Integrating Services in South Asia‘ comes at a very im-portant juncture when services negotiations are under way within SAARC nations and are also de-emed to be a very impor-tant part of bilateral and multilateral trading arran-gements with huge poten-tial for the region. The services have emerged as the fastest growing sector in many parts of the developing world espe-cially in Latin America and Asia since mid-eighties, which propelled the Uruguay Round (1986-1992) of multi-lateral negotiations to include services export in the General Agreement for Tariffs and Trade (GATT). This resulted in the General Agreement on Trade in Services (GATS) that entered into force in January 1995 with the aim of extending the multilateral trading system to the service sectors, including almost similar provisions of GATT.
Although initially South Asia, under the dominance of India, did not cooperate much during the Uruguay Round of negotiations, after two decades of GATS coming into existence services have developed very high stakes within the South Asian region. This has been possible due to the vast increases in the share of services to their respective country GDPs alongside very high growth rates of the sector on quite high base.
In fact the literature on service in South Asia has been debating on the sustainability of such service sector led growth process in the region, particularly so for India in the past decade. Chanda’s book comes as an addition to this wide range of literature although not quite directly. The book deals more in issues related to trade in services within the region and argue the case for services integration under SAFTA (South Asian Free Trade Agreement) which according to Chanda has the potential to sustain the high services growth in the region albeit with the proper negotiations. The book is a successful attempt at bridging these two gaps between theory and policy by including an elaborate discussion on the potential opportunities and challenges in individual service sub-sectors on a range of cross cutting issues such as regional mobility of service providers, taxes, R&D, regulatory cooperation and others.
The author argues for letting the services sector lead the integration process within SAARC. She makes a case for increased multilateral trading arrangements and deepening trade and investment in services which would clearly benefit the region and individual nations given its sheer size. She says:
…while SAFTA may not be a successful agreement as it stands today, if it were to become broader in scope by including services and investment, it may be much more successful. It may provide the much needed dynamism to regional integration efforts in South Asia, and potentially also help overcome some of the factors that have constrained intra-regional trade in goods…. (p. 14).
Beginning with a glimpse of the journey from SAARC to SAFTA a detailed historical background to the regional integration efforts in South Asia in terms of progression from SAARC to SAFTA and their impact on intra-regional trade is provided. The author rightly points out that while bilateralism has worked out better for the nations in the region, yet regional integration, especially in commodities, has failed due to certain specificities which include similarity in trade baskets, creating competition between nations rather than working as complementarities, differing market sizes, poor transport and communication despite geographical proximity and also at times lacking in political consensus. &
Chanda goes on to explain how services have the full potential to pro-vide leadership for a successful regional integration effort. This is a very meticulous exercise done with empirical evidences from seven South Asian nations apart from Afghanistan to prove the rise of services within the economies of the south Asian region both in terms of its contribution to the GDP as well as trading patterns. The author argues for the potential of services based on the following rationales. Firstly she establishes the structural shift of the economy away from agriculture to services by providing sufficient statistical evidence for the respective countries and stresses on the considerable variations among countries in terms of size of service economies, output and export growth performance and the existence of differentiated comparative advantages across sectors and sub-sectors. Second, she says that such variations give rise to complementarities in the sense that India having a comparative advantage in ITeS would shift towards professional and business services while other countries continue to be dependent on traditional, commercial services such as tourism (Nepal, Sri Lanka). Finally the author links these complementarities to generate not just trade but also increase in capital and labour mobility across the region highlighting the limited capacity of the sector in terms of generating employment.
Chapters 3-7 provide a detailed analysis of selected service clusters covering telecommunication, energy, tourism, health and education respectively. The chapters are methodically structured and organized in a similar pattern providing an overview of the sector in terms of growth, value added, contribution to the economies, extent of liberalization and trade prospects and status of current intra-regional trade negotiations for regional cooperation both at the governmental and private levels. The discussions on negotiations primarily concentrate on the issue of furthering the process of integration using these cluster services. While for telecom services Chanda’s thrust is on the betterment of investment climate for ushering in greater integration through negotiations, for energy on the other hand, the political, institutional technical and commercial efforts have been highlighted. For others like tourism and social services, namely health and education apart from collaborations at the private levels and improvement
“India’s role as a leader in South Asia has not been adequately explored, although India’s vast presence has been mentioned in almost every chapter. The fact that India’s growth has the potential to lead the overall growth of the region via successful integration is lacking in the discussions… However, one feels that highlighting India’s onus to bring about greater regional integration might have provided a certain degree of assurance towards greater regional integration via services where commodities have not succeeded.”
of investment provisions, simultaneous governmental cooperation through consultations has been highlighted which the author presumes of utmost importance to sustain and increase the growth of such services.
The author has summarized the service sector commitments made by the SAFTA members at the WTO and critiques the unilateral tendencies of liberalization by the member countries. It highlights the more liberally committed Modes 1 and 2 compared to the Modes 3 and 4 and in terms of limitations in FDI flows despite commitments of completely liberalized regulations. Chapter 9 and the epilogue highlight the political economy problem existing within the region and discuss possible solutions through negotiating the existing modalities discussed throughout the book. The author also stresses on a flexible and broad based approach (p. 286) while formulating agreements.
While the book comes as an important addition to the wide range of literature on the SAARC initiative on regional integration and trade negotiations, it is however one among a rare collection which analyses the service sector exclusively, in minute details, well researched and substantiated by ample empirical evidence. In addition the author’s prolific writing and the structure of the book provides an interesting and informative read for not only academicians but also those in policy circles and other stakeholders. However one does feel throughout the book that in the efforts to regional integration, India looms large in the region as the greatest beneficiary from all negotiations due to its sheer size of the service sector. India’s service sector growth is the highest in the region, its share of exports is also the highest, much higher than the second largest nation within the region (Pakistan). This poses serious negotiation problems within the member countries, a point which seems missing in the arguments, although India is supposedly the most liberal among the SAARC member countries (2008: p. 97). India’s role as a leader in South Asia has not been adequately explored, although India’s vast presence has been mentioned in almost every chapter. The fact that India’s growth has the potential to lead the overall growth of the region via successful integration is lacking in the discussions. In the last chapter, Chanda does state this point quite in passing, putting it in the framework of a political economy problem. However, one feels that highlighting India’s onus to bring about greater regional integration might have provided a certain degree of assurance towards greater regional integration via services where commodities have not succeeded.