South Asia – The Emerging Region for Trade and Investment

Kathmandu,Dainikee

SAARC region is one of the fastest growing in the world and both domestic and export market are becoming more influential in global market. Now, the region has started to prove its importance as the emerging region. The 'macro' nature of the region signifies the optimism for trade and investment.

SAARC is the largest populated region, where middle class is fast growing. It has an impressive array of natural resources. The growth rate of region is above the global rate. With attractive growth market and strategic location it has largest skilled man-power and professional managers available at competitive cost, for example one of the largest pools of scientists, engineers, technicians and managers in the world. The region has well developed R&D infrastructure and technical and marketing services. A large and rapidly growing consumer market estimated growth at over 8% per year.

Although, the major focus of investors is China and Asia-Pacific but the trade and investment condition in India and some other countries of the region is also comparatively improving in global context. Privatization, trade and FDI liberalization are fast improving in the region. Gas and oil deposits of Bangladesh and India have, in fact yet to make an important impact. Maldives has a record in world renounce tuna business and world class tourism. Tourism industry in Nepal is in flourishing trends. Export structure of garment of various kinds and export of frozen food (Shrimps and Prawns) of Bangladesh are getting recognition in international market. Bhutan has been successful in producing and exporting hydroelectric power. Pakistan has made good base for manufacturing industry especially in textile production and Afghanistan is also in process to regain its interrupted economic base. These are major expertise areas in SAARC region and there are also other countless sectors and opportunities for trade and investment.

The major sectors for trade and investment in the SAARC region are IT, pharmaceuticals, biotech, micro biology sophisticated metallurgy, manufacturing items, infrastructure improvement etc. But SAARC lacks the brand recognition. Except Bhutan SAARC countries have increased their bilateral agreements with global countries. SAFTA is trying to speed up for coordinated regional trade.

Although, the physical infrastructure such as transport, communication etc. of most of the SAARC countries are not well developed. Complex bureaucracy, rigid labour laws, significant corruption, expensive and unreliable power, large poverty segment (over 25%) are some of the negative aspects of the region. Besides, border and customs are inefficient, legal system is overstretched and labour mobility is high and absenteeism in low skilled sector.

There are also some other risks and problems for trade and investment in the region. Such as cold relation between some SAARC countries, internal strife, violent exchange rate shifts, shifts in business regulations, standards issue of the product, natural risk of flood, draught and tsunami, caste system etc are examples.

Besides these risks and problems, the whole region is in improving trend in its investment legislation features. Investors have to follow the National Banks regulations and the Board of Revenue. And investment is increasing tremendously in the recent years in SAARC region. On the country basis, the key investment legislation features are as follows:

Bangladesh: FDI is open in most of the sectors and mostly no government approval is required. There is equal treatment to foreign and local investors. Government ensures legal protection to foreign investment against nationalization and expropriation and allows repatriation of proceeds from sales of shares and profit. 100% foreign equity allowed and royalty allowed of royalty, technical and franchise fee. Significant investment incentives exist in Bangladesh.
Bhutan: Government approval is required. Up to 70% foreign equity is allowed in Bhutan. Minimum project size should be of US$1m in manufacturing and US$0.5m in services sector and 14 sectors including manufacturing and tourism open for possible foreign participation. Bhutan allows repatriation of proceeds from sales of shares and profit if currency requirements met. Remittance allowed of royalty, technical and franchise fee if agreement approved. It is notable that significant investment incentives exist there. Government approval is required and most sectors go through automated process.

India: In India there is equal treatment to foreign and local investor. 100% foreign equity allowed but many exceptions: SME and sector caps. . India allows repatriation of proceeds from sales of shares and profit. Remittance allowed of royalty, technical and franchise fee. Significant investment incentives exist.

Maldives: 100% foreign equity allowed. Government ensures legal protection to foreign investment against nationalization and expropriation. There is freedom to repatriate profits and capital proceeds and no exchange restriction. Government provides long-term lease for long term projects. Significant investment incentives exist.

Nepal: 100% foreign equity allowed. Extensive government approval required and there are some restricted sectors. Nepal allows repatriation of proceeds from sales of shares and profit if currency requirements met. . Remittance allowed of royalty, technical and franchise fee if agreement approved. It is notable that significant investment incentives exist there.

Pakistan: 100% foreign equity allowed and mostly no government approval is required. All commercial sectors are open to FDI. . There is equal treatment to foreign and local investors. Government ensures legal protection to foreign investment against nationalization and expropriation and allows repatriation of proceeds from sales of shares and profit. Remittance allowed of royalty, technical and franchise fee if agreement approved. Attractive investment incentives exist.

Sri Lanka: 100% foreign equity allowed and mostly no government approval is required. There is equal treatment to foreign and local investors. Government ensures legal protection to foreign investment against nationalization and expropriation and allows repatriation of proceeds from sales of shares and profit. . Remittance allowed of royalty, technical and franchise fee if agreement approved. Significant investment incentives exist. Board of investment and Bureau of infrastructure Investment provide assistance in facilitating investment.

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