Regional integration vital for attracting FDI: Experts

Improving regional integration, making genuine political commitments and ensuring good governance are key to attracting foreign direct investment (FDI) in South Asia, according to experts.


File photo provided by The Daily Star.

November 6, 2023

DHAKA – Improving regional integration, making genuine political commitments and ensuring good governance are key to attracting foreign direct investment (FDI) in South Asia, according to experts.

They also alleged that till date, countries within the region have not gained the expected benefits of being a part of the South Asian Free Trade Area (Safta) as they lack coordination and political vision.

On the other hand, members of the Association of Southeast Asian Nations (Asean) are enjoying trade and economic benefits thanks to friendly relations and mutually beneficial dialogues and partnerships.

Buwaneka Perera, secretary general/CEO of the Ceylon Chamber of Commerce in Sri Lanka, said ensuring strong political leadership, genuine commitments and good governance would attract FDI.

Besides, improving regional integration in South Asia would bring economic benefits as well, he added.

Perera was addressing a session on value chains and foreign direct investment at the 14th South Asia Economic Summit, organised by the Centre for Policy Dialogue at Sheraton Dhaka yesterday.

“The region also needs harmonisation of different customs rules through the political vision of its member countries,” he added while speaking on the closing day of the event.

Perera suggested that governments should make it easier for the private sector to enhance regional trade by initiating close dialogues with relevant business chambers as they could advocate to this end.

Priyadarshi Dash, associate professor of the Research and Information Centre for Developing Countries in India, said South Asia needs to benefit from the Global Business Challenge to attract more FDI.

“This entails having the best managerial practices and technology. So, there is need to prepare skilled workers, research and development centres alongside technical education,” he added.

Dash also stressed on the importance of innovation to encourage FDI across South Asia.

Shams Mahmud, former president of the Dhaka Chamber of Commerce and Industry, said FDI is very important for technology transfers, value addition, and establishing backward linkage industries.

“But it is a matter of regret that domestic investment in Bangladesh is worth around 95 percent of total investment in the country even though it has been trying to attract more FDI,” he added.

Mahmud also said South Asia would not need FDI if local consumption and the overall market is expanded by enhancing regional integration.

He pointed out that at times, some exporting countries suddenly ban the export of particular products, creating a crisis in neighbouring nations that import the related goods.

Biswash Gauchan, executive director of the Institute for Integrated Development Studies in Nepal, suggested ensuring access to the sea for land-locked countries to improve regional integration.

Gauchan said only 4 percent of the total external trade of South Asia takes place inside the region.

But Bangladesh could avail huge opportunities in tourism by improving regional integration, he added.

Gauchan alleged that SAFTA is quite ineffective at present due to a lack of coordination among its members even though the arrangement could benefit all in the region.

Huma Fakhar, founding chairperson of MAP Capital Holdings in Pakistan, said technology has changed supply chain management as e-commerce companies do not require factories or warehouses.

She also suggested keeping business planning out of the purview of political agendas as it should be a win-win for all involved.

Regarding the China Plus One policy, Fakhar said South Asia has not been able to get much benefit.

So, South Asian nations should undertake effective unified policies to attract FDI and ensure smooth management of value chains, she added.

Chaired by NR Bhanumurthy, vice-chancellor of the Dr BR Ambedkar School of Economics University in India, CH Priyoranjan Singh, a professor at Manipur University, and Abdul Jabbar Memon, senior vice president of the Federation of Pakistan Chambers of Commerce and Industry, also spoke at the event.

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