Like many developing economies, the South Asian countries are
opening-up their economies with a view to accelerating their economic
growth through greater trade and investment. In this context, attempts
have also been made to encourage regional trade under the aegis of the
South Asian Association for Regional Cooperation (SAARC). In particular,
the South Asian Preferential Trade Agreement (SAPTA) provides for
reductions in tariffs and other restrictions on specific commodities on
a reciprocal basis, and the eventual objective is to integrate the South
Asian economies into a free trade area through SAFTA, which would come
into force on January 1, 2006. However, despite greater attention on
regional economic cooperation initiatives, there has been little
progress in regional trade expansion: intra-regional trade continues to
be minimal, not exceeding 5 percent of the total trade of the South
Asian economies. This paper highlights the importance of regional
economic integration in South Asia as elsewhere, spells out the factors
which have so far hampered economic cooperation in the region, and
outlines a future course of action to achieve greater economic
integration in South Asia. Section 2 provides a broad perspective on
regional economic integration with a particular focus on the need to
foster greater economic cooperation in South Asia. Section 3 discusses
the factors that have impeded intra-regional trade and economic ties
within the region. Section 4 spells out measures to enhance economic
cooperation in the SAARC region, while Section 5 concludes the
discussion.