Tuesday, February 22, 2011

Trade balance in South Asia

In South Asia, Maldives has the highest trade deficit (% of GDP), followed by Nepal, Pakistan, Bangladesh, Sri Lanka, and India. Bhutan is the only country having trade surplus in South Asia. My wild guess is that the countries that have negative trade balance have high trade complementarity, i.e. they produce the same kind of goods and services and compete in the same section of the global market for customers. Bhutan stands out because of its high electricity export to India (something other countries are not doing despite having the potential. E.g. Nepal). It is high time governments thought about diversification of both products and markets. Exploring of products with comparative advantage based on resource endowment, and industrial and trade policies to steer production in that direction is needed. May be following the lead of India (and China) and getting on board its growth trajectory would help (definitely for Nepal).