Deepening regional trade and investment integration

The annual meeting of the Board of Directors of the Asian Clearing Union (ACU) allows the member central banks to share experiences and ideas on how we are getting along amid unfolding events and developments in the global scenario, particularly in respect of macro financial stability and deepening of intraregional trade.
The member countries of the ACU are already collectively a significant global growth hub; we can heighten this significance much further by deepening regional trade and economic integration in pursuit of inclusive and environmentally sustainable growth.
In 2013, Bangladesh economy maintained stable growth momentum despite facing some spells of unusually disruptive blockades and hartals (strikes) in the run up to national elections. There were also other lingering uncongenialities like tepid recovery in global growth and infrastructural inadequacies impeding investment growth. The economy came through all these odds with remarkable resilience:
* holding on six-plus per cent real GDP (Gross Domestic Product) growth trend
* CPI  (consumer price index) inflation around seven and a half per cent
* fiscal deficit under four per cent of GDP
* narrowing trade deficit
* healthy BOP (balance of payment) current account surplus and foreign exchange reserves cover around six months' import requirement
* domestic currency Taka under sustained appreciation pressure from double digit export growth and
* healthy inflows of workers' remittances.
With post-election return to normalcy, investment and import growth have picked up momentum from the beginning of 2014, boding well for GDP growth acceleration going forward.
Besides the solid gains in macroeconomic stability, Bangladesh is progressing well also in social development indicators. Quite a few of the main poverty reduction and human development MDGs (Millennium Development Goals) have been attained well ahead of time line, while remaining well on course for attaining the others.
Bangladesh's GNI (Gross National Income) per capita has crossed the lower middle income country group threshold by close of FY13 (June 2013).
Bangladesh's steady and stable socioeconomic progress owes much to the government's commitment to inclusive, sustainable socioeconomic growth. This was proactively supported by Bangladesh Bank's (BB's) initiatives of ingraining a socially responsible (i.e., inclusive and environmentally sustainable) financing ethos in the country's financial sector.  
In pursuing the core objectives of price and macro-financial stability, BB's monetary and credit policies impart some directional bias promoting inclusive use of credit resources in productive pursuits rather than in financing wasteful conspicuous consumption. This approach has been accepted without demur by the entire financial sector. All banks, local and foreign, are now engaged in agricultural financing, directly and through MFIs (microfinance institutions) or other area agents. SME (small and medium enterprises) financing is also now a mainstream activity in the entire financial sector. Massive BB-led modernisation of financial sector IT (information technology) infrastructure is spawning innovation and rapid adoption of mobile phone banking and other cost-efficient off-branch financial service delivery channels through area agents. Mandatory inclusion of environmental risk assessment in loan appraisal routines is upholding green financing. Some extent of refinance support is available from BB for supporting the various lines of inclusive and green financing.
Stability enhancing impact of inclusive financing is fairly straightforward. It supports financial stability by widening the asset bases of lenders, reducing risk exposures to large borrowers, as also by providing stable funding bases of numerous small deposits, reducing risks of dependence on footloose large deposits. Real sector stability likewise gets boost from matching of incremental output on the supply side with incremental income and employment generated on the demand side.
Recent strong gains in external sector viability enable Bangladesh to embark on greater openness and integration with trade and investment of partner economies, regionally and globally. This should attract the massive investment inflows needed to realise the higher growth aspirations on path to rapid poverty elimination - leading to eventual prosperity. To this end BB is engaging with the business communities and other policymaking authorities in locating and ironing out impediments, and in facilitating investment inflows in all possible ways.
Simultaneously, major attention has been focused on developing the strengths and capacities in the domestic financial sector of efficiently handling massive investment fund inflows and outflows. Basel II risk-based capital adequacy regime is already in place, and work towards adoption of Basel III capital requirement modifications, liquidity and leverage guidelines is also underway. Risk-based refocusing of BB's supervision has brought internal management of banks, in particular their internal audit and internal controls, under intensive attention.  Stress testing routines assess capabilities of banks and financial institutions in withstanding likely scenarios of domestic and external shocks. Updated versions of contingency planning and resolution frameworks for financial sector distress events have been formalised. Online real time linking of banks and financial institutions to financial sector supervision dashboards at BB is at advanced stage of implementation, accessible by head offices of banks for online monitoring at their own ends.
Bangladesh's increasing external openness is reflected, as elsewhere, also in the 2013 data on ACU transaction settlements. Its trade settlements with other ACU member trade partners increased 8.77 per cent in 2013 even as total ACU intraregional trade settlements declined 7.53 per cent that year. Bangladesh's imports from other ACU members increased to USD 4920 million in 2013 from USD 4450 million of 2012; while exports to other ACU members declined to USD 113 million in 2013 from USD 176 million of 2012. Bangladesh's exports to the rest of the world sustained double-digit growth rate in 2013, and we would love to see rising trend in our exports to the ACU region.
To this end we would welcome investors from regional partners in establishing cost-efficient manufacturing bases in Bangladesh producing for local, regional and global markets. It is heartening to see the beginnings of easing of US sanctions on engagements with Islamic Republic of Iran, a big impediment holding back flourishing of ACU intraregional trade and investments.
The ACU continues to retain relevance as a useful regional cooperation platform, with its technical committees active in reviewing and bringing up revision suggestions on ACU rules and procedures to enhance transaction efficiency and to sort out settlement bottlenecks or differences of opinions as they arise from time to time.
Let us fully exploit ACU's unrealised potential in deepening trade and investment integration in our region.
The article is adapted from the speech Dr. Atiur Rahman, Governor of Bangladesh Bank, delivered at the 43rd ACU Board of Directors Meeting held at Kish Island, Iran on May 23, 2014. The same day, Dr. Atiur was elected chairman
of the ACU.