Asia today has evolved to become an emerging region of the world captivating the global focus

through its above average economic expansion. South Asia is no exception. Asia is the world's
largest consumer of goods and, within few years, it will become the world's largest producer as
well. Among the South Asian nations, India, Pakistan, Bangladesh and Sri Lanka have achieved
impressive growth rates. Over the past twenty years, South Asian region is attaining average per
capita growth rates of 6 percent a year with India achieving growth rate of 7.5 in the year 2014
South Asian countries are considered as a least integrated region in the world. On one side,
China has the leading Asian economy while on the other side South Asia is still struggling with
longstanding issues like poverty, bad governance, inequality and lack of foreign investment.
There are two groups of nation within South Asian economy- the first consists of nations which
are dynamic, technologically advanced with above average growth rates, whereas the second
group consists of nations that are primarily based on agriculture with sup-par growth rates and
economies that are weak and vulnerable. Progress has been hindered by unfavorable policies and
government has still failed to come up to the excellent policies to lure business in the region.
Development challenges can be segmented into five broad areas: i) Political Instability, ii) Weak
Leadership, iii) Bad Governance, iv) Conflict and v) Mutual Mistrust.

A politically stable environment is one of the keys to enhancing economic growth. With
political stability, countries can focus on managing their resources to its fullest potential. It leads
to institutionalization of bureaucratic processes and foster an environment to attract foreign
investments. Most of the South Asian countries have been witnessing political instability over
the last several decades. Political instability creates serious challenges for better economic
performance. Tug of war among political parties and frequent change in government leads to
policy changes, which further creates uncertainty and volatility thus suppressing growth.
Political instability not only deters foreign investment but also discourages national investors due
to lack of well-established policies and rules. Nepal presents perfect case study for this. Various
industries have been shuttered over the last several years- Biratnagar Jute Mill, Gorakh-Kali
Rubber Industry were shut down due political instability. This in turn has created several
employment challenges. According to The Ministry of Labor and Employment status report
2013, there has been steady increase in the total number of labor permits issued for foreign
employment. It shows how political instability leads to decline in investment & employment
leading to human capital flight from the country. Afghanistan is another example of how
political turmoil can destabilize the national economy. Hence it is clear that for South Asia to
achieve development targets, the region and its member states must strive to stabilize the
political environment.

Good Governance is effective management of human and natural resources by bureaucrats, be it

a manager of a firm or a leader of a country. The concept of good governance has been clarified
by the UN's Commission on Human Rights and key attributes of good governance are identified
as: Transparency, Responsibility, Accountability, Participation and Responsiveness. Although,
South Asian region have been facing several governance challenges like corruption, absence of
rule of Law, lack of accountability and ineffective parliament. Many South Asian countries claim
to have democracy but still there is no good governance, thus limiting development momentum
Bad governance result in inefficient utilization of resources due to lack of transparency,
corruption and uncertain legal system. This has detracted foreign investment and aids eventually
hindering development process. Strong governance leads to well defined long term policies,
effective management of resources resulting in poverty alleviation, rule of law, employment
opportunities and foreign investment.

In present time, South Asia seems to be missing great leaders like B.P Koirala, Chadrika
Kumaratung, Mahatma Gandhi, Muhammad Ali Jinnah, Ahmed Shah Masood, Mahathir
Mohamad who changed the course of their country. Asia is a home to half of the worlds poor.
Poverty gives rise to inequality and social tensions. Poverty not only hampers growth but also
risks derailing the development achieved till date. The large disparities between haves and have-
not have threatened peace and stability. South Asia is achieving impressive growth rates but the
truth looks far less impressive when dimensions of economic development are taken into
account. Lack of good leadership is one of the major challenges of South Asia in addressing
poverty, political instability and proper governance. At the middle of the twentieth century each
country of South Asia was led by the leaders with great visions to change the face of the nation.
However, great leadership appears to be greatest need of the present for majority of the South
Asian nations.

According to the World Bank, South Asia has the world's largest conflict affected population
and has become the most violent in the world including war, insurgency, terrorism and other
forms of civil unrest. South Asia is considered conflict prone region in Asia. Only Maldives and
Bhutan are considered stable. For example, Nepal has gone through Maoist insurgencies,
people's movement for ten years and is currently facing agitation in its Southern region Terai.
India has been experiencing internal and external conflict on and off. Sri Lanka has been scarred
by long civil war borne out of ethnic tensions. Afghanistan has been facing international conflict
since 2001. Such internal conflict has diverted both local and international attention from
focusing on long-term development projects. Many of the resources are spent on fighting “daily-
fires”. Prosperity follows peace.

Though the South Asian countries share the similar cultural and historical background, the
region is regarded as one of the least integrated region of the world. A region has witnessed
constant tension between the major countries like India and Pakistan and border disputes
between India and Bangladesh.

South Asian intra-regional trade share covers below 5 percent of the total trade. Attempts have
been made in the past to improve upon this through the establishment of SAARC (South Asian
Association for Regional Cooperation) which is an international forum to enhance regional
welfare by uniting South Asian region together through regional cooperation. Unfortunately, the
economic boom in South Asia is not consistent across various nations. It is quite clear that a
majority of challenges originates from lack of trust between the nations, political inconsistencies,
and bad governance.

As it has been previously discussed, South Asian countries have been harboring strong mutual
mistrust and regarded as the least integrated region in the world. The region has been less
effective not only in managing conflict but also in generating development flows. While there is
significant progress in connecting to the rest of the world, intraregional trade covers only 5
percent of the total trade of the region. However, in the ASEAN, which the SAARC was
modeled after, intra regional trade accounts for 50 percent of the total trade of the regions. Many
lessons can be learnt from ASEAN, which has contributed significantly in the progress of the
region primarily through regional interaction and mutual cooperation. Although SAARC
members refer to themselves as regional and development partners, they haven't yet been able to
put aside their differences to go hand in hand for mutual growth. Also, within the SAARC
region, capital flows through legal channels are negligible and physical connectivity is very
limited. Trade level within the region is significantly lower than where it should be. With full
cooperation and trust among countries, they can reap the benefit of greater regional integration.
According to Mukherjee (2002), both tariff and non-tariff barriers have hindered growth in South
Asia. It is argued that for a significant trade to ensue, all the quantitative restriction and non-tariff
barriers should be removed. Undoubtedly, due to lack of coordination and different political
priorities, no concrete modality has been created for regional cooperation. Each country has
many unexploited resources- that, if shared regionally will substantially propel the economy of
the region. To assure consistent development, the nations need to change the course by reducing
the restriction in the borders, easing the flow of goods through streamlined custom process,
solving disputes through dialogues and cutting down the bureaucracy to deal with the
inefficiencies and move forward in the path of cooperation. The region must break down barriers
to promote intra regional trade, which could potentially reach 25 percent.

The 21st century is projected to be dominated by the Asian economy. A study by Asian
Development Bank found that an additional 3 billion Asians could enjoy living standards similar
to those in Europe today and the region could account for half of global output by middle of this
century. The countries of the South Asian region needs to be more outward looking and integrate
deeper within the region by eliminating the challenges, which have been slowing down the
opportunities to move forward in the path of development. South Asian nations can grab the
opportunities and walk side by side with the other Asian nations to grab the global throne of the
world in this century. Integrated South Asia is a win win situation. South Asia has the potential
to be much more than what it is today, if the nations in the region can focus on creating a
conducive environment to enhance growth by exploiting its both natural and human resources.