PAKISTAN High Commissioner to India Aziz Ahmad Khan this week said smooth implementation of SAFTA agreement can prove to be the harbinger of sustainable growth by synergising the complementary economic strength of the SAARC member countries.
In his key note address at a seminar on " SAFTA : Opportunities & Challenges", Organised by FICCI, Khan said that Pakistan was committed to South Asian Association for Regional Cooperation (SAARC) as well as implementation of agreement on SAFTA.
He was of view that SAARC-member countries had to be careful as they were entering into an important phase of the implementation of South Asian Free Trade Area (SAFTA) which, he observed should benefit all member states.
The agreement, the Pak envoy said, entered into force with effect from January first, this year and the first tranche of tariff reductions was scheduled to be put in place July 1, this year.
The seminar, inaugurated by Minister of State for Commerce Jairam Ramesh was also addressed by Maldives Trade Minister Mohammad Jaleel, FICCI President, Sarok K Poddar, President SAARC Chamber of Commerce and Industry, Dasho Dorji, High Commissioners of Bangladesh and Sri Lanka, Nepal's envoy, Country Director of World Bank and Regional Director of FN Stiftung.
Aziz Khan said that it would not be out of place to allude to some non economic factors which have so far impeded economic cooperation between the regional countries. This learned audience can well appreciate the fact that though at times economics has driven political change, it might be rather simplistic to see this as a one way relationship, as quite often history has seen this causality run in the other direction as well, he added.
In fact, many eminent economists, including the venerable Dr. Amartya Sen, have dwelt at length on the linkages between factors deemed to be purely economic and the contemporary socio- cultural milieu, he said adding, this is true of the intrastate social dynamics as well as the interstate environment.
"Unfortunately, relations between countries in our region have had a chequered history. This has discernibly impeded progress of SAARC as an effective Organisation in general and the fostering of economic cooperation amongst member states in particular", he expressed.
For achieving meaningful progress on this front -- and to sustain any such progress in the long run, it is imperative that we squarely address the relevant issues to ensure tangible improvement in the political environment between the regional countries, he stated.
This would definitely give a fillip to the attempts to foster long term cooperation between the SAARC countries that can boost the regional economies and turn this important part of the world into the market of the future, added Pak envoy.
He expressed the hope that by approaching the goal of economic cooperation in all earnestness and sincerely addressing the challenges "we would be able to turn the entire region into a land of opportunity for our future generations."
As SAFTA comes into force and we start the implementations phase our deliberations today, he said it would provide a good opportunity to highlight issues of concerns and how to tackle those.
Under the SAFTA agreement, he said the relatively developed states in the region namely India and Pakistan are required to bring down their custom duties to 0-5.0 per cent within five years, Sri Lanka would implement this plan in a span of six years, while other member states would achieve this target within a period of 10 years.
Some estimates suggest that presently more than 60 per cent world trade is being generated through regional trading arrangements.
However, intra-regional trade among SAARC countries constitute only 5.0 per cent of region's total international trade. This compares quite adversely with other regional blocks. NAFTA has succeeded in increasing trade amongst the member countries to 37 per cent, the European Union to 63 per cent while ASEAN members conduct 38 per cent of their total international trade amongst themselves.
"We, therefore, have a long journey ahead of us for enhancing economic interaction within the region", he said and added, starting this journey in a meaningful way would help economic progress and prosperity and overcome poverty, which is so endemic in our region.
There are ample grounds for optimism as the countries comprising this region have their own strengths which can be counted on, he added continuing, the countries in South Asia have experienced healthy economic growth in the past few years which has added to the size of their middle class and given more depth to their domestic markets.
It can safely be estimated that out of the region's total population of 1.5 billion, at least 500 million people possess adequate purchasing power. This, by any standards, constitutes one of the largest markets in the world. Besides this, major markets like China, Japan and the ASEAN countries are in our neighbourhood.
Some of the emerging markets, like Russia and the oil rich Central Asian states, are also located in our vicinity. The large size of the regions' population, which currently is a cause for worry, can certainly be turned into a great strength.
Given the inherent strengths, he viewed that a smooth implementation of the Agreement on SAFTA could prove to be the harbinger of sustainable growth by "synergising the complementary economic strengths of the member countries, expand the market available to entrepreneurs, make our industries more competitive in the global context and most importantly bring prosperity to the multitudes of people presently living in unenviable circumstances."
The experience of other regional trade agreements has revealed that the harmonisation of standards and customs procedures and reducing the transaction costs of trading by addressing the non-tariff barriers play a larger role in effectively enhancing trade amongst the member countries than lowering of tariffs.
A study instituted by the Australian Department of Foreign Affairs and Trade has estimated that reducing international transaction costs by 5.0 per cent would increase the aggregate GDP of Asia Pacific Economic Cooperation Forum (APEC) countries by 0.9 per cent.
SAFTA also envisages the initiation of such steps and it is essential that this task is taken up on a priority basis and the member countries adopt a liberal approach towards opening up their respective economies, he said.