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First Private Sector Forum on South Asian Subregional Economic Cooperation

It gives me great pleasure to be present here today on behalf of the Asian Development Bank in the first Private Sector Forum on South Asia Subregional Cooperation. It is no accident that the inaugural event of this private sector led initiative is being organized by the Indian Chamber of Commerce in this historic city of Calcutta. Through the 18th and 19th century Calcutta developed into one of the greatest cities in Asia, comparable to the finest cities of the world. It became the hub of industry, trade and commerce, serving a vast hinterland straddling the great basins of the Ganga, the Brahmaputra and the Meghna. The 20th century saw a shifting of the tide when changing historical conditions led to a surge in economic activity elsewhere in East and South East Asia, and indeed other parts of this subcontinent. Throughout this period Calcutta retained its essential humanity, and a sense of its great historical heritage. It is, after all, the city that gave the world Rabindranath Tagore, Mother Teresa, Satyajit Ray and Amartya Sen, to mention only a few of its most illustrious citizens. Today the tide is turning again. There is a building momentum of economic revival, and South Asia is now one of the fastest growing subregions of the world. This Private Sector Forum on South Asia Subregional Economic Cooperation which we are holding today in Calcutta is itself a marker of this returning tide. Let us respond to the rhythm of history and seize this opportunity.

The Asian Development Bank considers it a great privilege to have been given the opportunity to facilitate this event because our stakes in the region are very large. Just this month the Government of India and ADB has concluded negotiations for a Calcutta Environment Improvement loan of $250 million. Another project of about $250 million is under preparation for approval in 2001 for developing a North-South road corridor, linking Siliguri in the north of West Bengal to Calcutta, and Haldia port in the south. A third investment project for inland waterways in West Bengal will be taken up in 2003. All these projects, especially the North-South road corridor, are important strategic components of a larger program of development for the South Asia Growth Quadrangle as a whole. To date ADB has provided loans totaling well over $16 billion to Bangladesh, Bhutan, India, and Nepal, in addition to about $340 million in technical assistance grants. In the current year alone ADB's assistance to these four countries is projected at about $1.8 billion, including about $20 million in grants. These loans and technical assistance are provided for physical infrastructure such as roads, railways, inland water transportation, power and energy as well as social overheads like education, health, and urban environment, all directed at accelerated social and economic development and shared growth in the region.

Mr. Chairman, ladies and gentlemen. This is your region, and the future of the region is in your hands, the citizens and Governments of the region. As your Bank and your development partner of long standing, we too have large and enduring stakes in the future of the region as I have just explained. We too have a vision. If you will permit me, I would like to briefly share that vision with you. The ADB today single mindedly pursues the mission of poverty reduction. It is the overarching goal of all our operations. It is not surprising therefore that the countries of the South Asia Growth Quadrangle are of special interest to us. Out of an estimated 900 million people living below the poverty line in Asia, some 500 million live in the SAGQ countries; especially Bangladesh, the eastern states of India including Bihar and eastern Uttar Pradesh, and Nepal. This region is home to the largest and deepest concentration of the world's poor. This unfortunate situation is not acceptable to you and it is also not acceptable to us in ADB.

Fortunately, Mr. Chairman, this challenge can also be transformed into an opportunity. The people of this region, both poor and non-poor, make up a huge force of hard working and disciplined workers at relatively low wages. Given an opportunity to be productively employed, with suitable investment in their skill formation, this work force will be a major competitive advantage of the region, not a liability. The rice fields of the Ganga-Brahmaputra-Meghna basins also constitutes one of the largest graineries of the world. With appropriate investments in improving agricultural productivity, and efficient water management, this grainery can comfortably feed the large work force of the region at reasonable prices. The natural endowments of the region, the hydropower potential in Nepal and Bhutan, the coal resources of West Bengal and Bihar, and the hydrocarbon reserves in Bangladesh, Assam and Tripura also make this region one of the world's great storehouses of potentially cheap energy. Additionally, there are large non-energy mineral deposits, forest resources, livestock and marine resources in the region, and a useful network of port cities in Chittagong, Mongla, Calcutta, and Haldia. How many regions can we think of in the world, which have this remarkable combination of endowments? Since the early 1990s, the countries of the subregion have also been implementing broad ranging market-oriented reforms. These have created a sound environment for accelerated investment over a broad front. Thus, all the essential ingredients are available here and now to transform one of the poorest subregions in the world into a leading subregion of dynamic economic growth. I should add that, geopolitically, the subregion is of great strategic significance as the gateway linking the whole of South Asia to Southeast Asia and East Asia in a vast Asian economic community. It is this long-term vision of transformation of the subregion, and its potential role in integration across Asian subregions, which underlies ADB's strong commitment to this area.

