Second-generation Cooperation Agenda

South Asia remains one of the least integrated regions in the world, which is manifested in its lack of connectivity, low levels of intra-regional trade and weak investment flows. On the other hand, there is an apprehension that Southeast and East Asia could fall into a ‘middle income trap’, if they are not able to raise competitive strength and productivity further. In view of this, it is argued that there is a need for a framework of second-generation cooperation and integration embracing these three subregions in Southern Asia. This calls for concerted efforts to leverage existing institutional arrangements and put in place new avenues of subregional and inter-regional cooperation. Expansion of production networks, developments of value chains and greater integration of markets will allow these subregions to translate their respective comparative advantages into competitive advantages. Through harnessing opportunities of technology transfer, connectivity and greater factor mobility, and by taking advantage of cross-regional division of labour, these subregions could promote new patterns of inter-regional trade structure and specialization, which could benefit all the countries of Southern Asia.