South Asia: on the cusp of regional connectivity

As South Asian leaders gather in Kathmandu this week for the 18th Summit of the South Asian Association for Regional Cooperation (SAARC), there is growing expectation for the discussions to result in stronger economic and energy connectivity in the region and opportunity for enhanced regional collaboration on a host of other areas. While it is too early to tell what agreements will be forged at the SAARC summit, such a focus is long overdue in a region that continues to be one of the least connected in terms of interregional trade. The United States firmly believes that increased regional economic connectivity within South Asia, as well as with other parts of Asia, can bolster economic growth, reduce poverty and enhance regional stability and security, which is why we continue to encourage governments, civil society and businesses in South Asia to strengthen regional cooperation.

This is not to say that progress has not been achieved. It has. Over the past 20 years, South Asia has averaged six percent economic growth per year, lifting millions out of poverty and improving the quality of life for hundreds of millions more. It is the second fastest growing region in the world and has the human capital, industry, and technology to catapult its citizens forward in the 21st century. Still, in terms of economic linkages, the countries of South Asia remain oceans apart, especially in stark contrast to other regions of the world. For South Asia, intraregional trade is anchored at around 5 percent, the lowest in the world. But the good news is we are seeing real leadership from governments of the region to change that dismal statistic.

India's Prime Minister Modi has made growing trade and investment among SAARC countries one of his government's top priorities, and these early efforts are having positive ripple effects throughout the neighborhood. This is especially true in areas like energy connectivity, where increased flows of electricity can fill supply gaps, provide factories with the power they need to engage in regional trade and showcase to potential investors the region as a platform for business and market access. Following Modi's trip to Nepal earlier this year, the two countries have advanced power trade and power development cooperation, which could enable greater private sector investment to develop hydropower capacity. India and Bhutan recently signed agreements to strengthen their ties and deepen regional energy, trade, and educational connectivity. And India and Bangladesh are working closely to expand their cross-border 500 MW electricity transmission line, which came online last year. In Afghanistan, the newly elected Government of National Unity has prioritised regional economic engagement, already signing a pricing agreement for transiting electricity from Central Asia through Afghanistan to Pakistan as one of its first policy acts.

This week, SAARC members have the chance to further deepen their regional ties by moving on three agreements that have the potential to revolutionise trade and regional economic growth: a South Asia power trade agreement, a motor vehicle agreement and a railway agreement which collectively will provide the basic framework for regional integration. We also welcome the continued pursuit of a South Asian Free Trade Area (SAFTA) by all the countries of SAARC, which would provide a strong, stable and transparent framework for investment while fostering greater trade and spreading opportunity. Such steps are necessary to create a single regional market that will spur market efficiencies, generate comparative advantages and shift to more productive, innovative and balanced economies.

As SAARC members work together towards a more connected and more prosperous future, they will have the support of international partners like the United States. We are already taking several steps to support greater South Asia cooperation. On the energy side, we have been working with South Asian countries on steps needed to create a regional energy market through greater electricity trade. On transit trade, the United States supports a strong regulatory environment for private investment and greater harmonisation of trade standards across borders. On border crossings, we are helping implement a single-window customs system to reduce border wait times at key points such as the Benapole-Petrapole crossing across India and Bangladesh. We have also offered technical assistance to organisations that facilitate greater regional linkages to the global marketplace like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) secretariat.

The United States sees a South Asia with unlimited potential, not only to dramatically increase trade within the region but to also reach out to regional neighbours in Central and Southeast Asia. This is why we are supporting initiatives like the Indo-Pacific Economic Corridor — connecting South to Southeast Asia — and the New Silk Road — connecting South to Central Asia — with greater energy, trade, transit and people-to-people links.

In short, the United States sees the potential of a much more unified Asia — with South Asia at the heart of dynamic regional connections. SAARC members can lead the way this week and unleash the region's true potential and create a more prosperous and secure future for their people.