Sherpa Hossainy's Blog

Ineffective SAFTA hurting South Asia’s economic growth

Posted in Bangladesh, Business, Dhaka, Economy, Export and Import by Sherpa Hossainy on June 29, 2011

Published in the Independent on June 29, 2011

Read the article on Independent website

Digital print version

Inadequate trade liberalisation and slow execution of the South Asian Free Trade Agreement (SAFTA) is resulting in a significant loss to consumers in the region, trade policy specialists said on Tuesday.

SAFTA came into existence in 2004 but it is yet to achieve its full potential as intra-regional trade is still minuscule compared to other economic blocs of the world, while external trade is rising briskly.

The experts were speaking at the “Cost of economic non-cooperation to consumers in South Asia” (COENCOSA) regional project review meeting in The BRAC Centre auditorium in Dhaka.

COENCOSA is implemented by Consumer Unity and Trust Society (CUTS) International, India, and Institute for Policy, Advocacy, and Governance (I-PAG), Bangladesh, with support from The Asia Foundation.

Mohammad Faruk Khan, minister for commerce, was present as the chief guest while Dr Gowher Rizvi, adviser on international affairs to the Prime Minister, was the special guest.

Syed Munir Khasru, chairman of I-PAG, said that although South Asian Association for Regional Cooperation (SAARC) came into effect in 1985, regional trade is yet to reach the level that could result in rapid economic development in the region.

“While intra-regional trade ranges between 20-60 per cent of total trade in other regional economic blocs, for SAARC it has been only about five per cent between 1995 and 2005,” Khasru said. Greater economic cooperation will ultimately enhance consumer welfare, he added.

Dr Gowher Rizvi said that there is an untapped potential for increased trade South Asian countries but infrastructural bottlenecks and tense political relations between SAARC nations is slowing down the economic integration process.

The commerce minister blamed politicians, bureaucrats and the civil society for overlooking the interests of common people and making SAFTA ineffective.

“When I seek advice from the bureaucrats, 90 per cent of the time they give me anti-people decisions, such as imposing more taxes,” Khan said. He said that the civil society is working for its own agenda.

The minister also expressed his dissatisfaction over the casual approach of his counterparts in other SAARC countries towards SAFTA.

“All the member countries were required to have reduced the negative-list by 20 per cent in the last SAFTA meeting. Except for Bangladesh, no one came up with the list; rather they asked for more time,” he said.

Khan said: “It goes to show that the political direction from other countries either is not very clear about SAFTA, or, it is very clear that they don’t want to implement it.”

The minister said that the South Asian countries are busy infighting while other regional blocks are increasing trade.

In 1967 intra-regional trade was 12 per cent of the total trade of the ASEAN countries, which rose to 26 per cent this year. Similarly, EU intra-regional trade went up to 55 percent in 2011 from 35 per cent in 1992; trade between NAFTA countries went up from 38 per cent in 1994 to 58 per cent in 2011. The African intra-regional trade also went up from 10 per cent in 1994 to 23 per cent this year.

“SAARC trade in 1995 was 2.28 per cent, and now it is 5 per cent. We are moving at snail’s speed,” Khan said.

The minister said that the increasing trade ties among South Asian countries will create a competitive business environment leading to higher standards of living, new investment opportunities, infrastructural development, better products and highly paid jobs.

SAARC members are still to initiate an institutional framework to take further steps toward full economic integration.

There has been no discussion about the possible next moves (following the implementation of FTA), such as to form a customs union, and eventually a common market and a regional currency with a common central bank.

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