South Asia lags behind despite huge potential

Despite huge potential, South Asia lagged behind compared to other regional groups, according to the experts.
There is immense economic potential in the region," vice chair of National Planning Commission Prof Dr Govind Raj Pokhrel said addressing a two-day regional consultation on 'Deepening Economic Cooperation in South Asia: Expectations from the 18th SAARC Summit' here in Kathmandu today.
Stressing on improving trade facilitation to boost intra-regional trade, he also highlighted on the potential of regional energy cooperation. The recent efforts of the government to promote energy cooperation with India are indication in the right direction, which could further facilitate regional energy cooperation, he added.
The programme – being organised as a side-event to the 18th SAARC Summit to provide useful recommendations to deepen economic cooperation in South Asia – was organised by South Asia Watch on Trade, Economics and Environment (SAWTEE), National Planning Commission and Federation of Nepalese Chamber of Commerce and Industry (FNCCI), in collaboration with
German Cooperation for Development (GIZ), CUTS International, India Council for Research on International Economic Relations (ICRIER), and Friedrich Eburt Stiftung.
President of FNCCI Pradeep Jung Pandey, on the occasion, provided an account of the barriers faced by the business community in conducting trade within South Asia. He also stressed the need to go beyond trade in goods and also look as how to exploit the untapped potential of the services sector.
More important he pointed out the need for greater economic as well as people-to-people connectivity in the region, and argued that normalised trade relation between India and Pakistan is necessary for South Asian Association for Regional Cooperation (SAARC) to move forward.
Inaugurating the programme, chief guest and minister of Foreign Affairs Mahendra Bahadur Pandey said that SAARC has long dreamed of deeper regional cooperation for economic growth and prosperity and has also undertaken initiatives to facilitate trade and investment, and improve regional connectivity. "However, several constraints like financial and investment-related, largely affect the efficient implementation of trade and transport facilitation measures," he added.
Expressing hope that SAARC would undertake necessary steps to promote intra-regional investments and attract foreign direct investments (FDIs), Pandey said that through the effective implementation of the SAARC Agreement on Trade in Services (SATIS), SAARC could see higher growth in the services sector.
Most countries in the region have failed to meet the Millennium Development Goals (MDGs), he said, emphasising that the SAARC Development Goals (SDG) should be aligned with the Sustainable Development Goals in line with the post-2015 development agenda.
He also highlighted the necessity to take mitigation and adaptive measures to address the threat of climate change, which is going to impact, among others, food security of the region.
Strengthening of regional cooperation on this front is essential, he said, expressing hope that the 18th SAARC Summit would be able to send across a strong message that SAARC leaders are ready to revitalise and implement all past initiatives undertaken by SAARC to deepen regional integration.
Likewise, an independent analyst from India Major General (Retd) Ashok Mehta, on the occasion, rightly highlighted the role of track-II approach in moving forward relevant issues to track-I. He spoke about the Kathmandu Declaration signed at the 3rd SAARC Summit, and how SAARC went against its original Charter to address the issue of peacekeeping, which was viewed as a security issue and was thus beyond SAARC mandate.
He also advocated for a collective regional stance on peacekeeping issues at the UN, through the formation of a regional consultative mechanism to discuss the issue at the political, academic and field level. "It would pave the way for enhanced economic cooperation," he added.
Despite the existence of SAARC, progress in deepening regional integration has been frustratingly slow and gains have only been modest, said executive chairman of SAWTEE Dr Posh Raj Pandey speaking as the chair of inaugural session.
Therefore, what is needed to move SAARC forward is political will and sincere commitments at the highest level, he said, adding that informal trade in the region being substantially higher than formal trade is testimony of policy-induced trade barriers, which need to be overcome to make SAARC a truly economically integrated region.
Importantly, he stressed the need to reinvent the regional development paradigm with inclusiveness.
Earlier, executive director of SAWTEE Dr Hiramani Ghimire welcoming the participants said that the regional consultation is an opportunity to discuss what can realistically be done to enhance economic cooperation in South Asia, and provide recommendations for the 18th SAARC Summit.
The two-day discussion will see more than 60 participants, including researchers, policy makers, private sector representatives and media from different South Asian countries are participating in the regional consultation.
They will brain-storm on issues like trade and transport facilitation, and transit; non-tariff barriers; trade, gender and technology transfer; India-Pakistan trade relations; intra-regional investment cooperation; and regional cooperation for energy security.

