GLOBALIZATION,REGIONAL ECONOMIC COOPERATION AND INEQUALITIES IN SOUTH ASIA Dr.

VIVEK KUMAR SRIVASTAVA CSSP,KANPUR,INDIA

vpy1000@yahoo.co.in

Paper For POLITICAL REGIMES,GROWTH POLITICS AND CONFLICT IN ASIA 5TH ANNUAL NORDIC NIAS CONFERENCE , 22-23 NOVEMBER 2011, STOCKHOLM UNIVERSITY,SWEDEN
Globalization is one of the most important socio-economic force which has impacted the contemporary age in a highly influential manner. Many developing societies adopted this tool of economic growth particularly after the decline of communism, Glbalization has come to stay in global economic behavior. It was apparent that ideological war of economic model was won by the capitalism in 1991 when USSR was dissolved due to its internal dynamics. In this background many of the South Asian countries too decided to adopt the tool of globalization in an effective manner, though many were already practicing it in milder form .India the leading and core country in the region adopted LPG model in 1991 when Government of Mr. P V Narsimharao adopted this model in order to push the country in to new directional path of economic growth. The LPG model included liberalization, privatization and globalization. The main objective of the model was to enhance the economic status of the country and to bring a sea change in the quality of life in the people. The economic model of globalization naturally opened the doors to

greater interaction among the countries. South Asian countries were in a state of the capital shortage besides entrenched poverty and unemployment status had placed them in the vicious cycle of the poverty in the words of Nurkse. It was hoped that these countries will be able to improve their quality of life , as a direct impact of the globalization multi nationals companies entered and foreign direct investment was created besides free flow of the information and technology was observed . It was a different stage than the previous one where government control were more in existence and the role of the private sector and private investment was not much delimited.

If economic status of the South Asia is given attention, it becomes clear that the region is one of the most backward in the economic and social terms.The economic and social infrastructure of the region is quite low. According to the latest Human Development Index report all of the South Asian countries lie quite below in the global perspective. In this background the globalization was considered as one of the most effective tool to overcome and eliminate the economic bottlenecks in the region. There were many attempts in the previous time when free trade was contemplated as the panacea of the economic problems. Under the guidance of the several international institutions and the policy makers the loosening of the government intervention in the economic fields was prescribed but globalization as an overpowering tool was adopted mainly after the fall of communist empire and conclusion drawn was that capitalism was the only answer to remove the economic problems of these countries. The adoption of this model by India is major event in the global affair due to many factors as it is one of the largest market of consumption, with a certain section of the population having a strong purchasing power and large demand for the international goods was considered as the most motivating factors for capitalist countries to move in India, secondly government had realized that socialist pattern of the economic development had not brought the desired results, the mass section of the society was still trapped in the vicious cycle of the poverty , hence globalization was adopted in the country with the support of the government at the policy level.

Global reasons also pushed the South Asian countries including India to take recourse to the Globalization. After the collapse of the USSR only capitalism appeared to be in winning track. It was now well proved that now no other model can be more successful than the model of the globalization coupled with the neo liberalism. Hence the global changes too pushed its adoption in the region. Simultaneously another thinking prevailed in the ruling elites in the region that collaborated efforts be ensued to remove the economic problems. In this background they conceived a regional economic institutional model and structure to overcome the economic difficulties in the region. For this purpose they decided to come closer by integrating on certain economic terms. They established in 1995 , the SAARC( South Asian Association For Economic Cooperation). Mr. Zia Ur Rehman in Bangladesh first floated the idea in late 1970s that there should be an economic organization in the region which could help to overcome many of the economic problems in the region by integrating the economic efforts of the member states in a regional structure by establishing a free trade regime . These two efforts have been adopted with a single objective of economic transformation in the region and in the particular country. In this background I propose two hypothesis. My first hypothesis is that globalization in South Asian region has yielded benefits to those who are better educated and having better access to the information. My second hypothesis is that regional economic structures in a conflict full environment yield more diversion of trade than in politically silent homogenous society and regional trading agreements cause inequality in LDC countries of the region. These two hypothesis may answer the question as to why after the adoption of these two economic strategies the inequality exist in the region, in what way and manner these countries in spite of the alleviating the economic problems of the masses have helped to establish the inequalities among them. For the study of impact of globalization, India is ideal laboratory in South Asia due to its large population and the adoption of model of globalization in 1991 along with the privatization and