Skeptics could well ask, if the subregion has all this natural potential, why has the subregion remained so poor for so long? It is a fair question and deserves a fair answer. First of all, the dynamism is already evident. As I said before, this subregion is now one of the fastest growing in the world. West Bengal is now one of the better performing states in India in terms of poverty reduction through growth. Growth has accelerated in Nepal. Growth has also brought about a very significant reduction in poverty in Bangladesh. The small population of Bhutan already enjoys a relatively high average standard of living. These improvements notwithstanding, it is certainly true that the vast potential of the subregion remains largely unutilized. The constraints which must be addressed if we are to unbind this Promethius, in David Lande's evocative phrase, are coordination and the shortage of investible resources.

To unleash this high growth potential, it will be necessary to make large and coordinated investments across a wide front. This cannot be left to the magic of the market place. Private entrepreneurs can and must be the main instruments of the transformation we hope to see. With recent developments in the techniques of unbundling large infrastructure systems, it is also quite likely that much of the funds for infrastructure investments will be provided by local and global private investors. Coordination is nevertheless required among the Governments of participating countries for all subregional investments, if only to create the necessary enabling environment, such as agreements to facilitate the cross-border movements of goods and services. Moreover, many of the infrastructure projects are themselves cross-border projects requiring coordination across national boundaries. The Governments concerned may also need to take the lead and coordinate across countries in identifying, planning, and mobilizing the funds for such investment projects. It is not easy for individual private entrepreneurs to accomplish these tasks, What we need clearly is a strong public-private partnership. It is therefore a matter of great satisfaction for us to participate in this private sector initiative to promote regional cooperation among your countries. I am confident that this initiative will eventually set in motion the historic transformation which I described earlier.

In this context I should refer to our experiences in regional cooperation in the Greater Mekong Subregion or the GMS as it is now known. The circumstances under which the GMS was launched some eight years ago were by no means ideal. Relations were still quite tense among some of the member countries of the GMS. The role of the private sector was also limited when we started, since most of the GMS countries except Thailand were still largely centrally planned economies. However, within a couple of years there was a remarkable improvement in the geopolitical climate; facilitated in part by the informal confidence building through frequent meetings and exchanges in the GMS cooperation process. A large shelf of priority projects was identified. Technical feasibility studies were initiated for those considered the most important. Today several infrastructure projects worth over a billion dollars are under various stages of implementation. Recently the GMS Business Forum, a private sector initiative, also had its first meeting in Bangkok. Compared to the early years of the GMS, conditions appear far more favorable in this subregion of South Asia today, and there is also a vibrant private sector in all the member countries of SAGQ. We have every reason, therefore, to look forward to a strong and effective private sector-public sector partnership in the economic transformation of this subregion.

As a practical vehicle for facilitating the coordination process, the Governments and representatives of the private sector could initiate the identification and preparation of priority projects for the region. Some excellent background studies are now available including, most recently, a study on Transforming Eastern South Asia by Prof. Rehman Sobhan, one of our leading economists in the subregion, who is also here with us today. The broad contours of an investment program for the region are also known. At its base we can think of an arc around the top of the Bay of Bengal, an economic corridor which links a continuum of ports and hubs from Chittagong in the east to Dhaka, Mongla, Calcutta, and Haldia in the west. This base would support a large transport grid. East-west railroads and highways would link the eastern Indian hill states with West Bengal through Bangladesh. North-south transport corridors, such as the Siliguri-Calcutta-Haldia project I mentioned earlier, would give improved access to Nepal, Bhutan, and the hill states of eastern India to ports on the Bay of Bengal. This transportation grid would be linked to the rest of India at Calcutta through the National Highways Development Project, in which ADB is also participating. This so-called Golden Quadrilateral of superhighways linking Delhi, Mumbai, Chennai, and Calcutta, is a top priority in India's road network development program. Similar grids could be developed for power, hydrocarbons, and information and telecommunications technology. These are only broad concepts. The time has now come to translate these broad concepts into specific, bankable, investment projects. I would urge the concerned Governments and representatives of the private sector to initiate the preparation of specific projects in the different sectors, and prioritize them for eventual financing.

We would be happy to help this process in any way we can. To date the ADB has provided about $1 million grant assistance in support of such preparatory steps, including this Private Sector Forum, but this is only a beginning. As I mentioned earlier, poverty reduction through growth in this subregion is of the highest priority for ADB and we have large stakes in the subregion. I would like to reassure you once again of our continuing engagement in the subregion, as a development partner of long standing, and our strong support for all your endeavors. I wish your Forum great success, and look forward to your deliberations.

Thank you.