Nepal’s Preparation Still Lackluster for Fruitful SAFTA

2005-12-25

NLN Correspondent, KATHMANDU:

Both government and Private Sector are showing lackluster preparation for implementing the South Asian Free Trade Agreement (SAFTA), even as the date is approaching for the formal enforcement of the agreement in Nepal.

SAFTA is going to be implemented after a week from January 1st 2006.

Participants of an interaction programme on “Implementation of SAFTA, How much beneficial for Nepal”, jointly organized by Media for Economic and Social Awareness (MESA) and Management Association of Nepal (MAN), on Sunday, said entering in SAFTA without proper preparation would not be advantageous for the country.

Participants said unless the needed reforms are made on required policies, entry to SAFTA could not provide expected results.

Adoption of business procedure, development of physical infrastructure, identification of exportable items were some of the key challenges needed to be addressed after joining SAFTA, but both the government and private sector are reluctant to work for this, participants complained.

According to the agreement made among member countries SAFTA is going to be implemented in coming January 1st 2006.

In the first phase, four important sectors have been selected for implementation, these are Rules of Origin, List of Sensitive Products, Compensation for Least Developed Country’s Revenue Loss, and Technical Support for LDCs.

Within the Rules of Origin member countries shall agree on value addition for 40 percent to LDCs and 30 percent to Developed countries of SAFTA framework. Further, LDCs were providing 10 percent derogation facility. Nepal, Bhutan, Bangladesh and Maldives were known as LDCs within SAFTA.

Mandatory to all member countries, within the rules of special production there were 190 products, on the basis of production the value addition for those products may vary 25 to 40 percent.

In another provision, only those products were acceptable for free trade, which contain 20 percent local or 50 percent member countries’ raw material. Otherwise, member countries could not use the facilities provided to them.

Similarly, the member countries agree to review the list of negative products, in the interval of every four years.

Likewise, on compensation on revenue loss, member countries agree to implement this provision for four years after the implementation period.

Within the SAFTA implementation process, member countries would have to reduce their custom rate 0-5 percent, within 2013 for Pakistan and India, 2013 for Sri Lanka, and 2016 for rest of the countries.

Joint Secretary at the Ministry of Industry, Commerce and Supplies, Prachanda Man Shrestha, said to minimize the risk after entering the SAFTA and to promote capacity and capability, the government was considering bringing new trade and industrial policy. He said it was beneficial to enter in free trade arrangement of SAFTA for country like Nepal, but it depend on countries’ trading capacity. “We can manage revenue loss by reforms in country’s revenue management system, but the reduction of cost of product is still our challenge.” Prachanda said.

Prof. Bishwambher Pyakurel said to get more from SAFTA both government and private sector need to adopt new research and studies. “Without proper study and research on trading issues we can’t compete in the free market.” Pyakurel added.

Representative from Federation of Nepalese Chambers of Commerce and Industry Kush Kumar Joshi said unless identification of exportable items, its development, promotion and marketing we couldn’t be in beneficial position. “Considering this we have planned to give suggestion about our niche item to the government.” Joshi said.

Minister for Industry, Commerce and Supplies Rajesh Kaji Shrestha, said after implementation of SAFTA the related issues needed further clarification, so coordination among government, private sector and civil society could make people more aware on regional and global trading issues.

The programme was chaired by Dr. Bimal Koirala, Chairman of MAN-MDC, whereas the welcome speech was delivered by Gopal Tiwari co-chairman of MESA.