liberalism mode of economic strategies for the economic upliftment. Twenty years have passed since the adoption of this model in India. it has brought many dividends to a section of the society but has also created economic inequality in the region. In order to extent of this inequality we decided to carry on an empirical study in the state of Uttar Pradesh , the largest state in the country with diverse level of the population in terms of economic status. For this study , a random sample survey of 50 individuals was carried on Tthis segment of the society included that vulnerable section of the society which can be termed as the deprived section. These included mainly vegetable vendors, rickshaw pullers, masonic , small commodity vendors, maid servants and like. The random sample survey concentrated people above the age of forty years who were in a better position to appreciate the effect of new economic model on their lives in post globalised age. The first question related to their economic condition whether it had improved than before .The answer of 95% respondent was that it had not improved. They stated that they were more in trouble in post globalised age than before .Their conclusion was that things in the markets had increased but they had no access to these, moreover the health and education for their children had become costlier than before(although about 60% respondents accepted that they had no idea about the way education had to be given to their wards, this fact was revealed even after the Government of India in the recent past has carried on a subsidized mass education programme .) They also stated that their housing and sanitation was not improved at all. They had not attained any specific movement in vertical direction in these spheres. The second question related to which extent they felt that they were not living in normal standard of life in comparison to those whom they served.It is a common fact that this section of the society act as service provider to middle class which constitute about 20 Crores (200 million) in population. This is a significant section of the Indian society with better earning mechanism. About 98% of the respondents were of the view that they have not improved in any manner with their masters, whom they serve .They in fact harboured a sort of psychological negativeness to

their masters.In one remote village some farmers did show their anger against the female teachers who were appointed in Government Primary schools and paid about 20,00 Rs. (400$). Their salary was considered by the local farmers being quite high as they were never in a position to earn this much huge amount of money even in one year. Some of them said that they were being paid for no work and the amount paid was too high.This statement exhibits the type and extent of negativeness about those fellows who belong to middle class of the society and has definitely benefitted from the new economic policies of the government in which role of the new mindset and technological benefits to them is quite high. This sample survey brought out certain features of the deprived and vulnerable section of the society, primarily there is a vast difference between the different strata of the society, secondly the benefits of new economic policies have not percolated equally to the every section of the society. The reality is that globalization has created two sections in the society, first beneficiaries and second non beneficiaries .Another revelations from this survey is that there is a wide spread anger and negativities among the non beneficiaries against those who can be clubbed in the section of the beneficiaries. The last finding can be termed as the psychological inequality as it is well entrenched in the mind of such people that they have not received the benefits of the new social economic dynamics prevalent in the society. The emergence of such psychological inequality is one of the most important factoer for the generation of the crime and antistate , anti social behaviour in the certain section of the society. The emergence of the Naxalite problem in a vast section of the society and territory of the country can be traced to this psychological inequality. The next step in the understanding of such development of inequality in the deprived section of the society were attempted .It was analyzed as to what were the main factors which have hindered the percolation of the benefits of the globalization to this section of the society. There is common conclusion that benefits of globalization has not percolated in equal terms to every strata of the society. Globalization in India has been brought in unrestricted manner unlike in selective way as we may find in the case of China where the free market opening is selective in nature in comparison to India. The major negative consequence of such unrestricted globalization has been that it has

created a social cleavage , particularly in the field of consumerism. In contemporary India there is increased sense and inclination towards consumerism . There have taken place opening of shopping malls , restaurant points, availability of the new models of gadgets. These things demand high purchasing power which is not available to vast section of the population. This has proved one of the most important cause of psychological inequality. One female vegetable vendor expressed her agony in the statement that she always wanted to own a four wheeler of the same standard in which her purchasers used to come in the market. This gap of purchasing power can be cited as the primary factor of differential impact of the globalization. This understanding leads to another question as to what are factors which have restricted the transfer of benefits of globalization to these fellows. The major impact of globalization if understood in terms of increased per capita income and purchasing power of the individual. There is some improvement in the per capita income of the country , but it is unscientific in real measurement. In fact the purchasing power and study of income at a particular individual level should be made the basis of understanding the real income level of the individual. This is necessary in the developing countries a particular feature due to the fact that in these societies different strata of people in terms of income level exist as a result if the income of higher income category is clubbed with a low income category individual. If their average income level is taken out then it appears quite higher. In this way the lower income category person will appear to be holding a higher income capacity but the truth lies some where else. The real low per capita income holders appear to be uplifted in terms of the per capita income as it is calculated by adding the higher per capita income but in real income lies quite down. Hence per capita concept in the developing societies is of not much of the relevance as when individual go out for purchasing and not in a position of purchase the commodities , psychological inequality is caused in the society. The major factor in this respect is to increase the purchasing power of the individuals. This fact should be understood by relating to another dimension of the globalization which aim to establish new free market regimes. The major overt impact of the globalization has been in the field of the establishment of new types of market structure where better choices, better products are available but who is the purchasers? The main purchaser is that who has accrued economic benefits from the impact of

