The Integrated Economic Community

H. Jackson Brown Jr. says “opportunity dances with those already on the dance floor.” True! If you are not on a dance floor how can anybody/anything dance with you. And to be on the floor, one needs to be healthy, not cynically crippled, and know how to dance well. It is not salsa, samba, tango, bharat natyam or Bhutanese “cham” the discussion is about. Let us not go literal, for PM Narendra Modi will push South Asian countries to the dance floor. He told visiting US Secretary of State John Kerry that he wanted to unite South Asia into an integrated economic community (IEC). By coming together, the South Asian economy will be much stronger. If they do, the IEC will be the “dance floor.” So we better do our homework and learn well the “economic dance” steps if we want the opportunities to dance with us. Even if IEC remains just a Modi dream (implausible), we still need to learn the nitty-gritty of South Asian economic affairs if our economy is to move in the right direction. If not, it will take its own course heading to dysfunctional configuration.

     Economic integration is the fusion of economic policies between different countries through partial or full elimination of tariff and non-tariff restrictions on trade between them. This is meant to lead to lower prices of goods and services benefiting distributors and consumers. The goal is to strengthen combined economic vitality and increase productivities of the countries. This is the economic rationale.  In addition to this, there are much more complex reasons, political obviously.

      The economic side alone will demand ambitious and coherent cooperation from the South Asian member countries. So the easy start for India to initiate the economic integration process is through Bhutan and Nepal.  Before the start of his first state visit, Modi has not only assured Bhutan of more funds for economic development but also wanted to speed up economic integration. This  he confirmed with massive increase of Indian grant and loan allocation to Bhutan of Rs 60 billion (US$ 1 billion equivalent) for this year compared with Rs 41 billion last year, an increase of nearly 50%. We do need strong capacity strength this year to uphold increased Indian assistance to the tune of 60% of GDP on our shoulders and stand straight. Prior to his departure to Nepal PM Modi said "I hope my visit will open a new chapter in India-Nepal relations, characterized by more frequent political engagement and closer cooperation across the full spectrum of our extraordinarily broad-based relations, which will serve as a model and catalyst for South Asian partnership for prosperity." He assured Nepalese parliament the availability of Nepali rupees 100 billion (US$ 1 billion) concessional line of credit  proposing “HIT” mantra [H:Highways (roadways), I:I-ways (information highways) and T:Transways (for energy transmission lines)] and encouraged harnessing hydro-power, of which Nepal’s untapped potential is estimated at 42,000 MW  while the installed capacity now is just 600 MW. I have my own analysis of the two one-billion-dollar packages and  "B4B" (Bharat for Bhutan and Bhutan for Bharat) vis-à-vis  "HIT" mantras, short- and long-term including the differences. You may have your own.

And, there are reports that the West Bengal state cabinet has allocated Rs 14 billion for improving North Bengal road connection with Bangladesh, Bhutan and Nepal even though the West Bengal Chief Minister Mamata Banerjee is proposing  to take her first overseas trip to Singapore to mobilize resources. The congress government in Assam, our other immediate neighbour in the south, may be indifferent to the momentum.

In the South Asian context,  Modi government wants a South Asian Association for Regional Cooperation (SAARC) development bank established early. In July 2014, the 8th South Asian Free Trade Area (SAFTA) Ministerial Council  met in Thimphu and agreed to fast-track the establishment of the SAARC  bank. The proposal is expected to be approved at the 18th SAARC summit scheduled in November this year in Kathmandu, Nepal. Transport and trade financing, the lifelines of economic integration, are expected to be major thrust of SAARC bank.

Within India a massive plan for new financial inclusion is expected to be announced by PM Modi on coming 15 August, independence day of India. There is no sense in talking integration with neighbours if your house is disintegrated. Simple as that. The plan includes providing universal access to banking facilities to the so far uncovered 100 million rural households. The second phase includes financial literacy programme, micro credit availability and creation of credit guarantee funds. All these, and more, on the economic front.

On the complex segment of economic integration, PM Modi sees integrated South Asian economic community through the security angle considering particularly the aggressive Chinese move to bring railways at three border points with Nepal, and at the "chicken's neck" area of Bhutan and India by 2020. The Chinese say the “network will play the role of continental bridge in South Asia and promote economic and cultural exchanges”. I am sure it will, but the complex aspect is silent.

When things move in critical direction in a break-neck speed can anyone afford remaining dysfunctional? It would simply be unfortunate!

The functionality of the government is often determine by the fact that how a healthy organization/society regulates corruption. A person commits a crime. Eventually, the organization/agent/news papers find out about it, and despite the fair amount of blowback, they will get and take a grip on it. The culprit digs in, but more inconsistencies are out. The person resigns. It's an unattractive example, but that's what a functioning system looks like.

And, the dysfunction looks like the following. The functionary identifies a procedural issue which, if messed with,  is almost impossible to take the grip on. That it debilitates the country’s economy is non-issue for those who look through kaleidoscopic procedural loopholes for rent seeking. Then paralysed and ethically deficient governance replaces performance and outcome. The people with passion and commitment sadly vanishes from the look.  There are these in every government. The rules are made with exception to take care of the weaker section of the society. The cunning entity turns itself into a weaker faction to take advantage of the exception, to bypasses the rule. Then there are vicious government-private circles that operate through the channel benefiting everyone at heavy cost to the government. There is a vacuum of ideology, principles, purpose and integrity which money rushes to fill. They do not even perceive the world go by outside their own window.

The reason why the Chinese and Indians are cracking the corruption ring respectively through investigations and severe actions on suspected "serious disciplinary violation" by communist party members and  crackdown by special investigation team on black money stashed abroad. In China the clean–up has reached  unprecedented level that a previous member of the highest 7-member decision-making body,  the Politburo Standing Committee, has taken the direct hit. The method and speed differs: one with communist style and pace and other republican. We are neither of two nor have so much cash to stash in vaults, but not ideally functional. It is just a question of couple of retrofits at the bull’s-eye enabling fresh and passionate empathy circulation into the system. That will bring passion, commitment and even courage in the right place. It is not possible to know how hot the water is without a dip. Not a rocket science, those who have taken a dip know where the bull’s-eye is. Even the termites bring down a beautiful house if their strength is underestimated. For bright and predictable, a spinal strength, it is about!