Facilitating regional trade
The answer lies in promotion of seamless banking or branchless banking in the regional trading bloc.
Regional trading blocs have demonstrated a pragmatic solution to enhancement in trade, investment, people’s movement and a decisive approach towards conflict-resolution. Despite initial misgiving and fear of job losses, revenue losses, or market losses, the evolutionary progress of regional blocs has transcended these doubts to a large extent. The success of regional blocs has enabled trade and industry to create regional linkages, and focal centres. The South Asia Association for Regional Cooperation (Saarc), despite being a regional trading bloc that is well meaning and with visionary initiative, has yet to achieve its true potential.
One major impediment in the way of facilitation of trade and investment in Saarc is the lack of banking instruments that are vital for fast-track operations of financial facilities. The present scenario is that the seven Saarc members have no bank branches in Pakistan. Afghanistan has four banks but no branches in other Saarc countries. Bangladeshi customers face huge problems in remitting money. In Maldives, a foreign bank is the focal corresponding bank for businessmen. Only one Nepali bank has branches in India. Bhutan has three banks but businessmen mostly use the State Bank of India or the Punjab National Bank.
Pakistani businessmen engaged in trade with India have to rely on third country banks for financial transactions. This entails added banking costs, is time-consuming, and at times, the letter of credit is susceptible to external factors such as build-up of tension at the border or some extremist event.
There are some cogent reasons why the process of liberalisation of financial facilities has not become a desirable reality. The homework has yet to be done in the regional context because the dynamics of all Saarc countries manifests distrust, discord and disharmony. Usually, broad-based conflicts and contentious issues take precedence over trade and investment liberalisation. However, the hard core decisions will have to be taken because the other regional blocs are rapidly moving towards making financial dealings faster, reliable and more transparent.
It is emphasised that half-hearted efforts or individual banks working on their own in cross-border transactions would not be cost effective nor would they serve the real purpose. There has to be a concerted approach with a common clearing house if Saarc is to have a successful banking model. It is imperative that there should be multi-policy coordination, including a dispute settlement mechanism, among all central banks of Saarc countries. Moreover, intra-Saarc remittances must be made convenient and affordable.
The answer also lies in promotion of seamless banking or branchless banking that can be achieved by getting all central bank governors as well as leading bankers, information technology technicians, telecom operators, representatives of trade and industry, and banking management experts to finalise, decide and implement a Saarc-wise seamless banking framework. Moreover, seamless banking is rapidly becoming the source of financial empowerment. The game-changer has been the combination of advanced technology and consumer behaviour that has enabled swift transactions at a lesser cost with easy access. According to a McKinsey & Company report, the usage of internet banking has risen over 30 per cent while mobile banking has shot up by 85 per cent across the Asia-Pacific region.
Seamless banking is ideal for the Saarc businessmen and more so for citizens in many respects. Many Indians and Pakistanis have kinfolk across the border and fund transfers are a norm. Bangladeshis working in Karachi routinely send part of their salaries through unofficial channels. Small and medium enterprises’ importers and exporters face innumerable problems in sending payments for smaller orders. Pakistani participants at Indian exhibitions take back cash or find non-banking channels to remit their sales revenue. Pakistani artistes also have to circumvent the regulations to transfer earnings. Tourists, or devotees on visits to religious events or shrines, families to weddings or other family events, and of course, business-persons can make their trips comfortable and secured through seamless banking facilities.
Published in The Express Tribune, July 1st, 2014.
One major impediment in the way of facilitation of trade and investment in Saarc is the lack of banking instruments that are vital for fast-track operations of financial facilities. The present scenario is that the seven Saarc members have no bank branches in Pakistan. Afghanistan has four banks but no branches in other Saarc countries. Bangladeshi customers face huge problems in remitting money. In Maldives, a foreign bank is the focal corresponding bank for businessmen. Only one Nepali bank has branches in India. Bhutan has three banks but businessmen mostly use the State Bank of India or the Punjab National Bank.
Pakistani businessmen engaged in trade with India have to rely on third country banks for financial transactions. This entails added banking costs, is time-consuming, and at times, the letter of credit is susceptible to external factors such as build-up of tension at the border or some extremist event.
There are some cogent reasons why the process of liberalisation of financial facilities has not become a desirable reality. The homework has yet to be done in the regional context because the dynamics of all Saarc countries manifests distrust, discord and disharmony. Usually, broad-based conflicts and contentious issues take precedence over trade and investment liberalisation. However, the hard core decisions will have to be taken because the other regional blocs are rapidly moving towards making financial dealings faster, reliable and more transparent.
It is emphasised that half-hearted efforts or individual banks working on their own in cross-border transactions would not be cost effective nor would they serve the real purpose. There has to be a concerted approach with a common clearing house if Saarc is to have a successful banking model. It is imperative that there should be multi-policy coordination, including a dispute settlement mechanism, among all central banks of Saarc countries. Moreover, intra-Saarc remittances must be made convenient and affordable.
The answer also lies in promotion of seamless banking or branchless banking that can be achieved by getting all central bank governors as well as leading bankers, information technology technicians, telecom operators, representatives of trade and industry, and banking management experts to finalise, decide and implement a Saarc-wise seamless banking framework. Moreover, seamless banking is rapidly becoming the source of financial empowerment. The game-changer has been the combination of advanced technology and consumer behaviour that has enabled swift transactions at a lesser cost with easy access. According to a McKinsey & Company report, the usage of internet banking has risen over 30 per cent while mobile banking has shot up by 85 per cent across the Asia-Pacific region.
Seamless banking is ideal for the Saarc businessmen and more so for citizens in many respects. Many Indians and Pakistanis have kinfolk across the border and fund transfers are a norm. Bangladeshis working in Karachi routinely send part of their salaries through unofficial channels. Small and medium enterprises’ importers and exporters face innumerable problems in sending payments for smaller orders. Pakistani participants at Indian exhibitions take back cash or find non-banking channels to remit their sales revenue. Pakistani artistes also have to circumvent the regulations to transfer earnings. Tourists, or devotees on visits to religious events or shrines, families to weddings or other family events, and of course, business-persons can make their trips comfortable and secured through seamless banking facilities.
Published in The Express Tribune, July 1st, 2014.