South Asia Free Trade Zone

ISLAMABAD - Jan 5/04 - IRIN -- The foreign ministers of the seven-member South Asian Association for Regional Cooperation (SAARC) approved the framework agreement for a regional free-trade zone on Saturday, announcing that the South Asian Free Trade Area (SAFTA) would come into effect in two years, a move termed significant by an analyst.

"It is a very significant development and if everything moves on track, this will lead to the creation of more jobs, generating more business and improving the standard of living for ordinary people of South Asia - which constitute one-fifth of humanity," Nasim Zehra, a senior journalist and international affairs analyst, told IRIN in the Pakistani capital, Islamabad.

Pakistani foreign minister Khurshid Mahmood Kasuri told a press briefing on Saturday that foreign ministers from SAARC member states Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka, who concluded their two-day meeting a day before the SAARC summit, had approved the draft of what is known as the Islamabad Declaration and sent the SAFTA agreement to their respective heads of government.

According to the SAFTA agreement, the region's least developed countries would reduce tariffs to between zero and 5% over the next 10 years while others would reduce tariffs by the same margin inside seven years, Kasuri said, adding that each member state would be allowed to maintain a sensitive list of products on which tariffs would not be reduced.

"The concerns of the smaller states have been taken care of and, I don't see, if there's political commitment at the top, that any kind of hitch can't be overcome," Zehra stressed.

The Islamabad Declaration is a wide-ranging draft covering the entire gamut from regional cooperation, poverty alleviation, social development and cultural interaction to the environment and the struggle against terrorism as well as enhanced links in communication and information technology, Kasuri said at the press conference.

"I think there will be nitty-gritty things that will have to be resolved but if there's going to be political commitment and, more specifically, an improvement of relations between India and Pakistan, it'll be on track," Zehra said, referring to the SAFTA agreement draft.

"If free trade can result in greater cultural exchanges as well as a freeing of trade within the service sector, smaller countries like Pakistan and Bangladesh can only benefit from it," Dr. Ali Cheema, a professor of economics at the elite Lahore University of Management Sciences (LUMS), told IRIN from the eastern city of Lahore.

The important question, Cheema said, would be how the member countries would position themselves to deal with the free trade zone. "I think subcontracting linkages would have to be created," he said.

Trade between Bangladesh and India was already virtually open, barring the goods which India doesn't want to trade in, so Bangladesh and Nepal have economies that were already integrated with India's, Cheema said.

"Pakistan's trade barriers are already fairly low so we're already fairly open. So opening up trade with India in that sense, vis-à-vis tradable goods, isn't going to be much of a shock," he said.

Copyright (c) 2004 UN Office for the Coordination of Humanitarian Affairs

The subscriber version of the article is available by Clicking here