The Summit of the South Asian Association of
Regional Cooperation (SAARC) is being held this time at the advent of
WTO regime which is about to come into force with effect from January
Despite having a market of over one fourth of
world's total population, the Saarc region unfortunately lags in
grabbing its due share out of the global economy.
This is the time that the people at the helm of
affairs should work together to consolidate the available resources
and use them productively to change the fate of a vast majority of the
people who have been pushed below the poverty line in all the member
countries of the SAARC region.
Although the member countries of Saarc had decided
at the time of its inception in 1985 to develop an atmosphere of
harmony among the member states and resource mobilization for the good
of the people, yet the cooperation and harmony is the most missing
element in this organization so far.
Contrary to the uncertain situation prevailing in
the Saarc region for the last 5 decades, the people of the European
countries have set an example unity and spirit for economic
cooperation before the world by developing a strong economic bloc
namely European Union which is no doubt emerging as the strongest
economic zone on the world map.
Unfortunately, this spirit could not be
demonstrated in this region mainly because of the political
differences between India and Pakistan due to Kashmir dispute
allegedly created by the British rulers while leaving the
sub-continent 56 years ago.
Consequently, this region could not achieve the
desired level of socio-economic growth and the people of the two
countries are in the trap of huge foreign debt. India owes over $117
billion and Pakistan around $36 billion to the international lenders.
It is the high time that the disputes among the
member countries should not be allowed to prolong in the larger
interest of the people as well as the region.
It sounds amazing that Pakistan's balance of trade
with Saarc countries was on the negative side when compared the
figures of trade during the year 2001.
According to break down of the trade figures,
Pakistan's exports to Bangladesh were estimated at $133.89 million,
imports $33.27 million with a trade balance of $100.2 in favor of
Pakistan. The volume of trade was estimated at $53 million with Bhutan
during that said year. Out of the total trade exports from Pakistan
were estimated at $28 million against the imports worth $26 million
from Bhutan indicating a $0.02 million in favor of Pakistan. While
glancing at the trade volume of India during 2001, the exports were
estimated at $55.43 million against the imports estimated at $238.33
million, tilting highly in favor of India. Trade with Sri Lanka was
estimated around $110 million. Out of the total volume of trade $75
million were exports from Pakistan and imports worth $35.18 million
from Sri Lanka. The trade with Maldives and Nepal were insignificant.
The total volume of trade with Saarc countries was estimated at $576
with a negative sign of $39.55 million.
The major items of exports to the Saarc countries
were including textile yarn and fabrics, vegetable and fruits. Rice,
fish, dried salted, cotton, sugar, cane etc.
Major items of imports from Saarc countries include
sugar, cane, organic chemicals, oil-cake residue of soya beans, tea,
jute, iron ore, dying, tanning materials, plastic in primary form,
rubber manufacturers, betal leaves, coal, vegetable and fruits, jute
cutting, transport vehicles and equipments, iron and steel.
The Saarc states approved the establishment of an
Inter Governmental Group to launch the South Asian Preferential
Trading Agreement (SAPTA) in order to promote business among
themselves under the concessionary tariffs agreements. The idea began
to take shape, when SAPTA was signed in 1993, in the wake of SAARC
summit. SAPTA was formally launched on December 8, 1995. Three rounds
of trade negotiations have so far been completed under SAPTA: The
first round of negotiations under SAPTA was symbolic in nature and
covered only six per cent on the intra-regional trade. A total of 226
items were offered for concessions by all the contracting states in
SAPTA-I comprising 106 concessions made by India, 35 Pakistan, 31 Sri
Lanka, 17 Maldives, 14 Nepal, 12 by Bangladesh and 11 by Bhutan.
Pakistan also allowed duty relief on as many as 35
commodities including essential items like spices, fibers, textiles,
pulses medical and medical herbs, leather, chemicals and other goods
being imported from Saarc countries.
The second round of negotiations (SAPTA-II)
concluded in November 1996 and resulted in concessions being exchange
on 1871 tariff lines by all the member states reflecting an increase
by almost ten-fold over SAPTA-I. This comprised 902 concessions by
India, 363 by Pakistan, 233 by Nepal, 226 by Bangladesh, 95 by Sri
Lanka, 47 by Bhutan and 5 by Maldives. These concessions have become
operational from March 1, 1997. Unlike the first round, the second
round of SAPTA covers both tariff and non-tariff and was expected to
increase the intra SAARC trade exponentially.
The third round of trade negotiations commenced in
1997 aiming to further expand the list of products, deepen tariff
concessions and remove non-tariff barriers. In SAPTA-III, trade
concessions were increased to 3456 commodities reflecting almost a
doubling over SAPTA-III. It maybe recalled that in the first and
second round, trade negotiations were conducted on product to product
basis. However, in the third round, the negotiations were conducted
The Central Board of Revenue (CBR) in Pakistan
announced new concessions duty rates on the import of 685 items from
the seven Saarc member states including India in June 2002. The duty
concessions granted under the SAPTA on the 685 items, if imported from
the developed countries of Saarc (India and Sri Lanka) would range
between 10-20 per cent of the existing tariff and if imported from the
least developed countries (LDCs) i.e. Bangladesh, Nepal, Bhutan and
Maldives, would range between 10-3 per cent.
