Thank you for doing me the honour of asking me to speak in such distinguished company at the

Kantipur Conclave. This is a remarkable occasion that you have devised, and the level of participation is proof of its value and influence, I thought I would use this opportunity to speak about the moment in which we in south Asia find ourselves.

I. The Paradox

Looking at south Asia today one is struck by a paradox: Many of our countries are in economic difficulty and face political uncertainty; and yet, to my mind, we have a moment of geopolitical and economic opportunity.

II. The Present Situation Let me expand on that.

Many describe our present condition as a crisis. Five governments changed in south Asia in the last year end a half—not all of them in an orderly, willing or predictable manner. Three of our countries are in advanced stages of working out solutions to their debt crises with the IMF and international community, and more may have to seek help.

Our economies are reeling from the global economic slowdown and the real prospect of recession in major economies, from the fall in remittances and tourism earnings caused by the pandemic, from volatility in commodity prices, and a decline in export earnings.

This is not unique to south Asia. We are not alone in our economic troubles The IMF says that 53 developing countries are at grave risk of debt crises. What makes this truly worrying is the fact that we have seen this coming for years but still nothing meaningful has been done about it.

Judging by the response, or lack of it, that the international community mounted in the last decade to the Covid pandemic, the developing country debt crisis, climate change, and other transnational problems, I think we can safely say that we should have low or no expectations from the international order.

We can not look to the world for answers or solutions to our present problems. Besides, the prospects for the world economy are also not good with growth forecasts being steadily revised downward and the real possibility of a recession in the US and Western Europe and a considerable slowdown in China.

Politics is in command of economic decisions in all these countries, both internally and externally, unlike the globalisation decades after the Cold War.

If this is how I see the situation, how can I say that we may have a moment of geopolitical and economic opportunity?

Geopolitics

Let us begin with the geopolitics.

Today south Asia is at the centre of global geopolitics. That creates opportunity for us. If we are bold enough to seize it. The world is now in a transition from the US or Western-led post-WWII order to something that we can only dimly discern, through a glass darkly, the nature of which is yet to be determined. I call this a world between orders, a world adrift.

Globalisation, the world economy and global politics are all in trouble and changing. The signs are all around us, in the return of great power rivalry, in the rise of China, and in the USChina strategic contention it has engendered, in the hotspots which are all alive again—from the Senkakus to Taiwan, the South China Sea, the India-China border, Yemen, etc. all the way to Ukraine. Notice that these hotspots surround us in south Asia.

And, the inability of the international community to respond to our main challenges suggests that we are between orders. As a result, global politics are more fraught than they have been for a long time, with great power rivalry evident between China and the US, and between Russia and the West. The rise of China has resulted in security dilemmas all along her maritime and southern periphery.

Unlike the Cold War, South Asia is now close to and the IOR is central to the major geopolitical fault-line of the day where the contention between the US and China is being played out.

This gives south Asia leverage and also makes the sub-region an object of outside great power interest for their rivalry and contention. We can no longer be passive or disinterested spectators. You in Nepal know this from experience as you are courted to be part of both BRI and the free and open Indo-Pacific strategy at the same time. But this great power rivalry also creates an opportunity.

It cannot only be coincidence that in the decade before Covid direct foreign investment in South Asia, particularly from China, grew in proportion to how acute their contention was as great power relations deteriorated. But the reaction to Western sanctions on Russia after the invasion of Ukraine showed, most countries seek an alternative, a third way, and don’t want to be caught up in great power rivalry.

We are not alone in this either. One unfortunate effect of great power rivalry and fraught international politics has been to make international organisations weaker and more ineffective than they have been since WWII.

We saw this during the pandemic, when the response of multilateral organisations was, frankly, pathetic, with powers trying to score debating points and gain political advantage rather than dealing with the humanitarian crisis caused by COVID-19.

After all, these are all organisations of member states. If those states are quarrelling with each other it is hard for them to cooperate to make those organisations effective in dealing with our major transnational challenges like climate change, the pandemic or the developing country debt crisis.

The change that has truly brought south Asia to centre stage in global geopolitics is the fact that the economic and political centre of gravity of the world is now in Asia.

Asia is central whether as the locus of production of the globe’s goods, or as the place where the global balance of power will be decided. South Asia is beside the most dynamic economies and the major flash-points and hotspots of global politics. This political centrality is unusual for south Asia, something we have not known in recent history.

During the Cold War South Asia was a geopolitical backwater, and, quite frankly, that seemed to suit many of us. Most South Asian countries were content to go their own way, untroubled by the world. But the end of the Cold War, the collapse of the Soviet Union, and the processes of globalisation changed all that. India’s economy, and, to a lesser or greater extent, all our economies, are now integrated into the world economy.

