Abstract

Despite being a group of contiguous countries, SouthAsia is one of the leastintegrated regions in terms of intra-regional investment and trade relations. Theshare of services in GDPof SouthAsian countries has increased substantially withSouthAsia exhibiting a high revealed comparative advantage in commercialservices and more particularly in “other services” including computer andinformation technology enabled services.Analysis of the foreign direct investment (FDI) inflows in SouthAsia reveals that the number of total sale deals includingGreenfield investments and Mergers andAcquisitions have increased in recentyears. Though India is ranked as the second most attractive destination for FDI,SouthAsian countries, including India, do not rank high in terms of the FDIperformance and potential indices and are also ranked low in the globalcompetitiveness index. The study points out the investment constraints in SouthAsia and cites poor infrastructure and labour market inefficiencies as thebottlenecks in attracting higher FDI inflows. Emphasising the importance of DohaDevelopmentAgenda on the one hand, the paper lays out the importanceof largerand broader RTAs like PanAsia Free TradeAgreement (PAFTA) instead of narrowRTAs like SAFTA. The success of SAFTAin enabling regional integration woulddepend on turning its current shallow constitution in favour of a deep agreementtaking into account various behind the border issues.

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