Trade Among South Asian Nations: Experiences and Prospects

The decade of the 1980s has been characterised by a distinct shift in the evolution of development policy. Even though often portrayed as a technical set of policies, structural adjustment represents a process of institutional reforms. It refers to a ‘set of policies propelled by the World Bank and the IMF. The explicit aims of opening up the Third World countries to world market competition are to: (1) promote their exports and (2) restrain domestic expenditure. Such policies seek to create a better climate for investment and to enhance economic growth’ (Messkoub 1992, p. 198). These stand in sharp contrast to the macroeconomic policy agenda of the two preceding decades. These policy initiatives also represent a radical shift from the management of the macroeconomy per se to that of both the macro — and microeconomy. In many less developing countries, structural adjustment policies permeate all aspects of their economies, the precise extent depending critically on the extent of reliance on the concessional assistance (S. H. Rahman 1992; Shand and Alauddin 1997). More recently further changes have occurred in international economic relations. The successful conclusion of the Uruguay Round of the GATT and the establishment of the World trade Organisation (WTO) have opened up new opportunities for exploiting comparative advantage that many LDCs including those in South Asia enjoy. The opportunities resulting from a liberalised world trade environment, however, have exposed structural limitations of many LDCs and underlined the critical importance of appropriate policy reforms (see also Chapter 3).