the globalistaion. As globalization is modern scientific business model which not only establish the modern market structures but also create new products for those who can afford them. Globalisation also provides the better wages and absorb a significant population in the job system by encouraging the growth of the new companies and infrastructure. Hence the growth of modern companies, development of new products, establishment of new markets are also derived impact of the globalization. This is one of the most important root cause of the inequality caused by the globalization in the developing societies. This is due to the fact that new businesses and the allied company establishments require highly skilled man power. It demands better informed young ones who are well versed in the modern education which in normal sense require the basic and advanced knowledge of the English and ICT(In formation Computer Technology ). The deprived section is not a partner in this requirement , hence the globalization demands are fulfilled by those who are better informed, technically qualified and have access to the modern system of education.This is that section of the society which is in younger age group but miniscule in comparison to those who are not partner to this dimension of the globalisation. These individuals can obtain a better jobs, though these got a better wage and thereby are in a position to purchase the consumer products and capitalize the better facilities. Globalization in this way has created inequality in these societies as mass of the society is illiterate with no access to modern type of information and is unaware how to reach to the status of the Highly Skilled man Power status. Income power inequality is therefore a natural result of the globalization in the developing societies. This form of inequality has produced another types of the inequalities in the society. Another analysis shows that inequality at the gender level, regional inequality, rural-urban inequality. As for illustration there was significant deviation from the equality when individual of northern India are taken up in contrast to the Southern states where modern technological establishments have been established. Though the next generation of many of the north Indian people are employed in the IT hub of the Bangalore and Pune but major shares in jobs and increase in per capita income has been witnessed in the Southern states than northern states..This

creates inequality in two different regions of the India. Many such studies with different variables can be taken up for understanding the different pattern of the inequalities in these developing societies. In this background we can find that first hypothesis that better information and education facilituies have created a structure of inequality in the Indian society.The better informed people, particularly are in a better position to attain a better status of the economic benefits by being a part of the better income category, in contrast those who are not in a position to serve the market economies are still in the deprived category. Hence they fall trap to psychological and economic inequality both. The better quality of life and a better real individual personal income is still out of the reach to these fellows. Hence inequality will continue as long as the true behavior and dynamics of the globalization is not understood. My second hypothesis is that regional economic structures in a conflict full environment yield more diversion of trade than in politically silent homogenous society and regional trading agreements cause inequality in LDC countries of the region. The logical understanding is that regional trading block offer more benefits to the member st than their individual . bilateral economic relationship with any single country. It means in such an environment inequality is likely to occur where political conflicts are in existence among the member states , intra regional trade is not much in quantity due to such state of affair and often trade diversion out of the region is caused. Even if in such environment a regional trading block is created , it may bring major benefits to big countries more and less developed countries in the region are pushed to inequality due to these structures. If these societies are highly stratified in economic measurement as found in the case of the South Asia where in economic terms society is highly segmented. A case in point is the South Asia where SAARC has been established in highly stratified regional society.It was established in 1985 in order to create an enhanced level of the economic cooperation among the member states.There are eight members in this organization, in which India, Pakistan and Sri Lanka, Bangladesh are major economies in the region whereas Nepal. Maldives and Bhutan and Afghanistan can be termed as the Least developed Countries in the

region. Considering the economic low standing of almost all the member states , it was their fond desire that they should make an attempt to create a economic structures for their own benefits. SAARC has been devised as an exclusive economic organization keeping in mind the high intensity of the political conflicts in the region, it was decided that no political issue can be raised in the platform of SAARC. This has been clealy mentioned in the article X of the charter adopted in year 1985.

There were other attempts as well by the SAARC to enhance the economic cooperation among the member states when SAFTA and SAPTA like structures were visualized. These have been implemented in the region in the due course .SAFTA is one of the most important free trade structures which aim to reduce the barriers in the region. SAPTA was envisaged primarily as the first step towards the transition to a South Asian Free Trade Area (SAFTA) leading subsequently towards a Customs Union, Common Market and Economic Union. In 1995.(and ) The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan. The Agreement entered into force on 1 January 2006, and the Trade Liberalization Programme commenced from 1st July 2006.1 Although it has contributed to a certain increase in the intra SAARC trade but that appears to be insufficient considering the economic potential in the region The following table exhibit improvement in the trade behavior among the member states but large population and entrenched segmentation of the society has restricted the benefits of such free trade regimes.

