South Asia has a long shared history and significant cultural similarity. The region is already positioned as a strong consumer market base with and consistent GDP growth rates, of 5-6%, over the past couple of decades. In terms of high demographic dividend, the region has the largest working-age population, and the milieu to foster entrepreneurship. Moreover, the institutions in the region can have ethnocentric proximity and reduced cultural distance, both conducive to investment and growth. Yet South Asia is one of the least integrated regions of the world in terms of conducive trade environment and policy space. South Asia’s intraregional trade as a share of total trade is the lowest in the world, at less than 2% of gross domestic product (GDP), compared to 40% for East Asia (World Development Report, 2007). Additionally, people to people connection as well as a cross-border investment is low owing to inter-regional conflicts leading to security hazards, and also infrastructure bottlenecks that render cross-border exchanges costly and therefore unattractive. There is a real need to promote integration by creating Regional value Chains (RVCs) in order to improve the region’s share in the global economy and overall growth and harmony.
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