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SAFTA trade pact cleared, to benefit South Asia
By agencies
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Friday, 02 December 2005, 20:30 IST
NEW DELHI: Ushering in a new era in the history of South Asian cooperation, the seven-member Saarc has finalized the South Asia free trade area (Safta), a newspaper said.
Safta, an agreement between Saarc countries India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, was signed during the 12th Saarc Summit in Islamabad last year, is scheduled to come into force on January 1, 2006. It will be fully operational by 2016, the Financial Express said.
The pact holds huge potential for intra-regional trade growth as over 90 percent of the imports by South Asian countries are being sourced from outside the region and a major part of exports of South Asia are made to countries that are not part of the group.
The total intra-regional trade amongst Saarc countries is less than $ 7 billion today as against the total volume of the combined international trade of $350 billion in the region.
India, which is the largest of the seven member countries, stands to gain significantly from the pact. Its total trade with Saarc countries increased over 8 percent to $ 5.2 billion in 2004-05. Benefits accruing to India would keep multiplying in the next ten years of the agreements implementation, trade experts said.
Safta would lead to growth in intra-regional trade from $6 billion to $14 billion within two years of its existence, the paper said.
Indias enthusiasm could be gauged by Prime Minister Manmohan Singhs recent statement in which he said the agreement would lead to growth in intra-regional trade from $ 6 billion to $ 14 billion within two years of its existence.
While it will take some time to resolve complex issues relating to tariff compensation mechanisms, huge negative list of products to be kept outside the agreement and exemptions for a substantial number of products from the strict rules of origin (ROO), these cannot undermine the huge opportunity the FTA holds for the region.
With unity ultimately leading to strength, a proper implementation of Safta could lead to greater recognition of the region in the global arena and lend it a more effective voice on international issues, the paper added.