Intra-regional FDI in South Asia: A firm level case study in banking, infrastructure, healthcare, tourism and textile sectors

Abstract

South Asia has been accredited as the second worst business environment in the world2 , and has performed relatively poorly compared to other regional associations like ASEAN and EU in attracting FDI inflows and promoting cross-border investments within the region. Understanding the constraints to intra-regional FDI flows and business environment will help to formulate policies to ensure sustainable growth. This study analyses the constraints to attracting intraregional FDI inflows in South Asia by examining several sectors, such as energy, healthcare, textiles, among others, where there is scope for investments within the region. The analysis is backed by firm-level case studies which delve into the political environment and the regulatory barriers to doing business in this region and also the competitive advantages offered by some of the South Asian countries to understand the trade and investment bottlenecks as well as the potential opportunities for enhancing regional integration through investment flows. The study also examines the likely benefits to intraregional trade from increased intraregional investments and the resulting benefits to the South Asian countries.