1

Key Proposals for Harnessing Business Opportunities

in South Asia Asian Development Bank (ADB)

and Federation of Indian Chambers of Commerce and Industry (FICCI)

3 March 2010

Asian Development Bank (ADB) and

Federation of Indian Chambers of Commerce and Industry (FICCI)

Prepared by

Key Proposals for Harnessing Business Opportunities in

South Asia

3 March 2010

Foreword

In this increasingly interdependent world, many of the economic and social issuesconfrontingnationsareessentiallyglobalandregional.The forcesofglobalizationandregionalizationhavereshapedthecontoursoftheexistinginternationaleconomyorderandhavebroughtnewchallengestotheforefront.SouthAsiaisnodifferentstory.

SouthAsiahas thepotential tobeaneconomicpowerby2025.Many inSouthAsia,however,stillfaceextremepoverty.Theregionishometohalfoftheworldspoor,with40%of itspopulation livingon less than$1.25aday. Whilealmostaquarterof theworldspopulationlivesintheregion,SouthAsiaaccountsforonly2.5%ofglobalgrossdomestic product (GDP), 2% of world exports, and 1.6% of world foreign directinvestment(FDI).

Many institutionshavebeenestablished topromote regionaleconomicdevelopmentincluding the South Asian Association for Regional Cooperation (SAARC), the SAARCPreferentialTradingArrangement(SAPTA)andtheSouthAsianFreeTradeArea(SAFTA).Nonetheless, thereexistsa large tradeand investmentpotential inSouthAsia,whichremains to be unleashed. In particular, the region is affected by various barriers tooutwardorientedprivatesectorleddevelopmentandregionalintegration.

If SAARC is to become a dynamic engine of growth, India may need to be moremagnanimous in itsapproachtowards itsneighbors includingthegrantingofunilateraltrade concessions to SAARCmembernations. SouthAsianneighboring countriesmayalsoneedtotakeadvantageofthegeographicalproximitytheyhavewith Indiawhichprovideeasyavailabilityofrawmaterial,economiesofscaleofalargeproductionbase,andabigmarket.

Recognizing the potential for accelerating South Asian regional cooperation andintegration, theFederationof IndianChambersofCommerceand Industry (FICCI)andtheAsianDevelopmentBank (ADB) joined hands to undertake an exploration of keyissues concerning trade facilitation and other impediments to private sector leddevelopmentandintegrationinSouthAsia.Thispaperidentifiestheseimportantissuesand suggestsactionableproposals fordealingwith them.Tackling these issueswouldofferapowerfulmeanstoharnessingbusinessopportunitiesinSouthAsia.

Acknowledgements

FICCIandADBwere fortunateandhonored tohavegatheredadistinguishedbodyofGovernmentofficials andprivate sectorplayersduring theConferenceonHarnessingBusinessOpportunitiesforSouthAsianEconomic Integrationheldon1718November2009 at the Federation House, FICCI, New Delhi (jointly organized with the SAARCChamberofCommerceandIndustry,SAARCSecretariat,andMinistryofExternalAffairsGovernmentof India).S.M.Krishna (MinisterofExternalAffairs,Governmentof India)gave the keynote address, and participants shared their experiences on keyimpedimentstoharnessingbusinessopportunitiesinSouthAsia1.Commentsandinputsprovided by the participants and the SAARC Chambers of Commerce are deeplyappreciated.Specialappreciationgoes toRajatNag (ManagingDirectorGeneral,ADB);AmitMitra(SecretaryGeneral, FICCI); Rajan Kohli (Advisor, FICCI); and SrinivasaMadhur (SeniorDirector,OfficeofRegionalEconomicIntegration,ADB)fortheirstrategicguidanceandsupport.This issuespaperwasprepared fortheconferencebya jointADBFICCIteammade up of Ganeshan Wignaraja (Principal Economist, Office of Regional EconomicIntegration,ADB),ManishMohan(JointDirectorandHeadSouthAsia,FICCI),GenevieveDeGuzman (ADBConsultant),AmeetKumar (AssistantDirector,FICCI),ShivaniBansal(Research Associate, FICCI), and Wilhelmina Paz (Senior Economics Officer, Office ofRegionalEconomicIntegration,ADB).ItistheoutcomeofaseriesofconsultationswithvariousprivatesectorbodiesinSouthAsiaduring20082009spearheadedbyFICCIandADB. The conference and technical work for the issues paper were financed by theregionaltechnicalassistance(RETA6432)onprivatesectorledintegrationinSouthAsiafromtheADBRegionalCooperationandIntegrationFund(RCIF).

1 SeeAppendix1fortheconferencereportandprogram.

TableofContents

IntroductionandSummary 13Issue1:ExpandingtheSAARCvisaexemptionscheme 45Issue2:AdoptingaSAARCregionalmotorvehicularagreement 67Issue3:Dealingwithnontariffbarriers 810Issue4:Improvinglandcustomsstations 1113Issue5:Promotingintraregionalinvestment 1417Appendices14 1827FurtherReading 28

KeyProposalsforHarnessingBusinessOpportunitiesinSouthAsia|1

INTRODUCTIONSouthAsiahasmadenotableeconomicprogressoverthelastquarterofcenturyandtheprivate

sectorhasplayedapivotal role in theprocessof transformation.SouthAsiasexportgrowth

increasedfivefoldfrom4.3%to20.1%between1990and2008.Theregionalsowitnessedan

average annual GDP growth rate of 5.9% from 19802008. A host of factorsfalling trade

barriers, reduced logistics costs, implementation of economic reforms, investment in

infrastructureandmodernizationofagriculturehavecontributedtotheregion'srapidgrowth

and exports. Alongside progress in global markets, South Asia has also begun a process of

regionalcooperationand integration.SouthAsiaoffersapotentialmarketof1.5billionpeople

with vast opportunities for intraregional trade and investment and enhancing the region's

prosperity.TheSAARCprocess isalsoadvancingwithdiscussionofa servicesagreementasa

second stageof SAFTA.Nonetheless, levelsof intraregional trade remainmodest at4.8% in

2008 compared with other regions. Residual issuesrelating to business travel, transit

infrastructure,nontariffbarriersandintraregionalinvestmentremainimpedimentstoprivate

sectorleddevelopmentinSouthAsia.

Whilebroad,longtermhurdlesexistforcountriesintheregiontoconsider(e.g.,poorphysical

connectivity, cumbersome behindtheborder procedures), there are also specific strategic

issuesthatcanbeaddressedintheshortandmediumterms.Thepurposeofthisissuespaperis

to examine those large thematic challenges, and highlight targeted, actionable issues for

improving the business environment for private sector led integration in South Asia. In this

paper,thefollowingissuesareconsidered:

(i) ExpandingtheSAARCvisaexemptionscheme;(ii) AdoptingaSAARCregionalmotorvehicularagreement;(iii) Dealingwithnontariffbarriers;(iv) Improvinglandcustomsstations;and(v) Promotingintraregionalinvestment.

Actionable proposals for dealingwith these issues are also presented under these headings.

Tackling theseparticular issues isa firststep to focusing regionaleffortsonprivatesector led

integrationandharnessingbusinessopportunitiesinSouthAsia.

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SUMMARYOFISSUESANDPROPOSALS

Issue Challenges Proposals

1. ExpandingtheSAARCvisaexemptionscheme

Entitledpersonslistdoesnotincludebusinesstravelersandotherprofessionalgroups.

Quotaonvisastickersleadstodelays.

Periodofvalidityandscopeoftravelpermittedistoonarrow.

Politicalrestrictionsimpedescheme.

Enablebusinesstoprocurevisaexemptionsmoreeasily;expandentitledlist.

Increasethenumberofvisaexemptionsissued.

Increasevaliditytermsofvisaexemptionsandremoverestrictionsontraveldestinations.

Movefromastickerschemetoanelectronicbusinesstravelcardandinstallelectronicreadersatairports.

2. AdoptingaSAARCregionalmotorvehicularagreement

Differentstandardsforacceptablevehicles.

Cumbersomeproceduresandlackofknowledgeablestaff.

Crossbordermovementisoftenrestrictedtoborderareasonly

Establishspecialstationsorfastlanesdesignatedforgoodstransportvehicles.

Harmonizetransitvehiclestandardsandcreatevehicletransitcards.

Offerlowcostfinancingoptionstohelpbusinessupgradetruckfleets.

Establishjointtruckingventuresbetweencountries.

3. Dealingwithnontariffbarriers

MeasuringtheimpactofNTBscanbedifficult.

RegulatorymeasuresareofteninconsistentandnotmutuallyrecognizedamongSAARCmembers.

Quotascontrolthequantityofcertainimports.

