countries are hesitant to allow mfn status to india. the recourse to a long negative list that restricts the volume of trade should be avoided at all costs. ( g ) • macroeconomic policies such as fiscal and monetary policies should be harmonized to achieve a stable, non - discriminating macroeconomic environment for all the countries in the region • supporting institutions to manage and facilitate integration, for example, setting standards, establishing regional development funds and for dispute resolution should be created. • communication and transport infrastructure between the bordering countries should be improved and upgraded to facilitate increased trade and factor mobility. • legal regulations for investor protection, intellectual property rights enforcement, antitrust law, commercial law, labor relations, financial institutions should be harmonized. • financial markets should be widened and regulatory changes introduced to promote cross - border investment, listings, syndication, bond issues, etc. south asian countries should tap the enormous potential of their large expatriate population in mobilizing investment capital, foreign exchange earnings, skilled manpower and exports of ethnic products and services. india, pakistan, bangladesh and sri lanka together receive about $ 20 billion of remittances from their workers annually but their contribution in domestic capital formation is insignificant. unlike overseas chinese community that has played a substantial role in foreign direct investment, nonresident indians have been a source, to some extent, of professional, technical and managerial skills but not much in terms of large financial outlays. the non - resident deposits transferred to india account for only a miniscule proportion of their wealth holdings abroad. these flows are quite stable in nature and should be able to augment domestic savings for accelerating the pace of investment without creating future debt obligations. innovative products and investment vehicles to attract the savings of nonresident south asians should be encouraged with the help of regulatory agencies. south asian countries have so far missed the boat by not becoming a part of global value chain and participating in international supplier chain arrangements. there is no single business model for participating in this chain and there can be many phases of transition and many modes of involvement. for example, joint ventures, franchising, purchasing by international firms, licensing, sub - contracting, fully owned firm, original equipment, manufacturing, original design and manufacturing, strategic partnerships for technology, overseas acquisition of equity are the diverse means whereby developing country enterprises can gain wide access to international markets at their own level of capability, climb the technology ladder and benefit from globalization. east asia is

this period, in a sense, the policy effects stemming from the ample liquidity provided by the bank, through which concern about the availability of liquidity was eased, may have been greater than those of the bank's policy commitment, namely, its commitment in terms of policy duration. since then, both the economy and the financial situation have been on an improving trend. since fiscal 2002, the year - on - year growth rate of real gdp has been positive, and the year - on - year rate of decline in consumer prices has diminished to almost zero percent. an accommodative corporate financing environment has been supporting these developments. together with an increase in financial institutions'capital adequacy ratios and an improvement in firms'financial strength and profitability, increased confidence among financial institutions and firms about the availability of funds brought about by the quantitative easing policy has produced this desirable environment. the quantitative easing policy framework provides stronger support for economic recovery, the more the economic recovery gains momentum. here, the effects stemming from the bank's commitment in terms of policy duration are gradually playing a larger role than those stemming from ample liquidity provision by the bank. interest rates usually rise with an improvement in economic activity and an increase in prices. the bank's commitment, however, keeps longer - term interest rates low by stabilizing expectations about the future level of interest rates, and this will allow firms to continue to enjoy low funding costs. while funding costs remain low, the rate of return on investment increases with economic recovery, and, accordingly net returns on investments in economic activity will improve. the quantitative easing policy has continued to contribute to the japanese economy with some changes in the way it affects the economy, as i have just described. recently, the market situation that surrounds the policy is changing significantly with the enhanced soundness of the financial system and abatement of anxiety about financial system stability. financial institutions have become more confident about raising funds in the market. furthermore, they are increasingly placing emphasis on strengthening their profitability with a view to improving their credit ratings and raising stock prices, and this may have been reducing their incentive to maintain funds in current accounts at the bank that yield no interest. as financial institutions'demand for liquidity has been declining, their demand for funds supplied through the bank's market operations has decreased. recently, as a result, undersubscription, where financial institutions'bids fall short of the bank's offers, has occurred frequently in funds -