Free up capital, labour for regional good: BB boss tells Mumbai meet
bdsnews24.com, Bangladesh
Free up capital, labour for regional good: BB boss tells Mumbai meet
9 September 2009
Dhaka, Sept 9 (bdnews24.com) – Bangladesh Bank governor Atiur Rahman called for freer movements of capital and labour among the first steps for greater financial integration of South Asian nations, speaking at a global banking conference in India on Wednesday.
He spoke in favour of greater economic integration among SAARC countries to better weather financial storms, such as the world recession, as well as a means to curb conflict and fight poverty throughout the region.
"Regional economic unions and regional currencies are likely to fare better than individual economies ... in turbulent, volatile global economic situations," Rahman told the Conference on Global Banking at Mumbai’s Grand Hyatt Hotel.
The conference brought together high-level financial experts and policy makers from around the world to address issues impacting the financial sector and develop strategies in the wake of global recession.
The South Asian Association for Regional Cooperation has not as yet explicitly declared total financial and monetary union as an ultimate cooperation goal, but Rahman said there was ample scope for scaling up and speeding up ongoing SAARC initiatives for greater integration.
The Bangladesh Bank governor outlined the ’Dos and Donts’ for the path towards South Asian financial and monetary integration.
He said the first step was integration of intraregional trade with harmonisation of tariffs and the second was freeing up movements of capital and labour.
"These would lay the foundations for monetary union ... with the final phase being fiscal integration, that is fiscal transfers to worse off member economies from a fund pool contributed by better off members, as well as some degree of political integration in terms of social policies as well," Rahman said.
Giving the example of European Union, he said, "It shows how truly remarkable the gains from full integration can be; nations with history of being at each other’s throat in hostility for centuries and triggering two world wars are united in harmonised laws and regulations for socio-political and economic life, making new armed conflicts between regional members look very unlikely."
Rahman said the EU was the most conspicuous success story thus far in regional integration. "The disputes and differences between South Asian neighbors look minor and insignificant seen against past hostilities between major EU members," he added.
He said meaningful steps towards an explicitly announced goal of full monetary union in South Asia over the medium to longer term would help iron out political disputes and differences, reducing the risks of armed conflicts and channeling resources to combat poverty from wasteful expenses on arms buildups.
He also mentioned that policies of large member economies in a union typically have substantial negative or positive impact on economies of smaller members.
"To create and preserve an atmosphere of mutual trust and confidence the larger member economies need to demonstrate sensitivity and gestures of generosity in addressing concerns of smaller members."
"This would be a long haul even in most favorable circumstances; and care will need to be exercised, especially by the larger members, not to impede progress in integration with unhelpful policy steps guided by other concerns," he added.
He said erecting barbed wire fencing along state borders with neighbors "does not resonate well with integration priorities".
There are other feasible options for dealing with illegal movement of goods and people, Rahman said, including harmonisation of tariffs towards cross border price parity, permitting limited border trade and streamlining of immigration procedures.
"Looking for transit facilities through smaller members to remoter regions of larger economies instead of further facilitating trade of these remoter regions with neighbouring smaller economies may likewise raise concerns unhelpful in promoting integration," he added.
Rahman regretted that there was no announced strategy statement of SAFTA for systematically allaying these concerns.
"In absence of a clear strategy statement for the opening up processes, negotiators tended to remain stuck to overcautious positions with long negative and sensitive lists."
He also regretted that the SAARC Development Fund was yet to complete its formative phase, mentioning that there had never been any investment in an actual project by the earlier South Asia Development Fund.
But he was hopeful that the Asian Clearing Union (ACU), with central banks of Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka as members, could actively carry forward some degree of regional cooperation and integration.
