CONTENTS Forewordvii Acknowledgementsviii Prefaceix List of Tables, Figures, and Boxes xi List of Abbreviations xiii Executive Summaryxvii 1 :Global Economic Environment1 1.1.Introduction. ! 1.2.Global Economic Outlook1 1.3.Downside Risks and Uncertainties5 1.4.Addressing the Global and Regional Challenges 9 1.5.Concluding Remarks12 2 :Macroeconomic Performance and Outlook of South Asia15 2.1.Introduction15 2.2.Growth Performance over the Past Decade and Outlook 15 2.3.Factors underpinning the South Asian Resurgence18 2.4.Sustaining South Asia's Dynamism22 2.5.Concluding Remarks25 3 :Trade Performance and Competitiveness27 3.1.Introduction 27 3.2.Emerging Trends and Patterns in Merchandise Trade Performance27 3.3.Services in SAARC Countries' Trade 37 3.4.Trade Policy Developments: Preferential Trading 39 Arrangements in South Asia 3.5.Challenges for Improving Export Competitiveness42 4 :Foreign Direct Investment Flows and Investment Climate 47 4.1.Introduction47 4.2.FDI Flows in South Asia: Trends and Patterns 47 4.3.Investment Climate and Potential of Infra-regional FDI Flows 50 4.4.South Asia's Emergence as a Source of Outward FDI 53 4.5.Concluding Remarks 56 5 :Deepening Regional Economic Integration in South Asia : SAFTA and Beyond 59 5.1.Introduction59 5.2.Potential of South Asian Economic Integration for Balanced Regional Development 59 5.3.South Asian Free Trade Agreement (SAFTA) : Enhancing its Effectiveness 67 5.4.Deepening South Asian Integration Beyond SAFTA : Towards a South Asian Economic Union (SAEU) 71 5.5.Concluding Remarks 74 6 :Trade Facilitation Measures in South Asia77 6.1.Introduction77 6.2.TF Initiatives in South Asia 77 6.3.TF Measures Undertaken by South Asian Countries78 6.4.Deepening TF Reforms84 6.5.Conclusions and Policy Recommendations87 7 :Transport Infrastructure for Deeper Regional Integration: Emerging Challenges and Policy Options 93 7.1.Introduction93 7.2.Development of Physical Infrastructure in South Asia93 7.3.Cross-Border Infrastructure in South Asia : Challenges for Regional Cooperation 97 7.4.Looking Forward: Towards a Vision of Borderless South Asia103 8 :Regional Cooperation for Energy Security 115 8.1. Introduction115 8.2. South Asia's Energy Profile115 8.3. Regional Energy Supply Security Impulses 120 8.4. Rationale for Regionally Integrated Energy Cooperation 122 8.5. Energy Trade and Regional Cooperation: Unlocking Potentials 122 8.6. Important Barriers to Regional Energy Trade127 8.7. Concluding Remarks128 9 :Social Infrastructure and Human Development in South Asia : The Road Ahead 133 9.1.Introduction133 9.2.Overview of the Poverty and Progress in Health and Education Sectors in South Asia 133 9.3.MDGs and SAARC Development Goals : A Report Card139 9.4.National and Regional Initiatives for Social Infrastructure143 9.5.The Way Forward149