Higher cost discouraging intra-regional trade

The cost of trading within the region among South Asian countries is twice, and in some cases, even three times, than trading with countries outside the region, according to the minister.

It is important to improve trade facilitation in South Asia to increase the intra-regional trade, said finance minister Shanker Prasad Koirala inaugurating a two-day inception meeting of two projects, ‘Trade and Transport Facilitation Audit in South Asia’ lead by South Asia Watch on Trade, Economics and Environment (SAWTEE) and ‘Promoting Micro, Small and Medium Enterprises (MSMEs) for Inclusive, Equitable and Sustainable Development in South Asia’ lead by UNDP Asia Pacific Regional Centre (APRC), Bangkok, both supported by the Australian Agency for International Development (AusAID), started in Kathmandu today.

Despite the existence of several regional efforts like Agreement on South Asian Free Trade Area (SAFTA), intra-regional trade in South Asia has remained extremely modest due to a number of factors – one of which is trade and transport facilitation-related bottlenecks – he said, expressing hope that the two projects will create a momentum in South Asia and contribute to transforming the region into an international trading hub.

Australian ambassador to Nepal Glenn White, on the occasion, said that since the latest Aid for Trade Report has highlighted the importance of regional projects for enhanced trade, the current initiatives taken by SAWTEE, UNDP APRC and their regional partners would be extremely beneficial in advancing regional economic integration in South Asia.

Likewise, country director of UNDP Nepal Shoko Noda pointed out that unrealised economic potential of women was getting increasing recognition in the global political and economic sphere. “South Asian countries, which hold immense potential in advancing MSMEs, and in which a large number of women are engaged, will not only contribute to increase economic growth of these countries but also empower women,” she added.

Secretary General of the SAARC Chamber of Commerce and Industry Iqbal Tabish mentioned the benefits of trade liberalisation that will not be realised unless trade facilities are rationalized. “Some 75 per cent of MSMEs in South Asia are operating informally and argued that informality of MSMEs has limited their growth potential,” he said, adding that bringing them within the legal purview of the state can lead to higher growth of the sector.

Despite the fall in traditional trade barriers, costs related to trade facilitation, infrastructure and transit have risen over the years, which has promoted informal trade in South Asia, said chair of inaugural session and executive chairman of SAWTEE Dr Posh Raj Pandey. “It has also forced exporters, businesses and consumers to bear additional cost burden,” he said, adding that trade facilitation is a must for effective trade integration.

Welcoming the guests, chief executive director of SAWTEE Dr Ratnakar Adhikari highlighted the main features of the projects and their objectives.
“Trade facilitation audit study project will aim to identify regional benchmark for trade facilitation measures in South Asia, assess the cost incurred due to lack of regional trade connectivity and thickness of borders, as well as the benefits of removing trade barriers, and most importantly, estimate the investment required to address the identified bottlenecks,” he said. “Similarly, the other project will focus on identifying market access barriers faced by MSMEs and advocate for the removal of such barriers.”
More than 50 participants, including researchers, policy makers, private sector representatives and media from different South and Southeast Asian countries are participating in the inception meeting.