INTRA SAARC TRADE Yea r 2006 0.00 0.00 Bangladesh India Maldive s 14,001.1 5 2007 15,273,177.84 2008 98,316,963.16 3,783,410.31 8,984,420.68 0.00 576,164.99 19,828.02 19,652,581.16 40,789.22 139,138,891.5 7 2009 199,786,454.7 315,256,736.3 2 4 0.00 56,119,007.59 0.00 43,509,984.90 608,623.96 559,161,799.9 2 517,566.00 570,281,530.5 7 74,609.00 74,609.00 55,324.00 0.00 69,325.15 Pakistan Sri Lanka Total

0.00 31,796,718.51

2010 236,711,501.2 276,933,455.7 4 2011 Tota 550,088,096.9 604,958,023.0 l 6 7 4

14,001.1 132,057,199.9 1,261,416.2 1,288,378,737 5 9 0 .

(SAFTA performance as made available by the SAARC Secreteriat ) There is acceptance at expert level in the SAARC that SAFTA has not lived up to theexperctation. As of 10 August 2011, the total f.o.b. value of exports by Member States under SAFTA has reached to around US$ 1.3 billion since launching of SAFTA Trade

Liberalisation Programme (i.e. July 2006, the figure of total exports under SAFTA has reached about US$ 1.3 billion but is still far below the potential.2 Due to its non functioning to the desired levels, it is observed that many of the member states have attempted to link themselves with another SAARC nation in the free trade mechanism.The recent example is of the India_Sri Lanka free trade bilateral pact, India has also taken lead to look towards East Asian countries under its Look East Policy. It has forged strong economic relations with the ASEAN. These facts bring out the conclusion that inspite of the existence of a regional trading organization where every year summit level meetings takes place, SAARC has not yielded any constructive , positive benefits in reference to its potential The SAFTA s limited success has pushed these countries to look beyond the SAPTA, as a consequence trade diversion has taken place.The major example being India bring out the fact is that those countries which have taken more active participation outside of the South Asia will bring economic benefits to them but will not create any substantial benefits to the LDC countries as aresult they will fall more in inequal stage than their neighbours.Their limitations to participate in international trade could have been compensated a little if they had regional market available in true manner. It suggests that regional economic cooperation have not brought any sea change in the level of living in the common people of the region. Although three fourth intra regional trade remains unexploited. SAFTA can hope by creating supply capacities in lesser developed countries , and regional economic cooperation provide new oppurtunities for trade creation and to foster equitable development.This will take place by efficiency seeking industrial restructuring that involves building production and supply capacities in relatively less developed countries through intra-regional development.3 There is another point as well if SAFTA and SAPTA succeed in future.The maximum benefits of such integration will be accrued by the most developed economies in the region due to their better economic capabilities. India is one of its major example. This fact assumes importance due to the fact that India continues to have a dominant share of the regions exports of goods as shown in . Its exports are more diversified and include durable consumer goods, intermediate materials, and certain machinery that is competitive not only internationally but also in South

Asian markets, especially Bangladesh and Sri Lanka. The other economies are smaller and their exports more specialised in labour-intensive products, especially textiles, garments, leather goods, seafood, and agricultural products. 4

This will produce similar form of inequality as we have discovered in case of the globalization, hence LDC countries are likely to be forced in low condition due to lackness of better economic and social infrastructure. This understanding prove the second hypothesis too. The major problem is therefore of the industralisation, highly skilled manpower for the LDC countries.This statement becomes more acute when we take into account the nation states behavior in the region , due to extreme political conflict in the region , there are hamperings of free trade development. Recommendations As it has been discovered that globalization and regional economic integrationcreates inequality to that section of the population of the society which is weak in education, modern technology, hence the major task for these societies should be to upgrade this aspect of the social infrastructure.This is an illuminating fact for the developing societies. For accruing the benefits of the regional trading organization, the weaker countries should focus upon the industrialization, modernization of education infrastructure otherwise such arrangements or trade diversion in due course will create inequalities in their societies. BIBLIOGRAPHY 1.information available at SAARC Secreteriat ,Kathmandu 2.ibid 3. Tai Yong Tan,Challenges of Economic Growth, Inequality and Conflict in South Asia: Proceedings of the 4th International Conference on South Asia, 24 November 2008, Singpaore, ,World Scientific, 2009

4. Sadiq Ahmed And Ejaz Ghani(Ed) South Asia,Growth and Regional Integration,The International Bank for Reconstruction and Development/The World Bank ,Macmillan India Ltd., 2007