SAPTA-IV first meeting of Inter-Governmental Group
on trade liberalization to initiate the fourth round of trade
negotiation under SAPTA was held in March 2002. For the fourth round,
it has been decided that the negotiations would, as far as possible,
be conducted on chapter-wise, sectoral and across-the-board basis.
One of the core principles of the SAPTA agreement
is that there should be special treatment for LDCS through the
consideration of additional measures. It was accordingly decided in
1999 to reduce the domestic content requirement further under the
SAPTA rules of origin to enable the smaller and least developed
countries to benefit equitably from economic liberalization. This
reduction would apply to all products covered so far in the trade
SAPTA was envisaged primarily as the first step
towards the transition to a South Asian Free Trade Area (SAFTA)
leading subsequently, towards in customs union, common market and
economic union. In 1995, the sixteenth session of the council of
ministers held in Delhi agreed on the need to strive for the
realization of SAFTA and to this end an Inter-governmental Expert
Group was set up in 1996 to identify the necessary steps towards
moving into a free trade area. The Male Summit in 1997 recognized the
importance of achieving a Free Trade Area by 2001, however, the
objective of a free trade area is still in the pipeline.
Earlier, the Saarc Summit had formally set South
Asian Free-Trade Area (SAFTA) as an eventual goal and reached an
agreement to transform the region into a free trade zone at least by
According to Economist London a more ambitious
trade agreement on a common market of the whole region, originally due
to be agreed, this year now looks unlikely to come into force before
In fact, Saarc has not been able to make much of
headway due to worsening bilateral relations between member countries.
Progress is possible only if there is a manifestation of strong
political will in the member countries to forge ahead notwithstanding
the problems of bilateral relations.
The progress has been hamstrung by specific
interest of individual members and perceived fears of losing market if
concessional trade is open up. However, it must be clearly understood
that international trade is not a zero-sum game. Where one country?s
gain in another?s loss; but a vehicle through which all participants
can gain by exploring their competitive advantage. SAFTA will provide
enlarged captive market for exporters of member countries, thus
enabling them to compete in the international marketplace more
Apprehensions have also been expressed in some
circles, that the trade prospects under SAFTA are limited due to
similarities in the structure of production in Saarc countries. This
is a rather myopic approach, as the Customs Union Theory amply
demonstrates that in cases where the economies are competitive,
individual members, by specializing in the products and product
categories in which they can produce of comparatively lower cost, can
enhance the total welfare of the region by trade creation. European
Union which started off with six countries with similar production
structure is a successful case in point. In case of product categories
where economies are complementary, the productive activity can be
accelerated through subcontracting and induction of technology made
feasible by extension of the market.
Indian prime minister Atal Behari Vajpayee said
that he would attend the Saarc summit in Islamabad in January and that
he wanted bilateral talks with Pakistan also not be pointlessly
Pakistani politician Maualana Fazalur Rehman who
recently visited India said that he urged Vajpayee to take the next
bold step after initiating the fresh peace moves. In his remark
Vajpayee said that we had tried to sort out our differences by war. It
did not solve the problems.
Soon after saying the Simla agreement could be the
basis of talks between the India and Pakistan.
South Asian Association of Regional Cooperation (SAARC)
was signed in December 1985. The member countries are Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The region has
more than 25 per cent of the entire world's population with a combined
GDP of $300 billion.
Today, the share of SAARC in world trade is hardly
1 per cent while the share of intra SAARC trade is only 3 per cent of
its global trade. India exports to the SAARC region in 2000-01
amounted to paltry 4 per cent of its total export trade while
Pakistan's were a mere 3 per cent. This compares very poorly with 63
per cent intra Europe trade, 37 per cent for North America and 38 per
cent for East Asia. These figures speak volumes on vast scope for
trade expansion, which is also evident from the trade worth billions
of dollar taking place through unofficial channels.
The basis of cooperation of SAARC community was to
promote peace, harmony and stability in the region. But, later on,
there seems a shift in its objective i.e. to build cooperation in the
economic sphere as well. Thus, it was decided that there should be
trade interaction between the member countries.
In 1987, the representatives of the National
Planning Organization met for the second time in Islamabad and
recommended that in view of the adverse international economic
situation facing the region, there was a need to pool resources for
long-term regional cooperation.
Recognizing asymmetries at the development levels
and the fact that the share of SAARC in world trade was relatively
small, the meeting recommended that analytical studies need to be
carried out in the first instance to facilitate identification of
priority areas for economic cooperation. As a result of this
recommendation, a consultant was commissioned to carry out a study on
trade, manufacturers and services (TMS) in the South Asian region. The
TMS study, which was completed in 1991, considered economic
cooperation among the countries of the SAARC region as an inevitable
imperative for promoting all-round development of the region. In May
1991, the council of Ministers at their North Session at Male endorsed
the Study and established a high-level Committee known as the
Committee on Economic Cooperation (CEC) comprising Commerce/Trade
Secretaries of the SAARC member states.
