South Asian economic union remains a distant dream

The recent India visit of Sri Lanka’s President Anura Dissanayake seems to be aimed at easing any lingering tensions in bilateral ties between the two neighbours. It may have also eliminated concerns over the fact that he has long been viewed as being pro-China and anti-India. As head of state, he now evidently seeks to project a more neutral image, especially in the backdrop of the economic distress faced by his country in recent years.

It would be difficult to overlook the fact at New Delhi provided consistent support throughout Colombo’s financial crisis by stepping forward with assurances to enable clearance of a bail-out from the International Monetary Fund (IMF). The fact that his first visit abroad was to India indicates there is recognition of the sterling role played by New Delhi in helping the island nation to recover from the foreign exchange crisis.

For India, this represents the outcome of a measured policy to support its southern neighbour in a time of need. It went the extra mile by ensuring that food and fuel supplies were ferried to Sri Lanka when the economy was facing acute shortages of these commodities. It also did not hesitate to offer credit of $4 billion to provide additional support to an economy that was battling a shortage of foreign exchange resources and inflationary pressures. In addition, it stepped forward quickly to ensure that the much-needed IMF loan of $2.9 billion was not stalled due to lack of support from the country’s creditors.

The result is that discussions between the two sides during the Dissanayake visit were not only cordial but outlined specific areas for substantive co-operation. Significantly, these did not include the Adani wind energy project which has been criticised for its potential adverse environmental impact. The new government has already declared that it will review the project in the light of these environmental concerns. Yet the focus is clearly on ensuring that infrastructure development continues without any pause judging by his comments that Adani group investments would be evaluated purely on merits and would not be affected by the reports of the company’s indictment in United States courts.

Other areas covered by the joint statement include maritime security, defence co-operation, and expansion of economic and trade ties. Digital connectivity and energy co-operation, for instance, have been highlighted as these are sectors where bilateral co-operation can yield positive benefits for Sri Lanka. Discussions are reported to have been held on LNG supply and development of Trincomalee as a regional energy and industrial hub along with renewable energy schemes.

In this context, it would be an opportune time to expand and upgrade the existing India-Sri Lanka Free Trade Agreement. The pace of talks on the proposed Economic and Technical Co-operation agreement also need to pick up, as it has been under negotiation for quite some time.

While India’s ties with Sri Lanka are clearly on the mend, the situation is not the same on the northern, western, and eastern borders. Though tensions with China have eased in recent days, there is little prospect of the trust deficit being bridged in the near future. As for Nepal, it has recently concluded a framework agreement to go ahead with China’s Belt and Road Initiative (BRI)’s infrastructure projects. This is despite India’s strenuous opposition to the BRI on the grounds that it impinges on its territorial integrity. In fact, Nepal Prime Minister K P Sharma Oli’s decision to make his first foreign visit to China rather than India, as has been the case till now, is being viewed as a major shift in that country’s policy.

On the east, relations with Bangladesh have plummeted to all-time low with the advent of the Mohammad Yunus-led government. In other words, India is surrounded on most sides by countries bristling with animosity. This may not have any immediate repercussions on the domestic economy despite the sizable investments made by Indian industry in Bangladesh, especially in the textile sector. In the long run, however, it means that there is little chance of integrating economies in the region as was envisaged when the South Asian Association for Regional Cooperation (SAARC) was originally set up.

This is despite the South Asian Free Trade Agreement (SAFTA) being concluded about 20 years ago. Both SAARC and SAFTA remain in cold storage as fissures between countries in the region continue to widen. It is regrettable that this makes it virtually impossible to harness the potential economic benefits of a South Asian economic zone.

An integrated South Asia would enable the smaller countries in the region to access the larger Indian market while energy co-operation could potentially reduce fuel costs significantly. Given the current state of affairs, however, the possibility of a South Asian economic union is likely to remain a distant dream for a long time to come.

Sushma Ramachandran is a senior journalist.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.