South Asia needs to cut trade cost, enhance regional connectivity: India

29/11/2023    53

The South Asian Association for Regional Cooperation (SAARC) is in hibernation now and it can only be restored with many changes, Indian trade and connectivity expert Dr Prabir De has said.

"It is known to all that India-Pakistan rivalry is the main reason behind the stalemate of the SAARC process. As both countries suspended their trade relations in 2019, the intra-regional trade has also faced a slowdown," he said.

He was talking to The Financial Express on the sidelines of the 14th South Asian Economic Summit (SAES XIV) held in Dhaka in the first week of this month.

Dr De, who is a Professor at the Centre for Maritime Economy and Connectivity (CMEC) at Research and Information System for Developing Countries (RIS) in New Delhi, said the intra-regional trade in South Asia was only $16.32 billion in 2010 that increased to $40 billion last year which was around seven per cent of the region's total international trade.

"India alone has contributed around 86 per cent of the regional trade in the last year and so the intra-regional trade shows a higher concentration in favour of India," he continued.

He pointed out that if India is kept aside, the combined contribution of other seven countries in regional export remained around $8.0 billion in the last decade.

He was of the view that the gains from trade in the region appeared to be uneven as contribution of Afghanistan, Nepal and Pakistan to the intra-regional trade declined in the last decade.

Dr De also said that except Bhutan and Nepal, other member countries of the SAARC do not trade much with the region.

Against this backdrop, he mentioned, the global powers like the United States (US) and China are flexing their muscles in the region. "China has also become one of the major trading partners of most of the South Asian countries including India," he added.

De also mentioned that India, which is the biggest and most powerful nation in the region, generally follows benign foreign policy. So, it is not in a position to interfere.

In this connection, the economist argued to take proactive measures to reduce trade cost and increase trade facilitation measures by the regional countries. He also said that the region's connectivity plan must address the trade issue to energise the regional integration process.

"A lot of time and energy have been deployed heavily to SAARC institutions and all these must not go into vain," he underscored.

The connectivity expert also pointed out that the regional cooperation in South Asia was moving on as there are some small pockets of bilateral cooperation like India-Sri Lanka Bilateral Free Trade Agreement (BFTA), Afghanistan-India and Bangladesh-Bhutan PTAs. Bangladesh and India are now negotiating a Comprehensive Economic Partnership Agreement (CEPA).

"Though SAARC process is suspended, people in the region are communicating with each other through various means, especially digital modes,'' added. "For instance, they are watching movies on Netflix, they are purchasing e-books online instead of physical books. A servicification of goods has already taken place here."

In a different note Dr De said that Bangladesh needs to develop expertise on bilateral and regional free trade negotiation as the country is yet to be experienced in negotiating, signing and implementing any BFTA.

"There is also a risk of political use of FTA as a tool to inject geo-political issues. India-Sri Lanka BFTA is an example in this connection," he mentioned. "In some cases, the deal is used to divert products from the third country."

Regarding Bangladesh's move to join Regional Comprehensive and Economic Partnership (RCEP), the Indian economist supported the attempt.

"It is a right decision to join the RCEP," he said. "It will open a big market for Bangladesh." He, however, added that it will take time to rip the benefit.

RCEP is the world's largest free trade bloc having 15 members. The China-centric mega-regional economic forum covers 2.3 billion people, accounts for US$ 25.8 trillion or about 30 per cent of global GDP, $12.7 trillion or over a quarter of global trade in goods and services, and 31 per cent of global foreign direct investment (FDI) inflows.

Dr De also backed the extension of preferential trade benefits for the graduating Least Developed Countries (LDCs) like Bangladesh for a limited period.

"The graduating LDCs need some additional time to adjust with the phasing out of subsidies and trade benefits," he added.

Source: The Financial Express