MarshalconsensusonclassifyingNTBsforbetterregulatorycooperation.

CreateNTBnotificationsystemsandbuildonlineinventoriesforbettermonitoring.

StrengthenhumanandinstitutionalcapacitiesforcollectionandanalysisofdataonNTBs.

Providetechnicalassistancetofirmstohelpmeettechnicalstandards.

Establishadisputesettlementmechanism.


SUMMARYOFISSUESANDPROPOSALScontinued

Issue Challenges Proposals

4. Improvinglandcustomsstations

Inadequateroadstolandcustomsstationsrestricttrafficflow.

Parkingfacilitiesatlandcustomsstationslackcapacity.

Lackofwarehouseandtestingfacilitiesforperishableandnonperishablegoodsdelaysshipments.

Customsproceduresatlandcustomsstationsaremostlypaperbased.

Buildordesignatebypassroadsintolandcustomsstations.

Expandsizeofcustomsstations,includingparkingandwarehousesandprovidebasicamenities.

Establishmultiagencytestinglaboratories(internationalstandard)atmajorcustomstations,wherefeasible,orauthorizenearbylaboratoriestoconducttesting.

Promotepublicprivatepartnershipstofundupgrades.

5. Promotingintraregionalinvestment

Restrictivepoliciesonintraregionalinvestment,e.g.,excludedsectors,equityrestrictions.

Investorprotectionneedsstrengthening;bilateralinvestmenttreaties(BITs)areunderutilized.

Lackofstrategicpromotionofintraregionalinvestment.

Openexcludedsectorsonalimitedbasis,i.e.allowFDIforthosesectorsinspecificcities.

Expandtheuseofbilateralinvestmenttreaties(BITs)andharmonizewithinvestmentprovisionsinfreetradeagreements(FTAs).

BoardsofInvestment(BOIs)atthecountrylevelshouldpromotemoreintraregionalinvestment;establishdedicatedcountryoffices.

Expandmarketingstrategiesandtargetprioritysectors.

ConductafeasibilitystudyoncreatinganumbrellainvestmentbodyforSouthAsia.

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1. ISSUE:ExpandingtheSAARCVisaExemptionSchemeImproving the business environment in SouthAsiawill depend on creating opportunities formorepartnershipsand increased interactionamongbusinesspersonsandprofessionalsacrossborders. Allowing greater access will enable business communities to network, establishlinkages, and foster new businesstobusiness opportunities for a more vibrant South Asianprivatesector.Freedomofmovementacrossborderswasaddressedin1988withtheproposalof the SAARCVisa Exemption Scheme. Sincebecomingoperational in1992,1,600 visashavebeen issued to promote deeper linkages across borders. Under the scheme, the holder isentitledtoaonemonthstaywithoutrestrictionsinselectedcitiestobevisited2.WhiletheVisaExemptionSchemehas increasedsomecrossborderexchange, ithasfallenshort inpromotingprivate sector interaction across countries. Expanding the scope of the existing SAARC VisaExemptionscheme toease themobilityofbusiness iscrucial to fosteringmoreprivatesectorintegrationinSouthAsia.

Challenges:

Entitledlistdoesnotincludemostbusinesstravelersandotherprofessionalgroups.Atpresent,personsentitledundertheVisaExemptionschemebelongto limitedcategoriesandhigh levelposts,suchasSupremeCourtJudges,MembersoftheNationalParliaments,HeadsofNationalAcademic Institutions, Foreign/Permanent Secretaries dealing with foreign affairs, SAARCSecretaryGeneralandDirectorsoftheSAARCSecretariat,andPresidentsofNationalChambersofCommerceand Industry.Outside theentitledpersons list,extending theVisaExemption toindividualprofessionalscanbemoredifficult.

Quotaonvisastickersleadstodelays.WhileChambersofCommercecanassistbusinessesbyendorsingapplications,thenominationprocessisconstrainedbythemaximumnumberofvisastickersthatcanbegranted.SAARCmemberstatescanonlygrant100VisaExemptionstickers.Thisscarcityposesextrabarriersfornonentitledpersonsinacquiringasticker.Asaresultofthequota,businessescontendwithlongqueuesanddelaysonwaitinglists,andapprovalsthataremorestringent.Quotascanalsocreateopportunitiesforrentseekingassupplyiscrowdedout.

Periodofvalidityandscopeoftravelpermittedistoonarrow.Beyondtheapplicationprocess,limitationsexist inthe intrinsiccharacteristicsofthescheme.Timepermittedfortravelatanygivenentrypoint isonlyonemonth,hamperingbusinesstransactionsthatrequiremoretime3.Anotherpolicy that constrainsbusiness is the restrictiononmovement toonlya few specificcities,usuallymajormetropolitanareas.ThisnarrowscopeoftravelcanbeprohibitivetoSMEsthataremorelikelytoseekopportunitiesinsmallercities.

Politicalrestrictionsimpedescheme.UnrelatedtotheschemebutjustasproblematicistheuseofrestrictionsleviedonthestickerswhenpoliticaldisagreementsariseamongSAARCmembers.

2 Source:SAARCInformationCenter(http://www.saarcsic.org/fncoop.php)3 Regional average for South Asia for time to start business is 28 days. See Appendix 2 for a full

summaryofDoingBusiness2010indicators.


Whilemeantto lobbyforconcessionsandbargainformeasures,thesepoliciescurtailmobilityandcreatemorestumblingblocksforbusiness.

Proposals:

Enablebusinesstoprocurevisaexemptionsmoreeasily;expandentitledlist.Accessshouldbewidened tomake it easier for business persons and other professionals outside the entitledpersons list to procure exemptions. This can entail having special provisions for fast trackapplicationsfortheprivatesectorbyfacilitatingendorsementsorcertificationfromChambersofCommerceandBusinessAssociations. Inaddition,visastickersonarrivalschemescanbeconsideredforbusinesstravelers4.Similartovisaonarrivalschemes inASEANwheretravelerscan quickly acquire visas at the airport, visa exemption stickers issued on arrival wouldacceleratethemovementofbusinesstravelersandotherprofessionalsbyincreasingaccess.

Increasethenumberofvisaexemptionsstickersissued.TheSAARCChamberofCommerceandIndustryhas suggested increasing the supplyof visaexemption stickers from100 to200peryear.However,forthevisaexemptionschemetohaverealbusinessimpactandtraction,amoresubstantial increase in issuances in the rangeof1,0001,500per year isneeded. Since1992,when the SAARCVisa Exemption Schemebecameoperational,only1,600 stickershavebeenissued.By comparison, there are a staggering 34,000 activeAPECBusiness TravelCards (seeAppendix3) since theAPEC cardprogram started in1999.While selectivity from limiting thenumberof exemptionshas somemerits, ensuring that applicants are carefully reviewed andcrosscheckedagainstsecuritywatch lists,thescreeningprocessshouldbemore liberalizedtoallowforincreasedparticipationfromthebusinesssector.

Increase validity terms of visa exemptions and remove restrictions on travel destinations.Extendingtheperiodofvalidityofvisaexemptionswouldgivebusinesswiderberthinengagingin longtermprojects.Theexemptionscanbemademore flexibleby: (i) raising themaximumlengthofstayallowed fromone to threemonths, (ii)extending stickervalidity to threeyearsfromissue,and(iii)droppingrestrictionsonmovementtospecificcities.

Move from a sticker scheme to an electronic business travel card and install electronicreadersatairports.Aredesignof theVisaExemptionscheme from theuseofstickersto fullfledged cardswithbuiltinbar codingor security chips forbusiness travelerswould alleviateconcerns about crossborder security and facilitate crossborder movement. For example,departureandarrivalsatairportscanbemonitoredelectronicallybyborderagencies.Businesstravelerswouldhave fasttrackentry andexitprivileges throughdesignated lanes at airportswheretheircardscanbescannedbyelectronicreaders.Asimilarscheme istheAPECBusinessTravelCard(seeAppendix3)usedbyAPECmembers.Itcontainsfeaturesthatpromoteeaseoftravelforbusinesswithoutsacrificingsecurityandborderintegrity.

4 Indiaiscurrentlypilotinganexperimentalvisaonarrivalschemefortouristsfromselectedcountries

tobolstertourism.The18countriesputforwardforthepilotprogramincludeNewZealand,France,Germany,Luxembourg,Netherlands,Belgium,Finland,Spain,Switzerland,Norway, Iceland, Japan,RepublicofKorea,Argentina,Brazil,Chile,MexicoandVietNam. Indiahasalsocalled formultipleentry longterm visas tobe extended to certainASEAN countries, including Singapore,Myanmar,Cambodia,LaoPDR,andBruneiDarussalam.

