The prospects of financial system in South Asian Regional Countries

There is no denying the fact that the financial system relating to South Asian regional countries are basically level-headed rather than harmonizing as the commodities have a propensity to be similar in the extractive or primary industries for consumable goods. Only in the more sophisticated mechanized and capital goods would there be scope for a non-competitive trade, but this would tremendously benefit India which alone has a considerable consumer goods produced in the manufacturing industry. However, these sectors of production, regardless of some lower transportation costs, are not necessarily cheaper or equal quality to foreign goods and therefore there is limited benefit for smaller states to import from India.         

The extra-regional export pattern of the SAARC countries is mutually competitive rather than complementary. Jute goods are exported by Bangladesh as well as India. Tea exports are shared by Sri Lanka, India and Bangladesh. Pakistan competes with India in the world’s high quality rice market as well as in the cotton goods. Of late, Nepal has fulfilled a significant percentage of demand for hand-made carpets along with India and Pakistan. The SAPTA Agreement provides the least developed member states to encourage their export prospects through technical assistance and co-operation arrangements to increase their production capacities. The achievement of complementarily in products under SAPTA may not be possible due to the absence of technical co-operation and development financing in the South Asian countries. Diversified attitude of SAARC member states about financial and monetary co-operation create problems among SAARC states. All members are not equally in same opinion about the creation of a regional development bank, a regional import-export bank and a regional finance corporation.

Suffice it to say that SAARC countries have diversified interest in economic field. The formulation of a common strategy whether in respect of export or import may fumble at different stages because for such states as Bangladesh, Nepal and Bhutan, agricultural produce may figure prominently but for others i.e. India and Pakistan, finished products may be in an intermediate position? There is wide diversity in the levels of development in South Asia. The smaller states have feared that trade liberalisation may benefit the larger countries more. They also worried that this liberalisation will create relations of dominance and dependence between strong and weak partners.

In view of the above it is evident that in promoting co-operation among a group of politically and economically heterogeneous countries as in SAARC is in fact not an easy task and is bound to involve a wide range of issues and problems confronting the member states. For transforming South Asia as a homogeneous system, appropriate transfer of loyalty and legal authority to the regional representative supranational body is an essential prerequisite. There should also be some conflict reducing mechanism, capable of settling regional disputes as well as circumventing instability and violence.