Submitted in partial fulfillment of the requirements
Under the guidance of

Affiliated to University of Mumbai


This is to certify that,
Ms. HUMERA KHAN M.com Banking and Finance Part 1
Semester-1 Roll No: 49 has undertaken and completed the project
titled “ECONOMIC INTEGRATION” during the academic year
2015-2016 under the guidance of Prof. KALAVATI submitted to this
college in fulfillment of the curriculum of
This is a Bonafide project work & the information presented is
true & original to the best of our knowledge & belief.






I, HUMERA KHAN studying in Mcom Banking and Finance Part 1
course in the academic year 2015-2016 at S.K.SOMAIYA College of
Arts, Science and Commerce and hereby declare that I have
completed the project on “ECONOMIC INTEGRATION” as a part
of course requirements of MASTERS OF COMMERCE Banking and
Finance of University of Mumbai.
I further declare that the information presented in this project is true
and original to the best of my knowledge.


Signature of Student


SANGEETA KOHLI . S K SOMAIYA College of Arts. co-operation encouragement and time spent for this project work. Science and Commerce for his continued support. I also thank my family members for their continued support in completing this project work and last but not least. I would like to thank our Library Staff for providing me sufficient information. have great pleasure in giving my sincere thanks to those who have contributed their valuable time in helping me to achieve the success in my project work. 4 . which helped me to complete my project successfully. I would like to thank Principal Dr. I would like to express my sincere thanks to Co-coordinator for his constant encouragement. I wish to thank all my friends and well wishers who are directly or indirectly linked with the success of my project. I would like to thank all the lecturers for their support and guidance throughout the project. in completion of this project successfully.ACKNOWLEDGEMENT I the undersigned. I am indebted and thankful to my project Guide and Motivator Prof KALAVATI for her valuable and timely guidance.

INDEX SR.NO TOPIC PAGE NO 1 Introduction 6-8 2 Goals of economic integration 9 3 Forms of economic integration 10-11 4 Need for economic integration 12 5 Benefits of economic integration 13-14 6 Problems of economic integration 15-16 7 Measures to encourage economic integration 17-18 8 Trade blocs 19-30 9 CONCLUSION 31 10 BIBLOGRAPHY 32 5 .

For example. economic integration means that it is a creation of network of like-minded states together and design economic goals and work together to attain these goals. the corporation between Tornio in Finland and Haparanda in Sweden. Economic integration is not an easy task. Europe as a whole. The communist Government of the former social block have been replaced by democracy.INTRODUCTION: Economic integration is an economic alliance or network-based on co-operation. Another example could be the creation of a common 6 . Perhaps. Estonia. shared interests and objectives . but in non-member nations as well. Latvia and Lithuania. This. East and West Germany have been reunited to form a new nation. Both the cities have been benefitted from the enhanced city provided services which each town would not have been able to afford on their own. Thus. This is clearly evident from its nature and even more so as a problem in the Baltic region where there have been so many political changes in recent years. We have seen the formation of three newly independent states. risk and cost reduction. is becoming an economically integrated union mainly in the nations of the European Union. collaboration. closeness and a commitment between two countries on an integrating. These changes have made economic integration not only more difficult but also to some extent more necessary. These two cities have been successful enough in their economic integration that are now talks about integrating the entire straddling the sea of Bothnia. ongoing basis. more than anything signifies the changes and levels of increasing co-operation between European Union nations. the best example of this phenomenon of economic integration is the introduction of a common European currency. the Euro. or it can be an ongoing collaboration over a long period of time. adaptation. flexibility. It can be accomplished on a case to case basis. These two border towns have decided to cooperate on a number of issues to enhance the quality of life and economic activity in the region.

