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Pakistan approves free trade pact in South Asia

Pakistan approves free trade pact in South Asia

Wed Feb 15, 2006

ISLAMABAD (Reuters) - The Pakistani cabinet approved a regional pact on Wednesday to promote free trade and economic ties in South Asia, home to nearly one-fifth of the world’s population.

Information Minister Sheikh Rashid Ahmed hailed the ratification of the South Asia Free Trade Area (SAFTA) agreement as a "very important decision" but did not say when Pakistan would begin implementing it.

Under the pact, SAARC’s developing states - Pakistan, India and Sri Lanka - will cut tariffs to between zero and five percent within seven years. Agreed in 2004, it is due to come into force by July 2006.

Its least developed countries - Bangladesh, Bhutan, Nepal and the Maldives - have 10 years to complete the process, though all members can maintain a list of sensitive products on which tariffs will not be reduced.

The trade pact was first mooted in 1995 by the seven-nation South Asian Association for Regional Cooperation (SAARC), an economic grouping formed to reduce poverty, promote trade and fight terrorism.

Free trade is expected to boost economic activity and growth in a region that is home to about 1.5 billion people, of whom 400 million live on less than a dollar a day.

Although a preferential trade treaty has been in place for a decade, trading within SAARC accounts for less than five percent of the members’ total global trade mainly due to differences between India and Pakistan over the disputed region of Kashmir.

Ties between the nuclear-armed neighbours, which have fought three wars since gaining independence in 1947, have improved since they launched peace talks two years ago.

Prime Minister Shaukat Aziz, who chaired the cabinet meeting, said Pakistan wanted peace with India, which has already ratified the trade pact.

"But at the same time wants the core issue of Jammu and Kashmir be resolved in line with aspirations of the people of Jammu and Kashmir," an official statement quoted Aziz as saying.

 source: Reuters