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SAARC region needs inclusive economic growth

Published on 24th Aug, Edition 34, 2015

 

Pakistan keen to build TAPI for the benefit of the region

The Prime Minister of Nepal Mr. Sushil Koirala has rightly pin pointed with a wake up call that despite remaining in proximity, the countries in the South Asian Association of Regional Cooperation (SAARC) region did less than 5 percent trade among them as lack of physical connectivity; political will and long list of products under sensitive list have remained stumbling block for enhanced trade and investment in the SAARC region. Actually, a huge population living in the SAARC region is below the living standards despite presence of enormous economic potential and resources in the region due to lack of collective approach and inclusive economic growth. Although all these problems are dilated upon extensively at all levels yet lack of will and understanding the problems remained unresolved adding to the hardships of the people in the region for decades. For improving the lot of the huge population of SAARC countries and their standards of living, calls for economic policies to promote inclusive growth besides promotion of peace in the region is equally important, was the gist of the address of the Finance Minister Senator Ishaq Dar while speaking at the 7th SAARC Finance Ministers’ conference held in Kathmandu last week. Capital flows, especially foreign direct investment, across SAARC region can accelerate economic growth through technology transfer and skills acquisition, besides simplifying visa requirements, liberalize banking procedures and fast-track customs clearance are needed to achieve the desired level of economic growth in the SAARC region economy, Pakistan offers one of the most liberal foreign exchange regimes in the region said Ishaq Dar.

The liberalizing of the financial regimes by the governments in SAARC to boost intra-regional capital flows, which essentially required gradual reduction and eventual elimination of tariffs, para-tariffs and non-tariff barriers so as to allow freer trade amongst the SAARC states. In this respect a good starting point could be the simplification of procedures for the issuance of Safta Certificates of Origin. Work on the sensitive lists should be aimed at gradually phasing out these lists for rapid economic growth in the region. The global trade statistics revealed that while the volume of trade between SAARC states and the rest of the world is increasing, intra-regional trade remains far below its potential, which calls for evolving a mechanism to incentivize formal trade among the SAARC member countries.

Pakistan is contributing to regional peace and the country has paid a high cost by sacrificing tens of thousands of precious human lives in the war on terror, which has also resulted in economic losses to the tune of over $100 billion.

The SAARC member countries were facing power shortages despite the fact that the region has the potential to generate cheap and clean energy. However, Pakistan is very keen on building the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, which would be an example of affording enhanced proximity of the member states to natural resources of the region. Yet another project of regional integration which has been undertaken relates to the transmission of electricity from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan known as CASA-1000, which will provide 1300MW of electricity.

 

SBP vision on SAARC cooperation

State Bank of Pakistan’s (SBP) Governor Ashraf Mahmood Wathra speaking on the occasion said that SAARC member countries can fight with growing global challenges by increasing cooperation and information sharing. He highlighted some recent initiatives undertaken by the SAARCFINANCE, a network of central bank governors and finance secretaries of the region. The network was established in 1998 to promote dialogue on macroeconomic policies of the region and sharing mutual experiences and ideas.

The initiatives taken by the network included availability of short-term liquidity for members under the SAARC Swap Arrangement; capacity building programs for officials of members under the SAARCFINANCE Scholarship Scheme; the dialogue and exchange of knowledge on issues of mutual interest through SAARCFINANCE Portal; the creation of regional statistical database, and the recent initiative on collaborative research studies.

These initiatives will help foster closer relationships and build human capability in practical fields of central banking amongst SAARC partners. The SAARCFINANCE has identified five areas for cooperation that would ultimately work as a roadmap for the network.

These five areas include reducing the transaction costs of cross-border remittances in the SAARC region; cross-border trade in the region; capacity building of officials of member countries; the creation of SAARCFINANCE statistical database; and undertaking of collaborative research studies to assess issues of common interest.

SAARCFINANC is the Network of SAARC Central Bank Governors and Finance Secretaries of the region. The core objective of the Network is to promote dialogue on macroeconomic policies of the region and sharing mutual experiences and ideas. In this context, the Network has initiated a number of useful initiatives in order to achieve its objectives as envisaged in its terms of reference. Some recent initiatives undertaken by the SAARCFINANCE Network, such as the availability of short-term liquidity for members under the SAARC Swap Arrangement; capacity building programs for officials of members under the SAARCFINANCE Scholarship Scheme; the dialogue and exchange of knowledge on issues of mutual interest through SAARCFINANCE Portal; the creation of regional statistical database, and the recent initiative on collaborative research studies.

“These initiatives are beneficial in fostering closer relationships and building human capability in practical fields of central banking amongst SAARC partners.”

Governor SBP expressed optimism that these areas for mutual cooperation would help us build a clear mandate for future cooperation among the members. “The regional central banks have the ability to form cohesive policies towards gearing up cooperation in banking and finance with a view to facilitate cross border trade and investments, said the Governor adding, “we further intend to integrate and improve our payments and settlement system.”

Among others, the cooperation on this specific area would help promote bilateral and regional trade besides strengthening financial infrastructure in the region.

Future role of the SAARCFINANCE will become more challenging in the wake of high competition and growing economic and financial integration in the SAARC region. In this context, the regional central banks would need to join hands with other SAARC bodies and enhance coordination with them, especially with SAARC Chamber of Commerce and Industry, as it is engaged in promoting cross border trade and investment flows.

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