tax base and the abolition of import-export fees and the creation of the Common European Market. Economic integration usually implies repealing tariffs. On the other hand. 7 . and may also include extending favourable taxation rates or regulatory treatment to encourage crossborder investments. the more integrated the economies become. Negative integration relates to those aspects of economic integration which involve the removal of discrimination and restrictions on the movement of goods among member countries. In periods of economic growth. The aim of economic integration is to reduce costs for both consumers and producers. MEANING: Economic integration means the removal of barriers to trade by countries that prevent or hinder the flow of goods and services into or out of a nation or society. as well as to increase trade between the countries taking part in government. where business effectively get to treat the entire European Union as one state. however. being integrated can lead to greater long term economic benefits. in periods of poor growth being integrated can actually make things worse. The more integrated the economies become. or other punitive customs practices. the less power the governments of the member nations have to make adjustments that would benefits themselves. Tinbergen distinguishes between negative and positive integration. At the same time. embargos. Economic integration is an economic arrangement between different regions marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. the fewer trade barriers exist and the more economic and political coordination exists between the member countries By integrating the economies of more than one country. the short term benefits from the use of tariffs and other trade barriers is diminished.

positive integration involves the modification of existing institutions and policy instruments and the adoption of new ones in order to remove market distortions within the economic region. 8 . In fact. whether economic integration is negative or positive. it aims at free movements of goods and factor of production and removal of discrimination among nations in a regional group.

 To make the balance of payment position more favourable.  To promote indigenous research and developments.  To conserve the foreign exchange resources of the country. Thus.GOALS OF ECONOMIC INTEGRATION: The goals of economic integration are to create a network of likeminded states that together design economic goals and work together to attain these goals. the following are the objectives of economic integration:  To protect domestic industries or certain other sectors of the economy.  To guard against dumping.  9 . Economic integration can be accomplished on a case to case basis or can be ongoing collaboration between nations to enhance economic conditions over a long period of time.

Agreement is needed on the level of the common external tariff and on the administration of the tariff revenues. the goods from outside FTA may enter into free trade area through the member country levying the lowest tariffs. The members are free to impose their own trade restrictions on imports from countries outside Free Trade Area. CUSTOMS UNION: Customs Union is a free trade area plus an agreement to establish common trade barriers with the rest of the world. therefore. Free Trade Area: Free trade area is a permanent agreement between neighbouring countries. Preferential Trading Agreements: A Preferential Trading Agreement is the simplest form of economic integration. the members have to maintain customs points at their common borders to make sure that imports do not enter into the free trade area through the member levying the lowest tariff on each item. There is a complete removal of tariffs on goods traded between the members of the free trade area.FORMS OF ECONOMIC INTEGRATION: The important forms of economic integration between countries are given below: 1. 3. The preferential treatment may be in the form of reduced tariff or special quota for the goods of the countries. They have a common tariff against the outside world. the members need not have their customs control on goods moving among themselves or rules of the origin. 2. As a result of this. A group of countries have formal agreement to allow each other’s goods to be traded on preferential terms. 10 . To overcome this problem.

Monetary union may involve a fixed exchange rate system between member countries with a single or common currency and control over interest rates and other instruments of monetary policy. Fiscal policy co-ordination involves rationalisation of tax rates and some degree of control over government budgets and budget deficits. Economic Union ties up its economies closely so that in effect. This involves common market and also the harmonisation of economic policies in particular Monetary Union and the coordination of fiscal policies. ECONOMIC UNION: Economic Union is the most complete form of economic integration between countries. which is common to all firms trading within that market. There is also likely coordination of other economic policies such as agricultural. It allows free movement of goods services and capital among the member countries. they function as single economy. comprising all the member nations. A common market implies that there is an internal market.4. COMMON MARKET: Common market is accustoms union where internal non-tariff barriers have also been removed. 11 . 5. Thus. industrial and other policies.

NEED FOR ECONOMIC INTEGRATION: Economic integration among developing countries is needed to accelerate their economic development by:  Encouraging the establishment and growth of manufacturing industries. there is the need to attract foreign investment and utilise it profitably for economic development of the customs union or free trade area. the achievement of economies of scale. The aim is to industrialise their economies on modern lines. 12 . Economic integration is essential to change the existing pattern of trade which requires changes in the existing pattern of production. There is much less interest in trade creation through destroying inefficient producing units existing in the member countries.  Increasing the gains from trade and  Providing benefits of the extension of competitive markets Developing countries chiefly export primary products which are traded freely in world markets. Finally. But there is more interest in trade diversion by shifting purchases from the rest of the world to member countries. The purpose is also to mobilise and utilise fully their unemployed resources through industrialisation. their imports consist mainly intermediate goods and manufacturers which the majority of them either do not produce or produce in limited quantities. On the other hand. and more constructively.  Expanding intra-regional and extra-regional trade.

