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South Asia eyes free trade zone by 2016

NDTV, India

South Asia eyes free trade zone by 2016

18 April 2006

DHAKA (Reuters) - South Asian nations want to ease tariffs gradually with the aim of establishing a free trade zone in about a decade, experts at a trade meeting said on Tuesday.

South Asia is a vast economic powerhouse in terms of market potential, natural resources and qualified human resources, said Bangladesh Commerce Secretary Mohammad Abdul Karim, at the opening of the two-day meeting in Dhaka.

"The establishment of the South Asia free trade area (SAFTA) is seen as the first significant step towards deeper economic integration," Karim said.

SAFTA will operate within the South Asian Association for Regional Cooperation (SAARC) framework, grouping Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.

Afghanistan will join the group next year.

"With 1.4 billion population in the SAARC region, one of the largest areas in the world, the intra-regional trade is very minimal," Lyonpo Chenkyab Dorji, the secretary general of the SAARC Secretariat, told the meeting.

Intra-regional trade volume among SAARC countries stands at $6.0 billion, or about 4.4 percent of the total trade of member states worth $135 billion, officials said.

But Karim said: "The region can be expected to fare much better than what other economic blocs such as Europe, North America and Southeast Asia have achieved."

Intra-regional trade of European Union nations is 55 percent of the total trade of member states; that of North American Free Trade Agreement members is at 61 percent, and the Association of South East Asian Nations at 25 percent presently, officials said.

The Dhaka conference is the first formal meeting by the SAFTA committee toward the gradual easing of tariffs and other trade barriers.

The SAFTA agreement signed at a summit in Islamabad in Jan. 2004 came into effect in January this year. Tariff concessions under the agreement will be effective from July, 2006.

The first phase of the agreement covers the period from Jan. 1, 2006 to Dec. 2007.

Tariffs are to be reduced in two equal annual installments, to 20 percent for India, Pakistan and Sri Lanka, and 30 percent for Bhutan, Bangladesh, the Maldives and Nepal.

"The member states have agreed that the first round of tariff reductions would take place in July/August 2006," Dorji said. The second phase will begin in Jan. 2008.

"We want to make the whole SAARC region a free trade area by 2016," he told Reuters on the sidelines of the meeting.

A range of sensitive products from the seven member states, however, will be excluded from the free trade deal.