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2. ISSUE:AdoptingaSAARCRegionalMotorVehicularAgreement

SouthAsiascontinuedprogresstowarddeeperregionalintegrationwilldependonmaintainingcontinuity between past achievements and future activities, particularly focusing onimplementingregionalandsubregionalprojects.Atthe15thSAARCSummitheldinColomboin2008,Headsofmemberstates recognizedefficientmultimodal transportsystemasonesuchsubregionalproject important forpromotingdeeperSouthAsian regional integrationand forsustaining the regions economic growth and competitiveness. A comprehensive RegionalTransport and Transit Agreement is now being considered by SAARC members5 aimed attransforming ordinary transport corridors into multidimensional and dynamic economiccorridors.Thisoverhaultoenhanceconnectivityrequiresamixofphysicalhardinfrastructure(e.g.,buildingroads,railways,waterways;upgrading landcustomsstations,which isaddressedinthispaper)andsoftinfrastructure(e.g.,transportagreements).

FinalizingaSAARCRegionalMotorVehicleAgreement(MVA)isjustonekeytechnicalinputinalarger transport initiative, such as the Regional Transport and Transit Agreement beingconsideredbySAARCmembers.Nevertheless,asapilottransportagreementforSouthAsia,aSAARCMVAwouldfacilitatefreemovementofgoodsbetweenneighboringcountriesandpavethe way for future transport agreements such as a multimodal railway agreement andestablishingfullfledgedeconomiccorridorsintheregion.

Challenges:

Different standards for acceptable vehicles exist. Countries enforce different standards onvehiclesize,weightandsafety requirements,anddriverqualifications forpermission toenterborders. If a truck is denied passage at checkpoints because of noncompliance with localvehicularstandards,thecarriermustunloadandloadgoodstodifferenttrucks.Thesefrequenttransfersentailadditionalcosts,suchasmaintainingalternativetruckingfleetsandlossesfromgoodsdamagedintransfers.

Proceduresare cumbersomeand there is lackofknowledgeable staff.Carriersmustgrapplewithdifferentcustomsprocedures,inspections,clearances,andassessmentofduties;andotherrestrictivevisarequirements.Forwardersstaffareoften illequippedtopreparedocumentsforcrossbordertransit,havingpoorknowledgeofdocumentationrequirementsatdestination.

Crossborder movement is often restricted to border areas only. Transport becomesincreasinglydifficultorrestrictiveascarriersmove inland.Formovementtotakeplace,goodsmustoftenbetransferredtolocaltrucksorhandledbylocaltraderswholoadandtransportthegoodsontotheirowntrucks.Theseextraproceduresimposeadditionalcoststobusiness.

5 ASAARCRegionalMultimodalTransportStudy(SRMTS),conductedwithADBfinancialandtechnical

assistance, identified 10 road corridors, 5 rail corridors, 10 inland ormaritime gateways, and 7aviationgateways.Formoreinformation,seehttp://www.saarcsec.org/printable.php?id=199


Proposals:

Establish special stations or fast lanes for goods transport vehicles. Preapproved trucks,container fleets,andothercarriersmovinggoodsacrossborderscouldhaveaccess to speciallaneswithfacilitatedcheckpointstodecreasewaitingtimeanddelays.

Harmonizetransitvehiclestandardsandcreatevehicletransitcards.SAARCmemberscouldagreeona setofminimum regional requirements thatcarrierswouldcomplywith for transitacrossborders.Advanceprescreeningarrangementscouldbemadeforexemptionsonvehicleandphysical customs inspections. Vehicle transit cards issued to carrierswhohavepassedprescreeningtestscertifythatvehicleshavemetminimumtechnicalstandards(includingvehicleweights, axleload dimensions, registration requirements, etc.) and hence can pass. At theappropriate checkpoints, carrierswith transit cards couldbediverted through to acceleratedlanes. In effect, transit cards eliminate the extra procedural steps of inspections for vehicledocumentation (e.g., driving licenses, vehicle, and cargo insurance) and registration atcheckpoints.

Create lowcost financing options to help business upgrade truck fleets. Once regionalstandardsformotorvehiclesareinplace,firmsmayneedtoupgradetheirtruckfleets.Lowcostfinancing (e.g., 3% per annum) could be proposed as an incentive to encourage firms andcarrierstoinvestandapplyforcertainvehiclecertifications(e.g.,vehicletransitcard).

Establishjointtruckingventuresbetweencountries.Fleetsofmediumsizedmultiaxlecoveredtrucksand trucktrailersofuniform color (for identificationand security) canbe startedwithmutualshareholdersdrawnfromseveralSouthAsiancountries.Withregionalownership,thesecollaborative trucking ventures have the benefit of contributing to intraregional trade intransport services, as well as augmenting the impact of an implemented regional motorvehicularagreementandotherregionaltransitagreements.

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3. ISSUE:DealingwithNontariffBarriers(NTBs)6SAARC hasmade steady progress toward liberalizing its trade regime, progressively loweringtariffrates(refertoAppendix4)overtime.Thedeclineintariffsasaresultofregional,bilateralandunilateralliberalizationhasshiftedthefocustotheimportanceofnontariffbarriers(NTBs)asalarmingprotectionandregulatorypolicy instruments.Astariffandquantitativerestrictionson tradehavebeenprogressively reduced,other trade costs arising from regulatoryburden,inadequateinfrastructure,andgenerallyinefficientcustomsproceduresandlogisticsofmovinggoods acrossbordershavebecomemuchmore significant. The costs to tradeof inadequateinfrastructureandcumbersomeregulatoryenvironmentarebelievedtobesubstantiallyhigherthanthosefromtariffbarriers.NTBmeasures, suchas customsandadministrativeentryprocedures, import surcharges,andotherregulatorymeasuresaffectinginfrastructure,protectionofintellectualpropertyrightsandregulatory frameworks, increase costs to trade. Because of their adverse impact oncompetitivenessandmarketentry,NTBshavebeennowfullyrecognizedasagrowingchallengeby trade negotiators andGovernments in the region. For South Asia regional integration todeepen and its economies to maintain openness, these barriers should be eliminated orsignificantlyreduced.Challenges:Measuring the impact of NTBs can be difficult. Knowledge of NTBs, both empirical andconceptual, is rather limited and is hampered by the lack of common definitions andmethodologies,inadequatequantityandqualityofdata,andwaysandmeansofquantificationof impacts on trade. Problems also abound in trying to identifyNTBs because of conflictingperceptionsofindividualfirmsacrossdifferentsectors.Regulatory measures are often inconsistent and not mutually recognized.Sanitary/phytosanitary (SPS) certifications and laboratory testing results are not universallyrecognized among SAARC members. Health and safety standards and regulations are oftenapplied inadiscriminatorymannerandsupportingscientificevidence isoftennotavailabletojustifytheimpositionofSPS.Quotas control the quantity of certain imports.Quotas on products are often imposed andreducethebenefitsoftradeamongSAARCmembersbystrainingthesupplyofaproductandincreasing prices. Consumers lose, aswell as trading partners. Even if foreign producers canmanufacture goods more cost effectively and offer lower prices for consumers, the quota

6 According to theWorldTradeOrganization (WTO),nontariffbarriers (NTBs)broadly refer toany

bordermeasureotherthanatariff,whichactsasabarrierontrade.Thisincludesinternalmeasuresthat, despite in several instances being in line with WTO rules and serving legitimate policyobjectives,maydiscriminateorunnecessarilyrestrictaccesstomarkets,translating intoadditionalcostsfortheexportersortheimporters.