 There is expansion of trade among member countries with the removal of trade barriers. This further tends to increase the gains from trade.  In order to exploit economies of scale and utilize excess capacities in existing plants or process.BENEFITS FROM ECONOMIC INTEGRATION: There are many prospective gains from regional integration among developing countries.  Regional integration among developing countries encourages competition among them. With the extension of the 13 . or a customs union or a free trade area among themselves.  This leads to the movement of resources from less efficient to more efficient production. the new manufacturing industries will meet the local demand in member countries.  Since the developing countries have similar levels and patterns of consumption in particular regions. The following benefits accrue to developing countries when they form a trading bloc.  In the long run. the countries can benefit from the economies of scale.  Integration among developing countries also attracts direct foreign investment in new regionally based manufacturing industries that enjoy economies of scale.  On the basis of inter country agreements for the establishment of new and the expansion of existing manufacturing industries. regional trade agreements among them provide greater opportunities to expand their markets and develop.  There is “trade creation” when goods which were being produced by high cost partners are replaced by low cost producers within the region. Every member countries try to innovate and adopt new methods of production in its specified industries. developing countries can have complementary agreements for their development.

14 .market and increase in economies of scale. imposing tariffs on imported goods and increasing exports to the outside countries. these industries will be able to compete in world markets and thus export manufactured good.  Regional integration may also lead to improvement in the commodity terms of trade of member countries. This is achieved only if the demand for imports by members is reduced by producing import substitutes.

But the volume of intra. ADMINISTRATIVE: There are certain administrative requirements of a customs union which may be beyond the capacity of poor and weak members. They may not have efficient and sufficient administrative staff to implement the policies of the union. communications. They are. 5.regional trade is very small in the regions total foreign trade. The smaller. Even if there is geographical proximity among them. This is particularly so in Asia and Africa where there are national rivalries and boundary disputes. 3. 4. The lagging or weak countries fear that the economically better partner countries will retard rather than assist in their economic development. Nearness to each other is essential for forming an economic union to be successful. UNEVEN DISTRIBUTION OF BENEFITS: There are disparities among developing countries which create problems in equitable distribution of benefits.PROBLEMS OF ECONOMIC INTEGRATION: There are many problems or difficulties in the formation of a customs union or free trade area by developing countries. 2. infrastructural and other facilities for intra-regional trade. TRADE DIVERSION: The volume of foreign trade in developing countries is generally high relative to their domestic production. These two diverse trade 15 . reluctant to form a union with the latter countries. there are always small and large and less developing and more developing countries. They are enumerated as under: 1. GEOGRAPHICAL DISTANCES: The developing countries often lack in geographical proximity to each other. POLITICAL: In any regional integration. they lack in good transport. weaker and less developing countries fear that their freedom and sovereignty might be in danger if they form a customs union with their bigger and more powerful neighbour. therefore.

LOSS OF REVENUE: The fear of loss of revenue with the formation of a regional union is also an obstacle in the economic integration of developing countries. 6. Moreover. the weak members will not be in position to raise tariffs by themselves in order to meet their revenue requirements. The formation of an economic union will not serve any purpose because they will be competing for the same world markets for these primary products. Thus it is no use forming a union because trade diversion is always harmful. 7. This is because with economic union. 16 . This is because it will lead to diversion of old trade from foreign countries to each other. with the formation of a union and adoption of a common external tariff.patterns will lead to trade diversion among developing countries when they form a union. intra-regional tariffs will be eliminated. ECONOMICALLY DIVERSE: The majority of developing countries produces and exports primary products.

