SANEI: Completed Studies: Abstract

Foreign Direct Investment and Economic Integration in the SAARC Region

The prospect of free trade in South Asia raises the question of the role of foreign direct investment (FDI) in regional integration. It is important to recognise that however critical trade is, economic integration is not based on trade alone, particularly in the context of international capital market developments.

Recent evidence suggests that regional economic integration provides an important stimulus not only to trade, but also to FDI. There is significant potential for enhancing regional co-operation in the area of direct investment, both for expanding intra-SAARC investments, and for attracting FDI from outside the South Asian region. However, the role of FDI in economic integration is an issue that has received little attention in South Asia, particularly in research.

This paper seeks to examine the nature of intra-SAARC investment flows, their potential, constraints to expansion, likely consequence, and how the process of South Asian regional integration will affect FDI flows from outside.

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