Friday, August 28, 2009

South Asian Association for Regional Cooperation (SAARC)

The SAARC came into being in December 1985. The SAARC comprises Pakistan, India, Sri-Lanka, Bangladesh, Nepal, Bhutan and Maldives. In 1991, committee on Economic Co-operation (CEC) was setup to enhance intra-regional co-operation in the fields of trade and economic relations.

The SAARC region accounts for 22% of world’s population, 2% of global GDP and with 1400 million populations out of which 400 million live below poverty line, which are the half of world’s poor. The four members of SAARC like India, Pakistan, Sri-Lanka and Maldives are in the middle income group of developing countries, where as the Bangladesh, Nepal and Bhutan belong to the least developed group.

The success of regional co-operation depends largely on the extent of complementarities in the region. In the export profile of SAARC countries especially Pakistan, Sri-Lanka and Bangladesh account for more than half and for India only 30%. The major import items are POL products, machinery and industrial raw materials. India has a more diversified export base with significant share of engineering goods, pharmaceuticals and information technology. The traditional view of complementarities is at horizontal level i.e. some countries specialise in agriculture and others specialise in manufacturers, where as the latest trends in international trade indicate strong vertical specialisation i.e. specialisation in different component of car manufacturers. The scope of vertical specialisation exists in SAARC countries. Given the existing tarrif and non-tarrif barriers, the intra SAARC trade is not very significant.

In 1991 the sixth Summit of SAARC approved the establishment of SAARC preferential Trading Arrangement (SAPTA) by 1997. However SAPTA came into operation in December 1995. In first round of the trade negotiations (SAPTA-I) a 10 to 25% preferential tarrif reduction was agreed upon on 226 items by all countries. In SAPTA-II the number of commodities offered for concession went to 1868 and after SAPTA-III the number almost doubled to 3456. SAPTA-IV led to adoption of other measures for promoting trade. But SAPTA is being accorded little and too late effort in respect of trade liberalization it is quarter hearted move. This is the reason that in 12th Summit of SAARC held in Islamabad in January 2004, is to liberalize trade amongst SAARC countries. For this tarrif and non tarrif barriers will be removed among SAARC countries. Again here the agreement has been signed to establish a South Asian Free Trade Arrangement (SAFTA). The purpose of SAFTA is to liberalize trade amongst SAARC countries. For this tarrif and non-tarrif will be removed among SAARC countries. Again SAFTA will provide the sensitive list of commodities which member would like to exclude from tarrif concessions. Moreover it will also arrange for safe guards and anti-dumping measures to take care of unexpected developments. But the SAFTA has to confront the issue of least developed countries like Bangladesh and Nepal and middle income group of India, Pakistan and Sri-Lanka. The council of Ministers has approved the SAFTA frame work agreement. However, the issues like sensitive list, rules of origin and revenue compensation to least developed countries of Nepal and Bangladesh have to be resolved. The SAFTA frame work agreement will lead to SAFTA Treaty and time target for SAFTA coming into force. It will serve as a major land mark in SAARC economic cooperation. In addition to SAFTA a Technical Committee on Transport, a Regional Agreement on Promotion and Protection of Investment within SAARC, SAARC Chamber of Commerce and Industry, SAARC Trade fairs and SAARC network of researchers on global financial and economic issues are proposed to be setup in near future. All this will prove the way towards the formation of South Asian Economic Union (SAEU). But the creation of SAEU requires the abolition of all regional differences and settlement of political disputes in addition to economic unification.


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