1. 3. TRADE LIBERALISATION: The first step should be towards partial liberalisation of regional trade. trade promotion organization. 2. FOREIGN INVESTMENT AND TECHNOLOGY: They should be a regional agreement for the entry of foreign investment and technology in countries of the region. TRADE INFRASTRUCTURE: For the development of intra-regional trade. exchanging goods and services rather than purchasing them should be started. besides strengthening economic relations. the establishment of effective infrastructure facilities such as transport and communications within the region is required. It may be noted that all measures should aim at removing fears of the dominant members. REGIONAL INSTITUTIONS: To promote intra-regional trade such regional institutions as joint business councils. regional export processing zones. Trade barriers on products in which members of the region possess comparative advantage should be removed gradually.e. counter trade i. Such an agreement can bargain with foreign suppliers to the common benefits of all the countries. 4.MEASURES TO ENCOURAGE ECONOMIC INTEGRATION: The following measures are suggested for the formation and success of an economic union among developing countries. can be helpful. creating confidence among the laggard members of the region. It might be in specific product. regional trade information centre. etc. Countries having common borders can have inter-connected road and rail transport facilities. 17 . 5. COUNTER-TRADE: To promote intra-regional trade and cooperation among small and big states.

and to coordinate the activities of existing trade financial institutions and commercial banks. a regional central bank should be established. to give adequate line of credit to importers. 7. This will help to increase intra-regional trade. BALANCE OF PAYMENT SUPPORT: Economically weak countries are prone to balance of payments problems in intra-regional trade. To help such countries balance of payment support should be provided to them by establishing a regional payments union funded by all members in whom big countries should contribute more. CREDIT FACILITIES: To provide credit facilities to exporters.6. 18 .

This has driven ASEAN’s community building efforts. the Philippines. The ASEAN Declaration in 1967. the PoliticalSecurity Community. considered ASEAN’s founding document. together with the Initiative for ASEAN Integration (IAI) Strategic Framework and IAI Work Plan Phase II (2009-2015). they form the Roadmap for and ASEAN Community 2009-2015. Cambodia became ASEAN’s tenth member in 1999. Malaysia. The ASEAN Charter entered into force on 15 December 2008. ASEAN commands far greater influence on Asia-Pacific trade.ECONOMIC INTEGRATION OF SOME NATIONS: ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) The Association of Southeast Asian Nations (ASEAN) was formed in 1967 by Indonesia. Secretary Clinton signed the Treaty of Amity and 19 . With the entry into force of the ASEAN Charter. and cooperation. and. Dialogue partners meet regularly with ASEAN at the working and senior levels to guide the development of our regional relations. Each pillar has its own Blueprint approved at the summit level. political. Singapore. and Thailand to promote political and economic cooperation and regional stability. Economic Community and Socio-Cultural Community. formalized the principles of peace and cooperation to which ASEAN is dedicated. shortly after its independence from the United Kingdom. Laos and Burma were admitted into full membership in July 1997 as ASEAN celebrated its 30th anniversary. In July 2009.S. relations with ASEAN have been excellent since its inception. U. consensus. Brunei joined in 1984. The ASEAN Community is comprised of three pillars. This work is based largely on consultation. The United States became a Dialogue Partner country of ASEAN in 1977. ASEAN established its legal identity as an international organization and took a major step in its community-building process. and security issues than its members could achieve individually. and Vietnam joined ASEAN as its seventh member in 1995.

In 1994.Cooperation in Southeast Asia (TAC) which has greatly enhanced U. social progress and cultural development of member countries. President and all ten ASEAN leaders.  To accelerate economic growth. Nina Hachigian is the U. Ambassador to ASEAN. ASEAN took the lead in establishing the ASEAN Regional Forum (ARF). ASEAN holds its Post-Ministerial Conference (PMC) to which the Secretary of State is invited.S. On November 15.S. The Objectives of ASEAN were as follows:  To promote active collaboration and mutual assistance in matter of common interest. Every year following the ASEAN Ministerial Meeting. 20 . relations with ASEAN and the East Asia region. which now has 27 members and meets each year at the ministerial level just after the PMC.  To maintain close cooperation with the existing international and regional organisations with similar aims.  To ensure the stability of the south East Asian countries.S. political relations with ASEAN. President Obama met with ASEAN leaders in Singapore. The President’s meeting has greatly advanced U. This was the first meeting ever between a U. 2009.S.

