Path To Recovery: Embracing Intraregional Investments In South Asia

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Path To Recovery: Embracing Intraregional Investments In South Asia

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  • 00:01 [Cecile Fruman]: Good morning,  
  • 00:03 good afternoon, and good evening to  everyone. My name is Cecile Fruman.  
  • 00:08 I'm the Director for Regional Integration and  Engagement for South Asia at the World Bank.  
  • 00:12 And it is my pleasure to welcome you to  our eighth One South Asia conversation.
  • 00:17 [Cecile Fruman]: Our topic today is Path to Recovery:  
  • 00:20 Embracing Intraregional Investments in  South Asia. This is a bi-monthly series  
  • 00:26 where we discuss issues related to regional  integration and cooperation in South Asia.  
  • 00:32 Our approach to regional integration in  South Asia has three pillars of focus.  
  • 00:37 The first is on enhancing economic connectivity,  the second on reducing vulnerability and building  
  • 00:43 resilience in particular to climate  change. And the last is human capital.
  • 00:47 [Cecile Fruman]: Today's conversation is very much related  
  • 00:50 to the first pillar of economic connectivity. And  the central question that we will be addressing  
  • 00:56 is how do we promote greater economic  engagements and investments in the region?
  • 01:01 [Cecile Fruman]: 
  • 01:02 This event coincides with the launch of our new  report which explores intra-regional investments.  
  • 01:08 The title of the report is Regional Investment  Pioneers in South Asia: The Payoff of Knowing  
  • 01:13 Your Neighbors. The report is on our event page,  and I highly recommend that you take a look at it.
  • 01:19 [Cecile Fruman]: So many of us know that intra-regional  
  • 01:23 trade in South Asia is at very low levels,  barely 5% to 6% of the total trade in the region  
  • 01:29 compared to 50% in East Asia. Yet, what is less  known is that intra-regional investments are at  
  • 01:36 equally low levels. Inward intra-regional  FDI is less than 1% of the total inward FDI  
  • 01:44 from the world. And for women-led businesses,  intra-regional investments are even much lower.
  • 01:50 [Cecile Fruman]: 
  • 01:52 So trade and investments are closely linked and  they are drivers of growth of jobs and poverty  
  • 01:58 reduction. And post-COVID 19, we believe that  intra-regional trade and investments will become  
  • 02:04 all the more important to growth and  inclusive recovery across all sectors,  
  • 02:08 and in particular in the services sectors,  which are rapidly growing in South Asia.
  • 02:13 [Cecile Fruman]: So our discussion today will focus on embracing  
  • 02:17 the potential of intra-regional investments, both  inward and outward bound, and understanding the  
  • 02:22 various constraints. And to do so, we have  an amazing panel with us today. We have Mrs.  
  • 02:28 Fareena Mazhar, she's the secretary of the Board  of Investment in Pakistan, Mr. Hector Gomez Ang  
  • 02:35 is IFC's regional director for South Asia, and IFC  is the private sector arm of the World Bank group.  
  • 02:42 Mr. Sanjay Kathuria is a fellow at the Wilson  Center, was previously for many years with the  
  • 02:47 World Bank, and he is one of the co-authors of  the report that I just mentioned. And Mr. Ahsan  
  • 02:53 Khan Chowdhury is a CEO of PRAN-RFL Group, the  largest agribusiness conglomerate in Bangladesh,  
  • 03:00 which has been expanding its operations in South  Asia, and he'll be sharing his story with us.
  • 03:05 [Cecile Fruman]: So before we dig right into topic, just  
  • 03:09 a couple of reminders, we have a poll on our page.  It's at the bottom of the page, if you scroll  
  • 03:14 down. We invite you to take the poll and we'll  be sharing the results at the end of this event.  
  • 03:20 You can also post your questions on the  page, we'll try to address a few during the  
  • 03:25 conversation. We also have two guest bloggers with  us, Mr. Gonzalo Varela, who's the senior economist  
  • 03:31 with the bank, and Mr. Ravi Yatawara, who is one  of the co-authors of the report, and they will be  
  • 03:37 answering your questions live  also as this discussion unfolds.
  • 03:41 [Cecile Fruman]: So without further due,  
  • 03:43 let me turn first to Sanjay. Sanjay, your report  makes a very strong case for intra-regional  
  • 03:50 investments, especially in this post-COVID  times. Can you tell us what the key findings  
  • 03:56 are and mostly where you saw opportunities and  the main challenges that you encountered also.
  • 04:02 [Cecile Fruman]: Thank you, Sanjay. Over to you.
  • 04:04 [Sanjay Kathuria]: Thank you, Cecile. And I'd like to thank  
  • 04:08 my co-authors, Ravi Yatawara, who you mentioned,  and Xiao'ou Zhu, for helping us and producing  
  • 04:16 this report, I think which hopefully will  provide lot of food for thought for everybody.
  • 04:21 [Sanjay Kathuria]: So in terms of the opportunities,  
  • 04:24 I'd like to start by highlighting some of  the long term trends in world trade and  
  • 04:31 world economic engagement that have actually  been magnified or accelerated by COVID-19.  
  • 04:40 One is the focus on global value chain  diversification and shifting the such value  
  • 04:45 chains closer to home. We've seen a lot of talk  about that. There is also the rising trade and  
  • 04:52 connectivity costs globally where long distance  containers, the prices have gone up from...  
  • 04:58 We know this is all over the news... $2,000 to  $20,000, $18,000, and so on. So there is a huge  
  • 05:06 and massive increase in trade costs, albeit  hopefully this will go down in coming months.
  • 05:13 [Sanjay Kathuria]: There is also the importance of services in  
  • 05:16 global recovery. We know that the global recovery  has been much more focused on the goods side,  
  • 05:21 but services have yet to bounce back to  pre-pandemic levels. And in South Asia,  
  • 05:28 the services' sector is growing and is  very important. There is also the expanding  
  • 05:34 regional consumer markets in South Asia based  on shared prosperity and strong economic growth.
  • 05:42 [Sanjay Kathuria]: And then in South Asia, there is  
  • 05:44 the potential which has been unrealized, which  is the potential for regional trade to provide  
  • 05:51 the buoyancy which is often absent in world  trade and the kind of counter cyclicality,  
  • 05:57 again, against pivoting away from world trade  focusing on the region. So I think for all these  
  • 06:05 reasons, there should be a receptivity and an  energy to explore the region deeper with renewed  
  • 06:13 motivation because the regional opportunities  have come knocking at our door again.
  • 06:18 [Sanjay Kathuria]: And in our survey, we did a survey of 1,274  
  • 06:24 firms in all the eight countries in the region,  we found actually that 65% of first investments  
  • 06:31 were actually in the region. So there is a basis  for a deeper level of engagement fueled by the  
  • 06:37 links between trade, investment and connectivity.  And from a private sector perspective, the pioneer  
  • 06:46 firms, that is firms that have actually crossed  borders in an intrepid and innovative way,  
  • 06:53 such as PRAN represented by Ahsan here. There  are expanding consumer markets which provide  
  • 07:01 different kind of demand from that which  is available in higher income countries.  
  • 07:06 There is the production efficiencies, many firms  from South Asia have kind of relocated, or have  
  • 07:13 made use of these value chains, and there are  examples in the report about investments from  
  • 07:21 India to Sri Lanka, Sri Lanka to  India, India to Nepal, and so on.  
  • 07:25 There is also the issue of value change  management and brand upgrading where the  
  • 07:30 region, again, can provide a platform for  demand, for experimentation, and so on.
  • 07:37 [Sanjay Kathuria]: And then finally, from a  
  • 07:40 private sector perspective, I would say there is  also the rise of non-equity modes of investment,  
  • 07:48 including relational contracting. So the region  has afforded pioneer investors all kinds of ways  
  • 07:56 of engaging. And me and my co-authors think that  this provides possibilities for deeper engagement.
  • 08:06 [Sanjay Kathuria]: But you also asked, Cecile,  
  • 08:08 about challenges so there are all these things  that are happening which should energize regional  
  • 08:14 engagement, economic engagement, but  very briefly, what are the challenges?  
  • 08:19 Well, the first one, of course, is the  traditional lack of engagement within the region  
  • 08:24 when trading or investing. We know all about  that. But from a business community perspective,  
  • 08:31 something that we've talked about a lot in  the report, which is one of the highlights,  
  • 08:35 is the low knowledge connectivity... And I will  try to expand on that later if I get a chance...  
  • 08:41 But the average score on knowledge connectivity  between country pairs was only 1.9 versus a high  
  • 08:48 of four. So this creates a high cost  of search, matching and contracting.
  • 08:54 [Sanjay Kathuria]: From a firm capacity perspective also,  
  • 08:58 knowledge doesn't travel easily. Even if there  is a pioneer investor, the sort of knowledge  
  • 09:04 tends to stay within the group of that pioneer  investor, and it doesn't travel easily to firms  
  • 09:10 outside that conglomerate or group. So we call  it the case of the missing herd in South Asia.
  • 09:18 [Sanjay Kathuria]: And finally, from a government  
  • 09:20 and institutional perspective, there are all kinds  of restrictive outward foreign investment policies  
  • 09:28 in most countries. And hopefully, I'll get a  chance to talk a little bit more about that.
  • 09:33 [Sanjay Kathuria]: Thank you.
  • 09:35 [Cecile Fruman]: Thank you, Sanjay.