Free movement of vehicles in South Asia on cards

Regional economic integration in South Asia through cross-border free movement of vehicles might become a reality soon as the South Asian Association for Regional Cooperation (SAARC) nations are moving closer to striking a deal, albeit on some fixed routes in the beginning.
Vehicles from one SAARC nation carrying passengers and goods could ply across the border of another member country on some fixed routes with international permits issued by the vehicle originating country as the top transport officials of SAARC nations, who met in Udaipur, India, today agreed on limited mobility keeping in mind security concerns of the regional members.
The two-day meeting that started yesterday was inaugurated by India’s central minister for Transport and Railways Dr CP Joshi.

Organised by the Road Transport and Highway Ministry of India to facilitate the movement of cargos in the SAARC countries, the meeting discussed on the draft which will get ready in 2020 and all SAARC nations will get connected to each other, which will further improve their relations.
Despite declaring 2010-2020 as the ‘Decade of Intra-regional Connectivity in SAARC’, the region is the least integrated among all the regional blocs in the world.
The two-day meeting has also decided that a final draft of SAARC Motor Vehicle Agreement would be sent to member countries by August. The respective countries will further discuss the draft agreement during the SAARC transport ministers' meet that will forward it to the next SAARC summit for final adaptation.
The draft of the SAARC Motor Vehicle Agreement has been discussed at length including permits, documents that drivers and passengers need to carry while entering another country, determining routes, and right of inspection of vehicles including their fitness.
The draft agreement — finalised by an expert group from India, Pakistan, Afghanistan, Bhutan, Sri Lanka, Bangladesh and Nepal — has mentioned that member countries will decide on the charges for international permits of vehicles on the basis of distance travelled and vehicle load in the case of cargo vehicles, and number of passengers and distance travelled in the case of passenger vehicles.
However, cross-border passengers and drivers must have a valid visa and passport, apart from following customs and excise duty and negative list of items carried by cargo vehicles that depends on the rules of the respective member countries.
To integrate South Asia economically and increase intra-regional trade, the heads of the states had directed the inter-governmental group on transport to develop a regional agreement on motor vehicles and one on railways that could boost economic activities in the region, during the 14th SAARC Summit, held in New Delhi, in 2007.

Countries like Nepal have been suffering due to low connectivity as closer economic integration in the SAARC region will not only strengthen cross-border physical infrastructure like roads and rail corridors, but also boost Nepal's export trade in the region.

Increasing trade in South Asia — due to more connectivity — at preferential rates on a range of products that have both high intra-regional trade potential and high prospects for improving consumer welfare could save at least $2 billion per year, a study done by CUTS International, South Asia Watch on Trade, Economics and Environment (SAWTEE) and other research organisations in the region, has stated.

