Areas of Cooperation

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Financial Cooperation

 

The Meetings of SAARC Finance Ministers have become a regular feature on the agenda of SAARC. So far four Meetings of SAARC Finance Ministers have been held in Pakistan (11 July 2006), India (15 September 2007), Maldives (14 May 2009) and Bhutan (24 August 2010). The Fifth Meeting of SAARC Finance Ministers is scheduled to be held in Dhaka, Bangladesh on 30 January 2012. The Meetings of SAARC Finance Ministers are preceded by the Meetings of SAARC Finance Secretaries.

The First Meeting of SAARC Finance Ministers approved the establishment of an Inter-Governmental Expert Group on Financial Issues with a mandate to develop its draft Terms of Reference based on the areas outlined by the SAARC Leaders at their Thirteenth Summit, including development of the roadmap for achieving the South Asian Economic Union (SAEU) in a gradual and phased manner.  

Following the Thirteenth Summit directive, the Informal Meetings of the SAARC Finance Ministers are held along the same lines as the meetings of the Informal Meetings of the Councilof Ministers. A theme for the meeting is usually suggested by the SAARC Chair and a draft agenda is then circulated by the Secretariat.

So far five Informal Meetings of SAARC Finance Ministers have taken place in Hyderabad, India in 2006; Kyoto, Japan in 2007; Madrid, Spain in 2008; Bali, Indonesia on 3 May 2009 and Hanoi, Vietnam on 4 May 2011 on the sidelines of Annual Meetings of Asian Development Bank. The Sixth Informal Meeting ofSAARC Finance Ministers is scheduled to be held in Manila on 3 May 2012 on the sidelines of Annual Meeting of ADB.

The Fourth Meeting of Inter-Governmental Expert Group on Financial Issues held at the SAARC Secretariat, Kathmandu on 29-30 November 2010 held detailed deliberations on the scope of the Study on Economic Integration, which could be undertaken by an organisation such as ADB, and finalized the following Terms of Reference of the same:  

  1. The scope of the Study should be targeted and specific to the needs of regional cooperation in SAARC.
  2. Recommendations for promoting cooperation in different areas should be specific with indicative timelines for their achievement.
  3. Study should take into account the network of trade, services, capital flows and other economic cooperation arrangements in South Asia.
  4. It should take into account the existing work and templates within and outside SAARC on economic integration
  5. Include real, fiscal, external and monetary sectors of economy while studying the extent of economic integration in the region
  6. Identify priority steps to be taken at each stage of South Asian Economic Union
  7. Elaborate indicative timelines and measurable gains from each stage of the Economic 
  8. Quantify potential gains from strengthened economic integration in the region
  9. Study ways to monitor remittances and suggest ways to bring them into the formal channel 
  10. Conduct sub-studies, if required, in relevant sector to supplement the main Study
  11. Identify possible risks and impediments to strengthening regional economic integration 
  12. Explore the scope of currency convertibility in the SAARC region 
  13. Study the role of SAFTA and bilateral free trade agreements among SAARC Member States in overall economic integration
  14. Identify the scope of financial market integration in the SAARC region
  15. Complete the Study within a period of one year from the date of Inception Conference.

A Study on Economic Integration has been commissioned with the assistance of the Asian Development Bank.

A SAARC-ADB Inception Workshop for the SAARC Studies on Trade, Economics and Finance was held at the SAARC Secretariat on 23-24 June 2011 With regard to the Study on Economic Integration the following recommendations emerged after detailed discussions:

  1. The study should follow the TOR and it is not necessary to amend the TOR at this stage as it was approved by the SAARC Finance Secretaries.
  2. As for the title, the meeting shared the views that the term “South Asia Economic Community” may better reflect the stage of regional economic integration of South Asia. The meeting however suggested that the study should retain the original title which is the “South Asian Economic Union” as this was approved in the TOR.  But it can define what is expected as an economic uninion.
  3. Given the time constraints, the study will broadly present the roadmap for achieving the SAEU with indicative time lines. It will also identify further studies   to be undertaken and required resources to fully flesh out the roadmap for SAEU
  4. The study should focus on economic aspects of South Asia’s economic integration, especially connectivity
  5. Other issues to be incorporated in the study:

- Bilateral trade and regional trade.   The bulk of trade in the region is undertaken more on bilateral basis rather than within the SAFTA framework.  The study should therefore examine how SAFTA could maintain its role as an overarching regional framework for trade integration of South Asia, while on the other hand it can enable the synergies of bilateral trade agreements within the its regional 

- Linkages with East Asia and Central Asia. If South Asia is to realize its full potentials, it has to expedite its intra-regional integration, as well as expanding its interregional integration with other sub-regions to sustain the economic 

- Transit trade and how transit trade can benefit all countries 

- Non-tariff barriers

- Energy and power trade

- Identify and prioritize some products and/or sectors for fast-track liberalization/integration

- Costs and benefits of regional economic integration, including transaction costs and fees levied on goods of landlocked countries

- Role of India as an economic hub in the region

- Provide information to business community i.e., development of websites, creating regional platforms for interactions between member countries and business sectors and developing a regional directory of exporters and importers.

A separate Study on codification of variations in the level of development of Capital Markets in SAARC Member States has also been commissioned with the assistance of Asian Development Bank as approved by the Member States. This Study was recommended by the Colloquium on Management of Stock Exchange Systems and Regulation of Stock Markets (SAARC Secretariat, Kathmandu, 21-22 April 2008) the Report of which was approved by the Thirty-fifth Session of the Standing Committee (Colombo, 29-30 July 2008).

The SAARC-ADB Inception Workshop for the SAARC Studies on Trade, Economics and Finance (SAARC Secretariat, 23-24 June 2011) recommended the following terms of reference for the study on development of capital market:

  1. Review and codify the variationin the level of capital market development in SAARC member countries with reference to the benchmark of the G-30 recommendations and IOSCO principles;
  2. Assess member countries’ framework for trading, clearing and settlement systems in each member country;
  3. Assess member countries’ regulatory architecture, including rules and regulations and accounting standards;
  4. Assess member countries’ guidelines for initial public offering (IPO) and corporate governance;
  5. Based on (i) – (iv), and in full consultation with the relevant authorities make specific recommendations for harmonization of laws and regulations, and accounting and corporate governance standards;
  6. Propose specific mechanisms for effective cooperation among regional bodies, including SACRF and SAFE;
  7. Design and implement awareness and capacity building sessions necessary for initiating concrete steps towards regional co-operation in capital market development.

A SAARC Workshop on Public Debt Management was scheduled to be held at the SAARC Secretariat on 26 December 2011 as recommended by the Inter-Governmental Expert Group on Financial Issues. The Member States are in the process of exchanging Concept Papers on the subject. The First Meeting of SAARC Forum of Public Debt Managers would be hosted by Sri Lanka in 2012.

A SAARC Expert Group on Development of Capital Markets in South Asia was also held at the SAARC Secretariat on 27 Decemer 2011 as recommended by the SAARC Finance Ministers. The Second Meeting of Expert Group on Development of Capital Markets in South Asia will be hosted by Afghanistan in 2012.

The Fifth Meeting of the Inter-Governmental Expert Group on financial Issues was held at the SAARC Secretariat, Kathmandu on 28-29 December 2011 to review the progress in the implementation of its earlier recommendations.