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
Bangladesh
Bhutan
India
19.4
57.4
Maldives
Nepal
Pakistan
Sri Lanka
8.4
10.9
25.9
19.2
46.6
13.0
Bhutan
India
5.4
13.5
Maldives
11.2
25.1
Nepal
-19.7
Pakistan
-10.7
Sri Lanka
-9.1
-15.2
Source: Direction of Trade, 2006 IMF
6.3
15.5
59.8
58.5
57.9
-6.6
-13.9
14.3
13.3
-40.2
41.8
11.4
Intra SAARC trade: imports

Growth in Intra-regional Flow of Imports (2004-5) in percent
Bangladesh
Bangladesh
Bhutan
India
Maldives
Nepal
Pakistan
Sri Lanka
86.1
15.3
-50.0
-19.7
25.3
4.3
32.8
15.5
40.1
59.0
59.8
22.5
10.4
-13.9
-40.2
Bhutan
India
38.7
11.2
Maldives
-50.0
28.8
Nepal
8.4
19.2
Pakistan
16.6
Sri Lanka
35.9
-19.6
Source: Direction of Trade, 2006 IMF
64.9
-33.5
26.4
0.0
58.5
10.8
36.9
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
(Pakistan to India)
45
58
95
180
Imports
US $mn
(India to Pakistan)
206
287
521
689
251
345
616
869
Total
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
container)
1,221.10
732.50
1,101.50
875.30
1,232.00
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
container)
1,449.40
834.30
1,569.50
947.60
1,431.00
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!