South Asian countries should tap various avenues of local and international resources to bankroll development projects, experts said yesterday. 

“Domestic resource mobilisation should be determined by national governments, and it should not be taken as a pretext by the developed countries to reduce the relevance of official development assistance,” said Salehuddin Ahmed, a former governor of the Bangladesh Bank.

He spoke at a discussion on financing development at the ninth South Asia Economic Summit held at the Le Méridien hotel in Dhaka.

The framework for financing development in poor countries has to be formulated with a strong political commitment, he said.

The South-South and the Triangular cooperation are needed to encourage global partnership and transform the conditions of the least-developed countries. 

The South-South Cooperation can be defined as an exchange of knowledge and resources between governments, organisations and individuals in developing nations.

The Triangular Cooperation involves two or more developing countries in collaboration with a third party, typically a developed country's government or organisation, contributing to the exchanges with its own knowledge and resources.

The former BB governor called for broadening the tax base, enhancing efficiency of the tax collection authorities, ensuring transparency and reducing discretionary power of tax officials.

Strengthening the regulatory regimes and creating an enabling environment for private sector and foreign direct investment are also important.

Laws related to land registration and contract enforcement need to be more relevant to the present context.

The former central bank chief also said the financial sector has to be strengthened.

Banks, non-bank financial institutions, insurance companies and capital markets should promote a diverse range of investments, financial inclusion and gender equality.  Steps must be taken so that expert-oriented sectors can increasingly participate in the global value chain, he added.

The current magnitude of flows of financial resources in South Asia does not seem to be adequate given the level of development gaps, said Priyadarshi Dash, research associate of the Research and Information System for Developing Countries in India.

“Public resources are not enough and also not properly mobilised for development projects, while private investment is low even for commercially viable infrastructure projects.”

There is a low-level financial integration and bank-based finance systems restrict the financing options, he said.  Also, sub-national and municipal level governments cannot raise funds on their own for building and maintenance of the infrastructures they manage.

Dash's recommendations, which were aimed at plugging infrastructure financing gap, include issuance of local currency bonds and other debt instruments, issuance of municipal bonds and harmonisation of regulations across South Asian capital markets.

Countries have to build basic infrastructure for the private sector to come forward and operate, said Sreeradha Datta, director of Maulana Abul Kalam Azad Institute of Asian Studies in Kolkata. “Projects must also be implemented in a timely manner,” Datta added.

Asif Ibrahim, former president of the Dhaka Chamber of Commerce and Industry, called for widening the tax net in the region, as less than 1 percent of the people pay taxes in Bangladesh and Pakistan. In India, less than 3 percent pay taxes.  “There is a lot of room for improving tax collection.”

The garment entrepreneur called for liberalising exchange control regulations and cutting governments' involvement in the economy.

Bangladesh achieved the Millennium Development Goals largely riding on low-cost solutions, said Selim Raihan, a professor of economics at Dhaka University.

“You can't bank on the same approach in case of Sustainable Development Goals. High-cost solutions have to be taken, and quality is an issue in this respect.”

SDGs are a set of 17 aspirational “global goals” with 169 targets between them to end all forms of poverty, fight inequalities and tackle climate change, while ensuring no-one is left behind.

He said it is encouraging that Japanese and Chinese financings are coming for various projects but South Asian countries would have to use resources in a better way, by carefully dealing with the terms and conditions and interest rates of the loans.

There is huge emphasis on building large infrastructures in South Asia. But the economist urged the countries not to disregard the importance of small-scale and sector-specific infrastructure and linking them with the big ones.

Raihan also said the special economic zones need to be efficient and efforts must be made to develop a congenial environment for investors who fail to get space in the zones.

Otherwise, the dominant investors or sectors would get priority and then the whole idea of economic diversification may get lost, he added.  

Saadiya Razzaq, senior research associate at Pakistan's Sustainable Development Policy Institute, called for investing in developing quality data for making policies more responsive.  She also said prioritisation of projects is important as resources are scarce. 

South Asian countries need to mobilise more resources to finance development and achieve SDGs, said AB Mirza Azizul Islam, a former finance adviser of Bangladesh, while moderating the discussion. “However, raising resources are not enough -- the resources have to be used efficiently.”

South Asian countries can use capital markets as market capitalisation is quite low in all the countries in the region save for India, he added.    

Speaking during the open-floor discussion, Mahmuda Rahman Khan, senior programme development specialist at USAID Bangladesh, said an enabling environment has to be created so that women, who make up half of the population in the region, have easy access to the financial system.

Siddiqur Rahman Chowdhury, a former finance secretary of Bangladesh, said financing development is always a challenge and more so for South Asian nations.

The management of state-owned enterprises is a problem in Bangladesh as well as other South Asian countries. “They have become burden for treasuries, and we are slow to privatisation.”

The Centre for Policy Dialogue jointly hosted this year's conference -- under the theme “Reimagining South Asia in 2030” -- along with the Institute of Policy Studies of Sri Lanka, the Research and Information System for Developing Countries of India, the Sustainable Development Policy Institute of Pakistan and the South Asia Watch on Trade, Economics and Environment of Nepal.