  • 09:39 [Cecile Fruman]: I'm going to turn to Hector now.  
  • 09:41 So Hector, IFC is working to promote inclusive  growth in South Asia by improving infrastructure,  
  • 09:47 financial services and supporting  the private sector. How does  
  • 09:51 intra-regional investments fit into  IFC's overall strategy in South Asia?
  • 09:55 [Hector Gomez Ang]: 
  • 09:57 Thanks. Thanks, Cecile, and thanks for the  invitation. I think this is very, very timely.
  • 10:02 [Hector Gomez Ang]: Look, I mean, maybe one thing important  
  • 10:06 about IFC is that our mission, which is to support  the private sector, it gets accomplished through  
  • 10:12 our clients, through our private sector clients.  So it really has to be what private sector clients  
  • 10:18 are doing that we are able to support. Now, we  together with the World Bank, so as a World Bank  
  • 10:25 group, we clearly have regional integration as  a top priority for South Asia, in particular I  
  • 10:33 think regional infrastructure and what we call  South-South investments, right? So essentially  
  • 10:40 companies from emerging markets investing in  other emerging markets. I think the logic behind  
  • 10:45 it is that companies in emerging markets tend to  have a higher tolerance for risk and they're more  
  • 10:50 used to the specifics of working in emerging  markets. So tho those are sort of big picture.
  • 10:56 [Hector Gomez Ang]: Now, when it comes to more detail,  
  • 10:59 I think some of the stuff that we are doing  or we are looking at are very actively it's,  
  • 11:05 I think, regional power trade. We think this  is something that makes a lot of sense in  
  • 11:10 South Asia, that it can help the energy  matrix of some countries. It can make up  
  • 11:18 for some of the deficiencies in... In  some countries you don't have either  
  • 11:22 natural conditions, or enough space, or the wind  to do more renewables, but you do have in other  
  • 11:27 countries. You have hydro in some, you have...  So I think you can play with that and build. But  
  • 11:34 to do that, you need to have a working regional  power trade sort of a structure and regulation.
  • 11:40 [Hector Gomez Ang]: So this is something that we've been working  
  • 11:43 together with the bank, but also with private  companies. So for instance, as we speak, we are  
  • 11:49 discussing with two large groups to essentially to  build a cross-border power trade by putting assets  
  • 12:00 on one side and sort of the usage on the other  side, because we believe that it's only by doing  
  • 12:09 that, then these models will be replicated.  So we are working together to support that.
  • 12:14 [Hector Gomez Ang]: I think the other piece is  
  • 12:18 transport connectivity. So transport, probably  the most emblematic stuff that we're doing is  
  • 12:24 around port terminals, that would then connected  to multimodal, whether it's railways or roads,  
  • 12:31 can actually provide access to supports to  some countries. So this is the other play.
  • 12:38 [Hector Gomez Ang]: I think there is,  
  • 12:40 and I'm just going to go a little bit  outside of the whole trade thing, I think  
  • 12:45 on the challenges side, part of the solutions  that we see for climate change in the region are  
  • 12:52 going to have to be regional.  That's the other piece.
  • 12:57 [Hector Gomez Ang]: And then I think on the  
  • 12:59 South-South, which is essentially supporting  companies to go to other markets, we've  
  • 13:04 been very much engaged, but I think we have a lot  of room to grow. So, I mean, I can mention some  
  • 13:12 companies, but it tends to be mostly from  South Asia going into Africa, for instance,  
  • 13:19 it's something that we've done a lot. We've done  a lot of leading Asian companies coming into or  
  • 13:24 investing into South Asia from outside  of the region, but very few actually  
  • 13:30 within South Asia. And I think this  is what we see as an opportunity here.
  • 13:34 [Hector Gomez Ang]: Some of the stuff that we think is going to come  
  • 13:36 up, and we have very high hopes that it will be  a lot of intra-South Asian opportunities. I think  
  • 13:43 one is private equity and venture capital. We have  an experience, a global experience, where these  
  • 13:50 type of investors tend to want to have sort  of a regional scope. It helps diversify risk,  
  • 13:58 it helps open up more markets. So we are really  looking into it, particularly on the tech side.  
  • 14:05 For instance, the whole play in Sri Lanka  would be around using Sri Lanka technology or  
  • 14:13 startups to actually enter the larger  markets in the region, for instance,  
  • 14:17 just to oversimplify. That's  the kind of play that we see.
  • 14:20 [Hector Gomez Ang]: Digital connectivity, we think it has to be a  
  • 14:25 regional play. I think there are some  emerging businesses that we hope that they...  
  • 14:32 because they're new and they come  without baggage to a certain extent,  
  • 14:34 that they develop in a more regional way  following the logic. But then of course,  
  • 14:39 we need to work on the enabling environment,  hopefully we can get to talk about that,  
  • 14:43 like electric vehicles, right? So  that's coming, or it's here already.  
  • 14:47 And we are hoping and working and engaging, so  it hopefully develops in a more regional way.
  • 14:52 [Hector Gomez Ang]: Housing, we believe... I mean,  
  • 14:56 it's an industry that we've seen in other  regions developing at the regional level.
  • 15:00 [Hector Gomez Ang]: And then I guess the  
  • 15:02 final one I'll mention is capital markets. So  capital markets tends to be really on a national  
  • 15:09 level. But in some agents, and I  think there is a logic to do it,  
  • 15:13 if not the operation of the capital markets but  the use of funds and companies from one country  
  • 15:18 issuing in another country, I think that's  something that has a lot of logic in South Asia.
  • 15:22 [Hector Gomez Ang]: I'll stop there.
  • 15:23 [Hector Gomez Ang]: Thank you. [Cecile Fruman]: Right, right.
  • 15:25 [Cecile Fruman]: Thank you, Hector, and thank  
  • 15:26 you for articulating these opportunities and it's  quite a hopeful outlook you've portrayed there.
  • 15:31 [Cecile Fruman]: Fareena, we're going to move to you.  
  • 15:35 And it's interesting in this report, it documents  that actually Pakistan has been investing quite  
  • 15:40 a lot in the region and Pakistan's earliest  intra-regional investment goes way back to 1951,  
  • 15:46 a banking branch of the Habib Bank in Sri Lanka.  So over the years, can you tell us what has been  
  • 15:53 the trajectory of Pakistan supporting inward  and outward-bound investments from the region  
  • 15:58 and into the region? And post-COVID, do you see  any changes? What's the future going to look like?
  • 16:03 [Cecile Fruman]: Over to you.
  • 16:04 [Fareena Mazhar]: Thank you so much,  
  • 16:07 thank you for giving me this opportunity  to be talking to this forum today.
  • 16:11 [Fareena Mazhar]: I would like to say that  
  • 16:16 originally Pakistan did not have a very liberal  investment regime. They had restricted sectors  
  • 16:22 which were open for investment. But since 1976, we  opened up and we started promulgating new acts and  
  • 16:32 ordinances allowing investments in all sectors. So  at the moment we are following a liberal regime.  
  • 16:41 Then in 2013 also a policy was introduced, which  opened up all the sectors for investments, except  
  • 16:50 for agriculture, banking, I think, aviation. Other  than that, all sectors are open for the economy.
  • 16:59 [Fareena Mazhar]: So Pakistan, unfortunately, has not been receiving  
  • 17:04 the amount of foreign direct investments,  which I genuinely believe that it deserves.  
  • 17:11 Primarily, it has been a victim of terrorism.  People have been scared to come to the country.  
  • 17:21 Now, the issue is somewhat resolved. And other  than that, we did have energy shortages in the  
  • 17:28 past. So they did also have... That was an  impediment for the investors to be coming  
  • 17:34 and investing in Pakistan. But fortunately,  we've overcome both these issues. And now our  
  • 17:41 liberal investment regimes, which allows 100%  repatriation of profits and investment in any  
  • 17:49 sector without any gap regarding the minimum or  the maximum investments. And I think it's one  
  • 17:58 of the most liberal regimes in the world. And we  are hoping to get new investments in the country.
  • 18:04 [Fareena Mazhar]: Fortunately, we've not been hit by COVID as bad  
  • 18:07 as other countries, especially in Europe, and that  has not affected our inward investments in the  
  • 18:16 way it did for other countries. And we are almost  close to the post-COVID numbers right now. And we  
  • 18:25 are hoping that new investors, which have promised  us... They've asked for certain incentives,  
  • 18:33 we will be giving them those incentives  and they will also be coming to Pakistan.
  • 18:37 [Fareena Mazhar]: We have a very liberal,  
  • 18:41 special economic zones regime, which offers  a 10 years exemption on income. And also,  
  • 18:49 you can import the plant and machinery free of  duties and taxes, so these are the main incentives  
  • 18:55 in the special economic zones. Also, we have  sectoral policies to encourage our investments.  
  • 19:02 We have an electronic vehicle policy in place.  We have the mobile manufacturing policies.  
  • 19:08 And we've given massive incentives for the  export sector, providing them loans on very low  
  • 19:16 interest. And this government especially is laying  a lot of focus on the ease of doing business. And  
  • 19:25 I think everybody will be appreciating that we  improved 39 positions in the last two years when  
  • 19:32 the report on ease of doing business was there.  And unfortunately, the report discontinued this  
  • 19:41 year, we were hoping for further increases  in jump in the positions because we had made  
  • 19:47 massive reforms in that context and we had...  just to invite investors in the country,  
  • 19:54 we are trying to make all possible  facilitation measures which we can.
