Cooperation, Not Competition

Updated: May 23 2003, 05:30am hrs
Interestingly, it is the conservative bureaucracy rather than the political process which today is looking forward to greater cooperation among the southern states to promote sustained growth. The idea of a southern economic union discussed at the fifth meeting of the standing committee of southern zonal council on the lines of the European Union (EU) deserves to be welcomed and taken forward. In sharp contrast to this proposal is the reality of various chief ministers hard-selling their respective states to attract greater investments, resulting in a race to the bottom. Competition rather than cooperation in the form of tax breaks has only worsened their fiscal plight without resulting in any sustainable benefits. Individual states like Karnataka may have grown as fast as Asian tiger economies during the last 10 years, but that potentiality has eluded the south as a whole. With greater cooperation, the bureaucracy feels that overall economic growth in the region could in fact touch 10 per cent per annum. The idea of the union has been credited to the Confederation of Indian Industry which has made a study pointing out the possible benefits of uniform decision-making within the region as a whole. That indeed is an important prerequisite for a union on the lines of the EU.

Another prerequisite of course is greater cooperation among the chief ministers. Karnataka and Andhra Pradesh may be attracting the largest investments in software investments, but they are not advancing their interests by competing to build international airports. Where are the international traffic volumes to justify airports in both the metros Instead a better option would be to build a six-lane highway linking both the capital cities and encourage industrial estates to come up along the route which would develop the backward regions in both states. Similarly, both Karnataka and Andhra can harness their information technology capability to better serve the automobile industry in which Tamilnadu is preeminent. Kerala is similarly a frontrunner in the tourism business which the other southern states can learn from and evolve joint packages. There are many other possibilities for mutually beneficial cooperation. But a beginning indeed can be made in harmonising their tax regimes, rules and regulations including uniform subsidy policies. The EU in fact requires common monetary and fiscal policies among member states. An economic union of southern states should therefore aim for a broad convergence in their respective policy regimes. This will ensure that investments and skills diffuse through the region on efficiency and comparative advantage grounds rather than a race to the bottom. A spirit of cooperation than competition will definitely ensure the southern unions success.