The CEC was mandated to formulate and oversee
implementation of specific measures, policies and programs within the
SAARC framework to strengthen and enhance intra-regional cooperation
in the fields of trade and economic relations. With the creation of
the CEC, regional economic cooperation was formally institutionalized.
Over the years, the CEC has emerged as one of the
most important groups within the SAARC having a mandate over economic
and trade issues. The CEC has provided recommendations and guidance in
identifying new areas for cooperation on economic and trade related
matters as well as considering reports of constituted groups.
In fact, the mandate of the CEC includes monitoring
cooperation in areas such as standards and measurement, customs and
the harmonization of procedures, preferential trading arrangement,
rules of origin, agreements for the promotion and protection of
investments within the SAARC region as also for the avoidance of
double taxation; Setting up of a SAARC Arbitration Council, sharing
information on economic and trade related matters; taking note of
special circumstances of Least Developed Countries (LDCs) within the
region; and formulation of joint strategies to be adopted in
multilateral negotiating for the recommendations of the CEC are
submitted to the Standing Committee (of Foreign Secretaries) and
through it to higher bodies, namely the Council of Ministers and
SAARC has also initiated action on a series of
practical measures to facilitate the process of economic integration.
A group on customs cooperation was set up in 1996 and so far has held
three meetings. It was inter-alia decided to harmonize HS lines and
customs rules and regulations, simplify procedures for intra-regional
exports; upgrade infra-structural facilities and provide training
facilities. A customs action plan was drawn up in Islamabad in April
1997 and agreed by all member states.
The need to improve the transport infrastructure
and transit facilities in the region was recognized and the 11th
session of the SAARC Council of Minister in Colombo directed the CEC
to take appropriate steps in this regard.
Accordingly, a study was commissioned to assess the
existing transport infrastructure and transit facilities, including
procedural and documentation issues in the region in relation to
volume and composition of the existing trade in the region and to make
recommendations for their improvement, with a view to enhancing trade
within and outside the SAARC region. The study made far-reaching
In the area of trade and tariff which are critical
to individual member states and to the region as a whole, particularly
those relating to multilateral negotiations in World Trade
Organization (WTO), World Customs Organization (WCO), World
Intellectual Property Organization (WIPO) etc; regular consultations
are held not only at the headquarters of such international
organizations, such as Geneva, but also in the member states
themselves, so as to effectively coordinate, project and protect their
collective interests. This process of consultation has been
intensified so that wherever possible, a regional position may be
taken which is compatible with the overall principles of SAARC, and
which reflects the needs and requirements of the LDCs in the region
through the provision of special and more favorable concessions.
In this regard, SAARC commerce ministers issued a
declaration on the eve of the second WTO Ministerial Conference held
in Geneva 1998. Consultations were also held with regard to the WTO
ministerial Conference held in Seattle in 1999 and the SAARC commerce
ministers issued a preliminary joint statement on the issues likely to
be considered at the meeting.
The 11th SAARC Summit was held at Katmandu (Nepal)
in January 2002. In the declaration, the Heads of State or government
agreed to accelerate cooperation in the core areas of trade, finance
and investment to realize the goal of an integrated South Asian
economy in a step-by-step manner. Recognizing the need to move quickly
towards SAFTA, they directed the council of ministers to finalize the
text of the Draft Treaty Framework by the end of 2002, which in fact,
was due to be finalized by the end of 2001 as per decision at the 10th
SAARC Summit. They also directed that in moving towards the goal of
SAFTA, the member states expedite action to remove tariff and
non-tariff barriers and structural impediments to free trade. They
also instructed to conclude him meeting of on trade liberalization for
fourth round of trade negotiations under SAPTA as early as possible.
Conscious of the magnitude of poverty in the
region, and recalling also the decision of the UN Millennium Summit
2000 to reduce the world poverty in half by 2015, they made a review
of the SAARC activities aimed at poverty alleviation and decided to
reinvigorate them in the context of the regional and global
commitments to poverty reduction. It was agreed that a special session
on poverty alleviation at the ministerial level should undertake a
comprehensive review and evaluation of the status of implementation of
poverty eradication policies and programs carried out so far, and to
recommend further concrete measures to enhance e effective cooperation
at the regional level to the 12th SAARC Summit.
They also called for an early realization of a
rule-based and non-discriminatory world trade regime. In this context,
they appreciated the positive elements of the 4th WTO ministerial
conference held in Doha and called upon the developed countries to
fulfill their commitments to address the particular concerns and needs
of the developing and the least developed countries.
This time the Saarc Summit is being held in
Islamabad at a time when the implementation of WTO rules for
globalization of free trade is approaching fast. While the developed
world in order to protect their economic interests has already
developed regional economic zones, the South Asian Region was still in
the process rather limping towards that important goal to refuge its
developing economies under the umbrella of a common market.
Hopefully, the heads of the states of the seven
countries would realize the challenges which are in the store under
the garb of WTO.
Our region has a huge market, enormous resources
and a sizeable volume of common trade. Time has come that we should
pool our resources and consolidates our economic interests like others
elsewhere in the world.