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SAARC AND SOUTH ASIAN TRADEInternational Conference On SAARC @ 25
16-17 September 2010
Faiqa Umer
Sustainable Development Policy Institute, Islamabad.
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Introduction
SAARC established in 1985.Member countries: Afghanistan, Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka.
Core objectives:
To promote and strengthen collective self-reliance among the countries of
South Asia
To contribute to develop mutual trust, understanding and appreciation of one
anothers problem
To promote active collaboration and mutual assistance in the economic, social,
cultural, technical and scientific fields
To strengthen cooperation with other developing countries To strengthen cooperation among themselves in international forums on
matters of common interest
To cooperate with international and regional organizations with similar aims
and purposes.
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Progress so far
SAARC celebrated 25 years of existence at its 16th summit held on 28-29
April 2010 in the Bhutanese capital, Thimphu.
Formed instruments of regional cooperation
South Asian Free Trade Agreement (SAFTA)
Convention on Fighting Terrorism
SAARC Developmental Goals (SDGs)
SAARC Development Fund
SAARC Food Bank
Observer states include US, Japan, China.
Regional agreement on Trade in Services
Institutions need to address issues of empowerment, and formulate
appropriate implementation and monitoring strategies
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South Asian Trade
Intraregional trade is less than 5% of total trade in South Asia
(World Bank, 2009)
Presence ofTariff and non-tariff barriers
Substantial potential for trade due to high population density and
geographical proximity.
Trade essential to achieve investment, generate employment and
mitigate poverty in the region.
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Intra SAARC trade : exports
Growth in Intra-regional Flow of Exports (2003-5) in percent
Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka
Bangladesh 19.4 57.4 8.4 10.9 25.9
Bhutan
India 5.4 13.5 11.2 19.2 46.6 13.0
Maldives 25.1 6.3
Nepal -19.7 15.5 59.8 58.5
Pakistan -10.7 -15.2 57.9 -6.6 -13.9 41.8
Sri Lanka -9.1 14.3 13.3 -40.2 11.4
Source: Direction of Trade, 2006 IMF
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Intra SAARC trade: imports
Growth in Intra-regional Flow of Imports (2004-5) in percent
Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka
Bangladesh 86.1 15.3 -50.0 -19.7 25.3 4.3
Bhutan
India 38.7 11.2 32.8 15.5 40.1 59.0
Maldives -50.0 28.8 59.8 22.5 10.4
Nepal 8.4 19.2 -13.9 -40.2
Pakistan 16.6 -19.6 64.9 -33.5 58.5 10.8
Sri Lanka 35.9 26.4 0.0 36.9
Source: Direction of Trade, 2006 IMF
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Indo-Pak Trade
Indo-Pak trade:
% of Pakistans total exports: 1.93
% of Pakistans total imports: 3.74
% of Indias total exports: 1.13
% of Indias total imports: 0.31
(ITC, 2006)
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Indo-Pak Trade
2002-03 2003-04 2004-05 2005-06
Exports
US $mn
(Pakistan to India)
45 58 95 180
Imports
US $mn
(India to Pakistan)
206 287 521 689
Total
US $mn251 345 616 869
Pakistan indicates that NTBs need to be tackled first before it grants
MFN status to India.
Indo-Pak trade is being done on the basis of a positive list.
Pakistans exports to India have grown, however imports from India
have grown at a faster pace.
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Trade Facilitation Measures
Source: World Trade Indicators 2008
Indicators South Asia ASEAN NAFTA EU25 World
No. of documents for export 8.38 7.69 4.50 4.82 7.22
Days forExport 32.88 29.13 20.50 28.80 28.80
Cost to Export (US$ percontainer)
1,221.10 732.50 1,101.50 875.30 1,232.00
No. of documents for import 11.31 9.31 5.17 5.64 8.68
Days for import 41.50 29.81 13.17 13.73 32.96
Cost to Import (US$ percontainer)
1,449.40 834.30 1,569.50 947.60 1,431.00
Comparison of different regions in the world:
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SAFTA- Key Features
South Asian Free Trade Agreement (SAFTA) signed at the 12th SAARCSummit in Islamabad, Pakistan.
Build on SAARC Preferential Trade Agreement (SAPTA)
Enhanced scope of regional trade dialogue to include competition, tradeand transportation, harmonization of legislation, banking procedures,forex regulations and immigration processes.
Trade Liberalisation Programme (TLP): reduce tariffs and eliminaterestrictions on quantity of goods traded.
Trade not only in goods, but in services and investment too!
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SAFTA Key features
Non-LDC member states required to reduce existing tariffs to 20
percent within 2 years and then to 05 percent in the next 5 years.
LDC member countries required to reduce existing tariffs to 30percent in 2 years and then to 05 percent in the next 8 years.
Rules ofOrigin: ensure domestic value addition.
Encouraged negotiations for setting ceiling on negative list by each
member country.
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Challenges
Political tensions and conflicts in the South Asia region.
Obstructions to free movement of people, labor, currency and
other forms of capital.
Presence of protectionist trade barriers.
Multiple bilateral/regional issues or agreements aggravatecomplexity of issues.
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Way Forward
Need to move beyond mere framework and policy documents to
include practical provisions.
Official dialogue between South Asian governments throughconferences, meetings and seminars.
Advocacy and Outreach campaign: civil society organizations to
encourage policy dialogue with South Asian parliamentarians.
Develop network of South Asian research institutions focusing on
regional trade.
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Way Forward
Ease of travel restrictions between countries.
Expand positive list of trade items.
Explicit requirement to reduce negative lists over time (instead of 4
year review). Explicit requirement to reduce NTBs.
Make rules of origin flexible.
Fight against terrorism: regional peace essential to encourage
environment conducive to domestic and foreign investment.
Economic integration can in turn, pave the way for regional security
and social development.
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Thank You!