  • 20:00 [Fareena Mazhar]: We have a new investment law,  
  • 20:06 the draft is already there, it just  needs the approval from the parliament.  
  • 20:10 And that too creates opportunities for dispute  resolution, which we think is another going to be  
  • 20:16 a very big focus for the local and the foreign  investors, and something of interest to them.
  • 20:25 [Fareena Mazhar]: Pakistan is offering  
  • 20:33 around 180 billion is a one time emergency  cash grant to 15 million beneficiaries.  
  • 20:43 So this was the Ehsaas program of the government.  This was a major initiative in the COVID times  
  • 20:50 just to come up and meet the challenges of the  COVID and to help the poor people of the country,  
  • 20:57 especially the labor class. This has  proven to be a very big incentive for the  
  • 21:06 businesses to recover. Also, for the small  and medium companies, there's a special  
  • 21:12 finance package and a special regime for taxation  just to facilitate them come out of the COVID.
  • 21:20 [Fareena Mazhar]: So Pakistan, unfortunately, does not have a lot of  
  • 21:26 investments within the region. We do have a  bank and our another company has invested,  
  • 21:35 Soorty, in Bangladesh, in the denim manufacturing,  but we do not... We encourage their investments  
  • 21:44 outwards also. And the foreign exchange manual, it  has recently undergone a lot of changes and it has  
  • 21:53 made investments in the region, both inward  and outward, very friendly and easy to do.
  • 21:59 [Fareena Mazhar]: So this is what I  
  • 22:01 wanted to share with you on this account.
  • 22:03 [Cecile Fruman]: Right. Thank you very much,  
  • 22:05 Fareena. And I think what you described is  very significant progress and progression  
  • 22:11 and still room to grow inter-regionally clearly.
  • 22:15 [Fareena Mazhar]: Yeah.
  • 22:16 [Cecile Fruman]: Wonderful.
  • 22:17 [Cecile Fruman]: Ahsan, your company is the largest  
  • 22:20 food and beverage conglomerate in Bangladesh.  And in 2008, you opened your first production  
  • 22:26 facility in Tripura, India after the Indian  government lifted the ban on FDI from Bangladesh.  
  • 22:32 And India today is one of your largest  markets. This year you even started using  
  • 22:37 the river route to export goods to India. So  can you tell us about this experience of moving  
  • 22:43 into India and what future investment  prospects you have for the region?
  • 22:49 [Ahsan Khan Chowdhury]: Thank you very much for  
  • 22:51 giving me the opportunity to talk.
  • 22:53 [Ahsan Khan Chowdhury]: First of all, my experience in India has been  
  • 22:55 extremely positive. And I tell you, like according  from Sanjay [Hindi 00:23:01] talk, I feel the  
  • 23:01 opportunities in the regional trade is very high.  And again, referring to Sanjay [Hindi 00:23:06], I  
  • 23:07 will say that after COVID, it's a new world in  our part of the region. I feel that subcontinent  
  • 23:13 is going to grow and COVID has given us tremendous  amount of, say, boost in terms of the consumption,  
  • 23:20 and tremendous amount of energy, and  tremendous amount of reciprocity in the region.
  • 23:26 [Ahsan Khan Chowdhury]: So when we started, I feel that  
  • 23:31 people have a lot of stereotypes, so people  did not know what the investment in India  
  • 23:36 is going to be and whether our regulator  is going to allow. So it was very tough,  
  • 23:41 but once we were there, I feel the experience  were very positive. And I feel that  
  • 23:49 we kind of like found a new consumer  market out there. And the buoyancy that  
  • 23:56 Sanjay [Hindi 00:23:57] was talking about in  his report also, buoyancy for the world trade,  
  • 24:00 I feel that we find it in the region. If you ask  me about PRAN's experience, I would say that-
  • 24:06 [Cecile Fruman]: 
  • 24:14 Oops, it looks like we've lost-
  • 24:16 [Ahsan Khan Chowdhury]: ... tremendous amount...
  • 24:17 [Cecile Fruman]: Oh.
  • 24:18 [Ahsan Khan Chowdhury]: 
  • 24:19 I feel that tremendous amount of  opportunity is coming from the region,  
  • 24:23 and the buoyancy is huge. And I feel that it's  mainly a mindset game. And from the regulator  
  • 24:30 side, it is lack of understanding. And I feel  that this foreign currency manual that madam  
  • 24:35 was referring to, we had the same problem in  Bangladesh where our regulators also had to  
  • 24:40 refer and Indian regulators also had to refer to  those foreign currency manuals or the regulation  
  • 24:45 that they had, which were backed for 40 years.  And I think that Sanjay [Hindi 00:24:51] idea  
  • 24:51 is that there's a new opportunity that the  business people would like to experience.  
  • 24:55 And I feel that there is tremendous amount  of opportunity in the region if people are  
  • 25:00 just able to have an open mindset and people  are becoming a little bit outwardly in terms  
  • 25:06 of what they want to explore. I think there's a  wonderful world out there that has to be explored.
  • 25:10 [Ahsan Khan Chowdhury]: And I think the business prospect is going  
  • 25:13 to come from our regional trade and post-COVID  buoyancy that Sanjay [Hindi 00:25:18] was talking  
  • 25:18 about through his report, I'm sure we are  going to find that in our regional markets.
  • 25:23 [Ahsan Khan Chowdhury]: Thank you very much.
  • 25:27 [Cecile Fruman]: Great. [Cecile Fruman]: Ahsan,  
  • 25:28 and any plans to expand further in the region?
  • 25:30 [Ahsan Khan Chowdhury]: I have got too many plans, and I think my friends  
  • 25:34 in IFC and my friends in the regional market gets  very nervous when I start telling my plans. I can  
  • 25:39 tell you... So we started with Northeast part of  India. We have opened up in Eastern part of India.  
  • 25:44 We've got a factory in Calcutta, we are setting  up Siliguri. We are going to be in the south,  
  • 25:50 southern part of India in a place called Tumkur.  We are in north in Uttarakhand. And India,  
  • 25:55 I don't consider to be a country,  I consider it to be a continent. So  
  • 25:58 for a small company called PRAN operating from  Bangladesh, India is a world out there which  
  • 26:03 we are there to explore. And Nepal is also not  very far away. Thanks to the Nepal government  
  • 26:09 that they imposed almost a 100% duty on all PRAN  products coming into the Nepal, and I feel that  
  • 26:14 that was one of the best thing that could have  happened to PRAN that we were able to start up  
  • 26:19 almost like three plants in a matter of one year  in Nepal. So Nepal business is looking good.
  • 26:25 [Ahsan Khan Chowdhury]: Again, so with Taliban  
  • 26:27 coming into the government in Afghanistan,  we were exporting a lot of products in  
  • 26:31 Afghanistan, but no problem. After there  is a new change in thought in Afghanistan,  
  • 26:37 we are able to start, hopefully, the  local manufacturing, doing contracting out  
  • 26:41 with some local Afghan people and able to  have the product available for the consumers,  
  • 26:46 even in the Afghan market. And I feel that our  duty structures between Bangladesh and Pakistan  
  • 26:53 will improve after we have a chance to explain  to madam, maybe the duties will come down and  
  • 26:57 we'll be able to do more business with Pakistan  and be able to connect more and more regionally.
  • 27:02 [Cecile Fruman]: Great, Ahsan, great to see you so upbeat.
  • 27:06 [Cecile Fruman]: So, Fareena, maybe a good  
  • 27:09 segue to come back to you, what you described  is a real effort to liberalize and attract  
  • 27:16 FDI globally. Can you tell us a little bit more,  do you have any specific focus on the region,  
  • 27:22 any activities or policies? And also talk to us  a little bit about support for women investors,  
  • 27:29 women looking to bring investments into  Pakistan, or invest outside of Pakistan.
  • 27:37 [Fareena Mazhar]: As far as our policies are concerned,  
  • 27:41 they are just the same policy for everyone.  It's no specific policy for any specific region  
  • 27:49 as of now. And unfortunately, no specific  incentive for the women also. At the moment,  
  • 27:56 it's generally the same. But there's no impediment  also. We do not bar women from entering certain  
  • 28:02 services or certain sectors. So it's the same  policy for everyone, which I again say is very  
  • 28:09 liberal. It's the same regime for the local as  well as the foreign investor. Everyone, anyone,  
  • 28:16 can come and invest. The Board of Investment  serves as the one window and anyone who wants  
  • 28:23 to seek in investment opportunity, we have a  project's portal running where you have all the  
  • 28:31 listed projects coming from the government, and  they are also there with the timelines. And you  
  • 28:37 can see which sector you want to invest in, or the  amount that you can invest in. And then we take  
  • 28:43 them from there and we also follow them up for any  assistance or facilitation which they may require.
  • 28:51 [Fareena Mazhar]: And then we have these offices in the provincial  
  • 28:57 set ups, because Pakistan is a Federation, we  have a central government and the provincial  
  • 29:04 governments, and then the local governments. So we  have business regulations at three levels. It, at  
  • 29:10 times, becomes very cumbersome for the investors  to come and invest in the country. But the reforms  
  • 29:16 that we are doing in respect of these business  regulations are at all three tiers. So the Board  
  • 29:23 of Investment is working on setting up Pakistan  business portal, which is going to be a state of  
  • 29:29 the art one window stop shop for all the local  as well as the international investors. Through  
  • 29:36 the portal you can see which sector requires  which regulations, and if you want to start a  
  • 29:43 business in any particular region in a country,  what are the laws applicable there? What is the  
  • 29:51 availability of land and other usages? You  can do everything, make online payments...  