prevents them fromproducingadditionalunits.Foreign firmsmayoftenbe forced toexpendresourcestolobbyforimportpermits.Proposals:MarshalconsensusonclassifyingNTBsforbetterregulatorycooperation.AmongSouthAsiancountries,bettercooperationisneededinidentifyingandclassifyingtraderestrictivemeasures.From theoutset,privatesectorandGovernmentsshouldmove towardconsensusondefiningtraderestricting measures and identifying violations of general standards (e.g., UNCTADclassification and the World Trade Organization [WTO] Agreements on Technical Barriers toTrade,SanitaryandPhytosanitary).Create NTB notification systems and build online inventories for better monitoring.EstablishinganNTBnotificationsystemwillenablememberstobettermonitorandtrackNTBs.Thefirststep involves identifyingtheNTBbarriers7andthencreatingataxonomybasedon:(i)NTBtype,(ii)source,and(iii)dateof identification.Importerscan listalltheNTBstheyfaceatthe tariff line level, while Governments can identify priority NTBs in vulnerable sectors andindustriesfortargetedaction.In cataloguing the NTBs by type, classifications can fall under the following groupings8: (i)technicalbarrierstotrade(packaging,markings,trademark,and labelingrequirements,aswellasprocedures forassessingconformity tostandards), (ii)sanitaryandphytosanitarymeasures(standards relating to food safety and animalbornediseases), (iii)quantity controlmeasures(nonautomatic licensing, quotas, prohibitions, export restraint arrangements), and (iv)customs/administrativeprocedures (licensing,nontariffcharges).Measures shouldbe furthertaggedasthoseconsistentwithWTOagreementsand/orother internationalnormsandthosethat arenot.A comprehensivedescriptionof individualNTBs and link to relevant legal textswouldalsobeuseful.WithanNTBdatabaseinplace,SouthAsiancountriescantrackthe:(i)frequencyofNTBs,and(ii)importcoverage.NTBfrequencycanbeestimatedbycountingthenumberoftarifflinesonwhichanNTBisimposed.Fromthis,indicesindicatingtheproportionofnationaltarifflinesthatareaffectedbyaparticularNTBcanbederived.Measuringtheshareoftradevalueaffectedbya givenNTB, import coverage provides the share of countrys imports that are subject to aparticularbarrierorspecifiedgroupofNTBs.From these indicators,an earlywarningsystemmechanismcouldalsobeproposedamongmembers.TheNTB inventory shouldbemadeavailableonlineasdownloadable reports9or in the formofan interactive database and harmonized with existing international databases on NTBs,includingtheUNCTADTradeAnalysisandInformationSystem(TRAINS)andWTOnotifications.ANTBdatabasecanhavemultiplepurposesbeyondmonitoringandsurveillance.Datacouldbe

7 InformationcanbegatheredfromvoluntaryfirmreportsonNTBsorthroughsurveys.8 BasedonUNCTADCodingSchemeforTradeControlMeasures.9 SeetheASEANNTMDatabase(http://www.aseansec.org/16355.htm)foranexample.

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used inresearch,asaresource forexporters,bypolicymakers,andasabasis for futuretradenegotiations.Strengthen human and institutional capacities for collection and analysis of data onNTBs.NTBrelated data constitutes apublic good and should thereforebe in the public domain toensure access and transparency. Its coordination is a resourceintensive exercise and furtherunderlinestheneedforsupportandtechnicalassistance.ThecreationofanEminentPersonsonNTBscouldserveasanetworkofnationalfocalpointsto improveNTBdatacollectionandanalysis. Refining the database will require more systematic surveys targeting firms on theimpact of quantity controlmeasures, technical restrictions, and otherNTBs. Beyond anNTBdatabase,surveyscanprovidecasestudiesonvariousaspectsofNTBs(restrictiveness,costofcertification/technicalrequirements,etc.).Provide technical assistance to firms to help meet technical standards. Meeting technicalstandards and conformity assessment procedures can impose significant costs on firms,including expenditures on product redesign and new administrative systems. Toward this,businesses shouldbuild relationshipswith relevant tradeand industryassociations for stronginstitutionalsupportandguidanceon inspections,certifications,andcompliance.Entering intojoint venture arrangements or technology transfer agreements with foreign companies isanother way to ensure that domestic enterprises can learn and adapt to meet technicalregulations and standards. To mitigate difficulties, governments and customs can allow forsequenced or phasedin adaptations in products or production methods and also providetechnicalassistanceintheadjustmentprocess.Establishadisputesettlementmechanism.AregionaljudicialsystemtomanagedisputesoverNTBsshouldbeestablishedasaninstitutionalcomplementtoNTBsurveillanceandmonitoring.Developing an appropriate andeffective legal and institutional frameworkwill take time andresources,andSouthAsiashouldlooktootherregionalmechanisms.Internationalstandardssetforth by the WTO on Technical Barriers to Trade (TBT) and Sanitary and Phytosanitaryagreements can serve as the foundation for similar agreements in SAARC. A regionspecificdisputesettlementwouldsupplementtheproceduresusedtoresolveNTBsintheWTOsystem.In line with WTO proposals on NTB dispute settlement mechanisms, SAARC members havestressed the need for an expedient, solutionbased mechanism that avoids adversarialconfrontationsandoutcomes.Amutuallyagreeduponexpertfacilitatorknowledgeableofthespecializedarea inquestion(e.g.,SPS,TBT,etc.)canbeselectedfromarosteroffacilitatorstomediate. Facilitators would focus on casebycase resolution of disputes, considering thenegative trade impact of the NTB, rather than the legality of cases. Strict timeframes onoutcomescanbeenforcedwithdecisionstobesoughtafteraspecifiedperiodoftime(e.g.,60daysfromtheappointmentoftheFacilitator)toensurespeedyresolution.


4. ISSUE:ImprovingLandCustomsStations(LCS)Increasedconnectivity leadstogreaterandmorevibrantbusinessopportunities.Landcustomsstations(LCS)serveasgatewaysfortransitofgoods,servicesandpeople,strategicnodes,andimport/exportoutlets forborder crossingsbetween two countries.A regionaleffortenablingcooperationamongSouthAsiancountriesonLCSsisanotherstep,alongwithadoptingaSAARCRegionalMotorVehicularAgreement, in improvingtheefficiencyoftransportandconnectivityandwherethescopeforregionaleconomiccooperationcanbemostquicklyrealized.Challenges: Both deficiencies in physical infrastructure and procedural inefficiencies at LCSsimpose costs to businessraising direct costs of freight and storage, as well as imposingsubstantialcostsfromdelaysintransittime.Deficiencies inthe infrastructureandfacilities inLCSscreatebottlenecks inthemovementofgoodsacrossborders.(i) InadequateroadstoLCSsrestricttrafficflow.RoadsapproachingLCSsareoftencongestedand areunable to absorb theheavy flowof cargocarrying traffic. For example, the KolkataBarasatPetrapoleroadisnarrowandpronetotradecloggingtrafficbottlenecks.(ii)Parking facilitiesat LCSs lack capacity.Forexample,at the LCS station,Petrapole,at theIndiaBangladesh border in the West Bengal region, the CWC Truck Terminal is unable toadequatelyhostthenumberoftracksthatpassthrough.TheCWCterminalcanabsorbaround600trucksbuttrafficflowbetweenthetwoneighborsrequiresatleastafacilitycapacityoffivetimesthatthreshold.Thisdeficiencyhaspushedshipperstoparkinalternativelots,suchastheBongoanMunicipalParkingZone(5kmawayfromCWCtruckterminal),whichhavenofacilitiesforprocessingcrossbordershipments.(iii) Lackofwarehouseand testing facilities forperishableandnonperishablegoodsdelaysshipments. As countries specialize in particular stages of production in a regional or globalsupply chain like many countries in South Asia are beginning to do, improved quality oftransport infrastructurebecomesevenmore important.At thePetropole LCS,warehousing isinadequateand cargo isoftenoffloaded in small transit sheds in remote sites.The frequentneedtoimportintermediategoodsforprocessingforreexportrequiresadequatewarehousingfacilitiesforperishableandnonperishablegoods.Lengthyanduncertaintransittimesrequirealargerbufferstockofinventoryatdestinationtoaccommodatetheuncertaintimeofdeliveryofgoods,particularlyfortimesensitivegoods,suchasperishableagriculturalproducts,seasonalorfashion apparel, and holiday toys. Accessible warehousing facilities at LCSs are critical forbusinessspecializing in thesegoodsand facing longwait times.Testing laboratoriesareoftennonexistentatLCSscompoundingdelaysasgoodsmustbedelivered toseparate location fortestingandinspections.Customs procedures at LCSs are mostly paperbased. The clearance of bills and othersupportingcustomsandshippingdocumentsoftentakesmanyweeksbecauseeachdocumentmustbereviewedbyseveralpeopleandoffices.

