She was making her inaugural statement at the first meeting of the heads of the central banks of ECO countries held at a hotel here on Monday. Among others Dr Ebrahim Sheibani, Governor, Central Bank of Iran, Durmus Yilmaz, Governor, Central Bank of Turkey, Dovlet Ahalov, Deputy Chairman of the Board of Central Bank of Turkmenistan, Kubanychbek Bokontar of Kyrgyzstan, and Khan Afzal from Afghanistan attended the meeting.
Dr Shamshad said that one has to explore the possibilities of what would be the realistic institutionalisation of the co-operation mechanism that would achieve the desirable results of beneficial engagement of ECO central banks.
She said, "To kick-start the discussion, I propose, we launch an 'ECO Central Banks Network' (ECBN). This network could focus on (i) exchange of experiences and information on economic and monetary policy approaches and banks' regulation and supervision to learn from each other; (ii) nurture greater cross border co-operation of financial flows including possibilities of co-operation on anti-money laundering, and (iii) explore opportunities for harmonisation of standards and systems, where feasible. The co-operation would involve sharing perceptions on the objectives of policy co-ordination and corresponding institutional coherence."
She identified seven areas of priority and said that these areas would provide the necessary ground to build the strategy for co-operation.
1. Macroeconomic and Financial Stability. This could cover discussion on exchange rate regimes, prudent debt management, domestic financial deepening, and international developments. There should be discussion on the level and extent of harmonisation of banking sector policies and regulations to the extent feasible.
2. Launching of study to benchmark the state of economies, monetary policy regime and banking sector, their size and dimensions, and comparison of banking sector policies and regulation, state of corporate governance, etc.
3. Develop an agreed approach and framework for encouraging and facilitating opening of bank branches by the member countries in each other's territories.
4. Facilitation to intra-regional trade and commerce. To support this, the network should devise an efficient settlement framework and to examine the correspondent banking facilities for trade finance transactions.
5. Promote capacity-building among member central banks. Amount others, Pakistan would offer its National Institute of Banking and Finance to serve as a regional hub for training of central banks' staff and launching specific courses for banking for the region. Member states should proactively participate in structuring course work and delivery in this hub.
6. Enhancement of supervisory regimes for financial sector in member countries. Work together to strengthen the supervisory regimes in respective jurisdictions by enlightening ourselves with each other's experiences and best practices.
7. Sharing of information and experiences. We need to establish and strengthen regular mechanisms of consultations, communication, sharing of information and expertise as well as the identification and implementation of joint projects and activities among member countries.
She said that the key objectives of the ECO "are promotion of sustainable development in the region" through trade promotion, development of transport and communication infrastructure, mobilisation and utilisation of regional resources and co-operation on cross border issues. To support these goals and objectives, it is considered essential to foster greater financial co-operation and integration.
She said that the ECO region has tremendous economic potential and, given its strategic location and cultural and historic affinities, it offers promising ground for fostering economic integration. The region has about 400 million people, a land mass of about 8 million square kilometres, which offers fertile land and rich natural resources and offers a substantive market. Growing around 6.2 percent on average, real GDP in the region aggregate to $800 billion. The region is home of 8 percent of world's crude oil production and 9.2 percent of global natural gas production.
Consistent with its mandate, she said, the ECO has made some inroads in its endeavours to promote regional co-operation. This is manifested by ECO Trade Agreement, establishment of ECO Trade and Development Bank, Agreement on Promotion and Protection of Investment, and Transit Transport Framework Agreement.
The SBP Governor said: "There is, however, considerable scope for further unleashing economic potential of the region. For instance, the share of the ECO countries in world trade is only 1.7 percent. The trade potential ratio in ECO region is estimated at around 10 to 12 percent. However, actual intra trade in the ECO region has been floating around 4 to 6 percent. Further, the Human Development Indices of the region are quite low when compared with the developed regions. At the same time, there is ample scope for working towards fostering ties through greater information and source-sharing between the member states to mutual advantage for improving the region's economic and financial stability."
She said that in recent years, the world has recognised the significance and advantages of regional co-operation in fostering regional and global economic and financial stability and eventual integration. Trade and finance play a singular role in this context.
In evolving a direction for institutionalising some arrangements for central banks' co-operation, one can draw on wide ranging experience of central banks co-operative arrangements. These range from more elaborate and extensive arrangement such as EU whose some member states are aspiring to join and share the emerging role of Asean which is emulating EU model to regional groupings such as Seanza, Seacen, and Emeap in Asia, and Cemla in Latin America.