national-level inefficiencies, which are preventing a regional grid. Some countries face political mistrust and are not convinced that such initiatives can create economic interdependencies. In fact, the local narrative in these countries fuels speculation that the country with the upper hand (i.e. relatively more resource rich) may turn off the tap once political differences intensify.
The changing economic and political alliances in the region also prevent energy trade. The economic partnerships pursued by China, Russia and the United States with countries in the region play a key role in the decision of these economies on whether or not to cooperate among each other. This is a key reason why India is not interested, at least for now, in expediting work on the Turkmenistan–Afghanistan– Pakistan–India (TAPI) and Iran-Pakistan-India gas pipelines. 10 India has, in fact, formally exited form the latter arrangement.
Cooperation on water remains a far more daunting task. This largely is a result of asymmetric power relations among the states in Southern Asia. However other technical issues which allow water disputes among states to linger for a long time include: an absence of regional mechanism to share water as a resource, lack of framework agreements between SAARC member countries, and nationalistic sentiments seen in some states (Adhikari 2014).
South Asia being one of the regions worst hit by climate change has also seen changing cropping patterns. This, along with recurrent droughts, has led to food security challenges. SAARC member countries had embarked on prioritizing cooperation in agriculture. An Action Plan on Climate Change to use regional approaches to mitigation and adaptation was also put in place. In addition, SAARC Food Bank and SAARC Seed Bank were also endorsed but never pursued or expanded with a serious intent to counter recurrent food shortages in the region.
There has also been some delinking of trade from regional political disputes. Intraregional trade in Southern Asia is gradually picking up. More land routes for merchandise trade are being opened in the region. Intra-regional investment in energy, textile and fast moving consumer goods sub-sectors has also been observed (Ahmed et al. 2014). During the regular meetings between central bankers from across the region, there seems agreement to further liberalize the banking channels to facilitate cross-border trade and investment linkages. Medical tourism and trade in health services are being encouraged on passionate grounds (Manzoor and Ahmed 2016). All this will hopefully lead to enterprise-level learning and rise of a (business) constituency for peace in the region. An interesting feature has been that despite closed borders during several phases of geopolitical history, trade through informal channels has continued. All regional economies can only gain by formalizing these inflows (Ahmed 2014b, Ahmed 2015).
It remains unfortunate that these episodes of success have not been adequate to forge stronger interdependencies. The larger economies in the region – including China and India – face a security dilemma that reinforces military competition. 12 This competition is forcing (economically) smaller countries in Southern Asia to choose between friends in the region and keep cooperation limited to their select partners. Before such military competition in the region further derails economic liberalization and cooperation, there are several measures still available to the leadership. It will be important for countries in South Asia to promote interaction at track 1.5 and track 2 levels. In this regard, restrictive visa regimes for neighbors has not done well to promote an understanding of each other’s perspective. Inland security priorities of these countries should not hurt business-to-business and people-to-people dialogue.
Ahmed, V. (2014). A case of energy diplomacy. The News on Sunday-International The News.
Ahmed, V., A. Q. Suleri, and M. Adnan (2014) FDI in India: Prospects for Pakistan. Editors Nisha Taneja and Sanjib Pohit: India-Pakistan Trade – Strengthening Economic Relations. Springer.
Ahmed, V. (2015) Strengthening South Asia Value Chain: Prospects and Challenges. South Asia Economic Journal. Vol 16, Issue 2_suppl, 2015.
Ahmed, V. (2017). South Asia: Cooperation to Achieve Development? International Conference on Human Capital, Food Security and Economic Development in South Asia.
Ahmed, V. (2017) Economic Corridors, Investment Diplomacy, and Transit Cooperation; Chapter 6 in the book: Pakistan’s Agenda for Economic Reforms, published by Oxford University Press, Pakistan.
Adhikari, K. (2014). Conflict and Cooperation on South Asian Water Resources. IPRI Journal. 14(2), pp. 45-62.
Jha, S. (2013). Trade, Institutions, and Ethnic Tolerance: Evidence from South Asia. American Political Science Review. 107(4), pp. 806-832.
Liff, A and Ikenberry, G. (2014). Racing toward Tragedy? China’s Rise, Military Competition in the Asia Pacific, and the Security Dilemma. The MIT Press Journals. 39(2), pp. 52-91.
Manzoor, R. and V. Ahmed (2016) Desired Reforms in Health Services Trade between India and Pakistan. Aditi Bulletin Issue 6, Center for Study of Science, Technology & Policy.
Mawdsley, E. (2015). Cooperation, competition and convergence between ‘North’ and ‘South’. SAGE JOURNALS. 41(1), pp. 108-117.
Kim, Y and Fabio, I. (2013). The new great game in Central Asia post 2014: The US “New Silk Road” strategy and Sino-Russian rivalry. Communist and Post-Communist Studies. 46(2), pp. 275-286.
Khan, H and Ahmed, V. (2015). Fund-raising for Energy Projects in Pakistan. Sustainable Development Policy Institute. Working Paper No. 149.
Rasul, G. (2014). Food, water, and energy security in South Asia: A nexus perspective from the Hindu Kush Himalayan region. Environmental Science & Policy. 39, pp. 35-48.
Rumer, E., Sokolsky, R., and Stronski, P. (2016). U.S. Policy Toward Central Asia 3.0. Carnegie Endowment for International Peace.
Rehman, A and Ahmed, V. (2016). CPEC and regional integration. The News on Sunday-International The News.
Shabbir, S. and V. Ahmed (2016) Trade with Iran: Prospects for Pakistan. Criterion Quarterly, Vol 10 No 4.
UNESCAP. (2016). Intergovernmental Agreement on the Asian Highway Network. Economic and Social Commission For Asia And The Pacific.
2- Also see Mawdsley (2015).
3- See Rehman and Ahmed (2016).
4- For example, Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline, rail links being constructed between Afghanistan, Turkmenistan and Kazakhstan, and rail link from the Uzbek border to Mazar-e-Sharif in Afghanistan.
5- See Rehman and Ahmed (2016) and Ahmed V. (2017b).
8- https://www.valuewalk.com/2017/09/china-russia-turkey-pakistan-vs-us/ . See also Shabbir and Ahmed (2016).
10- See also Jha (2013).
11- See also Fallon (2015).
12- See also Liff and Ikenberry (2014).

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