South Asia Forum Calls for Regional Economic Union

Members of the South Asian Association for Regional Cooperation (SAARC), at the South Asia Forum called for the removal of tariff and non-tariff barriers to boost regional trade and investment and to prepare a road map for regional economic union.

The Afghan delegation, headed by Mr. Hamidullah Faroqi, former member of ACCI’s Board of Directors included Mr. Mohammad Qurban Haqjo, CEO of ACCI, Mrs. Fatima Nazari, Member of Parliament as well as officials from Ministry of Foreign Affairs and Ministry of Economy.

In his address to the Forum, Mr. Haqjo said that SARRC members should address the challenges that hinder practical efforts to bring economic integration and improve regional cooperation.

“In the last 25 years, out relationship was defined by our political differences. This is a new day.  Let us resolve, collectively, that the next 25 years is distinguished by economic cooperation and integration that results in our collective prosperity.”

Joining South Asia Free Trade Area (SAFTA) will give Afghanistan preferential market access to 1.64 billion people. This is fifty times the size of Afghanistan’s domestic market.

“SAFTA treaty shall oblige member countries to lower their tariffs by pre-determined dates. Non-least developing countries must lower their tariffs for least developing countries to 5% or less by 2011,” said Mr. Haqjo.

He added that Pakistan and India have promised to lower the tariffs on all Afghan products not on their sensitive lists to 5% or less as soon as SAFTA entered into force for Afghanistan.

Addressing the inaugural session, Deputy Chairman of the Indian Planning Commission Montek Singh Ahluwalia, urged SAARC members to embrace economic integration and projected that such a step would positively impact global stability.

“It should not be looked in a way that a well integrated South Asian economy will only attract global investment in India, but also the whole region will be an emerging market. It is a win-win situation for all of us (South Asian nations),” he reasoned.

“A range of tariff and non-tariff barriers, which have been erected in our region in the early years of our respective independence prevented businesses from developing value in the region.  Existence of tariff walls, problematic as it is, is in a sense as much a symptom of a problem as it is a challenge in itself,” said Mr. Ahluwalia.

He highlighted the fact that while the South Asia region is geographically and culturally positioned for the widest possible cooperation, in reality, it is the least integrated region in the world.

Underscoring the need for economic integration, Secretary General of SAARC, Fathimath Dhiyana Saeed said was time for SAARC to wake up from giving lip service and instead focus on the delivery of promises and agreed plans.

Referring to a World Bank report, Ms. Saeed said that intra-regional trade in South Asia is less than one percent of GDP, as compared to over 20 percent in East Asia. “Cost of trading across borders in South Asia is one of the highest in the world.”

The Pakistani delegation head, Farzana Raja, who is also a member of the country’s lower house of parliament, said that economic integration of the region should not be held hostage to historical legacies, differences, and political disputes.

She called for implementation of the South Asian Free Trade Agreement (SAFTA) in letter and spirit. ‘There is a need to implement SAFTA in letter and spirit to achieve the ideal of a South Asia Economic Union,’ Raja said.

Nepal’s Land Reform and Management Minister, Prabhu Sah said that the implementation of SAFTA was hindered by tariff, non-tariff, and para-tariff barriers.

He said SAARC members should heed the lessons from the success of economic integration in Europe and other parts of the world.

‘There is no reason why such an experience cannot be emulated in our region with full implementation of SAFTA in its letter and spirit,” Sah said.

Leading Nepali industrialist, Binod Chaudhary suggested a gradual integration rather than focusing on giant efforts to achieve whole integration. “Lack of homogeneity, psychological gap between the member countries and most importantly, the strained relationship between India and Pakistan has pushed SAARC nowhere.  Hence, it would be pragmatic to go step by step to achieve economic integration,” he argued.

Maldives Minister of Finance and Treasury, Ahmed Inaz said his country would reduce the sensitive list of goods by 60 percent as opposed to the 20 percent reduction required under the SAFTA.  Inaz also emphasized the need to allow greater movement of people among the SAARC region.

The South Asia Forum (SAF) meeting also deliberated on poverty alleviation, climate change, culture, and South Asian identity.

The establishment of SAF—basically an Indian proposal—was agreed at the 16th SAARC summit held in Bhutan last year.  SAF is envisioned to promote the concept of a South Asian community and the idea of a South Asian economic union corroborated by vigorous deliberations among government officials, think-tanks, media representatives, and the business community across the region.

SAARC has eight members – India, Pakistan, Nepal, Bangladesh, Sri Lanka, Maldives, Bhutan and Afghanistan.  Afghanistan is the newest member, being admitted to the regional grouping in 2007.