Cross-border payment system in SAARC region

Shahiduzzaman Khan | Published: December 05, 2015 22:43:36 | Updated: October 24, 2017 18:16:34


The 17th SAARC Payments Council (SPC) meeting was held at Cox's Bazar last week amid ambitious hope for developing a unique cross-border payment system at a lower cost using latest technology. 
Bangladesh Bank governor Dr Atiur Rahman, while addressing the meeting, said an interoperable system to manage cross-border payments using latest technology needs to be established. In fact, an effective communication and exchange of information in the region through SPC has helped most of the countries accomplish the task of payment system with the establishment of Automated Clearing House, Electronic Fund Transfer Network, Interoperable ATM (Automated Teller Machine) and POS (Point of Sale), and Real Time Gross Settlement (RTGS).
It may be mentioned here that the SPC is a regional forum, created by South Asian Association of Regional Cooperation (SAARC) Finance Group at a conference on regional payment group, held at the Central Bank of Sri Lanka in July 2007.
The basic aim of establishing SPC was to develop an understanding to promote cooperation among the member countries to move forward in reforming their national payment and settlement systems, and to facilitate between the SAARC countries makes both economic and logistical sense. 
The SAARC central banks were urged to design a process to appropriately contextualise the Sustainable Development Goals (SDGs) at regional level in payment systems arena. Adoption of a pragmatic and step-by-step approach towards solution of various issues is expected to open up new avenues of cooperation among the SAARC member countries.
In India, for example, the Reserve Bank of India (RBI) has already issued licences to 11 entities for setting up payment banks. Under the existing provisions, the payment banks can accept demand deposits of a maximum of Rs 100,000 per individual, issue ATM/debit cards, provide payment and remittance services through various channels, and acting as business correspondent of other banks. However, they cannot involve themselves in lending activities. 
Although the SAARC Payments Council has achieved some progress in the payment system in the region, the regional forum itself is yet to emerge as a viable platform for the states and peoples of South Asia. Twenty-two years after its establishment, many are now questioning its viability as an effective regional forum. 
Political analysts say the SAARC remains unproductive over the years, although many other regional forums have shown tremendous progress in all fields. However, its secretary general Arjun Bahadur Thapa, in a recent interview with the media, does not agree that the regional body did not do anything. May be, he said it could not fulfil the level of expectations due to many reasons.
Mr. Thapa claimed that a lot has been done although there is a need to do much more in the SAARC in future with collective wisdom and efforts. He mentioned about some achievements of the regional forum. For example, the SAARC leaders were able to meet on a regular basis and managed to prevent conflicts in the region. 
As the leaders periodically meet and talk about socio-economic development, common interest and problems of the region, the forum appears to perform much better. Besides, a number of things have been done in many areas related to trade, poverty reduction, connectivity, employment and energy security, apart from introduction of SAARC visa scheme.
However, compared to the ASEAN and the European Union (EU), the success rate of the SAARC is very low. On this issue, Thapa said, the regional body cannot be compared with them. In Europe, the member-states have surrendered their sovereignty to the EU. In South Asian region, the leaders felt that everything should be done on the basis of consensus. The SAARC forum, Thapa said, was doing something collectively in terms of connectivity, trade, employment and others.
Any serious analysis of the SAARC should take into consideration the bitterness of Partition that the sub-continent witnessed and the accompanied mistrust and suspicion that made normal state-to-state relations a complicated affair. Nevertheless, SAARC is providing a platform for the regional countries to meet and discuss issues confronting the region. The smaller countries of the region, being members of the forum, are playing a visible role by setting regional agenda in spite of 'big brother's presence.
The regional body has, to some extent, helped expand areas of cooperation that require collective regional effort, including certain non-traditional issues like terrorism, drug smuggling etc. Also, meeting of leaders on the sidelines of the SAARC summits have often helped in easing bilateral problems.
On the contrary, the ASEAN countries did not have contested ideologies, such as the one based on the two-nation theory. The countries comprising ASEAN came together to defend themselves from the communist threat. Such external threat was absent in the case of SAARC. Rather, India was considered as a threat by some member countries. Thus, SAARC and ASEAN cannot otherwise be compared.
Much before the inception of SAARC, Indo-Pakistan ties were strained. Where India was fearful that SAARC's strength might mean less regional influence for itself, Pakistan feared that the bloc would be dominated by India. At the same time, while the security scenario in the region has been unstable, the SAARC was crippled by its own structural shortcomings. This has prevented successful formulation and implementation of any resolution.
Countless agreements have been signed, but a very few could be implemented. Lack of implementation of agreements has thrown the body into a stalemate and thwarted its progress up to the potential. If some momentum can be generated on the national security front, particularly aiming at bringing India and Pakistan closer, the SAARC body may be able to overcome some of its structural weaknesses. It could potentially foster relations in the region, and stand as a powerful force at par with other regional bodies.
However, analysts say the biggest hindrance lies in a  single article of SAARC charter, which prevents the member nations from discussing issues of bilateral concerns, for example the Indo-Pak conflicts. Also, as it stands, any SAARC decision has to be made unanimously, which is near-impossible. No wonder, little or no discussion on contentious regional issues could take place, rendering SAARC largely unproductive. 
Under the circumstances, the basic idea of developing an understanding to promote cooperation among the member countries to reform their national payment and settlement systems will end up in a futile exercise if the SAARC fails to emerge as an effective regional body. 
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