Prime Minister Narendra Modi is set to push for the creation of a South Asian Association of Regional Cooperation (Saarc) development bank to boost trade and investment, as well as funding for several infrastructure and intra-Saarc developmental projects. The government had been quite vociferous in this regard, keeping in mind the importance of India’s neighbourhood in the prime minister’s foreign policy initiatives.
A senior official told Business Standard apparently, Modi was keen to push for the bank at the 18th Saarc Summit in Kathmandu on November 26-27. This will be Modi’s first Saarc Summit since he became prime minister in May.
At the Saarc ministerial meeting in Thimpu in July, the proposal was unanimously endorsed by all member countries — India, Pakistan, Sri Lanka, Nepal, Bhutan, Afghanistan, Bangladesh and Maldives. “The idea has been supported by all countries. Now, the challenge is to make it a reality and that can only happen when there is political will. That political will has to manifest itself during the summit level meeting this time. This will address issues relating to cross border banking,” said the official.
The idea is to secure easier access to capital for funding infrastructure projects by all Saarc member countries. If the plan is approved at the Kathmandu summit, the bank’s basic structure, equity base and headquarters have to be worked upon. Officials say though India will be the “natural choice” for setting up the bank, as it is the largest and most powerful economy in the region, there could be opposition from countries such as Pakistan and Bangladesh. A decision on the location of the bank’s headquarters will depend on the equity contributions by each country. This will also ascertain each country’s voting rights.
“It is at a conceptual stage. But if the region has to grow, this is definitely the need of the hour. It should fund infrastructure projects on real time,” said R U Das, professor, Research and Information System for Developing Countries.
Though the idea of a Saarc development bank was mooted during the United Progressive Alliance regime, it has received significant thrust under the new government. The National Democratic Alliance government had constituted a committee under the finance ministry to weigh the modalities of the proposal.
At the ministerial in Thimpu, member countries had also discussed whether instead of creating a new banking institution, existing institutions such as the Export Import Bank of India could be used for infrastructure funding, it had the wherewithal to finance cross-border projects and set up an effective funding channel.