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Journalism of Courage
In the deep waters of regional economic cooperation, SAARC is very small fish. Those despairing whether its size would ever matter may see — in the Tatas’s three billion dollar investment proposal for Bangladesh — the first promise of a growth pill. Indian FDI can take care of a major problem in SAARC economic cooperation. The fear of large trade deficits has come in the way of freer trade with India for many fellow SAARC members. The fear may be economically illogical — free trade benefits all participants — but SAARC members are hardly the only countries in the world to ignore economics when it comes to trade. Politicians’ grievances about a widening of trade deficit can be addressed by Indian FDI because the latter will add to the host country’s volume and value of exports. This has happened with Sri Lanka, and in a lesser—and more messy way—with Nepal. This can happen with Bangladesh and Pakistan. But FDI can’t cure the fear of trade if SAARC members fear FDI, too. And here, India’s case for delivering a sermon to its South Asian neighbours is not as strong as South Block may think.
The world’s second fastest growing economy is itself afraid of FDI. This, despite more than a decade of reforms. And despite the serial proof that FDI has encouraged domestic economic activity, not killed it. Dhaka can well tell Delhi not to lecture it on the benefits of foreign investment, when tortuous negotiations have to precede a simple matter like hiking FDI limits on telecom in India. Islamabad, if it wants, can recall amusing stories about how FDI in the retail sector has been a victim of a supposed traders’ lobby. Every bit of resistance Dhaka staged over the Tata investment proposal — over clearances, over supplies of the chief raw material, over incentives — would find an echo in the manner Delhi has chosen to handle dozens of FDI projects. India has been there, done that.
Bangladesh shouldn’t go there. Neither should Pakistan, or any other SAARC member. But they can hardly ignore the point that India still doesn’t have a simple, transparent policy for FDI: make government clearances redundant for all sectors, barring those figuring in a very small, publicly known negative list. As the Tatas struggles with Dhaka’s obstructionism, many in India will recall what Delhi did to the Tata-Singapore Airlines proposal. The worrying thing is Dhaka may remember it, too.
