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Stimulating Intra-regional Investment in SAARC

Author

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  • Raveen Ekanayake
  • Nipuni Perera

Abstract

Whilst unilateral liberalization of FDI policy regimes in South Asia have made significant headway and contributed to increased FDI inflows, as a region South Asia’s success in attracting FDI, compared to other more successful trading blocs remains limited. Notably, intra-regional investment volumes remain minuscule in comparison to the already dismal level of intra-regional trade. Despite a lapse of over a decade after the implementation of SAFTA, the recent past has witnessed renewed interest in a regional investment agreement in SAARC. This article evaluates how useful a regional investment framework would be for the SAARC. The article argues that whilst a regional investment framework is critical in spurring both intra- and extra-regional FDI, it is by no means the only determinant in attracting FDI. As the experience in ASEAN suggests, in addition to a regional framework, at the country level, each SAARC member state must strive to undertake broad-based reforms to improve their individual country investment climate if they aspire to attract greater volumes of both intra- and extra-regional FDI to support its trade expansion. The article also goes on to draw lessons and best practice from the ASEAN Investment Agreement in going about designing and implementing a Regional Investment Agreement in SAARC.

Suggested Citation

  • Raveen Ekanayake & Nipuni Perera, 2015. "Stimulating Intra-regional Investment in SAARC," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(2_suppl), pages 75-101, September.
    • Handle: RePEc:sae:soueco:v:16:y:2015:i:2_suppl:p:75s-101s
    DOI: 10.1177/1391561415594731
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    References listed on IDEAS

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    1. Bubb, Ryan J. & Rose-Ackerman, Susan, 2007. "BITs and bargains: Strategic aspects of bilateral and multilateral regulation of foreign investment," International Review of Law and Economics, Elsevier, vol. 27(3), pages 291-311, September.
    2. Stephan Dreyhaupt & Ivan Nimac & Kusi Hornberger, 2012. "Political Risk : The Missing Link in Understanding Investment Climate Reform?," World Bank Publications - Reports 10416, The World Bank Group.
    3. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
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    Cited by:

    1. Mumtaz Hussain Shah & Anum Gul Afridi, 2015. "Significance of Good Governance for FDI Inflows in SAARC Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(2), pages 31-52, October.

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    More about this item

    Keywords

    South Asia; foreign direct investment; regional cooperation; trade; capital flows;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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