Edited by Sultan Hafeez Rahman, Sridhar Khatri and Hans-Peter Brunner
Chapter 5: Liberalization of Air Services in South Asia: Prospects and Challenges
Anushka Wijesinha and Deshal de Mel BACKGROUND AND OBJECTIVES The mutual interdependence between regional economic integration and transport connectivity are clear. Transport connectivity is necessary for facilitating both the exchange of goods and services and people-topeople connections to stimulate investment and business transactions. At the same time, transport linkages will not materialize in a substantial manner unless there is a degree of existing regional integration. Therefore these two factors are interdependent and mutually reinforcing. It has long been recognized that South Asia is one of the least economically integrated regions in the world, with intra-regional trade stagnating at around 5 percent of total trade for the region. At the same time, transport connectivity in the region is also weak, characterized by a lack of direct capital to capital connectivity in many cases (e.g., Sri Lanka–Bangladesh, Sri Lanka–Nepal, Pakistan–Sri Lanka, among others). Accordingly, in order to travel between these cities it is necessary to transit in the Middle East (usually Dubai or Doha) or Southeast Asia (Singapore or Thailand), increasing both the cost and time for travel. These limitations in intra-regional connectivity undermine the potential for interaction among traders and investors to engage in business transactions. In this context, it is important to identify the factors that contribute to limiting connectivity in the region – particularly air connectivity. Air services globally are among the most restricted and regulated sectors of international exchange. This is influenced by the fact that the beneficiaries of liberalization are numerous and fragmented and receive...
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