Discussion Paper # 160
Regional infrastructure is one of the major determinants of economic integration process. It enhances international and regional connectivity through the free flow of goods and factors across borders, allowing countries to benefit from a better relocation of resources. Efficient transportation networks linking neighbouring countries enlarge market size and help national economies to grow further through higher trade and production. The South Asian merchandise trade due to South Asia Free Trade Agreement (SAFTA) is expected to increase by manifolds in coming years. Accompanying this growth will be an increase in demand of both national and regional infrastructure services, for both production and consumption, and international trade purposes. A failure to respond to this demand will slow down South Asias trade and hamper the growth process. Thus, the infrastructure challenges, both hardware and software, before the South Asian countries, particularly for those are land-locked and island, require better understanding and adequate support. This paper discusses the emerging scenario in regional infrastructure development in South Asia, identifies the infrastructure challenges for the future, and provides some policy options in order to better integrate the South Asian region.