Some economics graduates may not have heard about Dr. Mahbub ul Haq. His contributions to the study of development economics set the standards for quantifying human development. The pioneer of Human Development Theory and founder of UN Human Development Reports was a son of the soil.
The thirteenth edition of Human Development in South Asia was recently published by the policy research institute, founded by Dr Haq in Islamabad. The latest release focuses on international trade and its impact on development issues in developing countries.
Theories in international trade generally suggest that trade benefits developing countries disproportionately, due to cheap labour and resource mobilization. However, ground realities do not reflect such a comparative advantage.
Researchers at Mahbub ul Haq Human Development Centre, have also found that trade liberalization and multilateral agreements such at GATT and WTO are skewed in favour of the developed North. The developed world has dominated such bodies through superior bargaining power and better negotiating tactics.
Most countries in South Asia, in the post colonial period, established an inward looking economic policy. The mainstay for the first few decades was import substitution. Only in 80s and 90s did an outward looking, export oriented model gain acceptance in the region.
A few reasons mar the benefits to society of international trade in the region.
Liberalization in agriculture was detrimental to the local farmer because most farmers in South Asia are subsistence farmers, not entrepreneurs as in the developed world. Therefore the economies of scale, expensive inputs to increase yield, efficient infrastructure and mechanization have so far been uneconomical.
In terms of manufacturing, exports are concentrated around the textile and apparel industry throughout the region. Most exports are of primary goods, raw material or low value-added goods. In contrast, East Asian countries developed high end manufacturing capabilities over the years and are now economically much stronger.
The report suggests that international trade may be most beneficial for South Asia if intra regional trade is boosted. Numerous agreements, SAFTA, Pakistan Sri Lanka Free Trade amongst many others exist but volumes have remained shallow, less than 10 percent of overall trade volumes.
Some studies cite the lack of infrastructure as the major impediment to South Asian trading. But, a history of unsavoury relationships and the trust deficit may be potentially larger road blocks.
Finally the report suggests that integration with the world economy will only benefit South Asia if its policymakers design strategic, forward-looking policies, undertake liberalization based on an analysis of sectoral competencies and invest in institutions, infrastructure and human resource development.
It remains to be seen if policy makers in Islamabad will wake up to the realization that people are the centre of their authority, not the power that follows as a corollary.
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Trends in GDP growth and HDI in South Asia
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India Pakistan Bangladesh Nepal Sri Lanka Bhutan Maldives
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GDP growth(%)
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1995 7.6 5.0 4.9 3.5 5.5 6.0 7.4
2000 4.4 3.9 6.0 6.0 6.0 7.2 4.8
2008 7.1 6.0 6.2 5.3 6.0 13.8 5.8
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HDI Value
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1995 0.51 0.47 0.42 0.44 0.70 0.35 0.68
2000 0.56 - 0.49 0.49 0.72 - 0.72
2007 0.61 0.57 0.54 0.55 0.76 0.62 0.77
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Rank
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2006 132 139 147 145 104 131 99
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Source: MHDC
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