The members of the bloc are USA.  More and easy access to financial services among the member countries. Bush. In 1984.W. The NAFTA is basically a trade and investment agreement with a view to reducing barriers on the flow of goods. services and people among the three countries. It was ratified by the legislatures of the three countries in 1993. Mexican President Salinas.  Lowering trade barriers to movement of goods.  Creating of North American Development Bank. 1993 and entered force in January 1. Canada and Mexico. 21 . It was signed into law by President Bill Clinton on December 8.  Protection to investments in member countries. NAFTA is the most powerful trade bloc of the world. congress passed the Trade and Tariff Act.NORTH AMERICAN FREE TRADE AREA (NAFTA): NAFTA was signed by U.S.  Formation of a US-Mexico border environmental commission for avoiding all types of pollution and clearing toxic waste dumps. President George H. The Objectives of NAFTA were as follows:  Substantial tariff reductions over a period of ten years by member countries. and Canadian Prime Minister Brian Mulroney in 1992. 1994.

a study conducted by three economists of Federal Reserve demonstrated that NAFTA boosted incomes within the United States by 0.17 percent. Trade of services and goods between these three countries has elevated from $337 billion during the year 1993 up to $1. the increased trade because of NAFTA supports nearly five million jobs in the United States alone. Particularly. live animals.3 percent and in Canada by 0.  Increased of Trade Between. Canada.ADVANTAGES OF NAFTA  NAFTA Reduced Tariffs A tariff is the tax placed by the national government on an exported or imported service or good to discourage or encourage trade. crude oil and machinery from the two countries.  Provided More Employment Opportunities for the US Workers Based on the Chamber of Commerce of the United States. and frozen and chilled foods. gold. The reduced trade restrictions introduced by NAFTA enabled the Americans easy purchasing of Mexican and Canadian goods.  The Three Countries Take Advantage of Real Income Increases Based on the article of Washington Post. This is along with its fresh products. Mexico and the United States NAFTA has been recognized for hugely increasing trade between Canada. red meat. Mexico and the United States.96 percent. 22 . in Mexico by 1. the United States acquires much of its vehicles. snack foods.182 trillion during the year 2011.

while exporters should accomplish origin certificate paperwork. In simple words. Mexico agribusiness used more fertilizers and other chemicals. costing $36 billion per year in pollution. yet it did not do away with the number of customs regulation which might stifle trade. resulting in deforestation at a rate of 630. much of it has been used to establish factories in which Mexican workers offer cheap employment to make US goods.  Increased Tariffs Yet Not Regulations NAFTA might have removed tariffs between the three nations. 23 . The agreement has failed in its aim of increasing the middle class size of Mexico since Asian labour proves to be more affordable.DISADVANTAGES OF NAFTA  Less Benefits to Mexican Workers than Expected Though NAFTA encouraged huge US investments within Mexico.  Mexico’s environment deteriorated: In response to NAFTA competitive pressure. still there are a number of government-imposed obstructions to trade. Origin regulations rule decide if a good is qualified for trade under the guidelines of NAFTA. Rural farmers expanded into more marginal land. even with less or no tariffs.000 hectares per year.

The idea was then developed as the European Monetary System (EMS). In 1989. People in all of these countries use the same coins and notes and business amongst companies in Eurozone states takes place in the single currency. and government borrowing and spending had to be kept under control.Britain. The Euro notes and coins were launched on 1 January 2002.EUROPEAN ECONOMIC AND MONETARY UNION: The Euro is the currency used in the 19 member states of the EU that have signed up to full Economic and Monetary Union (EMU). For many people. The Euro economy relies on all members cooperating with one another. in 1998. the most noticeable benefit is that money does not have to be changed when travelling within the Eurozone. Sweden and Denmark .stayed out of this final stage of EMU. The Maastricht Treaty (1992) made EMU part of EU law and set out a plan for the single currency to be established by 1999. with low inflation and low interest rates. Politicians and economists have expressed concern that the different structures of member states' economies might cause the monetary union to come apart at the seams. 11 of the member states agreed to fix their exchange rates together and handed over the power to set interest rates to the European Central Bank (ECB). To be a part of EMU. countries had to meet certain rules. Finally. They agreed to keep their exchange rates within bands called the Exchange Rate Mechanism (ERM). History The idea of having one currency for the European Community was first put forward in the 1970 Werner Report. and obeying the rules of the Stability and Growth Pact (SGP). There has been scepticism about the ability of the Euro to remain a stable currency serving the interests of all its members. Three member states . member states set the process of Economic and Monetary Union in motion. 24 .

