A high-impact strategy

Photo: World Bank

Regional integration is the special focus of our 2/2021 issue of the OPEC Fund Quarterly, which includes interviews with some of the world's foremost development professionals.  Here, we speak to Cecile Fruman, the World Bank’s Director of Regional Integration and Engagement in South Asia, who shares her views about the importance of regional solutions and working with partners – including the OPEC Fund – to drive complex cross-border programs.

OPEC Fund Quarterly: Why is regional integration important from  a development perspective?

Cecile Fruman: Our mission at the World Bank is to reduce poverty and boost shared prosperity, two goals that have become more challenging during the COVID-19 pandemic. Evidence has shown that regional integration is a high-impact strategy to create jobs and raise productivity by investing in inland waterways, roads, and other infrastructure, and reducing trade barriers. But improving cooperation and the ability to tackle shared problems may be even more important in the long run. For example, large areas of South Asia are facing increasingly severe weather with widespread flooding and deadly landslides.

Another challenge is melting glaciers in the Himalayas, which impact drinking water for some 900 million people living downstream in the Indus, Ganga and Brahmaputra river basins. These cross-border issues require regional solutions. We publish our regional integration activities on www.worldbank.org/OneSouthAsia.

OFQ: What are the main obstacles preventing integration?

Cecile Fruman: South Asia is one of the world’s least integrated regions. Intra-regional trade accounts for barely five percent of South Asia’s total trade. By comparison, intra-regional trade makes up half of all ASEAN (Association of Southeast Asian Nations) trade. High tariffs, trade barriers, and inefficient border procedures discourage intra-regional trading among South Asia’s eight nations. Our research found it’s faster and cheaper for a firm in India to trade with Brazil – on the other side of the globe – than with Pakistan next door. Integrated regions such as East Asia and Europe move goods and services easily across borders and use transport links to create economic corridors. They work together to manage transboundary rivers in a sustainable way. Integrated regions have open borders for residents to visit family or attend cultural, business, sports and other events.  This kind of people-to-people contact builds trust and relationships.

OFQ: Are there some sectors that are more conducive to regional integration than others?

Cecile Fruman: Environmental threats to health and livelihoods are important to national policymakers. All eight countries of South Asia last year signed on to a project to reduce plastic waste choking the region’s seas and rivers. This project goes beyond picking up and managing waste. It aims to create a circular economy for plastics by identifying substitutes for many uses of plastic, incentivize renewable sources, and recycle used plastics to keep them out of the oceans and environment. Similarly, there is broad support in South Asia for the Climate Adaptation and Resilience (CARE) project now underway. It is helping policymakers plan adaptations and investments based on data about climate change risks and developing regional standards for safe infrastructure.

OFQ: How important is human capital in regional integration from a development perspective?

Cecile Fruman: Human capital is absolutely central to poverty reduction and sustainable growth. The World Bank calculates a Human Capital Index for countries based on data about  key components such as health care, education and employment. The index shows women remain an untapped source of strength throughout South Asia. The gap in employment rates  for men and women is more than 40 percentage points in South Asia; double the global average. We are trying to change that by ensuring our regional integration activities promote gender equity. For example, our research found that many women with small businesses did not use inland waterways to pick up supplies or ship their products because river ports lack toilets, lights and safe facilities for them and their children. We are using that information in projects to upgrade inland waterways that connect India and Bangladesh. 

OFQ: What has COVID-19 demonstrated about regional integration?

Cecile Fruman: India has delivered  free vaccines to its neighbors and will continue to be a significant provider of procured vaccines going forward. The crisis has also brought home the point that pandemics – like extreme weather and air pollution – ignore boundaries and need to be tackled collectively. The nations of South Asia see a greater need to cooperate on disease surveillance and pandemic response, as well as develop shared resources and standards in education and migration. On the other hand, the pandemic’s quarantine restrictions have also prompted some governments and businesses to accelerate their adoption of digital platforms, tools and services. At a recent #OneSouthAsia Conversation that we hosted, women entrepreneurs described how they rewrote business plans on the fly to fully move their businesses online and, in doing so, tap into neighboring markets that were previously inaccessible. 

OFQ: What role can the international community (DFIs, the UN, governments, NGOs) play in supporting regional integration for development? 

Cecile Fruman: The international development community needs to work together to support regional integration – much like we want South Asian nations to work together. By closely coordinating analyses and project financing, we can avoid duplicative work, support our clients with investments and reforms, and deliver a greater impact to help people. We can also benefit from each other’s strengths. The World Bank Group is especially effective in convening dialogues and analyzing research evidence to inform decision-making. We often co-invest with the Asian Development Bank, the Asian Infrastructure Investment Bank, and other partners in complex cross-border programs for electricity, transport, trade facilitation, water management, and climate change adaptation and mitigation. We are eager to work with the OPEC Fund and others in support of regional integration into the future.