The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC Summit held in Islamabad, Pakistan.

The Agreement entered into force on 1 January 2006, and the Trade Liberalization Programme commenced from 1 July 2006. Following the Agreement coming into force the SAFTA Ministerial Council (SMC) has been established comprising the Commerce Ministers of the Member States. To assist the SMC, a SAFTA Committee of Experts (SCOE) has been formed. SCOE is expected to submit its report to SMC every six months. The SAFTA Agreement states that the the SMC shall meet at least once every year or more often as and when considered necessary by the Contracting States. Each Contracting State shall chair the SMC for a period of one year on rotational basis in alphabetical order.
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SAFTA
SAFTA is a regional co-operation agreement signed between the member countries of SAARC (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan), with the commitment to strengthen intra-SAARC economic cooperation to maximise the realization of the regions potential for trade and development for the benefit of their people, in a spirit of mutual accommodation, with full respect for the principles of sovereign equality, independence and territorial integrity of all States, in line with the charter objective of promoting economic co-operation. The Agreement on South Asian Free Trade Area (SAFTA) was signed on 6 January 2004 during the Twelfth SAARC Summit in Islamabad and entered into force on 1st January 2006. The agreement outlines a 10 year schedule for trade liberalization, which aims at reducing and eliminating customs duties on cross-border trade. Objectives and Principles The Objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia: a) eliminating barriers to trade in, and facilitating the crossborder movement of goods between the territories of the Contracting States; b) promoting conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development; c) creating effective mechanism for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and d) establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this Agreement.

Who in Maldives benefits form the SAFTA? The arrangement built into SAFTA would facilitate the member countries to trade with a minimum or no tariffs. This is reduce to the total costs of imports from these countries as well as reduce the restrictions on exports of Maldivian

products to these countries. Hence, the main benefits accrued will flow to importers and exporters. Likewise, the trade facilitation arrangements will enhance the opportunities to attract investment from regional countries as well as from those who wish to access the regional Markets via Maldives. Overall, the regional integration is likely to increase the level of regional trade.
What will be the impact of the SAFTA on the economy? The overall impact of SAFTA on the economy can be viewed from the Balance of Payments perspective, or investment and technical co-operation perspectives. On the front of trade, SAFTA will eliminate market-access restrictions within the region. This is likely to increase imports to Maldives from these countries, particularly from India. However, given the narrow export-base of Maldives, a balancing level of export gains may not be achieved. This will dampen the balance of trade and lead to an increased loss of foreign exchange reserves. However, Article 15 of the agreement has a provision for any country facing acute and serious Balance of Payments problems to temporarily suspend the obligation of the agreement. On the other hand, if sufficient investments are attracted from the region, Maldives can potentially improve the export performance and thus gain positively from the arrangement. With the imminent graduation of Maldives from LDC status by 2011, market access to EU and other OECD countries will be hugely limited. However, the SAFTA arrangement will provide free access to the huge markets of India and other countries in the region. It is also important to note that Maldives has secured LDC treatment within the SAFTA arrangement, which, under Article 12 of the agreement entitles Maldives to preferential treatments from the 3 largest economies in the group (India, Pakistan and Sri Lanka).

What industry/service sectors are affected by the SAFTA? SAFTA is an all-encompassing free trade arrangement. Hence, all industries and services will have some affects. Notwithstanding the sensitive lists of member countries, which restrict the level of tariff reduction coverage, all members are required to reduce their current regimes of tariff and non-tariff barriers, which has the potential of increasing trade. As the agreement aims at promoting fair competition and equitable benefits to all countries, each country can be expected to make the best out of the arrangement. Given the current market development level in the region for Maldivian trade, fish exports can be extended to other countries in the region apart from the traditional Sri Lankan market. Likewise, market expansion can be achieved for other industries such as re-exports, and service industries such as tourism.