SAARC AND SOUTH ASIAN

TRADE
International Conference On SAARC @ 25

16-17 September 2010

Faiqa Umer
Sustainable Development Policy Institute, Islamabad.
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
another’s 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.
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
South Asian Trade
 Intraregional trade is less than 5% of total trade in South Asia
(World Bank, 2009)

 Presence of Tariff 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.
 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

 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

Indo-Pak Trade

 Indo-Pak trade:
 % of Pakistan’s total exports: 1.93

 % of Pakistan’s total imports: 3.74

 % of India’s total exports: 1.13

 % of India’s total imports: 0.31

(ITC, 2006)
Indo-Pak Trade
2002-03 2003-04 2004-05 2005-06

Exports
US $mn 45 58 95 180
(Pakistan to India)
Imports
US $mn 206 287 521 689
(India to Pakistan)
Total
251 345 616 869
US $mn

 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.
 Pakistan’s exports to India have grown, however imports from
India have grown at a faster pace.
 Trade Facilitation Measures
Comparison of different regions in the world:

Indicators South Asia ASEAN NAFTA EU25 World

No. of documents for export 8.38 7.69 4.50 4.82 7.22

Days for Export 32.88 29.13 20.50 28.80 28.80

Cost to Export (US$ per

1,221.10 732.50 1,101.50 875.30 1,232.00
container)

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$ per

1,449.40 834.30 1,569.50 947.60 1,431.00
container)

Source: World Trade Indicators 2008

SAFTA- Key Features…
 South Asian Free Trade Agreement (SAFTA) signed at the 12th SAARC
Summit in Islamabad, Pakistan.

 Build on SAARC Preferential Trade Agreement (SAPTA)

 Enhanced scope of regional trade dialogue to include competition, trade

and transportation, harmonization of legislation, banking procedures,
forex regulations and immigration processes.

 Trade Liberalisation Programme (TLP): reduce tariffs and eliminate

restrictions on quantity of goods traded.

 Trade not only in goods, but in services and investment too!

SAFTA – Key features
 Non-LDC member states required to reduce existing tariffs to 20
percent within 2 years and then to 0–5 percent in the next 5 years.

 LDC member countries required to reduce existing tariffs to 30

percent in 2 years and then to 0–5 percent in the next 8 years.

 Rules of Origin: ensure domestic value addition.

 Encouraged negotiations for setting ceiling on negative list by each

member country.
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 aggravate

complexity of issues.
Way Forward…
 Need to move beyond mere framework and policy documents to
include practical provisions.

 Official dialogue between South Asian governments through

conferences, 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.
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.
Thank You!