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COLOMBO: South Asian leaders meeting in Sri Lanka this weekend will
discuss improving commercial ties but political and other tensions
have dampened hopes a regional free trade pact will be implemented
any time soon, economists say.
The eight-member South Asian Association for
Regional Cooperation or SAARC first mooted a free trade pact in
1995, but it remains largely limited to paper and member states have
begun cutting bilateral deals instead.
SAARC, whose leaders meet in Colombo for a
two-day summit starting on Saturday, has made little headway toward
regional economic integration since it was formed in 1985, analysts
say.
“Politics have hijacked SAARC’s economic
agenda,” HSBC economist Arjunna Mahendran told Agence France-Presse.
Analysts say the group has been held hostage to
hostility between India and Pakistan—its two largest
members—which have fought three wars since independence from
Britain, two over the disputed Himalayan region of Kashmir.
Tensions now are rising again due to a deadly
attack on the Indian Embassy in Afghanistan earlier this month that
New Delhi blames on “elements” in Pakistan and a clash this week
between Indian and Pakistani forces along the de facto border
dividing Kashmir.
SAARC leaders are due to take up the regional
free trade issue and look at the possibilities of forging a common
currency along the lines of the euro at their meeting.
The South Asian Free Trade Area (SAFTA)
agreement aimed at achieving zero tariffs on almost all products by
2012 was signed in January 2004 and finally came into effect in July
2006.
The free trade zone would encompass the eight
members—India, Pakistan, Nepal, Sri Lanka, the Maldives,
Bangladesh, Bhutan and Afghanistan.
But SAFTA has failed to take off and bring the
promised economic benefits to the 1.5 billion people living in one
of the world’s poorest regions.
Regional trade remains low due to quarrels over
tariff concessions especially between India and Pakistan, economists
say.
“SAARC economies have improved with time,”
said Deshal de Mel, an economist at the Institute of Policy Studies,
a Sri Lankan think-tank.
But intra-regional trade has failed to rise
significantly, he added.
The India-Pakistan rivalry as well as fears
among the other nations that they might be swamped with cheap goods
have delayed any concrete steps toward free trade, economists said.
“India is the biggest market in SAARC but they
have been slow to allow competition to come in. India has instead
struck trade deals with individual member countries like Sri Lanka,
Nepal and Bangladesh,” de Mel told Agence France-Presse.
India, for instance, has struck bilateral deals
with Singapore and is increasingly looking at the Association of
Southeast Asian Nations to do business, Mahendan said.
Economist and Sri Lankan government advisor
Saman Kelegama said it was in the interest of SAARC members to
dismantle trade barriers and create a “SAARC investment area” to
encourage foreign and regional investment.
Sri Lanka’s foreign minister was optimistic
that progress would be made at the meeting toward regional economic
integration.
“It took the European Union 50 years to get
the euro out. We’re still just 23 years old. We’ll try to get
there [to lower trade barriers and forge a currency union] much
faster,” Foreign Minister Rohitha Bogallagama told reporters this
week.
-- AFP
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