  • 29:59 So the system will be ready in a year and a half,  by June, 2023. So we are really hoping that this  
  • 30:06 will be bring a big boost to our investment regime  and will be a big facilitator for the investors.
  • 30:14 [Fareena Mazhar]: Next to that, I think  
  • 30:20 we have these special economic zones, but there  are four economic zones under the China-Pakistan  
  • 30:27 economic corridor. I'd like to mention that these  CPEC SECs are not just specific to China. They're  
  • 30:34 open to anyone in the world, any investor,  either local or foreign, they can come and they  
  • 30:41 can invest there. And the government has taken up  the responsibility of funding them with the proper  
  • 30:51 utilities, water, electricity, gas. And  it's a plug in play kind of a situation.
  • 30:58 [Fareena Mazhar]: And I would say  
  • 30:59 that this COVID where it has created so many  problems, it has also created opportunities,  
  • 31:04 and it has created opportunities in the service  sector specifically. We've seen around 500 million  
  • 31:12 investment coming just in the  startups, in the service sector,  
  • 31:15 in the country, in the first 10 months of  this year. This is a good news. And also,  
  • 31:26 since Pakistan was not that badly hit, there  are many international investors who are looking  
  • 31:31 towards Pakistan for starting their new ventures.  So we are hoping that with this new regime,  
  • 31:39 we will get a lot of opportunity  for these new investors.
  • 31:43 [Fareena Mazhar]: Samsung has recently announced that they will  
  • 31:46 be setting up a plant in Pakistan and Uniqlo from  Japan is coming over. And we already have around  
  • 31:53 1000 investors. And I would like to mention that  whoever comes to Pakistan, never leaves Pakistan,  
  • 32:00 they're quite satisfied. They get good rate  of return on the investments that they make.  
  • 32:06 But just to start off is the primary thing.
  • 32:10 [Fareena Mazhar]: And we'd really want a good mix of investments  
  • 32:14 from all over the world, not just China, but from  all over the world and especially South Asia and  
  • 32:23 this region. And we are hoping that... As of now,  the volumes are very low. The volumes of trade  
  • 32:30 and investment from these region is low. And  I would say it's basically a political reason,  
  • 32:39 which is behind this. And I hope the situation in  Afghanistan gets better, and the situation also,  
  • 32:47 because people then would be more comfortable  coming to Pakistan and making investments here.
  • 32:52 [Cecile Fruman]: Great, thank you, Fareena. And it  
  • 32:56 seems that our Ahsan's going to come knocking on  your door very soon for some opportunities there.
  • 33:00 [Fareena Mazhar]: Sure. [Cecile Fruman]: So before I go back to Ahsan,  
  • 33:03 Sanjay, can you tell us a little  bit about how this report looks so  
  • 33:08 comprehensively at the investment landscape in  the region and what you found to be the most  
  • 33:14 restrictive policies that deter intra-regional  investments? And what would your suggestions  
  • 33:20 be on what should be changed quickest and  also what incentives will this require?
  • 33:25 [Cecile Fruman]: Over to you.
  • 33:26 [Sanjay Kathuria]: Thank you. Thank you.
  • 33:29 [Sanjay Kathuria]: So I think I will talk  
  • 33:30 both of inward and outward investment because  they are, in a sense, a part of firm strategies,  
  • 33:38 both are equally important when we  talk of intra-regional investments.
  • 33:43 [Sanjay Kathuria]: So let's start with the  
  • 33:46 outward foreign investment group, we use OFDI  shorthand. So I think there are the restrictions  
  • 33:54 on outward FDI in the region in South Asia are  strong in most countries, except India and, to  
  • 34:01 some extent, Sri Lanka. So I think our report, our  authors, all of us believe that this is really an  
  • 34:07 anachronism in today's day and age. The mindset,  which Ahsan also referred to, this is mindset  
  • 34:15 of the '70s, of the '60s and '70s where we had  issues like foreign exchange shortages and lack of  
  • 34:23 free flow of capital. We live  in a very different world today.
  • 34:27 [Sanjay Kathuria]: Let me give just some  
  • 34:28 highlights of the restrictions that we have  detailed a lot in the report, but for example,  
  • 34:35 there is lack of transparency in outward  investment regimes. So this is a big problem. So  
  • 34:42 in Afghanistan and the Maldives, for example,  there is no explicit mention of outward investment  
  • 34:47 in the national laws. In Bhutan, there is  permission needed from the Royal Monetary  
  • 34:54 authority and the Ministry of Finance to  hold foreign assets, foreign securities,  
  • 35:00 and the Ministry of Finance and Industry  regulate the establishment of business ventures  
  • 35:05 abroad. But again, there is not enough detail if  somebody really wants to start going about this.
  • 35:11 [Sanjay Kathuria]: Nepal has been a very interesting case because  
  • 35:16 there is an act restricting foreign investment  abroad since 1964, it prohibits actually outward  
  • 35:22 investment. But the Foreign Exchange Regulation  Act of 2019, clause 4A, allows non-resident  
  • 35:31 Nepalese to retain investments while earning money  abroad. And this is a loophole that has been used  
  • 35:40 to invest overseas by some Nepali investors. But  it shouldn't have to be this way, is the point.
  • 35:48 [Sanjay Kathuria]: In Bangladesh, which has been again quite  
  • 35:52 active. Apart from PRAN, many other companies  have been looking both in the region and globally.  
  • 36:00 There was a lot of restrictions until September,  2015 when the Foreign Exchange Act was amended.  
  • 36:09 And then in 2018, the government waived  mandatory permissions from Bangladesh Bank.  
  • 36:17 But even so, this was for opening just small  liaison offices. And to date, it is still the  
  • 36:25 point. The point to remember is that it is still  discretionary and the mindset does remain that we  
  • 36:32 are not in the business of outward investment  as such. It is still very much of a  
  • 36:38 inward... the whole mindset attracting  inward investment in Bangladesh not being  
  • 36:44 at the stage of a big overseas investment  player, which we think is antithetical to  
  • 36:49 where developments are taking and the  entrepreneurial spirit of Bangladeshi investors.
  • 36:54 [Sanjay Kathuria]: In Pakistan, all outward investments  
  • 36:57 are subject to approval by The State Bank of  Pakistan, which is fine. But again, there hasn't  
  • 37:04 been much happening, as Fareena also reminded us.  In terms of inward policies, now let me just come  
  • 37:13 quickly to inward policies, the problem in the  region is that actual investment on the ground  
  • 37:21 is very different from the policies that  are on paper, so devil is in the detail.  
  • 37:28 There are onerous sector restrictions that take  place. Regime look great on paper, but once we  
  • 37:34 start looking at actual investment possibilities  in specific sectors, I think things don't look so  
  • 37:41 rosy. And these, of course, affect all investment,  not just investment from within South Asia.
  • 37:49 [Sanjay Kathuria]: Let me also speak to some  
  • 37:51 specific regional aspect of inward investment. So  India has had some kinds of restrictions in place  
  • 37:59 in terms of currency and so on. But currently, the  most germane restriction in India regionally is  
  • 38:06 on those countries that share a land border with  India or where the investment in India is situated  
  • 38:14 in, or is a citizen of such a country which has  a land border with India, they need to go through  
  • 38:20 government route. That means government needs  to approve inward investment as opposed to the  
  • 38:24 so-called automatic route. This is a  sort of regional aspect of investment.
  • 38:31 [Sanjay Kathuria]: So Cecile, you asked about  
  • 38:32 what are the incentives to change? I think  this is very important today and I think  
  • 38:39 dynamic entrepreneurs, like what we have on our  panel today represented by Ahsan and PRAN, I think  
  • 38:46 they need the freedom to operate as the logic of  competitiveness. The logic of international trade  
  • 38:54 remains as strong as ever, not withstanding all  the noises globally. You need to be a part of...
  • 38:59 [Sanjay Kathuria]: So today, in order to be competitive and agile,  
  • 39:04 especially including in crisis situations such  as the ones we've faced over the last two years,  
  • 39:09 a firm must have at its command all possibilities  of imports, exports, being able to receive FDI  
  • 39:17 or engage in outward FDI. And government  policies do need to understand this.  
  • 39:25 Restrictive, yes, we understand that restrictive  outward investment policies are driven by  
  • 39:30 balance of payments concerns, but our report  argues that even for small economies and even  
  • 39:36 for those with such concerns, gradually relaxing  outward investment restrictions is important,  
  • 39:43 both from a competitiveness standpoint, as well  as for the need to be agile in a crisis situation.  
  • 39:50 And this can be done gradually as  indeed Bangladesh has started doing  
  • 39:54 slowly. But we would, of course, argue  that it needs to go beyond case by case.
  • 39:59 [Sanjay Kathuria]: There need to be some sort  
  • 40:00 of general rules whereby firms don't necessarily  need to go to the authorities for approval. And it  
  • 40:08 can be done within a framework, a macroeconomic  framework that allows appropriate reporting and  
  • 40:16 feedback mechanisms, and so on. But OFDI... So  the big point here is that outward investment  
  • 40:23 in today's day and age is as  important for firms remaining  
  • 40:28 competitive and agile in crisis and both in  normal situations, because they are two sides  
  • 40:34 of the same coin. And this is something that we  go at great lengths in the report to talk about.
