The South Asian Association for Regional Cooperation was officially established in December 08, 1985. The South Asian Free Trade Area (SAFTA) enter into force on July 01, 2006 under the umbrella of SAARC. From the same platform the SAARC Agreement on Trade in Services enter into force on November 29, 2012. SAARC Agreement on Promotion and Protection of Investment is yet to be finalized and enter into force. In the meantime 30 years gone. SAARC is the home of 21% (1.7 billion) world’s population with 9.12 % of global wealth
By Md. Joynal Abdin
The South
Asian Association for Regional Cooperation was officially established in
December 08, 1985. The South Asian Free Trade Area (SAFTA) enter into force on
July 01, 2006 under the umbrella of SAARC. From the same platform the SAARC
Agreement on Trade in Services enter into force on November 29, 2012. SAARC
Agreement on Promotion and Protection of Investment is yet to be finalized and
enter into force. In the meantime 30 years gone. SAARC is the home of 21% (1.7
billion) world’s population with 9.12 % of global wealth. Combined SAARC is the
third largest economy of the world. But a significant number of world’s poor
people are living in this region. With its diverse landscape and variety of
natural resources SAARC has every potential for economic development and
poverty alleviation within shortest possible time.
To achieve this objective
SAARC leaders has to be committed for further economic integration under this
common platform. Employment generation and entrepreneurship development could
be an effective weapon in this regard. To generate employment for such a huge
amount of population huge investment is needed. Intra SAARC investment
promotion as well as attracting foreign direct investment (FDI) could be the
one of the best options. SAARC Agreement on Promotion and Protection of
Investment has to be enter into force as soon as possible. At the same time a central
institution has to be established to promote FDI into the SAARC countries as
per respective competitiveness, raw materials, skilled manpower etc.
availability.
Till now SAARC do
not have visible achievements in terms of investment promotion. But I think
it’s ground works were started in form of signing and activating South Asian
Free Trade Agreement (SAFTA), SAARC cooperation in Standards, SAARC Agreement
on Trade in Services, Cooperation in Avoidance of Double Taxation, SAARC
Customs Cooperation, Organizing SAARC Trade Fairs for several times,
establishment of SAARC Chamber of Commerce and Industry, and SAARC Arbitration
Council. Now it is the time to finalize and activate Agreement on Promotion and
Protection of Investment among the SAARC Countries. This agreement may consider
to establish a body for united effort to attract foreign direct investment
(FDI) into the SAARC states based on respective competitive advantages of
different member countries.
Table Attribute: Macroeconomic dynamics of SAARC Countries
Current economic
dynamics of the SAARC Countries SAARC is covering about 3% of global territory
with all features of the earth. There are to mountains, deep oceans, longest
sea beaches, deserts, plain lands, green fields etc. Most of the SAARC
countries have more than thousand dollar GDP per capita and positive growth
rates. SAARC countries are till now trade deficit countries. All the SAARC
countries are importing more than that of their exports. As a result united
SAARC is one of the largest buyers of the globe. Most of the SAARC countries
used to import capital machineries, raw materials, and chemicals. On the other
hand their export basket is comparatively small and fixed with same or similar products.
They must have to diversify their export basket to grow further and capture a
larger portion of the global trade.
Challenges and
Constraints
Above discussion states that there are enormous potential to
increase FDI attraction into SAARC countries. At the same time intra-regional
FDI flow shall be increased day by day. But there are few challenges hindering
deeper economic integration among the SAARC countries. These are as follows:
Political
instability: Two major and influential SAARC member states fought twice in last
century. Besides this intra SAARC level of confidence / trust is not at a
satisfactory level. Almost all the SAARC countries other than India is
suffering from political instability. Afghanistan faced a series of wars during
last decade even last century. Therefore it is a challenge to implement a
regional commitment with the change in power (either party or system).
Autocratic rollers are not used to comply with people’s demands either in terms
of local or regional perspective.
Restriction on
investing abroad: In most of the SAARC countries only FDI inflow is inspiring
but FDI outflow (investing abroad) is restricted. As a result intra SAARC FDI
inflow is insignificant. To be deeply integrated SAARC countries have to
overcome this challenge in near future.
Complex visa
regime: Till now it is tougher to get an Indian visa for its neighboring Muslim
states than that of getting a U.S. visa. As a result neighboring government are
bound to follow same policy in case of Indian citizens. To make SAARC more
result worthy in terms of investment, trade and commerce visa system must have
to be easier. Even visa free SAARC regime could be considered. At least port
entry shall be allowed for each other’s to promote intra SAARC trade and
investment.
Connectivity and
Transportation: Till now most of the SAARC countries are not connected even in
air for daily business needs. Maximum SAARC states are disconnected for land
and sea connectivity as well. Therefore effective intra SAARC trade is not
occurring among the member countries. Transit and transshipment facilities are
in negotiation stage till now. To make an economically integrated SAARC region
free movement of people and free movement of goods has to be ensured first.
Increasing number
of non-tariff measures: Till now SAARC countries are applying non-tariff
measures to discourage intra SAARC trade. This trend of enforcing non-tariff
measures is increasing day by day. vi. Emergence of New Regional / Bilateral
Free Trade Agreement: To avoid existing political conflicting relationship
among few countries new bilateral / regional agreements are signing with few or
partial part of the SAARC. These agreements are decreasing the importance of
SAFTA or SAARC. Therefore it is time to promote new economic initiative under
the umbrella of SAARC rather bypassing it.
This article
is an excerpt from a research paper,
titled “Foreign Direct Investment (FDI) in SAARC Countries”, published at Global
Journal of Management and Business Research: C Finance Volume 15 Issue 8
Version 1.0 Year 2015 Type: Double Blind Peer Reviewed International Research
Journal Publisher: Global Journals Inc. (USA) Online ISSN: 2249-4588 &
Print ISSN: 0975-5853
Download The Paper - LINK
© 2015. Md.
Joynal Abdin. This is a research/review paper, distributed under the terms of
the Creative Commons AttributionNoncommercial 3.0 Unported License
http://creativecommons.org/licenses/by-nc/3.0/)
