Challenges for regionalism in South Asia: The role of institutions and human development

Abstract

A large body of literature exists in the area of trade integration in various regions of the world (for instance Mongelli, Dorrucci & Agur 2005 for EU; Chen and Nory 2011 for EU; Bouet, Cosnard & Laborde, 2017 for Africa, Athukorala & Yamashita 2006 for East Asia; Bussiere, Fidrmuc and Schnatz 2005 for Central and Eastern European countries). However, not much literature is available on South Asia trade and economic integration. Intra-regional trade just formed only 5% (in absolute terms 23$ billion) of South Asia’s total trade in comparison with the ASEAN region (25%) (World Bank). This is indeed perplexing as the countries within the region even though heterogeneous in terms of size and governed by different political ideologies, yet share similar cultural and historical closeness, high level of poverty and low level of human development (Arora and Ratnasari 2014). Among the factors influencing low formal intra-regional trade are high trade barriers, high level of mistrust among the countries leading to several conflicts especially between India and Pakistan. This chapter examines some of these issues and especially examines the association between low human development, institutional development and regional integration.