  • 40:39 [Sanjay Kathuria]: Thank you.
  • 40:40 [Cecile Fruman]: Great. Super, Sanjay.
  • 40:43 [Cecile Fruman]: So, Ahsan, can you  
  • 40:45 tell us from your personal experience, what are  some of the key restrictions that you faced in  
  • 40:50 trying to invest in the region? And  if you had your way, what are those  
  • 40:56 that you would want to see changed to  facilitate investments in the region?
  • 41:01 [Ahsan Khan Chowdhury]: I would say the... I think Sanjay  
  • 41:04 [Hindi 00:41:04] reports has already covered  quite a bit. So one of our biggest challenge was  
  • 41:08 getting an approval from our regulators  here in Bangladesh. I think what Sanjay  
  • 41:13 [Hindi 00:41:13] also mentioned, so there's land  border issue. Since we are very close neighbors,  
  • 41:17 the approval process is a little bit  complicated that we had to face in India.  
  • 41:22 But I feel that, like I said, regardless  of whatever challenges that we have  
  • 41:26 with our regulators, I think there is a more  holistic thing behind. I feel it's a stereotype,  
  • 41:32 it's a lack of understanding that we don't  have as human beings trusting our neighbors  
  • 41:36 more than... We feel that when we want to talk  about export, let's go to North America, let's  
  • 41:41 go to Europe. That's the preconceived thinking  that people have in our part of the world that  
  • 41:46 probably doing regional trade is probably  not the most sensible thing to do.
  • 41:49 [Ahsan Khan Chowdhury]: I think it is how people get more and  
  • 41:51 more educated. And, again, thanks to COVID that  it is training us new things for the new world.  
  • 41:58 And Sanjay [Hindi 00:41:59] mentioned about  higher container freight, and this is such a  
  • 42:02 strong reason... In order to have food security  for a small country like Bangladesh, I feel that  
  • 42:07 we have to integrate with our Northeastern part  of India neighbor that we have. It's going to  
  • 42:12 give them automatic access to our market, which is  beautiful market called Bangladesh, which is going  
  • 42:17 to change completely the agriculture landscape of  people in Northeastern part of India who do not  
  • 42:23 have any export possibilities if they don't come  into Bangladesh. And I feel that countries need  
  • 42:29 to really, really understand the requirements of  general citizens like us, that it is the business  
  • 42:36 people that have to connect because for hundreds  of years, say, our countries were the same.  
  • 42:41 We were connecting and our regional business  were backbone of our livelihood. So, Afghans  
  • 42:48 were operating in Bangladesh maybe 300 years ago,  say before our generations were in this world.
  • 42:54 [Ahsan Khan Chowdhury]: So I feel that the time has come when,  
  • 42:56 after COVID, in order to have food security, we  have to reach out to Meghalaya, and we have to  
  • 43:01 see how we can use the land-man ratio of Meghalaya  to see how we can feed the Bangladeshis because  
  • 43:08 Australian grain and Canadian grain is not able  to reach us during COVID because the freight  
  • 43:12 prices are shot up so high, and inexpensive  imports coming in from China will not be able to  
  • 43:19 feed the requirements of a great nation called  India. So I feel that it's the neighbors like  
  • 43:24 us which will reach out to bigger markets  like India. And it's also, it is the rule  
  • 43:30 of the economy will start playing. And I think the  rules of the government will have to play a role.
  • 43:34 [Ahsan Khan Chowdhury]: And government will have to look into bigger  
  • 43:38 things rather than trying to restrict its nations  or citizens to do business among ourselves,  
  • 43:43 and we have to go back 300 years ago and we have  to do more business with our regional neighbors.  
  • 43:49 And I would say that that is how the world was,  and we have to go back to the world because  
  • 43:54 it's a post-COVID new world out here. So it's  just a chain that is coming into the world today.
  • 43:59 [Ahsan Khan Chowdhury]: Thank you. [Cecile Fruman]: Yeah. Thanks, Ahsan. I think really  
  • 44:02 that important point that it's as much as about  mindset as it is about policies and regulations.
  • 44:07 [Cecile Fruman]: So on this topic, Hector, I'm going to turn  
  • 44:11 back to you. You've had the opportunity to serve  in other regions. You've worked in Latin America  
  • 44:18 and Africa, and both are regions that actually  have higher levels of intra-regional trade and  
  • 44:23 investment. What makes those investments more  attractive in those regions? And what are some  
  • 44:28 of the lessons that we could draw for South Asia,  any experience that you want to bring to bear?
  • 44:32 [Hector Gomez Ang]: Thanks. Thanks, Cecile.
  • 44:36 [Hector Gomez Ang]: Just a note to maybe  
  • 44:38 agree with Sanjay on the importance of the outward  regulation or investments. And then I guess the  
  • 44:47 other point that Ahsan mentioned it, it fits right  into my view. On the regions I work, I worked  
  • 44:55 in Latin America, in Africa mostly... But maybe  just taking a step back, the report that Sanjay  
  • 45:01 and colleagues... so they identify there are three  or four main things, which I think were pretty  
  • 45:07 much summarized just now, which is there's a lack  of trust generally between countries. There is a  
  • 45:14 lack or low market knowledge. Then there's poor  infrastructure that tends to be in all countries,  
  • 45:18 it's not a privilege of South Asia. Protected  markets and very unfavorable FDI regimes.
  • 45:25 [Hector Gomez Ang]: So if you look through that lens,  
  • 45:27 which I think is a very good framework  to look into the other regions...  
  • 45:32 For instance, you come to Latin America... And  I don't want to paint here that Latin America,  
  • 45:37 it should be the poster child. But I think  regional integration is a journey, and probably  
  • 45:44 Latin America is a little bit ahead. That's how I  would put it. I think there is more knowledge and  
  • 45:52 trust among countries for historical reasons, for  language reasons, because these countries became  
  • 45:58 independent 50, 100, 150 years ago. So there's a  longer process. I think that's one big difference.
  • 46:06 [Hector Gomez Ang]: I think the other is,  
  • 46:07 these are countries generally in  Latin America that are very...  
  • 46:11 How can I put it?... They have very low tariffs,  so they have slowly used to trade with each  
  • 46:17 other and trade with the U.S., which is the big  gorilla in the region, and with Europe as well.  
  • 46:27 So they've been very much open to FDI. And there  are very few restrictions to outward investment,  
  • 46:34 this is the other key piece in Latin America.  There are very few countries that actually  
  • 46:38 have some sort of restriction to where their  
  • 46:43 companies invest. I think the fact that in  Latin America you've had multinationals for many  
  • 46:49 decades also creates a different sort of  a competitive [inaudible 00:46:55], right?
  • 46:58 [Hector Gomez Ang]: And if you look at how this has played out is  
  • 47:02 I think it also has to do with the type of  products that Latin America produces. So it's  
  • 47:07 big on mineral resources. It's big on agricultural  resources that by nature are tradable and you need  
  • 47:13 to have an international view to this. But  also, there are a lot [inaudible 00:47:18],  
  • 47:19 right? So Latin America has really become  a region that in many cases it manufactures  
  • 47:26 very little of what it consumes and it  exports services and it trades services. So  
  • 47:32 this has created, for instance, some phenomena  that we as IFC have actually supported, which is  
  • 47:37 banking. So banks in Latin America, you have  the Brazilian Banks have expressive presence  
  • 47:43 in the rest of Latin America. The Colombian Banks  have a very relevant presence in Central America.  
  • 47:51 So banking following local companies and  taking advantage of sort of free regulations.
  • 47:58 [Hector Gomez Ang]: But this is a process,  
  • 48:00 if we having this conversation 20 years ago,  you would see that most of these countries  
  • 48:05 would be basically looking at the U.S. In the case  of Mexico, for instance, they would be looking at  
  • 48:09 U.S. And even a country like Mexico there is still  80%, 85% of its trade is really with the U.S.  
  • 48:17 They just cannot diversify away. It's a process.  So I think that's one lesson in the sense that  
  • 48:26 the items identified by the report  which we're mentioning, the trust,  
  • 48:32 the knowledge, the [inaudible 00:48:37]  FDI regimes. I think that's one.
  • 48:39 [Hector Gomez Ang]: I think in the case of Africa, it's a complete  
  • 48:42 different play in my view. First of all, it's  many countries. So in South Asia you have, to a  
  • 48:49 certain extent, a very small number of countries.  But in Africa, one of the paradox is that you have  
  • 48:54 a lot of countries, but it feels like they have  a more cohesive approach to regional integration,  
  • 49:00 like it's a priority for most of them. So it  is from the policy perspective, but [inaudible  
  • 49:06 00:49:06] also many of the businesses only makes  sense if you look at them on a regional basis.  
  • 49:14 And this is what we've been supporting. So if  you are a, I don't know, telecom infrastructure  
  • 49:19 company building towers, your business only  achieves the economies of scale that you need  
  • 49:24 if you go into one, two, three, four, 50 markets  in Africa, right? And I think this is playing.
  • 49:29 [Hector Gomez Ang]: I think the other piece is,  
  • 49:30 there is a lot of mineral resources or natural  resources in Africa, and that attracts a certain  
  • 49:35 type and looks. I think the other piece is that  politically... So yeah, politically, I guess,  
  • 49:44 or diplomatically, there's a much more concerted  effort around pushing for trade integration,  
  • 49:51 and this shows. A lot of what we do in Africa  actually has a... We as IFC that we support...  
