"FDI might in some cases accelerate the growth, but it rarely leads the growth," Dr Mirza Azizul Islam told a launching ceremony of the book 'South Asia: Growth & Regional Integration', a joint publication of the World Bank and Macmillan Ltd, held in Dhaka.

"But, it does not mean that I am opposing FDI, I am very much in favour of FDI," he asserted.

Citing examples of Hong Kong and Singapore whose FDI-GDP ratio were 16 percent and 29 percent during 1991 to 1996, he said in the case of other Asian countries the ratio was less or more than 1 percent.

The FDI-GDP ratio in India is less than 1 percent, while the ratio is 2.4 percent in Taiwan and 3.7 percent in Thailand, he cited.

The finance adviser said rising relative inequality in the South Asian region is a threat to its growth and stability.

"Relative inequalities might result in social destabilisation," said Mirza Aziz, adding that when globalisation has proceeded and countries liberalised, relative inequality also marked a rise.

He, however, advocated for being part of globalisation and liberalisation.

The adviser lamented that considerable political mistrust among the Saarc member countries remains a major constraint for regional integration.

Besides, he said, the large size of India in terms of economy, gross domestic product (GDP), population and land is another constraint for regional integrity.

India has a dominant presence in the region that might create an asymmetrical situation in integration, Mirza Aziz said citing the European Union, of which all countries are comparable or similar in size.

"Due to large size of India, there is always a suspicion that India might get more benefits from regional cooperation," he said, adding that it should be ascertained how the regional cooperation can be beneficial for all. "But, it is not an easy task," he observed.

Commenting on the newly launched book, former adviser Dr Akbar Ali Khan said it missed the poverty issue, which is much talked about in the region.

Farooq Sobhan, president of Bangladesh Enterprise Institute, urged the World Bank to play a supportive role for capacity building in key regional institutions, such as Saarc Secretariat, formulation of a Saarc documentation centre for channeling information among the member countries, and setting up a Saarc energy authority for energy cooperation in the region.

Among others, World Bank Country Director Xian Zhu spoke at the function, while Sadiq Ahmed, director, Poverty and Finance, South Asia Region, World Bank, focused on some features of the book.

According to the book's overview, integration within the South Asian region remained very limited when it made significant progress in integrating with the global economy.

Intra-regional trade as a share of total trade is the lowest for South Asia despite having common cultural affinity and geography among the countries in the region, the overview said.

Despite progress in trade liberalisation, South Asia is the least integrated region in the world due to various types of restrictions on movements of goods and services, it remarked.

However, it said, focusing on regional trade alone will not generate the beneficial productivity and growth effects of integration.

The overview said South Asia has made significant progress in implementing the first-generation policy reforms. Increasingly, South Asia faces the challenges of second-generation policy reforms, which have become the key downside risks to growth, including high cost of doing business, weak institutions, weak knowledge economy and weak infrastructure.

Increasing investment rates will require reducing costs of doing business, improving institutional capacities and addressing infrastructure constraint. South Asia also needs to expand its knowledge economy to raise the productivity of investment, it said.