ECONOMIC COOPERATION IN SOUTH ASIA
SAFTA CAN OPEN NEW AVENUES.
Jan 31 - Feb 6, 2011
A successful South Asia Free Trade Agreement (SAFTA) can achieve the overall goals of rapid trade integration, economic growth, and poverty reduction. SAFTA can become instrument for trade creation, help stimulate competition, attract capital inflows, and encourage transfer of technology. Operationalization of SAFTA is a landmark in the history of the SAARC grouping. As per the agreement, India, Pakistan and Sri Lanka will bring down their customs duties to 0-5 per cent by 2013 while the least developed members Bangladesh, Maldives, Nepal and Bhutan will do it by 2018. New Delhi has a sensitive list of 884 items for non-LDCs and 765 for LDCs. These are those items on which tariff reduction would be carried out.
Liberalization of trade is expected to open new avenues for economic cooperation among South Asian countries in energy supply, hydel electric generation and distribution, shipping, banking, insurance, overland transport and so on.
The leaders of the South Asia Association for Regional Cooperation (SAARC) during 14th summit in New Delhi in April 2007 had predicted a new dawn for South Asia. New Delhi had announced duty-free access for its smaller South Asian neighbors urging member states to ensure effective market access through smooth implementation of trade liberalization programmes. Islamabad had reiterated that Kashmir was the key dispute between India and Pakistan and linked free trade with India to progress on the issue of Kashmir.
The SAARC, which was formed in 1985 at Dhaka with seven member states-Pakistan, India, Bangladesh, Nepal, Sri Lanka, Bhutan and Maldives, could not so far achieved the point where a regional organization becomes superfluous.
SAARC is still dormant. Even 23 years have lapsed, yet it could not achieve the very goal of its regional cooperation. Poverty is the most important and common problem of the member states staring them in the face. Critics call SAARC a talking shop that has failed to improve the lives of the nearly 1.5 billion South Asians since it was set up in 1985 to boost trade and cooperation. They largely attribute SAARC's failure to spur economic development to bickering among member states and the waste of resources on conflict management particularly between India and Pakistan.
SAARC officials widely admit that differences between India and Pakistan, which have fought two of their three wars over disputed Kashmir, hamper development efforts.
Though bilateral issues fall outside the scope of SAARC but the bitterness over the issues remain palpable in the summit meetings. The political tensions and unresolved disputes have surely emerged as a major hurdle in the way of reviving trade ties among SAARC countries. The noble vision of SAARC set by its founders cannot be achieved amid tensions and volatile state of the region.
India-Pakistan peace process has helped in improving the political climate in South Asia in recent years. The process has so far resulted in signing of nuclear risk reduction accord and shipping protocol. If the two sides continue adopting a more positive stance towards each other, it is hoped that both countries would reach an agreement on Siachen, Sir Creek, the visa regime and Kashmir, which are the vital issues.
India and Pakistan are poised to entering into various preferential trade agreements (PTAs), bilateral as well as regional. QIZs type arrangements, which may be included in some of the agreements with EU, US and China and even within SAFTA, would help both Indian and Pakistani exporters and importers to reap benefits of free trade as well as promote greater cooperation. Moreover, Turkmenistan-Afghanistan-Pakistan (TAP) and the Iran-Pakistan-India (IPI) gas pipeline projects may also help in promoting trust and regional economic cooperation between India and Pakistan.
The signing of new shipping protocol was considered in Indo-Pak political circles a historic move and a step forward in improving relations between the two south Asian arch rivals. Such measures can accelerate greater economic cooperation between the two South Asian nations through reduction in tensions and mistrust and bringing in peace and tranquility in the region. South Asia is a poverty-stricken region where majority of the people is regularly experiencing the pangs of hunger, disease and calamities. More than 600 million people live below the poverty line in the region. They direly need a healing touch.
The SAARC leaders have been expressing their firm resolve to combat the problem of poverty with new sense of urgency and pledging to undertake affective and sustained poverty alleviation programs but their pledges went on renewing in every concluding session of SAARC summit for the last 20 years. While the world nations are inclined toward establishing new trade zones to counter the adverse effects of globalization, the SAARC members have been engaged in creating new monsters of regional disharmony and showing rigidity over resolving the intra-regional disputes.
The political tensions and unresolved disputes have ever emerged as a major hurdle in the way of reviving trade ties between the two countries. Though bilateral issues fall outside the scope of SAARC but the bitterness over the unresolved issues ever remained palpable in the SAARC summit meetings. Ironically, the poverty is the most important and common problem of the two states staring them in the face. The peace-promoting economic relations between India and Pakistan have ever been marred by the Kashmir dispute and the cross-border infiltration. Presently, both India and Pakistan are moving closer constantly encountering hurdles.
Free trade relations with India would enable Pakistan to achieve a higher and more equitable GDP growth and will have a salutary effect on prices. Analysts believe that the normalization of Pakistan-India trade would put an economic brake on military escalation in the subcontinent and could lead to economies of scale and greater efficiency, as transportation costs for bilateral trade would be minimal because of their shared land borders.
Undoubtedly, SAFTA would pave the way for free trade of goods among SAARC countries of the region.
The SAARC nations sparsely contribute to the global trade. Its share in global trade hardly stands at two per cent and in intra-regional trade approximately five per cent of the total trade. The trade among the South Asian States is lowest in comparison to the trade within other regional organizations. The trade among the SAARC countries can be enhanced to the level of ASEAN states through implementation of SAFTA withan integrating role of SAARC.