Regional economic integration
Courtesy:- Col M Hanif (R)
Regional economic integration is a process in which trade barriers (tariffs and non tariff) among member countries of a region are reduced or removed, common external barriers are established and products, services and factors of production are allowed to move freely among membercountries to earn trade and development benefits. This all is possible because among regional countries with many similarities, due to shortdistances, better communications and quick mobility, cost of trading and development is reduced and profit margins increase. The trend of regional economic integration was further reinforced by the development of modern technologies in the fields of construction, telecommunication, heavy machinery, road, rail and air transportation, shipping and container services, finance and banking and development of micro/macro computers and internet.
Unlike other economically integrated regions such as EU, NAFTA and ASEAN with lot of potential for free trade and economic development, South Asia was quite late in recognizing the concept of regional economic integration. It took the first step in this direction in 1985 by establishing South Asian Association for Regional Cooperation (SAARC). Despite being slow in embracing regional economic integration, SAARC, in its life of 26 years has gradually made efforts in this regard. Biannual summits of SAARC have been mostly held regularly except some delays and attendance at ministerial levels due to political differences. During first decade of formation of SAARC its activities remained limited after which it started functioning proactively. Since signing of the agreement to establish South Asian Free Trading Area in South Asia and coming into force of this agreement in 1995, to implement this agreement, during biannual summits, SAARC leadership has taken decisions and formed the Committee on Economic Cooperation (CEC), Council of Ministers, a Group on Customs Cooperation, a Standing Group on Standards, Quality Control and Measurements, and SAARC Chamber of Commerce and Industry (SCCI). SAARC leaders have also signed agreements on Mutual Administrative Assistance in Custom Matters, Establishment of SAARC Arbitration Council and Avoidance of Double Taxation.. In this regard the leaders have also agreed to accelerate cooperation in the core areas of trade, finance and investment to realize the goal of an integrated South Asian Economy in a step-by-step manner.
The SAPTA agreement provided a framework and institutional base for trade liberalization and economic cooperation between the SAARC membercountries. SAPTA distinguishes between its members according to their level of economic development. Bangladesh, Nepal, Bhutan and the Maldives are defined as “ Least Developed Countries”(LDCs) and are treated differently from the three “non LDC” members, India, Pakistan and Sri Lanka Theagreement provides for Special and Differential Treatment for the LDCs by the non LDCs including deeper and wider preferences. The signing of theAgreement on South Asian Free Trading Area (SAFTA) during the summit meeting held at Islamabad in January 2004 marked a major milestone in the history of economic integration in SAARC. As per the SAFTA framework agreement, under the trade liberalization programme scheduled for completion in 10 years by 2016, the customs duties on products from the region will be progressively reduced. Under an early harvest programme for the least developed member states, India, Pakistan and Sri Lanka are to bring down their customs duties to 0-5 percent by 1 January 2009 for the products from such member states. The least developed member states are expected to benefit from additional measure under the special and differential treatment accorded to them under the agreement.
In the last 26 years of life of SAARC, to assess the degree of its success in achieving economic integration one has to review the success of SAPTA enforced in 1995 and SAFTA partially to be implemented by end of 2006 and to be fully implemented by 2016. The progress towards SAPTA and SAFTA has been quite slow although implementation of these two agreements, particularly SAFTA by SAARC countries can largely succeed them in reaping the huge benefits of economic integration. Despite that most of the measures under SAPTA frame work were implemented by non LDCcountries i.e, India Pakistan and Sri Lanka, according to South Asia Centre for Policy Studies, SAPTA has had no significant impact on trade patterns of South Asia and related benefits. This was due to the ambiguous trade concessions accorded mainly to non-LDCs, issues related to NTBs imposed by India, rules of origin, and absence of provisions for anti dumping. Hence SAARC wanted to quickly move over to implementation of SAFTA. However due to some anomalies implementation of SAFTA has also run into problems. This is due to four unresolved issues which are delaying the transition from SAPTA to SAFTA. These issues are list of sensitive items, which would be exempt from customs duty reduction, rules of origin, revenue losscompensation mechanism and technical assistance to LDCs. Move from SAPTA to SAFTA has also been delayed due to tensions between India and Pakistan. While all along Pakistan has been endeavouring to resolve mutual disputes based on justice and fair play as guided by UN Charter, India wants to assert her hegemonic attitude disregarding facts and ground realities. There are other reasons also for South Asia’s slow progress towards regional economic integration. Smaller South Asian countries had reservations that India will dominate their domestic markets. Also all thesecountries had disputes with India since she has not been fair in resolving issues. India being a big country with aspirations to become a major power ignored South Asia and developed trade relations with outside world.
However, despite all these obstacles, now there seems to be a realization among South Asian countries that they should accord priority to economicsthan politics and emulate other successful regions to realize benefits of regional trade and economic integration. That is why Pakistan has now announced trade concessions to India, which are meant to accord MFN status to her by end of this year. Pakistan’s this good gesture should be acknowledged by India by making a commitment to resolve mutual disputes including Kashmir justly under the spirit of UN Charter. In view of this changed environment all SAARC countries should use their energies with a spirit of sacrifice and mutual benefit to remove all impediments in the way of implementing SAFTA and take additional steps such as development of infrastructure involving roads, transport, customs, communications, finance and banking through local investments to move towards achieving economic integration at a faster pace. By achieving desired speed in integrating economically, South Asian is expected to do well in further connecting economically to West Asia, Central Asia, ASEAN and Near East
Regional economic integration is a process in which trade barriers (tariffs and non tariff) among member countries of a region are reduced or removed, common external barriers are established and products, services and factors of production are allowed to move freely among membercountries to earn trade and development benefits. This all is possible because among regional countries with many similarities, due to shortdistances, better communications and quick mobility, cost of trading and development is reduced and profit margins increase. The trend of regional economic integration was further reinforced by the development of modern technologies in the fields of construction, telecommunication, heavy machinery, road, rail and air transportation, shipping and container services, finance and banking and development of micro/macro computers and internet.
