Regional trade and economic cooperation in South Asia

Regional trade and economic cooperation in South Asia

 Md. Joynal Abdin

Financial Express on April 12, 2009

 GLOBALISATION polarised the world and made international trade very competitive. Each and every country is trying to exploit whatever trade opportunities are available. The World Trade Organisation (WTO) contracting countries are facing various barriers to trade promotion. Due to bureaucratic and time-consuming process of removing the barriers, many countries are now thinking of alternatives like regional and bilateral free trade agreements for duty-free market access for many of their products.

 The European Union (EU), considered a model of regional integration, has emerged an economic power. It acts as a unit in various international bodies like the UN and the WTO.

 The South Asian leaders formed South Asian Association for Regional Cooperation (SAARC) and adopted South Asian Preferential Trading Arrangement (SAPTA) and South Asian Freed Trade Agreement (SAFTA), keeping this in mind. The SAFTA came into effect January 01, 2006 for free trade among the eight SAARC member countries: Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka. South Asia is miles from the cherished goal of free trade.

 Bangladesh must study and analyse the opportunities and disadvantages of business under the SAFTA. The business community must strengthen their strengths to take opportunities of the SAFTA and prepare to overcome their weakness to avoid its disadvantages.

 Bangladesh does need to assess properly the possible effects of SAFTA on its trade with other SAARC member-countries, whether or not it would increase trade, if not why? Bangladesh should raise the issue of its major exportable products in the  negative list in the next trade negotiations with the SAARC countries under the SAFTA. It should study the barriers its businessmen are facing in doing business with the other SAARC countries to pinpoint the measures to make SAFTA more effective.

 The study should concentrate on analysing the possible impact the SAFTA would have on Bangladesh’s trade with the SAARC countries. It should identify Bangladesh’s major exportable products in the negative or sensitive list of the SAARC countries, so that it can take up the issue in next trade negotiations under the SAFTA.

 Bangladesh should identify major barriers to intra-SAARC trade. It should take up the issue of making SAFTA an effective regional trade arrangement by removing the problems.

 The study should identify the opportunities and disadvantages of the SAFTA. However, an in-depth study requires for a researcher to travel all the SAARC countries to meet their ministers and officials to get their views on the issues involved. This is possible only when the required statistics is available.

                Bangladesh’s trade with SAARC countries

                                                                                         (U.S $ in Million)

Year SAARC Countries       World         Percentage

1997/98     1160.77     12696        9.14 %

1998/99     1444.80     13342        10.82 %

199/2000   1040.40     14155        7.35 %

2000/2001 1402.46     15830        8.85 %

2001/2002 1183.29     14526        8.14 %

2002/2003 1563.41     16206        9.64 %

2003/2004 1885.76     18457        10.21 %

2004/2005 2398.87     21832        10.98 %

2005/2006 2342.41     25272        9.26 %

2006/2007 2855.04     29123        9.80 %

2007/2008 4155.71     35735        11.62 %

                     Source: EPB. 

 Bangladesh’s trade with SAARC countries is rising slowly though, interrupted at times. But this trade under the SAFTA has not risen as it should have.

However, Bangladesh’s trade with rest of the world has risen sharply. It means SAFTA has brought no significant beneficial effect for Bangladesh trade. 

Bangladesh exports to, and imports from SAARC countries

 Fiscal Year         Import From SAARC Countries     Export to SAARC Countries

1997/98     1036.58     124.19

1998/99     1340.27     104.53

199/2000   937.48       102.92

2000/2001 1299.04     103.42

2001/2002 1092.73     90.56

2002/2003 1439.17     124.24

2003/2004 1734.71     151.05

2004/2005 2171.58     227.29

2005/2006 2026.12     316.29

2006/2007 2486.47     368.57

2007/2008 3696.39     459.32

 While Bangladesh’s imports from SAARC countries have increased significantly after the SAFTA was activated, but its exports have not increased accordingly.

