Tremendous potential exists for increasing trade between South and Southeast Asia, which would provide substantial economic benefits for both regions. South and Southeast Asia are large regions in population and economic terms. South Asia has 1.69 billion persons and a total GDP of $2.37 trillion while Southeast Asia has 622 million persons and a total GDP of $2.35 trillion.
Although historically trade and transit links between South and Southeast Asia have existed for centuries, modern trade between these two regions has been hindered due to poor infrastructure, regulatory barriers(including various tariff and non-tariff barriers), and limited regional cooperation.
Renewed trade between the regions will require, among others, better roads, better rail and port infrastructure andsimplified border crossing procedures. In this regard, signing of the Motor Vehicle Agreement among countries in both the regions coupled with completion of the tri lateral highway connecting India, Myanmar and Thailand can prove to be a major game changer.
However, greater connectivity requires infrastructure, and infrastructure requires investment. World Bank estimates $2.5 trillion worth of investment over the next ten years in South Asia alone. Even if we assume that this amount of investment is doable one of the key question is whether the ensuing domestic/regional preparedness is in place to effectively absorb and utilize the investment so as to facilitate greater regional integration.
To this end, the deliberations will aim at identifying the major drivers of regional integration, economic gains accruing to the countries in the two regions, the key policy bottlenecks that can hinder such regional integration and what needs to be done to overcome them. While deliberations will take place on Motor Vehicles Agreement, the Trilateral ASEAN highway and enhancing Air connectivity, discussants will also touch upon issues pertaining to improving the investment climateand their impact on trade flows, present status of capital account liberalization, and how to facilitate better capital inter regional capital flows. Discussions at the consultation will culminate into preparation of a long term action oriented agenda to facilitate greater regional integration through enhanced trade and investmentflows.