SIGNIFICANCE OF REGIONAL COOPERATION

KANWAL SALEEM
(feedback@pgeconomist.com)

Feb 27 - Mar 4, 20
12

South Asian Association for Regional Cooperation (Saarc), with India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka as members, was established at the first Saarc Summit held on 4-8 December 1985. Afghanistan became its eighth member during the 14th Saarc Summit held in April 2007.

India, Pakistan, and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCSs) and Afghanistan, Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States (LDCSs).

The Saarc Preferential Trading Arrangement (SAPTA) provided a framework for exchange of tariff concessions and also for liberalization in para-tariff and non-tariff measures with a view to promoting trade and economic cooperation among the Saarc member countries.

The agreement on South Asian Free Trade Area (Safta) was signed during the 12th Saarc Summit held at Islamabad in January 2004 which came into force from 1st January 2006.

Safta, inter alia, prescribes a phased Tariff Liberalization Programme (TLP) according to which all the member states would reduce their tariffs, at the most favoured nation (MFN) applied rate existing as on 1st January 2006, to zero to five percent within ten years of the agreement coming into force.

This TLP would cover all tariff lines except those items kept in the sensitive list by each country. With the Safta agreement coming into force, there would be no more negotiations under Sapta.

Trade diversification reflects an economy's growing competitiveness resulting from its broadening productive base with processes getting more efficient, improving fundamentals, and its increasing willingness and capabilities to effectively integrate with the world economy. Asia and Asean region is India's largest trading partner.

During the period April- September 2010-11, Asia and Asean region accounted for about 58 per cent of India's trade (exports and imports). Europe and America, together, account for around 31 per cent of India's trade.

China and India have agreed to endeavor to raise the volume of bilateral trade to US$100 billion by 2015.

Trade with China has already crossed US$42.4 billion during 2009-10. Major items of Indian exports to China include iron ore, primary and semi-finished iron and steel, plastic, linoleum products, processed minerals, inorganic/ organic/agro chemicals, minerals and ores, drugs, pharmaceutical and fine chemicals. Major imports from China include electronic goods, coal, coke, briquettes, organic chemicals, machinery and medicinal and pharmaceuticals products.

Within South Asia, the vision towards a meaningful economic cooperation is being pursued within the ambit and under the banner of Saarc. However, real potential existing in the region is yet to exploit, as member countries of the region lack meaningful cooperation. Intra-Saarc investment is negligible. Till now the South Asian countries have concentrated their efforts in attracting FDI to their respective countries and a comprehensive strategy to enhance and stimulate intra-region investment that is key to development in the region.

On overage, only about 4-percent of total global trade of Saarc countries is accounted for by international trade.

In order to boost Indo-Pak trade through Wagah land route in Punjab, businessmen both from India and Pakistan are advocating that barter trade between Jammu and Kashmir and Pakistan should be stopped as goods from all regions are now being traded tax free in Kashmir, affecting trade in other regions and also amounting to huge revenue loss for both the governments.

They said, "Initially, this system of trade was started so that the local (residents of Jammu & Kashmir) could benefit but later on traders started importing duty-free goods and sold them in other parts of the country." As a result, the imports from Wagah land route, was affected, as it attracts import duty.

They said there should also be a container movement, as trade through Wagah land route is still limited to truckload of goods in sacks that are bought across the border and unloaded. "We need to upgrade to container loads with free passage for convenience," they added.

Presently, the main source of revenue at Wagah land route is import of dry/fresh fruits from Afghanistan (via Pakistan). There is no import of any item of Pakistani origin from the route.

In 2010-11, 94.57 per cent of the total target revenue was achieved, out of which duty on imports was Rs55.51 crores. The total cargo cleared of import of dry/fresh fruits from Afghanistan (via Pakistan) was 67337 mt in 2010-2011.

It may be noted that India and Pakistan together account for roughly 80 per cent of the total GDP of the Saarc countries.

Experts believe that the trade with these two countries will further achieve a new milestone, once the state-of-the-art ICP becomes operational. After the completion of ICP, the infrastructure will enable ten times the number of trucks to pass conveniently.

Leading businessman and Vice-President Saarc Chamber of Commerce & Industry (SCCI), Pakistan Chapter Iftikhar Ali Malik said all member countries of SCCI must work together to strengthen and promote existing economic ties coupled with durable peace besides accelerating development activities for welfare of people of the region.

He said that 65 per cent of total South Asian trade potential has not been exploited, adding that it is one of the key reasons for instability in this region. He said that the intra-regional trade figures of South Asian are disappointing as trade in the region constitutes only 1.4 per cent of the total world imports and only 27.9 per cent of the GDP, the lowest in the world.

He said although South Asia has significantly reduced import tariffs, the cost of trading across its boarders is one of the highest in the world. A number of non-tariff barriers have been identified which hamper trade and increase cost.

He said that SCCI would provide impetus to liberalization of inter-SAARC through SAFTA.

Mr. Malik said that with rapid advancement of technology the need for sustainability and survival has become crucial perspective for firms throughout the world as competition grows gruesome.

He said that current global crunch has become a setback for countries throughout the world especially in developing and transition economies. Therefore, regional cooperation is one of the most important phenomena today.

He said that the world today has now become a global village and the integration of business and multinational firms has made the world a smaller place to live in. "Distances and time are no longer the constraints for business across the globe."