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Proposals:Build or designate bypass roads into LCSs. Dedicated routes for transport vehicles providepriorityaccess to stationsandease the flowof regular trafficby creating special commerciallaneswheretruckscanbediverted.Roadrehabilitationtonationalhighwaystandardscanalsoreducethenumberofaccidentsandtrafficbottlenecks.ExpandsizeofLCSs, includingparkingandwarehousesandprovidebasicamenities.Parkingfacilitiesandwarehousescouldbebuilttoabsorbtheincreasingcargovolumespassingbetweencountries.LCSs shouldalsobeequippedwith thepropercargohandlingequipment, includingheavycranesandforkliftsformoreefficientloadingandunloadingandtoreducetheincidenceof accidents.Mobile inspection platforms for cargo and truckswould also reduce inspectiontime.Publicconveniencessuchastoiletsanddrinkingwaterfacilitiesshouldbeconstructedandmade available for cargo handlers and drivers. Other amenities such as waiting areas,restaurantsand refreshmentareas,dutyfree shops, truckparking, container yards,officesoftransport and logistics companies, banks and financial services, dormitories, and all relatedfacilitieslikeservicestationsandfuelstationscouldbeconstructed.Establish multiagency testing laboratories (international standard) at major LCSs, wherefeasible,orauthorizenearby laboratoriestoconducttesting.Testingfacilitiesareparticularlyimportant for cargo involving food and animal products that need to undergo sanitary andphytosanitaryinspections.Laboratorieslocatedatornearcustomsstationswouldprovideonestop shops for inspections and certifications. Special sanitized zones with stateoftheart,dedicated passenger and cargo terminals comprising adequate customs and immigrationcountersandXrayscannerscanbesetupforperishablesandotherspecialcargo.Invest inautomatingsystems inLCSs(software,hardware,networking)forcargoprocessing.Electronicdata interchange (EDI)canbeenhanced tocontrolallmajorcustomsoperationsatLCSs to speedup theprocessing, tracking,anddispatchofcargo.Computer clearance canbeexpanded and online connectivity implemented to cover main application areas of goodsdeclarationprocessing,cargoclearanceprocessing,revenuecollection,taxanddutydrawback,andcollectionoftradestatistics.ThiscutsthroughtheredtapeandextraneousinterventionbyCustomsofficers,streamliningthescreeningprocess.EventuallythenewcomputerautomationsystemscanbeintegratedwiththesystemsofotherGovernmentagenciesandclients,includingtransportoperators,banks,freezoneandwarehouseoperators.Ultimately,aSingleWindowsystem will make the regulatory process seamless for both import and export both at thenationalandregionallevels.Foreachmember,thepresentstateofautomationwithincountriesshouldbeassessedandaprogram toaccelerateautomation inLCSs forcountriesstill in theearlystagesofautomationshould be developed and implemented. Major LCSs should attain at least general level ofautomationcapability.Systemsbuiltorenhancedacrosscountriesshouldbeharmonizedwitheach other for the longerterm objective of intercommunication between customsadministrations.


Country coordinators can be assigned to initiate and guide the automation process andwillliaise closely with SAARC Secretariat and be involved with consultations with businessassociationsandchambers.Select priority LCSs for development. South Asian countries should develop infrastructureprofilesofexistingLCSsandprioritizeforfocuseddevelopmentattention.ProfilescanbesharedamongGovernments. For example, out of the operational LCSs in India, 16 LCSs have beenprioritizedforinfrastructuredevelopment.Promote publicprivate partnerships to fund upgrades.Upgrades to LCSs such as expandingparkingandwarehousingfacilitiesandbuildingbypassroadswillentailsubstantialconstructioncosts. Investment and financial support from the private sector with cofinancing andcoordinationfromGovernmentscandefraycostsandpreventdelaysfromfundinggaps.SAARCandotherregionalbodiescanactasacatalystforresourcemobilizationfrombusiness.CreateanEconomicCorridorsForum(ECF).ConnectivityamongtheSouthAsiancountriescanbe enhanced through the development of subregional infrastructure, such as transportcorridors,power interconnectionsystems,andtelecommunicationsnetworks.AnECFcouldbedesigned toenhance collaborationand focusoneconomic corridordevelopment,particularlyLCSs. Itwillhelp improvethe interactionbetweenthepublicandprivatesectorsandbetweencentralandlocalGovernmentsoninfrastructuredevelopment.

14|ADBandFICCI

5. ISSUE:PromotingIntraregionalInvestmentBuilding up business competitiveness relies heavily on technology and connections toworldmarkets. Foreigndirect investment (FDI) isone essential ingredient for tapping technologicalcapital and access to regional and external markets. FDI is important in the context ofproductionnetworks,prompting strongbackward and forward linkages, and canprovide thecatalyst for industrial development, particularly in technologyintensive sectors. The changefrom traditional to modern manufacturing under way in South Asia is creating newopportunities for investment and demand higher skills and technologies that are likely toenhance the roleofFDI.Positiveexternalitiesrange from technology transfer tomanagementandlaborskills,withspilloversforlocalfirms.Deepening regional cooperation on investment among South Asian economies, as well asaddressing Issues 14 discussed in this paper (visa scheme for business travelers, motorvehicularagreement,NTBs,andLCSs)wouldbesubstantialcatalyststo improvingthebusinessenvironmentandmakingSouthAsiaamoreattractivedestinationfor investment.WhileSouthAsia has progressively started to liberalize FDI policies in the last decade, divergent policiesamong individual countries remain stumblingblocks. The investment regime in SAARC isnotonlyrestrictivebut lackspolicyharmonization.SupportingmechanismsareneededtosupporttheflowofcapitalandtohelpattractmoreFDIfrommembers.Whileacoordinatedprogramofregulatoryreformand investmentclimateharmonizationwilltaketime,effortsatthenationallevelthroughindividualcountryreformsareasignificantfirststep.Challenges:Certain policies on intraregional investment, e.g., excluded sectors, equity restrictions, arerestrictive.IntraregionalinvestmentisstymiedbytwomainrestrictivepoliciesinSouthAsia:(i)the number of excluded sectors, particularly those sectors across countries that may havecomplementarities if they areopenedup (e.g., textiles and garments, retail trading); and (ii)strict equity requirements. For example, in Sri Lanka, investment in retail trading is notpermittedwithcapitaloflessthan$1million.Indiaimposesrestrictionsoninvestmentinprivatesectorbanks, insurance, telecommunications, and certain typesofminingof less than100%.Nepal does not allow investment in cottage and smallscale industries. In Bhutan, variouscontrolsareappliedtoinvestmenttransactions.Investorprotectionneedsstrengthening;BilateralInvestmentTreaties(BITs)areunderutilized.ParticipationofSouthAsiancountriesinformsofFDIundertakingssuchasBITsandDoubleTaxAvoidanceTreaties(DTTs)attheregional level issmall.Thoughcountriesare involved inmorethan100BITs,only twoBITs involve countries in the region (covering India,Pakistan,andSriLanka);BhutanandMaldiveshavenosuchtreaties(seeTable5.1).


Table5.1:BITsandDTTsinSouthAsia

BITs DTTs

Country Total Intraregional Total Intraregional

India 26 withSriLanka 65 involvingSriLanka,Nepal,Bangladesh,Pakistan

Pakistan 36 withSriLanka 51 involvingIndia,SriLanka,Bangladesh,Nepal

SriLanka 26 withIndiaandPakistan

5 involvingIndia,SriLanka,Pakistan,Nepal

Nepal 5 None 9 involvingIndia,SriLanka,Pakistan,Bangladesh

Bangladesh 16 None 20 involvingIndia,SriLanka,Pakistan,Nepal(underconsideration)

Bhutan 0 0

Maldives 0 0

Total 109 150

Source:Variousofficialsources

Lack of strategic promotion of intraregional investment. The annual SAARC Trade Fair hasbeenlargelyfashionedasacrossculturalexchangewithexhibitionsofproducts,culturalevents,specialpromotions,andfoodfiestasforvisitors.Moreeffortshouldbemadetopromotemoretargetedbusinesstobusinesscontact,tostimulatemoreintraregionalinvestment.Proposals:Openexcludedsectorsonalimitedbasis,i.e.,allowFDIforexcludedsectorsinspecificcities.While dropping restrictions on sensitive sectors everywhere may be politically infeasible,countries can explore the possibility of allowing FDI in particular locations, such as majormetropolitanareas.AMemorandumofUnderstanding(MOU)couldbedevelopedbetweentwocountriestodevelopajointventureincertainlargecities(e.g.,DelhiorDhaka).Forexample,anarrangement couldbemadebetween retail traders in India andBangladesh, enabling IndianretaildeveloperstoestablishapresenceintheBangladeshimarketandenabletheBangladeshiretailerstogainfromIndianexpertise.Realestateisalsoanotherrestrictedsectorthatcouldbeliberalizedandopenedforinvestmentonlimitedbasis.ExpandtheuseofBITsandharmonizewith investmentprovisions inFTAs.SouthAsiashouldensure theconclusionand implementationofBITs,whichaim toprotect investmentsabroad,

