A BROAD improved policy framework to attract international investment, offering fiscal and tariff relief and providing procedural and social facilities, needs to be developed for pushing up global integration anchored on regional cooperation.

Special attention has to be given to the development of human capital and the base for quality services, taking into account policies within each country. A broad policy framework has characterised all countries of the South Asian Association for Regional Cooperation (Saarc) region in recent years. Each country has evolved its own particular variant of this design and its own sequencing of reform processes, according to its own national priorities.

On the other hand, the World Trade Organisation (WTO) aims to strengthen the management of world trade and global economic integration, as well as to implement and complete the ‘Uruguay Round’ agreements, but shies away from any investment of any magnitude, even hi-tech industrial investment in countries of the region.

The most-favoured nation (MFN) status is ingrained in the charter of the WTO, since it has to oversee that the status of equality is accorded to and among all nations, rich or poor. This organisation is, among other things, trying to introduce liberalisation of global trade through curtailment of import duties, elimination of export subsidy, and phased abolition of quantitative (quota) restriction, which have already brought misery to developing countries in the East and the West.

All trade negotiations under the WTO are being based on reciprocity, as the main theme, in terms of quantitative restrictions, is to safeguard against opening markets in the developed world for goods, services, capital, technology and labour, so that no harm is done to domestic productive enterprises.

However, additional restrictions are being imposed by the mechanics of WTO, by removing the quota for textile exporting developing countries in return for the removal of restrictions for exports of industrialised countries to these countries. By opening up these markets for imports from developed countries, in exchange of removal of quota restrictions, the beneficiaries would be the industrial countries and their multinational corporations (MNCs). One such example is the quota administration by the developed countries.

Foreign direct investment: South Asian countries also have a poor industrial structure that is characterised by limited capital and technology. Foreign direct investment (FDI) can lead to the creation of higher levels of employment and foreign exchange earnings through export promotion within the region.

FDI can also facilitate technology transfer. This, in turn, helps in advancing the development and sophistication of the industrial structure. FDI can also trigger secondary effects, such as improvements in infrastructure, and creating a network of domestic suppliers and distributors.

Each country in the region has a number of operating industries. The private sector ought to have access to the markets of other member countries; market forces will then determine the best products finding their way into the markets of other member countries.

Moreover, the close interaction between the private sector will encourage the setting up of value added industries in other member countries, which in turn, will help in the transfer of technology. This process will increase job availability and have a great effect on the common man.

The countries in the region should, therefore, seek to identify areas in which they have comparative advantage and greater potential for development and growth. Once identified, governments should seek effective means of directing investment funds into these areas, with the help of the private sector.

Regional countries could assist one another in identifying these attractive areas and helping in their development and progress. For example, any investment with more emphasis on jute industry is relevant to Bangladesh, tea to Sri Lanka, metals to India, and fuel-power, textiles, cement and sugar to Pakistan. This will not only help in catering to the region but also international exports.

Through the capital, technology and tripartite arrangements with friendly countries, investment will ensure the success of the projects having economies of scale. Business sectors must cooperate to create an enhanced export production capability within the region. Many countries do not have adequate facilities for export production and would need collaborative support. It is in this area that the role of cooperation in investment becomes all the more important.

Products can be marketed internationally as products of Saarc. Profit-sharing from sales could be based on respective value added. Related issues are to facilitate more intra- regional value addition; that is, inputs into the domestic production processes that emanate from regional countries be considered as domestic inputs, and hence be exempt from all tariff and non-tariff barriers for a multi-dimensional value addition structure, so that commodities with higher proportion of regional value added will have preferential access to domestic markets.

This would promote the development of more South Asian products, which could be marketed internationally as a product from the region and not from a particular country.

Infrastructural support: Setting up of efficient infrastructure facilities like rail, road, power, and communication, will enhance productive capacities of a country and boost trade, industry and investment.

The private sector’s participation in developing infrastructure facilities should be sought for promoting a more aggressive privatisation schemes and encouraging Build Own and Operation or Build Operate and Transfer (BOO/BOT) ventures.

With global integration in itself having not having stood the test of the ever-changing times, there is now reliance on regionalism — leading to global integration. There is the expanding role of the EU and the North American Free Trade Agreement (Nafta). The experience of the Asia-Pacific Economic Cooperation (Apec) and the Association of South East Asian Nations (Asean) lends support to regional cooperation among South Asian countries.

These countries, however, have political conflicts, which hamper economic cooperation between them. The political differences must be amicably resolved before it is too late, and there is a need to promote cooperation through integration — for increased investment, trade and industry in these countries, which will lead to socioeconomic well-being for the general welfare of the one-fifth of the world’s population that resides in this region.

However: (One who seeks, gets it!)

—The writer is chairman of Atlas Group of Companies