South Asia faces challenges in global value chain integration due to the high trading costs, hindering its competitiveness on the global stage. The region’s historical advantage of offering affordable labour and resources is diminishing, necessitating a shift towards attracting more Foreign Direct Investment (FDI).

Overreliance on FDI poses risks, and the need to foster the growth of local Small and Medium Enterprises (SMEs) and Cross-Border SMEs (CSMEs) is crucial for sustainable development. The role of the SAARC Chambers of Commerce needs refinement to mediate effectively between the private sector, including both large industries and SMEs, and the government to enhance the regional value chain.

The industry-academia linkage is currently insufficient, impacting knowledge generation, which could be addressed through improved regional integration. Exploring the revival of food corridors and assessing the feasibility of exchanging food for products between countries could open new avenues for economic cooperation.

To address the integration challenges, efforts should be directed at reducing the cost of trading in South Asia. FDI can play a role in providing necessary capital, but a balanced approach involves supporting local SMEs and CSMEs, encouraging local investors, and fostering a conducive business environment.

The SAARC Chambers of Commerce should focus on mediating partnerships between the private sector and the government. Strengthening the linkages between Industry and Academia is essential for reducing knowledge generation costs through regional integration. Exploring the revival of food corridors and assessing the feasibility of exchanging food for products could stimulate economic cooperation.

Additionally, South Asian countries should collaborate on green initiatives, going beyond business considerations, and harmonise environmental standards for traded products. Ensuring political stability, a predictable taxation policy, and fostering friendly relations among South Asian countries are crucial for regional economic growth and cooperation.

These are some of the insights that emerged at the parallel session B3 of the Fourteenth South Asia Economic Summit (SAES XIV) titled ‘Value Chains and FDI’ held on 5 November, 2023.

The Chair of the session, Dr Bhanumurthy N R, Vice-Chancellor, Dr B.R. Ambedkar School of Economics (BASE) University, India, remarked that the South Asia has huge potential to capitalise on its digital infrastructure and leapfrog into the global value chain.

‘The economic dynamics in South Asia has been shaped by CSMEs and people to people connectivity’ underscored the Honorary Consul of Embassy of the Federal Democratic Republic of Ethiopia, Mr Shams Mahmud.

Engr Abdul Jabbar Memon, Senior Vice President of the Federation of Pakistan Chambers of Commerce & Industry, emphasised that South Asia’s economic challenges can be addressed through the collective efforts of the private sector and civil society, rather than relying solely on the government.

‘It is necessary for politics to gradually recede, enabling the emerging tech-driven world to introduce effective algorithms that can facilitate the global value chain’, recommended the Founder and Chairperson of MAP Capital Holdings, Pakistan, Ms Huma Fakhar.

Mr Buwaneka Perera, CEO/Secretary General of The Ceylon Chamber of Commerce, Sri Lanka, proposed that the key role of the SAARC Chambers should be mediating between the private sector, encompassing both large industries and SMEs, and the government. This mediation aims to facilitate the development of the value chain in the South Asian region.

While commenting on the issues of imports, Dr Biswash Gauchan, Executive Director, Institute for Integrated Development Studies (IIDS), Nepal, said ‘Being a landlocked country, Nepal is heavily dependent upon India for imports and now agriculture is also becoming a liability as well and no one is talking about the farmers’ rights’

Dr Ch Priyoranjan Singh, a Professor at Manipur University, India, highlighted the significance of India’s substantial investments in transportation corridors. However, he emphasised that the establishment of an economic corridor in the region is even more crucial for fostering regional development.

High-level policymakers, political leaders, academics, development practitioners, civil society activists from Bangladesh and the South Asian region attended the session and shared their valuable insights.