NTBs choke intra regional trade growth in South Asia

Non-tariff barriers (NTBs) have choked intra-regional trade as according to a study, elimination of tariffs in South Asia could help double intra-regional trade.
"The study conducted by CUTS International suggests that complete elimination of tariff under SAFTA may increase intra-regional trade by 1.6 times," said former commerce secretary and trade expert Purushottam Ojha, speaking at an interaction on 'Non-tariff barriers in South Asia and its remedy,' organised by South Asia Watch on Trade, Economics and Environment (SAWTEE), here in the valley today.
"Reduction in transport costs and other trade facilitation measures would entail the welfare gain to consumers on account of import value for SAARC member countries like Nepal, India, Pakistan, Bangladesh and Sri Lanka," he said, adding that non-tariff barriers are relatively non-transparent and unpredictable in relation to tariff barriers and measuring its effect on trade is more difficult.
Though South Asian nations have been gradually reducing tariffs under SAFTA, non-tariff barriers have become a major problem in increasing intra-regional trade. "Bureaucratic hurdles at customs points, delay and mal-intention of customs officials, and lack of infrastructure are some of the non-tariff barriers that have increased the cost of trade of Nepal with regional members," said Ojha, adding that Nepalis have failed to export herbs from Jumla and Humla as the state government of Uttar Pradesh, India, has made it compulsory to pay transit fee while transporting export consignment through their territory.
"Likewise, domestic pharmaceutical companies are unable to complete the arduous and time taking process for exporting their products to Bangladesh and India."
Nepal should strengthen national laboratories and human resources skills for accreditation of such laboratories, Ojha suggested. "Trade facilitation measures should be applied along with the concept of creating a regional transit transport network — which has been in talks since long but not materialised — within the region, and is key to regional integration."
Among the regional blocks in the world, the South Asian region is the least integrated, according to SAARC Chambers of Commerce and Industry vice president Pradeep Kumar Shrestha.
Free flow of goods and people will help regional integration, he said, adding that the next generation could live in a developed South Asia, if the current generation works hard and plants the seeds of economic integration and development.
Likewise, addressing the interaction, joint secretary at the ministry of commerce and supplies Jeebraj Koirala said that increasing non-tariff barriers, which are also against multilaterism, has hurt a country like Nepal that has a small basket of exportable products. "Non-tariff barriers are against the World Trade Organisation (WTO) norms," he said, adding that the number of non-tariff barriers have increased four times to 1,500 in 2012 from 1995, according to a global trade regime report.
Executive chairman of SAWTEE Dr Posh Raj Pandey, concluding the interaction, said that the sooner the South Asian countries act in reducing non-tariff barriers the more will intra-regional trade — that can integrate the poorest regional block and lead towards prosperity — increase.

Cost of economic non-cooperation to consumer in South Asia high

Increasing trade in South Asia at preferential rates on a range of products that have both high intra-regional trade potential and high prospects for improving consumer welfare could save at least $2 billion per year, according to a recent study done by CUTS International, South Asia Watch on Trade, Economics and Environment (SAWTEE) and other research organisations in the region.
Launching the report, 'Cost of Economic Non-Cooperation to Consumers in South Asia’, at a meeting in Kathmandu today, minister of Commerce and Supplies Lekh Raj Bhatta said that the interests of consumers, who constitute the largest segment of stakeholders, should not be neglected while assessing the impact of trade liberalisation.
"While tariff liberalisation increases overall consumer welfare, it also brings with it revenue loss, impacting spending on crucial development activities," he said, adding that tariff liberalisation should also be complemented with a robust and meaningful revenue compensation mechanism.
"Those, who would have to make a net positive contribution to the compensation fund and may be loath to the idea should note that the contribution is aimed at facilitating and speeding up trade liberalisation, which helps their own exporters."
On the occasion, executive chairman of SAWTEE Dr Posh Raj Pandey said that South Asia represents a puzzle as far as the issue of regional economic cooperation is concerned, where despite geographical proximity and cultural similarity, trade and economic interaction is extremely limited.
"The share of regional trade, which currently stands around five per cent, is equivalent to what the region was able to achieve in 1950s," he said, suggesting that the region has virtually made no progress in the past six decades.
"People put the blame on political factors but economic factors have also contributed in low volume of trade in South Asia," he added.
A perception survey — which was also a part of the study, held in Bangladesh, India, Nepal, Pakistan and Sri Lanka — revealed that though most of the stakeholders including government officials — dealing with issues of regional trade integration — politicians, trade and industry representatives, and consumer representatives believe in the merits of regional economic cooperation, optimism about economic possibilities is hidden in pessimism about political feasibility. "Also, awareness about the benefits of imports and its potential for consumer welfare is very low among some key stakeholders," the report noted, adding that more objective discussion on economic benefits can discredit many unjustified belief about regional economic cooperation and bringing the dimension of consumer welfare gains into the ambit of such discussion can influence the course of future regional integration substantially, making it more inclusive, participatory and progressive.
Similarly, advisor and head of International Trade and Regional Cooperation at the Economic Affairs Division of the Commonwealth Secretariat Edwin Laurent said that trade and investment nexus should be harnessed to benefit from trade liberalisation in the region.
However, it is necessary for the developing countries to be fully prepared before and understand the fine details before signing any investment treaty, he added.
Likewise, country representative of the Asia Foundation Nick Langton expressed the view that tremendous potential exists for regional cooperation in South Asia, not only in the areas of trade in goods, but also in trade in services. He also emphasised that it is the consumer that is going to benefit the most from any trade liberalisation effort.
The event is jointly organised by SAWTEE, The Asia Foundation, Commonwealth Secretariat and CUTS International that initiated the project to enquire into the potential benefits of increase in intra-regional trade to consumers in the region, based on a hypothesis that ineffective and insufficient trade liberalisation in South Asia is resulting in high cost by way of loss of consumer welfare.