After concern that other weak Eurozone economies would face similar crises. The EFSF will contribute a total of €109. especially as many members have failed to stay within the SGP rules. In March 2012 the size of the rescue fund was increased from €500 billion to €800 billion. Portugal. However. after Greece failed to meet the deadline for a crucial payment to the European Central Bank. which damaged confidence in the Euro. In return Greece had to cut its public spending and allow EU auditors to assess its finances. except Denmark and the UK which have negotiated an 'opt-out' clause. Latvia in 2014 and Lithuania in 2015. Italy and Spain) struggled to repay their debts. Of the new member states that joined the EU in 2004. a European Financial Stability Facility (EFSF) was created to provide loans to struggling Eurozone states. 25 . In general. Despite initial reluctance. Ireland will receive a €17. Eurozone countries gave €80 billion worth of loans to Greece. Slovakia joined in 2009.g. Cyprus and Malta followed in 2008. worth €85 billion. Ireland.The Europa series of banknotes will be gradually phased in from November 2015.1 billion to the second Greek bailout. All new EU member states have to join the Euro once they fulfil the necessary monetary and budgetary conditions. Slovenia adopted the Euro in 2007. Greece joined the Eurozone in 2001. the markets have been cautious about the single currency. In 2013 the EFSF will be replaced by the European Stability Mechanism (ESM). In particular.7 billion loan over 2011 and 2012 as part of its bailout package and Portugal will receive €26 billion. The situation in the Eurozone worsened in 2010 when Greece suffered a financial crisis. to be disbursed over 3 years. Estonia in January 2011. Eurozone members with weaker economies (e. in 2015 a third Greek bailout was agreed. a permanent crisis mechanism for the Eurozone. Since the Euro was set up. countries worldwide suffered badly. The currency had performed well until a global economic downturn began in 2008.

the South Pacific Forum (SPF). and promoting economic and technical cooperation. and a business advisory council. Japan. South Korea.ASIA PACIFIC ECONOMIC COOPERATION (APEC) Asia-Pacific Economic Cooperation (APEC). Malaysia. decisions can be taken in the absence of unanimity. Hong Kong. Mexico. Russia. Canada. the Philippines. decisions are not legally binding on member governments. The following year it adopted the Osaka Action Agenda. At the end of the 1990s APEC’s membership included its 12 founding members— Australia. and Vietnam. China. Papua New Guinea. ad hoc policy groups. Despite these commitments. Peru. 26 . APEC works to raise living standards and education levels through sustainable economic growth and to foster a sense of community and an appreciation of shared interests among Asia-Pacific countries. facilitating business activities. working groups. The committees. At its 1994 summit meeting. Brunei. Thailand. APEC’s effectiveness has been limited by its requirement that all its decisions be made by consensus. and the United States—as well as Chile. organization that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region. and the secretariat of the Association of Southeast Asian Nations (ASEAN) maintain observer status. The Pacific Economic Cooperation Council (PECC). Although APEC seeks unanimity. New Zealand. Established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional economic blocs (such as the European Union and the North American Free Trade Area) in other parts of the world. Taiwan. a plan to implement APEC’s goals of liberalizing trade and investment. Singapore. APEC set an ambitious goal of achieving a free trade and investment regime in the Asia-Pacific region by 2010 for members with developed economies and by 2020 for members with developing ones. Indonesia. APEC is organized into numerous committees. however.

and budgetary matters. transportation. The APEC secretariat. The working groups are headed by experts and consider specific issues. including energy. hosts an annual summit meeting and meetings of foreign and economic ministers and other senior officials. meet twice per year. which rotates annually. The organization’s chair. and telecommunications. tourism.which examine issues such as trade and investment. economic trends. fishing. established in 1993 and headquartered in Singapore. provides advisory and logistic services as well as research and analysis. 27 .