  • 49:57 has a regional bend because this is what  companies or private companies are doing.
  • 50:03 [Hector Gomez Ang]: I think I would,  
  • 50:05 maybe to leave with a message, that it is a  journey. And this journey is actually take by  
  • 50:13 companies like PRAN and others, right? These are  the guys that looked at it and you say, "Yes,  
  • 50:19 there are challenges, but they're manageable."  Or, "We can find a way." And this is how  
  • 50:24 things... And I think the trust is built by  looking at a company, like PRAN or like others,  
  • 50:29 that actually does it, is successful, and that  encourages others to follow. And of course, I  
  • 50:34 think on the public sector and other authorities,  this needs to be facilitated and enabled,  
  • 50:40 but it is these examples and I think we need more  of in South Asia to really create these dynamics.
  • 50:46 [Hector Gomez Ang]: I'll stop there.
  • 50:47 [Cecile Fruman]: Thanks, Hector.
  • 50:49 [Cecile Fruman]: And that's a great segue for my next question  
  • 50:51 for you, Ahsan. So what do you see as the role  for firms like yours or business associations,  
  • 50:57 chambers of commerce, to actually encourage  more of this intra-regional investment? And  
  • 51:02 are there any regional business organizations  that have a role to play in your view?
  • 51:07 [Ahsan Khan Chowdhury]: I think we all have a role to play.  
  • 51:10 I think our chambers, we need to understand our  business prospect of the regional connectivity and  
  • 51:16 how we can do more business with the region. But I  feel that, I want to refer to what Mr. Hector had  
  • 51:21 to say, I think it's a journey. It's a journey  where people need to learn, our regulators need  
  • 51:27 to learn, our business people need to learn, and  our trade bodies also need to learn. And this is a  
  • 51:33 case of where you guys in IFC and World Bank, you  can start doing advocacy, which you are currently  
  • 51:38 doing like so you made this beautiful paper,  and Sanjay [Hindi 00:51:45] has done a great job  
  • 51:45 at it. So I feel that you are doing a good job,  are doing an advocacy. And I see an explanation  
  • 51:51 that what can be the upside of regional  integration can be, how many jobs it can create?  
  • 51:58 How it can change the lives of millions of people  who are in the region? How the agriculture can be,  
  • 52:05 say, impacted? How the case of integration  can be logically understood by everybody?
  • 52:11 [Ahsan Khan Chowdhury]: And I think it's a journey  
  • 52:12 that is not going to reap rewards in one day,  like say that our diplomatic affairs have  
  • 52:20 hurt our intra-regional business so much that  there is a lot of work that needs to be done.  
  • 52:25 But again, if we have certain success stories,  and say we are too small to be declared as one,  
  • 52:32 but I think we are in a journey. And  once we succeed in the journey...  
  • 52:37 People ask me that whether I have had a wonderful  experience of operating in India or Nepal, I feel  
  • 52:43 that one day PRAN will be a bigger company than  what we are in Bangladesh, and we'll call India  
  • 52:48 to be our largest market, because they deserve  it, because it's a country of a billion people.
  • 52:52 [Ahsan Khan Chowdhury]: So I feel that this journey that we  
  • 52:54 are on and this journey that we have started...  The business people have started the journey,  
  • 52:58 regulators have started understanding the concepts  and the benefits of our regional integration.  
  • 53:04 And I feel that the COVID has really,  really taught us a good lesson.  
  • 53:07 And I feel that once we are in the journey,  and I think we will see light at the end  
  • 53:12 of the tunnel and we'll do more and more in  terms of regional integration in days to come.
  • 53:16 [Ahsan Khan Chowdhury]: Thank you.
  • 53:17 [Cecile Fruman]: Thank you. Thanks, Ahsan.
  • 53:19 [Cecile Fruman]: Fareena, maybe  
  • 53:21 in the same spirit, is there any effort  amongst boards of investments in the region  
  • 53:26 to try to coordinate efforts, work together  to support more intra-regional investment?
  • 53:32 [Fareena Mazhar]: On this, I would say that, unfortunately,  
  • 53:38 I don't think there is any coordination with the  board of investments or the investment promotion  
  • 53:43 agencies within the region. And primarily, I  think SAARC can play an important platform and  
  • 53:50 provide a platform for doing that. We can take  it up from the SAARC's platform. We do have some  
  • 54:01 liaison with Bangladeshi Board of Investment,  BIDA. And also their... the export  
  • 54:08 processing [inaudible 00:54:09] zone,  BEZA authority. So we shared one of our  
  • 54:16 consultants from JICA, she was also a consultant  to these boards. So she arranged our meetings with  
  • 54:24 them. So we tried to share experiences and they  had some questions for us and we had for them. But  
  • 54:29 it's not a kind of a formal setup or a formal  engagement. It's more of an informal thing.
  • 54:35 [Fareena Mazhar]: But I think, yes, there is a need to have a formal  
  • 54:39 setup and know the concerns of the investors from  within the region, why they are reluctant to come  
  • 54:47 invest or do business in the region. Whereas  we all see that I think the East Asia, Europe,  
  • 54:56 America, they're all good examples where people  with similar cultures, with similar backgrounds,  
  • 55:03 they feel more comfortable going to another  country which is to just across the border,  
  • 55:08 or very close by. And they usually have  families there and relatives there too.  
  • 55:15 But unfortunately, no such mechanism exists as  far as the South Asian countries are concerned.
  • 55:21 [Fareena Mazhar]: However, for the Central Asian republics,  
  • 55:25 we are kind of engaging with their investment  promotion agencies, and we might have an agreement  
  • 55:36 amongst them so as to formalize an arrangement  where we could meet regularly and discuss issues  
  • 55:44 and share experiences. The prime minister of  Pakistan has visited these countries, two of them,  
  • 55:51 Kazakhstan and Kyrgyzstan, and he also took a  business delegation with him. And the feedback  
  • 55:57 from the people who were accompanying him is  very positive, and they say that there is a lot  
  • 56:04 of opportunity, especially they are energy rich  countries and Pakistan is energy short country.  
  • 56:13 They can provide us with energy at a  good reasonable rate, which we need. And  
  • 56:20 also, other similar tastes, similar customs and  situation in Afghanistan. One unfortunate part  
  • 56:29 is that we do not have land border with  the five countries of the Central Asia.
  • 56:34 [Fareena Mazhar]: But if the situation in Afghanistan is stabilized,  
  • 56:40 then we are thinking of having a railway track  all the way through them to Kazakhstan. And  
  • 56:47 I think from there onwards, there will be a lot of  
  • 56:50 opportunity for the business and  investment which will be created.
  • 56:54 [Fareena Mazhar]: With Sri Lanka, we do have a free trade agreement,  
  • 56:58 but the investment chapter of that agreement  is still under discussion. And we are still  
  • 57:06 finalizing the modalities relating to that.  
  • 57:10 And I think with Sri Lanka also,  we can have this arrangement.
  • 57:15 [Fareena Mazhar]: Thank you.
  • 57:16 [Cecile Fruman]: Thank you, Fareena.
  • 57:18 [Cecile Fruman]: Sanjay, one of the aspects of this report  
  • 57:22 that I found particularly interesting is how you  develop this concept of knowledge connectivity,  
  • 57:28 how knowledge about the investment landscape  influences key decisions. Tell us a little  
  • 57:33 bit more about this and where do you see the  potential of knowledge links to be tapped?  
  • 57:39 And I'll ask you to be brief because we're  reaching the end of our time together.
  • 57:42 [Sanjay Kathuria]: Sure.
  • 57:45 [Sanjay Kathuria]: Yeah, so indeed knowledge  
  • 57:47 connectivity is one of the things where I think  our report has broken some ground, new ground. So  
  • 57:54 let's just unravel what it means to begin with.  Knowledge connectivity refers to how well firms  
  • 58:00 know the economic and investment environment in  another country. So if there is a poor knowledge  
  • 58:06 connectivity, then there are high information  costs and costs of economic engagement. If there  
  • 58:12 is good knowledge connectivity, then it reduces  the sunk costs. You have to incur fixed costs  
  • 58:19 of entering in any other country, and it reduces  the costs of doing that by reducing the frictions  
  • 58:26 of searching, matching, and contracting. So,  our report documents the different strategies  
  • 58:35 used by these regional pioneers within South Asia  to reduce entry costs and facilitate their entry.  
  • 58:42 And there are multiple ways in  which they have been doing that.
  • 58:45 [Sanjay Kathuria]: So, for example,  
  • 58:48 it's own learning, a firm can learn through its  own experience. So it can start by exporting  
  • 58:55 through non-equity arrangements. This experience  helps the firm to then go on to become a bigger  
  • 59:05 investor in the future. Firms  can learn from other pioneers,  
  • 59:10 so this is the information spillovers.  And it works best within a business group.  
  • 59:16 And I spoke earlier about how outside the business  group, information doesn't [inaudible 00:59:22].  
  • 59:23 Firms can also learn or develop through its  own social networks, and we found case study  
  • 59:31 evidence of this that every single case study  that we had in the report... We studied about 10  
  • 59:37 in some detail... all the pioneers had  a ethnic or social link to the first  
  • 59:44 outward investment destination. And this,  in the case of services investments, this  
  • 59:50 actually presence of a network matters even more  than productivity improvements in its home base.