16|ADBandFICCI

particularly in cases where investor rights are not already protected through existingagreements, and encourage the adoption of marketoriented domestic policies that treatprivate investment in an open and transparent way. BITs negotiated among South Asiancountriesshouldensurethattheinvestorsinahostcountryaretreatedasfavorablyasthehostcountrys local investors throughout the full cycle of the investment (from establishment,acquisition, management to operation and expansion). The BITs should set clear limits onexpropriationandprovideeffectivecompensationwhenexpropriationdoestakeplace.Marketexchangeratesshouldbeusedwheninvestmentrelatedfundsaretransferredintoandoutofahost country.BITs promoting intraregional investment should also restrict the imposition ofperformancerequirements,suchaslocalcontenttargetsorexportquotas,asapreconditionforaninvestment.IffuturetradeagreementsinSouthAsiaincludechaptersoninvestment,termsshouldbecarefullyalignedwithexistingBITsforinvestmentharmonization.Boards of Investment (BOIs) at the countrylevel should promote more intraregionalinvestment;establishdedicatedcountryoffices.Expanding intraregional investment iskeytobolsteringtheinvestmentregimeinSouthAsia.ThesourcesofFDIarehighlydiversifiedinmostSAARC countries, though mostly still originating in developed countries, outside the region.India,which is industrially themost advanced country in the region, attractsmostof its FDIinflows from countries outside the region. According to Indias Ministry of Commerce andIndustryFDIstatistics,thetopinvestingeconomiesfrom20002009wereMauritius(44%ofFDIinflowstoIndia),Singapore(9%),theUS(8%)andtheUK(5%),followedbytheNetherlands(4%)andJapan(3%).ForBangladeshandPakistan,investorsarealsopredominantlyfromoutsidetheregion.WhileIndiaisatopinvestorinNepalandSriLanka,accountingformorethantwothirdsofinflowsintothosecountries,thereisstrongcasefordeeperintraregionalinvestment.Expandmarketingstrategiesandtargetprioritysectors.SAARCTradeFairsareheldannuallyandprovideacommonplatformforbusinessestoshowcasetheirproducts.TradeFairscanbeexpandedwith respect to itscoverage to rampupmore intraregional investmentpromotion,particularly in priority sectors for FDI (see Table 5.2). Parallel events, apart from the regulartradefairactivities,canbehostedtobringtogetherinvestorsandbusinesses.OnemutualsectorofimportanceinSouthAsiaistourism.Anothercriticalsectorisenergy.CountriesinSouthAsiaface rapidly risingenergydemandsas theireconomies continue togrowbutarehinderedbyinsufficientenergysupplies.Theseenergyshortfallsconstrainbusinessintheformofcostlyandrecurring electricity outages. Countries in the region should look to diversify their energysuppliesandexpandregionalenergytradebypromoting investment.Specificprojectsthatcanbepromoted formore intraregional investment inenergy trade includehydropower.BhutanandNepalhavethehighestsharesofhydroelectricpowerintheirenergyconsumptionandcanexpandintoenergytradewithitsneighborswithfurtherinvestmentanddevelopment.


Table5.2:PrioritySectors

Country Sectors

Pakistan Priorityindustries:tourism,housing,engineering,chemicalsandconstruction

Value added export industries: manufacturing categories such as garments, bedlinens,surgicalinstruments,andsportinggoods

Hightech and IT industries: chip manufacturing, software development andprecisionequipmentmanufacturing

Bangladesh Textiles, electronics, IT, natural gas based industries, frozen foods, leather,ceramics,lightengineeringandagrobased

Nepal Medicinalandaromaticplants,agrobased (mushroom, spices,vegetables, fruits),dairy,tea,sericulture,hydropower,leather,poultry,andtextiles

SriLanka Electronics, lightengineering, textiles,rubber,mineralandprocessing, tourism, IT,gemsandjewelry,healthcareandpharmaceuticals,ceramics,services

Bhutan Hydropower,agroprocessing,tourism,medicinalplants

Maldives Marinebasedindustries,tourism,infrastructureandairandseatransport

Source:FDIPromotionAgenciesinSAARCcountries

ConductfeasibilitystudiesoncreatinganumbrellainvestmentbodyforSouthAsia.Aregionalcoordinating Board of Investmentswith a direct link to chambers and business associationscould be established to encourage more information exchange among national BOIs. Aregionally shared investment body can ensure a stable investment climate for business toflourish,enhancinginvestorconfidenceandfacilitatingcapitalflows.Inaddition,thiscentralizedagencycouldpromotegovernmentschemessuchasexportprocessingzones(EPZs),the100%exportorientedunits (EOUs),and technologyparks,helpingbusinessesaccess concessions inspecific industries. SAARC fund to finance joint ventures can be expanded and targeted tosectorsofmutualinterestamongmembers.

18|ADBandFICCI

APPENDIX1:ConferenceReportandProgram

HarnessingBusinessOpportunitiesforSouthAsianEconomicIntegration1718November2009

FederationHouse,FICCI,NewDelhi

BackgroundSouth Asia has made progress toward deeper regional cooperation and integration throughgradual economic reforms and preferential liberalization, but numerous challenges remain.MoreprivatesectorinvolvementiskeyinacceleratingSouthAsiasregionalintegrationprocess.PrivatesectorledintegrationcanhelpbuildmorestableandenduringfoundationsforgrowthinSouth Asia, helping smooth business cycles, stimulate innovation, reduce poverty, andcomplementglobaleconomicinstitutions.Withcountriesintheregionfacingashiftingbusinessand trade landscape, knitting SouthAsia together isan importantobjective for the region torealize its full potential as a fully integrated economic environment for enhanced trade,economiccollaboration,anddevelopment.

AbouttheConferenceA conference convened inNewDelhi on 1718November 2009 to identify practicalways toharness business opportunities for South Asian economic integration. Coorganized by theFederationof IndianChambersofCommerceand Industry (FICCI),theSouthAsianAssociationforRegionalCooperation(SAARC)Secretariat,India'sMinistryofExternalAffairs,GovernmentofIndia,andtheAsianDevelopmentBank(ADB),theconferencebroughttogether134participantsincludingseveralhighlevelgovernmentofficialsandprivatesectorrepresentativesfromSAARCcountriestodiscusstheroleofprivatesectorandthechallengesfaced.Theconferenceconsistedofaplenarysessionand three technicalsessionson: (i)FacilitatingTrade:IssuesinCreatingPhysicalinfrastructureandTradeFacilitationMechanisminSAARC;(ii)SAFTA&Way Forward towards SAARC CustomsUnion; and (iii) Building Brand SAARC.Participants from theprivate sector also joinedbusinesstobusinessmeetingson the seconddayoftheconference.HighlightsfromthePlenaryandTechnicalSessions

1. ThePlenarySessionfeaturedapanelofrepresentativesfromSAARC,theGovernmentofIndia,andADB.Mr.RajatNag, (ManagingDirectorGeneral,ADB)urgedgreaterSouthAsian integration,notingthatIndiahasapivotalroletoplay inthe integrationprocessby creating a shared sense of unity and common purpose in fostering the region'sintegration.Other countries inSouthAsia shouldalso recognize India's roleandwork


together to expand trade and business opportunities, which are crucial to bringingSouthAsiatogether.

2. Mr. S.M. Krishna (Minister of External Affairs, Government of India) reiterated the

importanceofIndia'scommitmenttoSAARCinanonreciprocalmannerforthebenefitofthecountriesoftheregion.Mr.Krishnaalsoemphasizedtheimportanceofelevatingthe "SAARC brand" and noted the progress made through SAARCdriven regionalprojects.

3. H.E. Dr. Sheel Kant Sharma (SecretaryGeneral, SAARC) outlined SAARC's agenda for

South Asian integration, which included strengthening connectivity in the regionthroughtheSAARCtransportinitiativeandspearheadingotherregionalprojects.

4. Mr. Tariq Sayeed (President, SAARCChamberofCommerce and Industry)highlighted

key issues to improve business environment in South Asia and emphasized theimportance of political will and change in the mindset of the political leadership inenhancingeconomicintegrationinSouthAsia.

ConferencePlenarySession,moderatedbyDr.AmitMitra,SecretaryGeneral,FederationofIndianChambersofCommerceandIndustry(farleft).Panel from left to right:Dr.AmitMitra (SecretaryGeneral, FICCI);H.E.Dr. Sheel Kant Sharma(SecretaryGeneral,SAARC);Mr.S.M.Krishna(MinisterofExternalAffairs,GovernmentofIndia);Mr. Rajat Nag (Managing Director General, Asian Development Bank); Mr. Tariq Sayeed(President,SAARCChamberofCommerceandIndustry)

5. In the Technical Session: Facilitating Trade: Issues inCreating Physical infrastructure

and Trade FacilitationMechanism in SAARC, participants raised five key issues thatremain impediments to a more dynamic business environment in South Asia. Theconferencepaper,KeyProposalsforHarnessingBusinessOpportunitiesinSouthAsia,

20|ADBandFICCI

preparedbyADBandFICCIinconsultationwithSAARCChambersofCommerce,offeredproposals to mitigate those business hurdles. The issues discussed included: (i)expanding the SAARC visa exemption scheme; (ii) adopting a SAARC regional motorvehicularagreement; (iii)dealingwithnontariffbarriers; (iv) improving land customsstations;and(v)promoting intraregional investment.ParticipantsagreedthattacklingtheseissuesoffersapowerfulmeanstoharnessingbusinessopportunitiesinSouthAsia.

