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This event took place on November 22, 2021

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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.
15:23 [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.
25:27 [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.
33:00 [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.
43:59 [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.

Path To Recovery: Embracing Intraregional Investments In South Asia

Follow the event on Twitter #OneSouthAsia

South Asia continues to recover from the recent wave of COVID-19, with a rebound in global demand and targeted measures put in place. But the recovery remains fragile and uneven. As per the latest South Asia Economic Focus forecast, the region’s average annual growth over 2020-2023 will be 3.4%, which is 3 percentage points less than what it was in the four years preceding the pandemic.

A key part of South Asia’s recovery will be fully embracing global, regional, and local business opportunities. However, intraregional engagements in South Asia have been restrictive—the intraregional trade alone is 5% of the total trade, as compared to 60 % in Europe. Intraregional investments have been equally inadequate at around $3 billion, which is barely 0.6% of the total regional inward foreign direct investment (FDI) from the world. Post COVID-19, with disruptions in global value chains, rising trade and transportation costs, intraregional engagements and trade will be critical to providing the much-needed buoyancy to economic recovery. Further, the rising demands for goods and services within the region are creating significant opportunities for trade and investment to expand and diversify.

But within the region, restrictive and non-transparent policies, particularly outward FDI regimes, deter investments. Limited knowledge about the economic and investment landscape in the neighboring countries, and low bilateral trust further increase costs and restrict economic engagements. Knowledge connectivity, therefore, remains key to intraregional investment decisions. Despite constraints, a few pioneers in South Asia have successfully established intraregional ventures across various sectors. These pioneers tend to be prior exporters; well-networked, often with strong social and ethnic connections; and are high productivity firms with surplus investment funds.

Our 8th #OneSouthAsia Conversation will share the experiences of such pioneer investor firms and explore the ways intraregional investments can be strengthened to boost robust recovery and overall economic growth in South Asia. The event, held in collaboration with IFC, will bring together WBG leadership, leading investors from South Asia, and policy makers. The event builds on the latest World Bank report Regional Investment Pioneers in South Asia: The Payoff of Knowing your Neighbors, that explores the potential of intraregional investments and some understudied constraints to such investments. The report also profiles South Asian pioneer investor firms that have built successful intraregional ventures and documents their drivers and constraints.

See the list of speakers ˅

00:00 Welcome and introductory remarks
03:47 Opportunities and challenges for intraregional investments
09:41 Intraregional investments and IFC’s overall strategy in South Asia
15:36 Pakistan supporting inward and outward-bound investments from the region
22:19 Further investments prospects for South Asia
27:09 Pakistan's specific policies and support for women investors
33:03 Restrictive policies that deter intraregional investments and how can that be changed
40:44 Main hurdles to inward and outward investments from the private sector’s viewpoint
44:11 Intraregional investments in Latin America and Africa
50:52 Introducing changes and flexibility to improve the investment landscape
53:21 Efforts from the Board of Investment for more intra-regional investments
57:19 Knowledge connectivity and the potential of social-ethnic and knowledge links
1:01:22 The role of IFC in promoting intraregional investment opportunities
1:08:15 Inland water way transport between India and Bangladesh
1:10:45 Changes in the next 12 months that could boost intraregional investments
1:14:08 Closing remarks

Read the transcript

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.
15:23 [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.
25:27 [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.
33:00 [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.
43:59 [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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Speakers

Hector Gomez Ang

Regional Director, South Asia, IFC
Ahsan Khan Chowdhury

CEO, PRAN RFL Group, Bangladesh
@akcsunny
Sanjay Kathuria

Fellow, Wilson Center and Coauthor, Regional Investment Pioneers in South Asia
@Sanjay_1818
Fareena Mazhar

Secretary, Board of Investment, Pakistan
@fareena_mazhar

Moderator

Cecile Fruman

Director, Regional Integration and Engagement, South Asia
@cfruman

Watch previous #OneSouthAsia Conversations

Harnessing Technology to Build Human Capital in South Asia

Replay

September 16, 2021

Harnessing Technology to Build Human Capital in South Asia

pollution from the exhaust of cars in the city in the winter. Smoke from cars on a cold winter day

Replay

July 27, 2021

Breathing Uneasy: Regional Response to Air Pollution in South Asia

Turning the Tide on Marine Plastics in South Asia

Replay

May 05, 2021

Turning the Tide on Marine Plastics in South Asia

Pivoting in a Pandemic: Women Entrepreneurs Tap Regional Opportunities

Replay

January 29, 2021

Pivoting in a Pandemic: Women Entrepreneurs Tap Regional Opportunities

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