ASEAN-SAARC ECONOMIC RELATIONS

Abstract

This study is prompted by the creation of SAARC which offers opportunities for increasing inter-regional linkages. The prospects for regional cooperation are enhanced by the accelerating pace of liberalisation of the SAARC economies which opens up the large and untapped South Asia market. Political, economic and social forces, in varying degrees, are responsible for the creation of SAARC and ASEAN, explaining the existing relationship and influencing future relations and determining the prospects of AFTA and SAARC becoming a free trade zone by 1997. This academic exercise is only looking at the economic aspects of inter-regional relations. Chapter One, the Introduction, takes a quick review of some important literature on ASEAN-SAARC economic relations. The various forms and costs/benefits of regional cooperation and integration are examined. The theoretical foundation and the framework of analysis are also presented. Chapter Two gives an overview of ASEAN and SAARC countries - their comparative profile and the trends of inter and intra regional trade. In Chapter Three, intensity indices are used to study bilateral trade relationships in goods and the revealed comparative advantage index is used to analyse shifts in comparative advantage of the two regions between 1975 and 1990. Attempts are made to evaluate the prospects and challenges for trade expansion in view of the changing comparative structures of the two regions as countries liberalise their economies and barriers to trade. Chapter Four looks at trade in services and attempts to predict the possible areas of cooperation between ASEAN and SAARC which could be beneficial to both regions. Chapter Five looks at the importance of foreign direct investment in economic development and discusses the impact of SAARC countries' liberalisation measures on the flow of FDI, focusing mainly on Singapore's investment commitments in SAARC. The concluding chapter summarises the main findings in the academic exercise. Policy implications on the role of government and private sector are briefly discussed, and an attempt is made to recommend ways by which ASEAN and SAARC could further strengthen their economic ties.