Formal pact on SAARC Development Fund

Rajmi Manatunga and Rasika Somarathna

COLOMBO: The agreement for setting up a SAARC Development Fund (SDF) to provide financial assistance for the economic, social and infrastructure development of the SAARC Member Countries will be signed during the SAARC Heads of State Summit to be held from August 2 to 3 in Colombo.

The agreement, which is one of the four principal accords to be entered into during the ongoing 15th SAARC Summit, will reconstitute the existing South Asian Development Fund (SADF) to SDF, to serve as the umbrella financial institution for all SAARC development projects, Chairman of the SAARC Programming Committee Grace Asirwathan said.

According to the Chairman, the Fund will be set up with an initial corpus of US$ 200 million, while the SADF balance capital of US$ seven million will also be amalgamated to the SDF.

In addition, India has pledged an ad-hoc contribution of US$ 100 million for the proposed Fund, which is aimed at project collaboration among SAARC countries and mobilising funds from within and beyond the region.

Asirwathan said the new financial entity would feature two improvements on its predecessor SADF, namely, provision for obtaining financial assistance from other international organizations and the power to function as a bank for the South Asian region.

“The Fund will have three windows to provide assistance to member states: the social window, the infrastructure window and the economic window. The social window will focus, among others, on areas like poverty alleviation and women and children,” she said.

The SDF secretariat will be housed at the SAARC Secretariat in Kathmandu, Nepal until a permanent location is found in a member state.

Leaders of SAARC Member Nations are set to sign three other agreements concerning the Inter Regional Mutual Legal Assistance on Criminal Matters, Protocol of Afghanistan’s accession to SAFTA and the establishment of South Asian Regional Standards Organisation.

The South Asian Development Fund (SADF) was created in 1996 with the merger of the SAARC Fund for Regional Projects (SFRP) and the SAARC Regional Fund, as recommended by the 21st session of the Standing Committee and endorsed by the Sixteenth Session of the Council of Ministers (New Delhi, 18-19 December 1995).

The SADF objectives were to support industrial development, poverty alleviation, protection of environment, institutional /human resource development and promotion of social and infrastructure development projects in the region.

During the 13th SAARC Summit in 2005 it was agreed to reconstitute the SADF into the SDF to serve as the umbrella financial institution for all SAARC projects and pro grammes. The Leaders directed the Finance Ministers to look into the operational modalities of the Fund.

The Social Window is to primarily focus on poverty alleviation and social development projects. The Infrastructure Window would cover projects in the areas such as energy, power, transportation, telecommunications, environment, tourism and other infrastructure areas. The Economic Window is to focus on non-infrastructural funding.

During the First Meeting of the SAARC Finance Ministers (Islamabad, 11 July 2006) considered the recommendations and approved the Framework for SDF.

The Meeting also had agreed on a road map for the creation of SDF which was endorsed by the Twenty-seventh Session of the Council in 2006.

The First Meeting of the SDF Board was held at the Secretariat in February 2007 to consider the inputs developed through the studies undertaken on legal architecture.