South Asia ready for FDI promotion

Author: Khondaker Golam Moazzem

The article titled “South Asia ready for FDI promotion” was published in the second issue of the twelfth volume of the Trade Insight (p. 24-26) by South Asia Watch on Trade, Economics and Environment (SAWTEE).

The author observed that during 2010-2015, Foreign Direct Investment (FDI) grew by 31 per cent in Asia, 24 per cent in Africa, 0.27 per cent in Latin America and 16.7 per cent in Europe. Within Asia, South Asia (SA) achieved the second highest growth rate (44 per cent during 2010-2015), after East Asia’s 58 per cent. It increased from US$31.42 billion in 2010 to US$48.43 billion in 2015 in SA. The major share of this investment went to India1 mainly due to the lack of a conducive business environment in the region for the proportional distribution of FDI. After the operationalization of the South Asian Free Trade Area (SAFTA) in 2006, investment related issues have received more attention in the South Asian Association for Regional Cooperation (SAARC) process.

The “SAARC Investment Promotion and Protection Agreement” has been drafted, but is yet to be signed by the member countries. The “SAARC Agreement on Trade in Services (SATIS)”, if operational, would facilitate service related investment. In contrast, the South-East Asia region has made considerable progress on investment cooperation under the Association of Southeast Asian Nations (ASEAN) mechanism.

SA countries should consider regional investment cooperation beyond the ‘traditional’ framework that focuses heavily on intra-regional investment. The institutional framework for investment should cater to the multi-dimensional aspects of investment cooperation, both within and outside SA.