The grant is focused on India and Pakistan because they are the region’s two largest economies and both have been taking steps to promote stronger RCI.
"India and Pakistan could potentially play a pivotal role in advancing wider Asian integration, as well as catalyzing South Asian regional cooperation," said Jayant Menon, Principal Economist with ADB’s Office of Regional Economic Integration.
In the past, progress on cooperation has been slow and South Asia remains the least integrated region in the world with intra-regional trade, for example, accounting for just 2% of gross domestic product, compared to 20% in East Asia.
Challenges to closer ties include persistent poverty, rising inequality, civil conflict and at times, tense political relations. High levels of trade protectionism also persist despite the establishment of the South Asian Free Trade Area.
However, there has been progress in recent years with a pickup in the level and pace of domestic policy reforms across South Asia; improved relations and increased levels of trade between India and Pakistan; and a greater opening up of South Asian economies to other regions and the world.
The grant will seek to support and accelerate domestic policy reforms that have begun in India and Pakistan, and to identify long-term strategies for closer regional cooperation that could maximize gains from the policy changes.