The Economics

And that integration brings us both problems and opportunities. The figures show that South Asia did well from the globalisation decades: Those of us who used the opportunity and embraced that integration, like Bangladesh, did best, improving their economic condition and the welfare of their people.

Both our present economic crisis and our geopolitical opportunity are proof that South Asia is now an integral part of a globalised world. Indeed, many of our problems are precisely because of that linkage. To my mind, that cannot be unravelled and denying it or turning our back on the world is not an answer. There is no going back. Instead, the solutions to our problems can be found in changing how we deal with the world and each other in South Asia, and, in addition, in our internal political and economic management.

III. Solutions

So what might we do?

When globalisation, the world economy and global politics are all in trouble, many of the solutions will have to be found among ourselves. In other words, we could improve our situation by enhancing our regional connectivity and cooperation, and by improving our dealings with the rest of the world, and by using the opportunities the new situation throws up.

Here is my indicative list of suggestions. I would be happy to hear amendments, reactions and additions. My list includes (in no particular order):

• South Asia should work together to integrate the region economically. There are simple steps that some of us have implemented. When implemented we have benefitted. Connectivity—road, rail, power, and in other respects—is the key. 

• Another step that we might consider in today’s situation is making creative changes to payment systems. In the Sri Lankan case, it was countries in south Asia that came to her assistance, making available fuel, food and credit. India has provided over US$3.8 billion this year alone, while larger creditors are still discussing the terms and nature of their help to an economy in free-fall! External powers have their own priorities and cannot be relied upon. Nor, as I said, can we rely on international organisations in this situation.

• The reason we are one of the least integrated sub-regions in the world is because we have not built the supply and value chains that would use the comparative advantage of our immediate neighbours. Most of the world’s manufacturing takes place in one of three cross-border manufacturing networks centred on the USA, Germany, and China, (previously Japan until about 2007). Trade of intermediate inputs within these networks explains more than half of all international trade, while cross-border trade of finished goods and services accounts for only one-third. (Energy and metals commodities make up the rest.)1

• Another opportunity is in energy, where south Asia has long been an importer. Yet, as we move to a greener and more sustainable future, and energy technology and therefore the economics of energy is revolutionised, south Asia has new opportunities. In a remarkable turn around, Nepal is showing us her potential as a major source of hydroelectric power for the region. Sri Lanka could be the same for wind energy. And solar energy is a resource we are all blessed with. Renewable energy thus opens opportunities of cross-border cooperation, if we can overcome the hesitations and timidity of the past.

• We need to reinvigorate our own sub-regional institutions—SAARC, BIMSTEC etc. I do not believe that any one country should be in a position to veto others from cooperating.

• As for how we engage the world, we now have new possibilities, with the south Asian diaspora present in real numbers across the world and people of south Asian origin gaining influence as they participate in the polities and economies of their new homes. Their role in changing our image abroad, enabling policy and contributing economically to our development is increasing. Just look at the role that remittances play in all our economies. Channeling this is an opportunity.

• We also need to take responsibility for our own politics, seeking security and stability as a common goal, jointly arrived at. We have good examples of practical cooperation in the subcontinent itself on maritime security, counter-terrorism and other areas. Since 2010 maritime security cooperation between India, Sri Lanka, the Maldives and others in the Indian Ocean has grown and I am hopeful that we will also be able to do such work together in the Bay of Bengal. What India and Bangladesh did together to counter terrorism and insurgent groups after 2008 laid the basis for us to begin tapping the economic potential of connectivity in the relationship, to considerable mutual benefit. We in south Asia should build on the successful experiences that we have among ourselves and scale them up.

• A lesson of our past failures is that domestic politics based on arousing fear of neighbours only leads to a dead end. Until we the citizens make this clear to our political leaders, they will keep playing their zero-sum political game, thus preventing us from realising our potential. To conclude, a crisis is only useful when it leads to change by jolting us out of our certainties and habits into doing something new or different. The reason I say that this could be south Asia’s moment is because we have a chance to use the present crisis to break the bad habits of the past which have kept us one of the poorest and least integrated sub-regions of the world. We should be doing what, say, India did in 1991 when a balance of payments crisis was used as an opportunity to break out of the license permit Raj and open up the economy. The present crises and shifting international landscape are our opportunity to change zero-sum political thinking that sees any advantage to a neighbour as a loss to oneself and, instead, to build a better future for the people of south Asia.