6. Participants intheTechnicalSession:SAFTA&WayForwardtowardsSAARCCustoms

Union discussed ways to enhance SAFTA, such as including LDCfriendly provisions(e.g.,sequencedtariffliberalization),flexiblerulesoforigin(ROOs),streamliningofROOadministration and technical assistance. Instituting a common framework of marketaccessthroughSAFTAservesasacomplementto increasinganddiversifyingtradeandcultivatingtradelinkageswithotherregions(e.g.,EastAsianmarkets).ParticipantsalsotoucheduponthesensitivelistissueandNTBs,whichdampenthefullbenefitsoftariffliberalization.

7. In the concluding Technical Session: Building Brand SAARC, participants discussed

ways to make the SAARC brand more visible through: (i) regional projects beingimplemented out of the SAARC Development Fund (particularly in the areas oftelemedicine, longdistance education, solar rural electrification, seed testinglaboratories,and rainwaterharvesting); (ii) increasedpeopletopeople levelactivities;(iii) the continued establishment of regional entities, such as the SAARC Food Bank,South Asian University in New Delhi, the SAARC Standards Regional Organization inDhaka, and the SAARC Arbitration Council in Islamabad. Participants agreed thatstrengthening the SAARC brand is critical to boosting regional integration in SouthAsia.

ConferenceMessages SouthAsiahasenormouspotential forusingeconomic integration to reducepovertyand

move the region tounprecedentedprosperity.Nonetheless, todate,progress in regionalintegrationhasbeenlimitedcomparedtoothersubregionsinAsiaandelsewhere.

Lackofprogress ineconomic integration inSouthAsia isduetopoorphysicalconnectivity,

particularly transport; complex and cumbersome at and behindtheborder procedures;absenceofregionalproductionnetworksinkeyindustries;andlimitedpublicprivatesectorpartnerships.

Improving transport connectivity is one of key issues to promoting private sectorled

integration inSouthAsia.ExpandingtheSAARCvisaexemptionscheme,adoptingaSAARCregional motor vehicular agreement, dealing with nontariff barriers, improving landcustoms stations and promoting intraregional investment are also other importantelements.


Energycooperationcancircumventthetransportconstraint.CrossborderenergytrademayplayaroleinjumpstartingtheprocessofSouthAsianintegration.

Indiahasamajor role in fosteringSouthAsia integration.Given India'sgrowingeconomic

strength,onecanenvisionseveraldistinctrolesforIndiainAsianandSouthAsiaeconomicintegration:(i)first,workingwithintheSAARCframework,IndiacanplayaleadroleinSouthAsianintegration;and(ii)second,itcanactasamajorconduitforconnectingSouthAsiatotherestofAsia,especiallyEastAsia.

GiventhatSAARCisstillinitsformativeyears,strengtheningthebrand"SAARC"andmaking

itusefulisthenaturalnextsteptowardsgreatereconomicintegrationintheregion.SAARCismovingintherightdirection.Atthe15thSAARCSummitin2008,leadersreaffirmedtheircommitmenttoprioritizingprojectsforimprovingintraregionalconnectivityandfacilitatingeconomic,socialandpeopletopeoplecontact.

22|ADBandFICCI

MinistryofExternalAffairs

GovernmentofIndia

Incollaborationwith

ConferenceonHarnessingBusinessOpportunitiesforSouthAsian

EconomicIntegration

November1718,2009FICCI,FederationHouse,NewDelhi

PROGRAM

November17,2009

10.0011.00a.m. Registration11.0012.00noon

PlenarySession

11.0011.05am OpeningremarksbyDrAmitMitra,SecretaryGeneral,FICCI

11.0511.15am AddressbyMrRajatNag,ManagingDirectorGeneral,AsianDevelopmentBank

11.1511.25am AddressbyMrTariqSayeed,PresidentSAARCChamberofCommerceandIndustry

11.2511.40am AddressbyHEDrSheelKantSharma,SecretaryGeneral,SAARC

11.4011.55amInauguralKeynoteAddressbyMrSMKrishna,HonbleMinisterofExternalAffairs,GovernmentofIndia

11.5512noon ConclusionbyDrAmitMitra,SecretaryGeneral,FICCI

12.0012.15p.m. Tea/CoffeeBreak

12.152.00p.m.

TechnicalSessionI FacilitatingTrade:IssuesinCreatingPhysicalinfrastructureandtradefacilitationmechanisminSAARC

(10Minutes)

Chair: DrSrinivasaMadhur,SeniorDirector,OfficeofRegional EconomicIntegration,AsianDevelopmentBankPresentationbyDrGaneshWignaraja,PrincipalEconomistOfficeofRegionalEconomicIntegration,AsianDevelopmentBankandMrRajanKohli,Advisor,FICCIonKeyProposalsforHarnessingBusinessOpportunitiesinSouthAsiapreparedbyADBandFICCI

Speakers MrArvindMehta,JointSecretarySAARC,MinistryofCommerce&


(710Minutesforeachspeaker)

Industry,GovernmentofIndia DrMRahmatullah,FormerDirector,TransportESCAP,Bangkokand

formerSeniorResearchAdvisor,CPD,Bangladesh MrJKBhatti,JointGeneralManagerRITES MrHusseinAliMahrammi,Trade/WTOConsultant,MinistryofCommerce

andIndustry,GovernmentofAfghanistan MrSKAggrawal,MemberFICCI&Director,VimalOrganicsLimited

Discussion

2.002.45p.m. Lunch

2.454.15p.m. TechnicalSessionII SAFTA&WayForwardtowardsSAARCCustomsUnion


Chair: MrArvindMehta,JointSecretarySAARC,MinistryofCommerce& Industry,GovernmentofIndiaSpeakers

MrNaeemAnwar,MinisterTrade,HighCommissionofPakistaninNewDelhi Mr.GomiSenadhira,DirectorGeneral,DepartmentofCommerce,Government

ofSriLanka MrSuryaPrasadSilwal,JointSecretary,InternationalTradeDivision,Ministryof

Commerce&Supplies,GovernmentofNepal DrVVDesai,Consultant&FormerChiefEconomist,AsianDevelopmentBank

Engr.M.A.Jabbar,formerVicePresident,FederationofPakistanChambersofCommerceandIndustry(FPCCI)andIncharge,WTOCell,FPCCI

Discussion

4.154.30p.m. Tea/CoffeeBreak

4.305.30p.m. TechnicalSessionIIIConcludingSession:BuildingBrand`SAARC


Chair:MrRajanKohli,Advisor,FICCISpeakers:

MrKanakManiDixit,ChiefEditor,HimalSouthasianMagazine,Nepal Mr.KumarMallimarachchi,VicePresident,FederationofChambersof

CommerceandIndustryofSriLanka MsUmaSwaminathan,Director,SEWADiscussion

5.305.45p.m. SummingupbyFICCI&ADB

7.30p.m. Dinner(Venue:FICCI,FederationHouse,NewDelhi)

November18,2009

10.3012.00noon BusinesstoBusinessmeetingsforthedelegates

24|ADBandFICCI

Appendix2:DoingBusiness2010Indicators

StartingaBusiness DealingwithConstructionPermits

OVERALLRANK

Rank Procedures(number)

Time(days)

Cost(%ofincomepercapita)

Min.capital(%ofincomepercapita)


Time(days)

Cost(%ofincomepercapita)

Afghanistan 160 23 4 7 30.2 0 149 13 340 12,877.60

Bangladesh 119 98 7 44 36.2 0 118 14 231 645.1

Bhutan 126 80 8 46 8 0 127 25 183 149

India 133 169 13 30 66.1 210.9 175 37 195 2,394.90

Maldives 87 49 5 9 10 4 9 9 118 21.9

Nepal 123 87 7 31 53.6 0 131 15 424 221.3

Pakistan 85 63 10 20 5.8 0 105 12 223 716.3SriLanka 105 41 4 38 5.9 0 168 22 214 1,458.80

EmployingWorkers RegisteringProperty

Rank Difficultyofhiringindex(0100)

Rigidityofhoursindex(0100)

Difficultyofredundancy

index(0100)

Rigidityofemployment

index(0100)

Redundancycosts(weeksofsalary)


Time(days)

Cost(%of

propertyvalue)

Afghanistan 69 0 20 40 20 30 164 9 250 4

Bangladesh 124 44 0 40 28 104 176 8 245 10.2

Bhutan 12 0 0 20 7 10 41 5 64 0

India 104 0 20 70 30 56 93 5 44 7.4

Maldives 41 33 20 0 18 9 183 .

