Member states agree to form Saarc Development Bank
Jul 25, 2014-
South Asian nations have agreed to establish a Saarc Development Bank. The bank is expected to finance infrastructure development in the region, which is grappling with poor infrastructure.
During the eighth meeting of the South Asia Free Trade Area (SAFTA) Ministerial Council held from July 23-24 in Thimphu, Bhutan, the member countries agreed to materialise the agreement during the Saarc Summit scheduled for Nov 11-12 in Kathmandu. For this, they will take ahead the process through a “fast-track mechanism”. The proposal of the bank was floated by India in the meeting.
It has just been a few days since the Cabinet decided to become the founding member of China-promoted Asian Infrastructure Investment Bank (AIIB), the country is set to become founding member of another bank dealing in the infrastructure sector. Recently, BRICS emerging economies, including Brazil, Russia, India, China and South Africa, also decided to form an infrastructure bank.
MoCS Joint-Secretary Jib Raj Koirala, who was a member of the Nepalese delegation, said the meeting “agreed in principal” to set up the bank “as soon as possible”.
“However, issues related to the bank’s paid-up capital, structure and functioning mechanism are yet to be finalised,” he said.
Koirala said funds for the proposed bank would be generated mainly from Saarc (South Asian Association of Regional Cooperation) member countries.
Government officials say formation of another bank is good for a country like Nepal which has one of the poorest infrastructure in the world and faces a huge resource gap to fund the sector.
Nepal needs $13-18 billion from 2011-2020 to bridge the infrastructure investment gap, according to a recent World Bank (WB) study titled “Reducing Poverty by Closing South Asia’s Infrastructure Gap”.
Madhu Marasini, chief of international cooperation coordination division at the Finance Ministry, said Nepal could get loans at cheaper interest rates if banks compete to provide loans. “Nepal is also in a position to get a huge amount of loans as the country’s debt to gross domestic product (GDP) ratio is just around 30 percent,” he said.
International Monetary Fund, in its recent article IV report, has put Nepal’s debt/GDP ratio under low risk category.
Besides the Saarc Development Bank, the meeting also agreed to implement the Vehicle Agreement and a Railways Agreement in the upcoming Saarc meet.
MoCS said the agreement would allow movement of the containers freely across the region. The meeting also okayed implementation of the web-based Certificate of Origin (CoO) system.
Other agreements include reducing the number goods on sensitive lists. Koirala said Nepal has agreed to reduce the number of goods on its sensitive list by 30 percent.
The revised list will be provided to the Saarc Secretariat by December 15. Nepal currently has 1,036 goods on the sensitive list for non-LDCs, while 998 goods for LDCs.
The member countries also agreed to finalise the list of services for the Saarc Agreement on Trade in Service (SATIS) by December-end. Koirala said SATIS would look after what types of services to be traded.
Published: 26-07-2014 10:30