Less Red Tape, More Deregulation Would Boost South Asia Growth: ADB

The Bombay Stock Exchange index reflects investor confidence in the economy of India

South Asia has the potential to go the way of robust economies of East Asia, but India and its neighbors must do more to cut red tape and remove regulations that stunt business initiative, the Asian Development Bank said Thursday.

The ADB said in a report released here Thursday that improved governance, better quality of regulation and infrastructure can help South Asian economies emerge as the "New Tigers" of the region.

South Asia, led by India and Pakistan, posted stellar growth in 2005 and has registered higher growth than its peers in Southeast Asia in the past five years, with high growth forecast to continue through at least next year.

Its banking sectors have not only improved their performance over the recent past, but have also reduced the performance gap between themselves and other economies in Asia, according to the ADB's South Asia Economic Report.

However, the performance in state-owned banks has generally been weaker than that of private and foreign banks.

Restructuring and privatizing state-owned banks should remain a high priority on the reform agenda, it added.

"Despite a shift towards market liberalization, South Asia continues to be overregulated. As a result, it is not fully realizing its growth potential."

The bank said firms are "frequently confronted with a heavy burden of administrative regulations" and in general 12 signatures are required to export and 24 to import, compared to five and seven, respectively, in large Southeast Asian economies.

"South Asia stands at a critical juncture today, where the potential for sustained high growth and poverty reduction is excellent.

"A unique opportunity exists to drastically reduce poverty over the next decade, provided the right choices are made," said Kunio Senga, director-general of ADB's South Asia department.

The report, the first in a series of biannual publications on economic and development issues in the South Asia region, concludes that there is considerable scope for improvement in the effectiveness and efficiency of government interventions.

Common problems among South Asian countries include the highly bureaucratic nature of government administration, a lack of coordination between different ministries and government agencies, and overstaffing and inadequate pay and benefit levels in the public sector.

It called for public investments to be targeted at areas where infrastructure bottlenecks are emerging, including electricity generation.

The quality of the transport infrastructure also needs improvement, it added.

Source: AFP

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