Nepal 148 67 0 70 46 90 26 3 5 4.8

Pakistan 146 78 20 30 43 90 119 6 50 7.2

SriLanka 96 0 0 60 20 217 148 8 83 5.1


GettingCredit ProtectingInvestors

Rank Strengthoflegalrightsindex(010)

Depthofcredit

informationindex(06)

Publicregistrycoverage(%ofadults)

Privatebureaucoverage(%ofadults)

Rank Extentofdisclosureindex(010)

Extentofdirectorliabilityindex(0

10)

Easeofshareholdersuitsindex(010)

Strengthofinvestorprotectionindex(0

10)

Afghanistan 127 6 0 0 0 183 0 0 2 0.7

Bangladesh 71 7 2 0.9 0 20 6 7 7 6.7

Bhutan 177 2 0 0 0 132 5 3 4 4

India 30 8 4 0 10.2 41 7 4 7 6

Maldives 150 4 0 0 0 73 0 8 8 5.3

Nepal 113 5 2 0 0.3 73 6 1 9 5.3

Pakistan 61 6 4 5.6 1.5 27 6 6 7 6.3SriLanka 71 4 5 0 14.3 73 4 5 7 5.3

TradingAcrossBorders

Rank Documentstoexport(number)

Timetoexport(days)

Costtoexport(US$percontainer)

Documentstoimport(number)

Timetoimport(days)

Afghanistan 183 12 74 3,350 11 77

Bangladesh 107 6 25 970 8 29

Bhutan 153 8 38 1,210 11 38

India 94 8 17 945 9 20

Maldives 126 8 21 1,348 9 20

Nepal 161 9 41 1,764 10 35

Pakistan 78 9 22 611 8 18SriLanka 65 8 21 715 6 20

Note:Economiesarerankedontheireaseofdoingbusiness,from1183,withfirstplacebeingthebest.Ahighrankingontheeaseofdoingbusinessindexmeanstheregulatoryenvironmentisconducivetotheoperationofbusiness.This indexaveragesthecountry'spercentilerankingson10topics,madeupofavarietyof indicators,givingequalweight toeach topic.The rankingsare from theDoingBusiness2010report,coveringtheperiodJune2008throughMay2009.Source:DoingBusiness2010(WorldBank);accessed11October2009.

26|ADBandFICCI

Appendix3:APECBusinessTravelCard

TheAPECBusinessTravelCard(ABTC)allowsbusinesstravelersprecleared,facilitatedshorttermentrytoparticipatingmembereconomies.TheABTCremovestheneedto individuallyapplyforvisasorentrypermits,savingvaluabletime,andallowsmultipleentries intoparticipatingeconomiesduringthethreeyearsthecardisvalid.CardholdersalsobenefitfromfasterimmigrationprocessingonarrivalviaaccesstofasttrackentryandexitthroughspecialAPEClanesatmajorairportsinparticipatingeconomies.

TheABTC alsohelps to enhanceborder integrity and security inparticipating economiesbyprovidingbenefitstoborderagenciesasitincreasesthenumberoflowrisktravelerssinceeachapplicantischeckedagainst 'watch lists'ofotherparticipatingeconomies.Therefore, itcarriessavingsnotonly forbusinesspeoplebutforgovernments,too.

Thereare20APECeconomiescurrentlyparticipating intheABTCScheme:Australia;BruneiDarussalam;Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia;Mexico;NewZealand;PapuaNewGuinea;Peru;Philippines;Singapore,Taipei,China;Thailand;andVietNam.TheUnitedStatesofAmericaandCanadaarecurrentlyTransitionalMemberofthescheme.

In2007 the increase inapplicationsreceivedby theparticipatingeconomieswasmore than100%onayearonyearbasis.ByMarch2008,theactivenumberofcardswasmorethan34,000,withthehighestsharereportedbyAustralia(nearly40%ofthetotalamountissued).

Cardholders fromallparticipatingeconomiesarenowalsoentitledtouse 'fasttrack' immigration lanes(currently designated for aircrew) at all international airports in the United States and 8 majorinternationalairportsinCanada.Cardholderswillstillneedtopresentvalidpassportsandvisasifrequiredby existing United States and/or Canadian law, although expedited visa interview scheduling will beprovided to APEC Cardholders at United States and Canadian embassies and consulates in APECeconomies in caseswhere a visa is required for theCardholder to travel to theUnited States and/orCanada.

Summary information on ABTC lanes arrangements at airports, length of stay granted to APECCardholders,andaverageforeignpreclearanceprocessingtimeisavailableat:

http://www.businessmobility.org/key/ABTCArrangementsMarch2008.html

ExampleofAPECBusinessTravelCard

Source:APEC(http://www.apec.org/content/apec/business_resources/apec_business_travel0.html);accessedOctober2009.


Appendix4:AverageAppliedTariffRates,%

Country 2000* 2006* 2007**

SouthAsia 18.0 14.7 15.6Afghanistan 5.7Bangladesh 19.8 13.9 14.6

Bhutan 15.7 18.5 21.9India 30.6 15.4 14.5

Maldives 21.3 22.3 20.2Nepal 12.6 11.9 12.6

Pakistan 19.0 13.3 14.1SriLanka 7.1 7.8 11.0

Notes:*Calculatedusingaverageapplied import tariff ratesonnonagriculturalandnonfuelproducts**CalculatedusingsimpleaverageappliedMFNrateforallproductsincludingagriculture.Sources:*UNCTADGlobaStatDatabase(accessedOctober2009),**WorldTariffProfiles2008(WorldTradeOrganization).

28|ADBandFICCI

FurtherReadingAsianDevelopmentBank.2008.SouthAsiaEconomicReport (SAER)ForeignDirect in South

Asia:RecentDevelopmentsandChallenges.Manila:AsianDevelopmentBank._____. 2009. South Asia Economic Report (SAER) Financial Sector in South Asia: Recent

DevelopmentsandChallenges.Manila:AsianDevelopmentBank._____.Forthcoming2010.SouthAsianRegionalCooperationin2030:ThePotentialRoleofIndia

andPakistan.Manila:AsianDevelopmentBank.AsianDevelopment Bank andUnitedNations Conference on Trade andDevelopment. 2008.

Quantification of Benefits from Economic Cooperation In South Asia. New Delhi:Macmillan.

CentennialAsiaAdvisorsPTELTD.2009.TheImpactoftheGlobalEconomicSlowdownonSouth

Asia.Manila:AsianDevelopmentBank.Francois,J.,P.Rana,andG.Wignaraja.2009.NationalStrategiesforRegionalIntegration:South

andEastAsianCaseStudies.London:AnthemPress._______. 2009. PanAsian Integration: Linking East and South Asia. Basingstoke United

Kingdom:PalgraveMacMillan.Kumar,R.andM.Singh.2009.IndiasRoleinSouthAsiaTradeandInvestmentIntegration.ADB

Working Paper Series on Regional Economic Integration, No. 32. Manila: AsianDevelopmentBank.

Asian Development Bank6 ADB AvenueMandaluyong City1550 Metro ManilaPhilippineswww.adb.org

Federation of Indian Chambers of Commerce and IndustryFederation HouseTansen MargNew Delhi 110 001Indiawww.ficci.com

ISBNPublication Stock No. Printed in the Philippines

About the Federation of Indian Chambers of Commerce and Industry

FICCI plays a leading role in policy debates that are at the forefront of social, economic and political change. FICCI works closely with the government on policy issues, enhancing efficiency, competitiveness and expanding business opportunities for industry through a range of specialized services and global linkages.

Partnerships with chambers across the country carry forward our initiatives in inclusive development, which encompass health, education, livelihood, governance, and skill development. A non-government, not-for-profit organization, FICCI has direct membership from the private and public sectors, including small medium enterprises and multinational corporations. It is an apex chamber in India with over 350 chambers of commerce and industry as members. With eight offices in India, overseas offices in the UK, US, Singapore, and other locations, and institutional partnerships with 211 counterpart organizations, FICCI serves as the first port of call for Indian industry and the international business community.

About the Asian Development Bank

ADBs vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries substantially reduce poverty and improve the quality of life of their people. Despite the regions many successes, it remains home to two-thirds of the worlds poor: 1.8 billion people who live on less than $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration.

Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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