Investments trump trade agreements in run for growth, says official

South Asia should focus more on attracting FDI over boosting trade relations for stronger regional development

By Charumini de Silva

South Asian nations should focus more on attracting investments rather than focusing only on bilateral trade agreements to increase the region’s growth prospects, noted a Pakistani official.

“Investments are the key to reinvigorate economies,” Pakistan High Commission in Colombo Counsellor (Political) Hasan Ali Zaigham said at the South Asian Association for Regional Cooperation (SAARC) Entrepreneurs Forum organised by FCCISL in Colombo recently.

He pointed out that SAARC had been unable to attract Foreign Direct Investments (FDIs) from other parts of the world compared to the scale enjoyed by South East Asian economies, creating a significant drawback.

Citing an example, he said despite Thailand having high labour costs, it had been able to attract FDIs into high-tech manufacturing sectors, which had supported its economy to increase export volumes as well as be a part of the global value chain.

“Bilateral trade agreements are one instrument countries could use to enhance exports. We need to attract FDIs within SAARC as well as from outside our region to energise South Asian economies and to be a part of the global value chains,” Zaigham added.

Commenting on trade agreements, he noted that harmonisation of standards was one key challenge the SAARC region had to tackle, adding that it had to be tackled at bilateral level as well as on a regional level. 

“We have a long way to go. To enhance trade facilitation between countries, harmonisation of standards must remain a priority,” he said

Zaigham asserted that Pakistan and Sri Lanka were aiming to boost bilateral trade to $1 billion from the current $ 325 million over the next few years. Islamabad and Colombo are also in talks to expand the existing Free Trade Agreement between the two countries to include services. 

Sri Lanka and India are shaping the contours of an Economic and Technology Cooperation Agreement (ETCA) focused on improving investment regionally as well as with the rest of the world but talks have been met with tough opposition from professional groups in Colombo. The Government has insisted it will not allow free movement of labour as part of the agreement. 

The Sri Lankan Government has also outlined FTAs with a range of countries including Thailand, Turkey, Singapore and China to boost growth and increase exports.