Objective of the SAARC to develop economies. collective self reliance in the South Asian countries and to step up the social and cultural development in South Asian countries. 3% of the area of the world is represented by SAARC countires. Subsequently on the 8th of December 1985 fist SAARC countries summit was held in Dhaka Capital of Bangladesh. Foreign Ministers of the SAARC counties are met twice a year and the official meeting of the leaders of the SAARC countries are held once a year. Pakistan. Initial members of the SAARC countries were India. All six member countries share boarders with the big brother of the SAARC nations India. Only exception is Afghanistan.SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC): SAARC is an organization of eight countries located in the South Asia and it stands for the South Asian Association for Regional Corporation. These centers are handled by Boards of representatives 28 .7 billion of the people and it is 21% of the world population. Later another country Afghanistan was awarded the full membership and there are several other countries were given observer memberships. The Secretariat of this organization is located in the Kathmandu which is capital of Nepal. Bhutan. Late President of Bangladesh Ziaur Rahman first raised the necessity of regional and political and economical cooperation in the South Asia on the 2nd May 1980. SAARC has established permanent diplomatic relations with the European Union and United Nations as observers. Maldives and Sri Lanka. Neola. On 26th and 27th November 2014 18th SAARC country leader’s summit was held in the Kathmandu capital of Nepal Regional Centres have been established in member’s countries in order to promote regional cooperation. Bangladesh. It is around 1.

It decided that certain categories of dignitaries should be entitled to a special travel document which would exempt them from visas within the SAARC countries. Kathmandu. Pakistan. Islamabad. SAARC Documentation Centre (SDC). On 29th and 31st December 1988 at the fourth SAARC summit which was held at Islamabad in Pakistan leaders realized the significance of having cooperation among the peoples of SAARC countries. Dhaka. SAARC Disaster Management Centre (SDMC). It is specific and in the 13th SAARC meeting emphasis was made in cooperation among SAARC countries to fight collectively against the terrorism. SAARC Human Resources Development Centre (SHRDC). India. Dhaka. Journalists. SAARC Information Centre (SIC). Visa exemption scheme was instituted in the year 1992 by SAARC countries. Maldives. Bangladesh. SAARC Tuberculosis and HIV/AIDS Centre (STAC). Political situation is discussed at meetings and member countries are desist from interfering in the domestic issues of the member countries. Sri Lanka. The main objective of the SAARC organization is the lasting peace and prosperity of its member nations. SAARC Forestry Centre (SFC). SAARC Energy Centre (SEC). Senior Government Officials. Businessmen and Sportsman. Nepal. Bangladesh. SAARC Coastal Zone Management Centre (SCZMC). Pakistan. Nepal. judges of higher courts. 29 . Such regional centers are . SAARC Meteorological Research Centre (SMRC).from all SAARC countries. Bhutan and SAARC Cultural Centre (SCC). New Delhi. Visa exemption categories are Parliamentarians. India.

Contribute to mutual trust. Promote active collaboration and mutual assistance in the economic. vii. social. 30 . Strengthen co-operation with other developing countries. iii. Promote the welfare of the peoples of South Asia and improve their quality of life. Strengthen co-operation among themselves in international forms on matters of common interest. social progress and cultural development in the region by providing all individuals the opportunity to live in dignity and realise their full potential. understanding and appreciation of one another’s problems. cultural. Cooperate with international and regional organisation with similar aims and purposes. ii. vi. v. iv. and viii.OBJECTIVES OF SAARC: i. Promote and strengthen collective self-reliance among the countries of South Asia. Accelerate economic growth. technical and scientific fields.

31 . Free transfer of resources helps in increasing the productivity of member nations. It facilitates economic cooperation among the members of the group.CONCLUSION: Economic integration bring together different independent economies and bring the nations closer. Economic integration helps in enhancing degree of regional cooperation and interrelationship. They eliminate trade barriers and encourage free trade. This is clearly evident from its nature. Economic integration is not an easy task.