  • 59:59 [Sanjay Kathuria]: So what do we conclude from this?  
  • 01:00:02 And I think this will go back to what Fareena was  just saying, information is a public good and,  
  • 01:00:10 therefore, it requires a public intervention  to make up for deficiencies in this. So the  
  • 01:00:18 addressing, for example what we call sticky  knowledge where knowledge doesn't flow easily,  
  • 01:00:23 or the case of the missing herd, but despite  regional pioneers, there has not been a herd  
  • 01:00:29 phenomenon in investment. So, what can policy  makers do is to take an integrated approach to  
  • 01:00:38 international engagement. And in fact, in the  report, many of the things that we've mentioned  
  • 01:00:44 do not... I think they are a bit different  because they do not entail large fiscal outlays,  
  • 01:00:50 incentives, and so on. No. We are talking about  focusing on connectivity, knowledge connectivity,  
  • 01:00:57 digital connectivity, but they could have  a positive impact on FDI. So I'll give-
  • 01:01:09 [Cecile Fruman]: Sanjay, I'm not hearing you anymore.  
  • 01:01:16 So while we wait for you to come  back, I'll just turn to Hector.
  • 01:01:21 [Cecile Fruman]: So Hector, one thing we've  
  • 01:01:24 heard is everyone has a role to play in all of  this. Where do you see IFC supporting an effort to  
  • 01:01:32 work with business organizations or other  key knowledge players in this space?
  • 01:01:37 [Hector Gomez Ang]: Okay. Thanks, Cecile.
  • 01:01:41 [Hector Gomez Ang]: 
  • 01:01:43 Look, I think a little bit of what Ahsan  mentioned, I think a lot of our role here is,  
  • 01:01:49 it's advocacy. I mean, we will invest, we will  support, we will finance, but there're not as  
  • 01:01:55 many opportunities as we wish there would be. So  I think what we've done is it's a lot of advocacy  
  • 01:02:02 that falls into different buckets. I mean, very  quickly, there is one thing that we're doing which  
  • 01:02:06 is, we used to informally provide advice to our  clients, the potential clients, like if you're  
  • 01:02:13 going to Africa, you could do this, or this, or  that. We have actually created a business line  
  • 01:02:18 around it, so we actually provide formal advisory  and help companies identify partners, identify  
  • 01:02:24 investors to go from one country to another  particularly. So we've done this successfully in  
  • 01:02:33 all the regions. We have a pipeline in South Asia  and we hope that one year from now, we will be  
  • 01:02:41 implementing some of these opportunities,  and then we could also invest.
  • 01:02:45 [Hector Gomez Ang]: But the initial piece is,  
  • 01:02:46 it's advice, it's helped them... Bangladeshi  company wants to go into Africa into way  
  • 01:02:51 East Africa, so we know, we are there, we  invest, we know them, so... That's one piece.
  • 01:02:56 [Hector Gomez Ang]: The second piece, I think,  
  • 01:02:57 is a more classical IFC World Bank approach, which  has been, it's helping governments on investment  
  • 01:03:06 climate advisors, which you know very well. So,  helping them with FDI regulatory frameworks,  
  • 01:03:14 both inbound and outbound, and partnering with  investment promotion agencies to help them really  
  • 01:03:20 to maximize the impact that they have, and to  try to create sort of a positive trend. So we are  
  • 01:03:27 now together co-hosting with BIDA, with  the Bangladesh International Investment  
  • 01:03:35 Summit. So this is something that happens at  the end of November, which we expect it becomes  
  • 01:03:40 a tradition and it signals the need to have... We  hope that intra-regional plays a big part of this.
  • 01:03:48 [Hector Gomez Ang]: And then I think we are doing a lot of, I think,  
  • 01:03:53 and a more... taking two, three steps back...  we've been doing, as IFC, as World Bank group,  
  • 01:03:58 to actually what we call Country Private Sector  Diagnostics. So we look at a country and we look,  
  • 01:04:03 these are the gaps that are needed for the private  sector to develop. And when you look at those  
  • 01:04:07 reports, that hopefully provide a roadmap for  reforms that the government can able to increase  
  • 01:04:13 private sector participation. Many of them are  related to [inaudible 01:04:17] trade, or opening,  
  • 01:04:18 or FDI. So it's a combination of these things. I  think we need to keep it dynamic, some years we'll  
  • 01:04:25 need to do more of that, some years you need to do  more of those. but until we have enough pipeline  
  • 01:04:32 that we can say, "Okay, we don't need to do a lot  more advocacy." But I think we are far from there.
  • 01:04:36 [Cecile Fruman]: Thank you. Thank you, Hector.
  • 01:04:39 [Cecile Fruman]: And I think Sanjay's back. So back to you, Sanjay.
  • 01:04:42 [Sanjay Kathuria]: Okay.
  • 01:04:47 [Sanjay Kathuria]: Can you hear me?
  • 01:04:48 [Cecile Fruman]: Yes. Yes, we can Sanjay.
  • 01:04:53 [Cecile Fruman]: Oh, now we can't. You're on mute. You're on mute.
  • 01:05:00 [Sanjay Kathuria]: Okay. Yeah.
  • 01:05:03 [Sanjay Kathuria]: So I was saying that  
  • 01:05:07 there are approaches to address sticky  knowledge and the missing herd phenomenon  
  • 01:05:13 in South Asia. And I think I was going  to give a couple of examples that let's  
  • 01:05:18 say smaller countries in South Asia can target  affiliates, global affiliates of large firms,  
  • 01:05:24 that have already made the investment of coming  into South Asia. So for example, there is a huge  
  • 01:05:32 presence of German companies in India. So  instead of courting these German companies  
  • 01:05:38 in Bonn or Berlin, they could easily come to  India and target and court these companies. So  
  • 01:05:45 they have already incurred the knowledge  and sunk costs of learning about South Asia.  
  • 01:05:50 So this is a very fruitful approach  which countries in the region can employ.
  • 01:05:55 [Sanjay Kathuria]: Similarly,  
  • 01:05:57 courting high visibility foreign investors is  important, because such firms engage for a long  
  • 01:06:04 term and they can attract follower investors.  Again, that knowledge spillover just by the  
  • 01:06:10 fact that they're there in the region, others  will get attracted. And these firms can attract,  
  • 01:06:15 can afford high sunk costs. So I think they  are, again, fruitful for countries to pursue.
  • 01:06:23 [Sanjay Kathuria]: In the report, we also identify cross-border  
  • 01:06:27 information enhancing and network development  activities, which are distinct from traditional  
  • 01:06:32 connectivity. For example, supporting industry and  business associations, industry meetings. But with  
  • 01:06:41 a focus, not in the way that it is normally done.  It is including cross-border women's networks.  
  • 01:06:49 Industries should tap on industry  veterans who have already succeeded  
  • 01:06:54 in penetrating neighboring countries. There is  a treasure trove of information and knowledge  
  • 01:07:01 which is inside those heads of those  industry veterans which can be tapped on.
  • 01:07:07 [Sanjay Kathuria]: So I will just end by saying that one has to take  
  • 01:07:12 both the governments and the public agencies, have  to take an integrated approach and realize that  
  • 01:07:20 in today's day and age, we can't really start  differentiating inward investment, outward  
  • 01:07:27 investment or traditional connectivity and digital  connectivity. Because digital connectivity,  
  • 01:07:33 as Ahsan has reminded us again and again about  the post-COVID opportunities, it's all part of  
  • 01:07:40 the same international engagement strategy. So  if countries and public agencies start thinking  
  • 01:07:47 in this integrated way, actually they will  have to focus less on those fiscal incentives,  
  • 01:07:53 spending large parts of their GDP in attracting  companies, and focus instead on these efficient  
  • 01:08:00 ways and working together with the region and go  on this journey, as Hector has also reminded us.
  • 01:08:08 [Sanjay Kathuria]: Thank you.
  • 01:08:09 [Cecile Fruman]: Great. Thank you, Sanjay.
  • 01:08:11 [Cecile Fruman]: And before we do our final  
  • 01:08:13 round of questions, Ahsan, there's a question  for you from one of our viewers, Prasant Sharma,  
  • 01:08:20 and this is more on the trade side, less on  the investment, but I think it's still really  
  • 01:08:23 relevant. The question is, what has been your  experience and the initial gains that you have  
  • 01:08:30 achieved with using the inland waterway  transport between India and Bangladesh?  
  • 01:08:36 Also a topic that we at the World  Bank are very interested in.
  • 01:08:40 [Ahsan Khan Chowdhury]: Waterways transportation is the future because I  
  • 01:08:44 feel that waterways is reducing the cost manyfold.  Just to tell you, our transportation cost between  
  • 01:08:52 India and Bangladesh will come down to 10%. And  please understand, today if you're spending 100,  
  • 01:08:58 our cost of reaching India will be 10 if you are  able to use our waterways in a very scientific  
  • 01:09:04 manner. But still, we have got a lot of work to  be done. And we, private sector, will do the work  
  • 01:09:10 that needs to be done because government has  given us the policy to export products from  
  • 01:09:15 Bangladesh to India through the riverine route  which was connected the hundreds and years ago,  
  • 01:09:21 we are able to connect to West Bengal.  We are not able to connect to Assam,  
  • 01:09:24 so I hope we'll be able to connect to all the  Indian states, especially in the coastal states in  
  • 01:09:31 the Southern part of India, Western part  of India, and Eastern part of India.