Intra-regional trade benefits South Asian consumers

South Asian consumers stand to gain hugely from enhanced intra-regional trade, according to the experts.
One of the main reasons why intra-regional trade in South Asia failed to take off is lack of political will in taking the SAFTA negotiations to the next stage, said secretary general of CUTS International Pradeep Mehta, speaking on the importance of the summit of South Asian leaders. "The annual savings of consumers could be as much as $2 billion," Mehta said, adding that many products with regional trade potential are still kept out of bounds of the Agreement’s tariff liberalisation programme for fear of disturbance to domestic industries from import competition.
According to a study undertaken by CUTS with support from The Asia Foundation and in collaboration with prominent think tanks from five major South Asian countries, the South Asian Free Trade Agreement (SAFTA) holds the key to realise this gain.
The SAARC Summit to be held in Maldives in this week provides a good platform for South Asian leaders to renew their commitment toward greater regional integration.
Though South Asian economies have achieved significant growth in international trade, expansion of trade relationships has been mostly with trading blocs outside the region.
There are many product categories in which imports are currently sourced by South Asian countries mainly from Europe, South East Asia and the Middle East, while they could resort to cheaper imports from regional trading partners, who have export competence in such products.
The CUTS study entitled Cost of Economic Non-Cooperation to Consumers in South Asia shows that in about 355 excluded products listed by SAFTA members, there exists very strong prospects for higher regional trade if preferential tariff rates under the Agreement are applied to them.
Not only will consumers benefit from lower prices and wider choice, possibilities for scaling up of production in sectors like pharmaceuticals, textiles and mineral fuels will be thrown open, according to the study that has estimated that intra-regional trade at reduced tariffs on these products would amount to more than 30 per cent cut in their current import bills, which translates to an absolute increase of about 50 per cent in current volume of trade between SAFTA members.
A change in the attitude of South Asian countries toward more and better regional integration is an imperative to push the tariff liberalisation agenda forward, without which deeper economic integration will remain unattainable.
The first step is to realise the importance of granting import concessions on a reciprocal basis, not only just as a policy tool to gain export markets but also as a significant source of economic benefits on its own.
The CUTS study also suggested that regional trade can be boosted with minimal risks to import competing sectors by selecting product categories diligently.Moreover, the estimates generated represent minimum static gains and the long-term potential of SAFTA to contribute towards economic growth and development in the region is even greater. "It is because once a minimum sustainable level of intra-regional trade flow is reached it would naturally create a greater momentum in trade relationship resulting in better trade facilitation measures, better returns from investments in trade-related infrastructure and additional incentives for private enterprises to explore regional markets," it added.
Substantial cuts in trade costs can surely be expected resulting in the beginning of a positive cycle of trade leading to more regional integration.
CUTS International is a Jaipur-based non-governmental think-tank doing policy research and advocacy on trade and regulatory issues. Enhancing regional cooperation in South Asia is one of its major areas of work. The organisation has created a dynamic network of South Asian think-tanks, academia, policy-makers, media representatives to take forward the initiative.