Comparison between Bangladesh’s export to SAARC countries and world, before and after SAFTA was activated:

Fiscal Year         Export to SAARC Countries Export to World Market         Percentage of Export

 1997/98     124.19       5172 2.40 %

1998/99     104.53       5324 1.96 %

199/2000   102.92       5752 1.78 %

2000/2001 103.42       6467 1.59 %

2001/2002 90.56         5986 1.51 %

2002/2003 124.24       6548 1.89 %

2003/2004 151.05       7603 1.98 %

2004/2005 227.29       8655 2.62 %

2005/2006 316.29       10526        3.00 %

2006/2007 368.57       12177        3.02 %

2007/2008 459.32       14110        3.25 %

Under the SAFTA arrangement, every member-country retains the right to protect its industry by imposing restrictions on imports. The list of restricted products is known as the sensitive list of negative items. The big negative list under the SAFTA calls for  a careful study and review.

The following are the major exportable products of Bangladesh in the negative list of the other SAARC countries under the SAFTA regime. Products are namely,

01.   Woven Garments – HS Code – 5208.11.00 – 5911.40.00

02.   Knitwear – HS Code – 6101.20.00 – 6310.90.00

03.   Lather Goods & Foot wars – HS Code – 4107.11.00 – 6406.99.00

04.   Ceramic Products – HS Code – 6901.00.00 – 6914.90.00

05.   Jute & Jute Goods – HS Code – 5601.10.10 – 5705.00.90

06.   Tea – HS Code – 0902.10.00 – 0902.40.00

07.   Handicrafts –HS Code – 4202.11.00

08.   Calendars – HS Code – 4910.00.00

09.   Bicycle – HS Code – 8714.11.00 – 8714.99.00

10.   Pharmaceuticals Product – HS Code – 3001.20.00 – 3006.92.00

11.   Meat – HS Code – 0201.10.10 – 0210.99.20

12.   Vegetables – HS Code – 0601.10.00 – 0801.11.00

13.   Ship (Finished Vessels) – HS Code – 8901.10.10 – 8908.00.90

Afghanistan listed 18 major exportable products of Bangladesh in its negative list under the SAFTA regime. They include RMG, ceramics and handicrafts etc. 

The negative list of Pakistan contains 39 major exportable products of Bangladesh. They include RMG, green tea, light engineering products, bicycle etc.

The negative list of India under the SAFTA regime contains  27 major exportable products of Bangladesh. They include RMG, textile materials, footwear’s, meat, sports item, ceramic and tiles etc.

The negative list of Nepal under the SAFTA regime contains 49 major exportable products of Bangladesh. They include RMG, textile materials, tea, ceramic and tiles etc.

The negative list of Bhutan under the regime contains six major exportable products of Bangladesh. They include RMG, textile, and green tea.

The negative list of Sri Lanka under the SAFTA contains 53 major exportable products of Bangladesh. They include meat, tea, textile, ceramics, households, and RMG.

The negative list of the Maldives under SAFTA regime contains  12 major exportable products of Bangladesh. They include fishing vessels, RMG, tea and jute products.

The other SAARC countries use very high rate of tariff structure as tariff barriers to obstruct imports.

There are also non-tariff barriers to trade in the SAARC region. These include: a.  Lack of Trust; b. Lack of Land Connectivity; c. Transit Crisis; d. Lack of Inter Border Transportation Entrance; e. Complicated VISA system; f. Political Conflict; g.  Lack of ICT support and h. Large Negative List.

However, the SAFTA can be more effective if the agreements thereof are properly implemented, the tariffs are reduced for intra-SAARC trade, the non-tariff barriers are removed, the negative lists are shortened and the private sector representatives are involved in the negotiations.

A SAARC task force does need to identify the problems for taking remedial actions. If a coordinated common economic policy is taken and a regional fund is created to promote poverty reduction, economic cooperation among the member-countries of the SAARC can be strengthened. 


Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

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