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Dhaka Tribune

Effective regional efforts key to cut risks of trade openness

Update : 29 Apr 2014, 07:31 PM

Bangladesh Bank Governor Dr Atiur Rahman has put emphasis on effective regional efforts to cut the risks of trade openness.

“Openness to global capital flows likewise spurs growth by attracting investment inflows, but at the same time heightens instability risks from volatile trends of global capital flows arising both from speculative position taking and from spillovers of persistent imbalances in major economies,” he said.

He said external opening up also poses new demands on approaches in safeguarding of monetary and financial stability.

The Governor was speaking at the inaugural session of a day-long SAARC Finance seminar on "Management of External Sector Openness - South Asian Country Experiences" in Dhaka yesterday.

Atiur said increasing openness to external capital flows heighten exposure of domestic banks and financial institutions to destabilizing surges of global fund flows, calling for appropriately strengthened regulatory and supervisory regimes.

Former finance adviser for a caretaker government Dr. ABM Mirza Azizul Islam presented the keynote paper at the seminar.

In his keynote paper, he said there are both opportunities and risks of allowing capital inflow and outflow among South East Asian nations. But he cautioned that trade openness would be counterproductive if the associate risks were not addressed with appropriate preemptive measures.

He recommended for ensuring effective regional coordination in regulatory and policy approaches for making trade openness beneficial to the economy.

Delegates from the central banks of SAARC countries and high officials from Bangladesh Bank, different ministries, other national and international institutions participated in the seminar.

In his keynote paper, Dr. ABM Azizul Islam said in terms of total trade as percent of GDP, Sri Lanka has been found the most open economy in this region among four major economies (Bangladesh, India, Pakistan and Sri Lanka) followed by Bangladesh. 

In last three decades, numbers of countries have opened-up their economy. Some of them are very much benefited since they have utilized and managed the flow of foreign capital successfully for their growth and development, he said.

On the other hand some countries had to face severe financial crises since they could not manage the flows of capital to their countries.

He said as reform and liberalisation measures were being pursued, the degree of integration of Bangladesh economy with world economy has increased gradually and country is now ‘trade dependent country’ from being an ‘aid dependent country’.

The country’s openness indicator- trade-GDP ratio increased from 18.5% in FY1990 to 30% in FY2000 and towards the decade, the steady growth of the ratio notable increased and reached to 47.1% in FY2013, according to the keynote paper. 

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