  • 01:09:35 [Ahsan Khan Chowdhury]: So we should be able to take a  
  • 01:09:37 small liner vessel from Bangladesh, and we should  be able to call on all the Indian ports because  
  • 01:09:42 our history says that we have to do more with  the land border connectivity that we have,  
  • 01:09:49 and also with the riverine connectivity that we  have. But we have to reduce our cost of labor  
  • 01:09:55 to unload. And we just have to work on  our port infrastructure. And believe me,  
  • 01:10:00 Indian exporters can also export to Bangladesh  at a nominal rate because, thanks to COVID again,  
  • 01:10:06 that after COVID, we have been able to improve our  train connectivity between Bangladesh and India.  
  • 01:10:11 So our cost of transportation has come down  thanks to the crisis that Bangladesh and India  
  • 01:10:18 became closer through our train connectivity.  And I hope with the riverine connectivity,  
  • 01:10:24 our exporters in India can reach to Southern part  of India, Southern part of Bangladesh, and also  
  • 01:10:31 anywhere in Bangladesh at  a very, very nominal cost,  
  • 01:10:35 and the cost will come down to 10% from the  current prevailing cost that is pretty high.
  • 01:10:40 [Ahsan Khan Chowdhury]: Thank you very much.
  • 01:10:41 [Cecile Fruman]: Great. Thank you, Ahsan.
  • 01:10:43 [Cecile Fruman]: So final question to all the panelists, and you  
  • 01:10:47 have the minute each, so that's really a rapid  fire, if there's one change you would like to  
  • 01:10:52 see in the next 12 months to support greater  intra-regional investments, what would it be?
  • 01:10:56 [Cecile Fruman]: Fareena, let's start with you.
  • 01:10:57 [Cecile Fruman]: You're on mute, Fareena.
  • 01:11:03 [Fareena Mazhar]: Yes, yes. Yes.
  • 01:11:04 [Fareena Mazhar]: So I really think that an investment seminar  
  • 01:11:08 along with a business to business interaction  amongst the regional countries of South Asia  
  • 01:11:14 would be really, really very helpful to boost  investments and business opportunities between  
  • 01:11:22 the people of these countries because I  see that there's a lot of misinformation.  
  • 01:11:26 There have been a lot of changes in the rules,  regulations, which are constantly not marketed  
  • 01:11:32 the way they should be. So this will provide  an opportunity where people and the government  
  • 01:11:38 levels, and also the businesses will know what  opportunities exist in which part of the country.
  • 01:11:44 [Cecile Fruman]: Right, wonderful. More information...
  • 01:11:46 [Cecile Fruman]: Ahsan, what would your wish be?
  • 01:11:48 [Ahsan Khan Chowdhury]: My wish would be two wish. I think  
  • 01:11:52 one for the government from all the sides, I feel  the government needs to understand the benefits of  
  • 01:11:57 regional trade. I think if the governments,  
  • 01:11:59 they understand their business prospects  there, I think it could be good.
  • 01:12:02 [Ahsan Khan Chowdhury]: Private sector, like say I think we should  
  • 01:12:05 see the broader picture. The regional business is  good for the private sector and that's how we can  
  • 01:12:11 help our businesses. And I feel that if government  understand and the private sector understand, we,  
  • 01:12:16 private sector have to be the one to be the strong  driving force for our regional connectivity and  
  • 01:12:21 regional business. So I think a little bit more  understanding from our side will be very helpful.
  • 01:12:27 [Cecile Fruman]: Great. Thank you, Ahsan.
  • 01:12:28 [Cecile Fruman]: Hector?
  • 01:12:29 [Hector Gomez Ang]: Well, maybe since  
  • 01:12:32 Ahsan asked for two things, I'll ask for two  things as well. So one is, I think... I mean,  
  • 01:12:38 we would really like to see many more examples  
  • 01:12:42 of private companies doing this. I think that's  going to drive the dynamics, as Ahsan puts it.
  • 01:12:47 [Hector Gomez Ang]: I think the other piece,  
  • 01:12:49 maybe not in a 12 month but in a 12 to 24 months  to see, it's kind of a regional investment forum  
  • 01:12:57 that has a really regional sort of approach,  that is business to business, as Fareena puts it,  
  • 01:13:04 where we discuss. So to try to grow the  trust, which I think is an important thing.
  • 01:13:09 [Cecile Fruman]: Super. Thank you, Hector.
  • 01:13:12 [Cecile Fruman]: Sanjay, final words to you.
  • 01:13:14 [Sanjay Kathuria]: Thank you.
  • 01:13:15 [Sanjay Kathuria]: Yeah. So I think it would  
  • 01:13:18 be too unrealistic to expect the governments to  remove all outward foreign investment regulations,  
  • 01:13:25 but I think signaling their intention  to do so right away within a timeframe  
  • 01:13:34 to start that journey. I think right now it's  not even on the radar of most countries that  
  • 01:13:40 there is big opportunities right here at our  doorsteps. So signaling that it's important,  
  • 01:13:46 and beginning that journey of actually starting  to dismantle outward investment restrictions,  
  • 01:13:53 I think would be a great step to capitalize  on all these opportunities that are,  
  • 01:14:00 as Ahsan has eloquently reminded  us, that are at our doorstep.
  • 01:14:04 [Cecile Fruman]: Right. Thank you, Sanjay.
  • 01:14:07 [Cecile Fruman]: So we are reaching the end of our time together.  
  • 01:14:11 This has been an incredibly rich conversation.  I want to thank all of our panelists. It would  
  • 01:14:17 be a tall order for me to summarize, but  I'm going to just tease out a few messages.
  • 01:14:22 [Cecile Fruman]: First of all, I think this  
  • 01:14:23 has been an upbeat conversation. I think we all  recognize that we're starting from a very low base  
  • 01:14:29 in South Asia, but other regions have shown the  way, we have lessons that we can learn from them.  
  • 01:14:36 And I think I heard many of you also say that  COVID actually can be an opportunity, this has  
  • 01:14:42 created a greater momentum for change and greater  momentum for intra-regional trade investment.
  • 01:14:48 [Cecile Fruman]: Second point is,  
  • 01:14:52 we know that there are restrictive policies, there  are restrictive regulations, and there's also  
  • 01:14:58 the mindsets, right? This is a lot about everyone  stepping up their game and creating these networks  
  • 01:15:08 of knowledge, of connectivity and boosting  these investments through changing mindsets.
  • 01:15:16 [Cecile Fruman]: Everyone mentioned that this is a journey,  
  • 01:15:19 it's not going to happen overnight. And as Sanjay  reminded us, even in the next 12 months that this  
  • 01:15:25 will be a progressive approach. And then finally,  that everyone here has a role to play, right?  
  • 01:15:31 The private sector is the main actor, they're the  driving force. They can also be the driving force  
  • 01:15:37 for change and advocating. Governments have a role  to play in creating this enabling environment for  
  • 01:15:44 investments. And then organizations like ours,  IFC and World Bank, have a role to play on the  
  • 01:15:50 knowledge side, but also supporting private  sector actors, governments in their changes  
  • 01:15:57 and business organizations. So there's clearly  a lot that we can do together on this agenda.  
  • 01:16:02 But generally, feel upbeat. I can see that there  are many, many opportunities for the future.
  • 01:16:09 [Cecile Fruman]: So let me read out our poll results.  
  • 01:16:14 We asked all of you, what is the main constraint  to intra-regional investment in South Asia? And  
  • 01:16:20 37% of you said that restrictive FDI investment  regimes is the main constraint. So obviously,  
  • 01:16:27 there's still work to be done there. And that is  followed by low levels of trust amongst countries,  
  • 01:16:32 25%. Lack of financing, 22%. And then finally,  knowledge and networking gap. So I think that  
  • 01:16:40 gives a good temperature of what people think  and where the efforts will lie in the future.
  • 01:16:47 [Cecile Fruman]: I would like, before we close,  
  • 01:16:49 to thank all of you who've joined us  today, all of our audience. We've had  
  • 01:16:54 an interactive session. A lot of questions  have been answered by our expert bloggers,  
  • 01:16:59 Gonzalo and Ravi, so thank you for that. Thanks  for your questions and thanks for those responses.
  • 01:17:04 [Cecile Fruman]: I want to thank this wonderful panel, Fareena,  
  • 01:17:08 Ahsan, Sanjay and Hector. Thank you for joining us  today and for such a rich conversation. And a big  
  • 01:17:14 shout out to my team, there's a lot of work that  goes on behind the scenes to put on these events.
  • 01:17:20 [Cecile Fruman]: We have a short survey on our page,  
  • 01:17:23 you can also use the QR code, we're asking  you to respond to four quick questions,  
  • 01:17:28 and this will help us make our  One South Asia conversation  
  • 01:17:31 better. We're also asking you to tell us what  topics you're interested in for the future.
  • 01:17:36 [Cecile Fruman]: So with this, I'll bring this  
  • 01:17:38 event to close. I want to thank you all for being  here today. Also, our shout out to, and thanks to,  
  • 01:17:46 our colleagues from conference services who  help a lot with the these events. We'll see  
  • 01:17:51 you in two months and continue to interact with  us. Please use the #OneSouthAsia. We also will be  
  • 01:18:00 [inaudible 01:18:01] this event and you'll have an  opportunity to interact with us on social media.
  • 01:18:05 [Cecile Fruman]: Thank you all very much and see you soon.

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