Unlike other economically integrated regions such as EU, NAFTA and ASEAN with lot of potential for free trade and economic development, South Asia was quite late in recognizing the concept of regional economic integration. It took the first step in this direction in 1985 by establishing South Asian Association for Regional Cooperation (SAARC). Despite being slow in embracing regional economic integration, SAARC, in its life of 26 years has gradually made efforts in this regard. Biannual summits of SAARC have been mostly held regularly except some delays and attendance at ministerial levels due to political differences. During first decade of formation of SAARC its activities remained limited after which it started functioning proactively. Since signing of the agreement to establish South Asian Free Trading Area in South Asia and coming into force of this agreement in 1995, to implement this agreement, during biannual summits, SAARC leadership has taken decisions and formed the Committee on Economic Cooperation (CEC), Council of Ministers, a Group on Customs Cooperation, a Standing Group on Standards, Quality Control and Measurements, and SAARC Chamber of Commerce and Industry (SCCI). SAARC leaders have also signed agreements on Mutual Administrative Assistance in Custom Matters, Establishment of SAARC Arbitration Council and Avoidance of Double Taxation.. In this regard the leaders have also agreed to accelerate cooperation in the core areas of trade, finance and investment to realize the goal of an integrated South Asian Economy in a step-by-step manner.
The SAPTA agreement provided a framework and institutional base for trade liberalization and economic cooperation between the SAARC membercountries. SAPTA distinguishes between its members according to their level of economic development. Bangladesh, Nepal, Bhutan and the Maldives are defined as “ Least Developed Countries”(LDCs) and are treated differently from the three “non LDC” members, India, Pakistan and Sri Lanka Theagreement provides for Special and Differential Treatment for the LDCs by the non LDCs including deeper and wider preferences. The signing of theAgreement on South Asian Free Trading Area (SAFTA) during the summit meeting held at Islamabad in January 2004 marked a major milestone in the history of economic integration in SAARC. As per the SAFTA framework agreement, under the trade liberalization programme scheduled for completion in 10 years by 2016, the customs duties on products from the region will be progressively reduced. Under an early harvest programme for the least developed member states, India, Pakistan and Sri Lanka are to bring down their customs duties to 0-5 percent by 1 January 2009 for the products from such member states. The least developed member states are expected to benefit from additional measure under the special and differential treatment accorded to them under the agreement.
In the last 26 years of life of SAARC, to assess the degree of its success in achieving economic integration one has to review the success of SAPTA enforced in 1995 and SAFTA partially to be implemented by end of 2006 and to be fully implemented by 2016. The progress towards SAPTA and SAFTA has been quite slow although implementation of these two agreements, particularly SAFTA by SAARC countries can largely succeed them in reaping the huge benefits of economic integration. Despite that most of the measures under SAPTA frame work were implemented by non LDCcountries i.e, India Pakistan and Sri Lanka, according to South Asia Centre for Policy Studies, SAPTA has had no significant impact on trade patterns of South Asia and related benefits. This was due to the ambiguous trade concessions accorded mainly to non-LDCs, issues related to NTBs imposed by India, rules of origin, and absence of provisions for anti dumping. Hence SAARC wanted to quickly move over to implementation of SAFTA. However due to some anomalies implementation of SAFTA has also run into problems. This is due to four unresolved issues which are delaying the transition from SAPTA to SAFTA. These issues are list of sensitive items, which would be exempt from customs duty reduction, rules of origin, revenue losscompensation mechanism and technical assistance to LDCs. Move from SAPTA to SAFTA has also been delayed due to tensions between India and Pakistan. While all along Pakistan has been endeavouring to resolve mutual disputes based on justice and fair play as guided by UN Charter, India wants to assert her hegemonic attitude disregarding facts and ground realities. There are other reasons also for South Asia’s slow progress towards regional economic integration. Smaller South Asian countries had reservations that India will dominate their domestic markets. Also all thesecountries had disputes with India since she has not been fair in resolving issues. India being a big country with aspirations to become a major power ignored South Asia and developed trade relations with outside world.
However, despite all these obstacles, now there seems to be a realization among South Asian countries that they should accord priority to economicsthan politics and emulate other successful regions to realize benefits of regional trade and economic integration. That is why Pakistan has now announced trade concessions to India, which are meant to accord MFN status to her by end of this year. Pakistan’s this good gesture should be acknowledged by India by making a commitment to resolve mutual disputes including Kashmir justly under the spirit of UN Charter. In view of this changed environment all SAARC countries should use their energies with a spirit of sacrifice and mutual benefit to remove all impediments in the way of implementing SAFTA and take additional steps such as development of infrastructure involving roads, transport, customs, communications, finance and banking through local investments to move towards achieving economic integration at a faster pace. By achieving desired speed in integrating economically, South Asian is expected to do well in further connecting economically to West Asia, Central Asia, ASEAN and Near East
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