ADB-UNCTAD study on Regional Cooperation in South Asia: Benefits from SAFTA and the Way Ahead

A seminar on the 'ADB-UNCTAD study on Regional Cooperation in South Asia: Benefits from SAFTA and the Way Ahead' was held on 2 May 2008 in Kathmandu, Nepal to disseminate and discuss the findings of the first draft of the study that provides an in-depth assessment of the likely impact of the Agreement on the South Asian Free Trade Area (SAFTA) on South Asian countries. Compared to earlier studies, the results show an optimistic scenario under SAFTA.

Over 60 stakeholders participated in the seminar organized by South Asia Watch on Trade, Economics & Environment (SAWTEE) in partnership with the Asian Development Bank (ADB) and the United Nations Conference on Trade and Development (UNCTAD).

In his introductory remarks, Mr Navin Dahal, Executive Director, SAWTEE, said that, against the backdrop of poor South Asian economic integration and the restrictive trade regime under SAFTA, India will have to play a lead role to expedite integration as it is the only country that shares a border with all other South Asian countries and is also the fastest growing economy in the region.

In her welcome remarks, Ms Pratima Dayal, Principal Country Economist, ADB pointed out that due to increasing complementarities in the region in recent years, SAFTA has the potential to bring considerable gains to members. She said that under the full liberalization scenario, Nepal, along with Bhutan and Afghanistan, will witness good export growth in agricultural products and primary commodities.

Highlighting the methodology and findings of the study, Mr Abhijit Das, Deputy Coordinator, UNCTAD India, said that SAFTA countries have become more competitive vis-a-vis the rest of the world and among each other; the basket of goods in which they have comparative advantage has diversified; and complementarities among members has increased. He pointed out that though trade potential under a full liberalization scenario under SAFTA is 120 percent more than actual trade, the loss of revenue for Nepal may not be offset by welfare gains. However, in the case of Bhutan, welfare gains more than offset revenue loss.

Chief Guest Dr Posh Raj Pandey, Member, National Planning Commission, Government of Nepal, stressed the need for South Asia to move from tariff liberalization to deep integration. He mentioned that the issues of sensitive lists, rules of origin and para tariffs should be revisited and also called for cooperation in regional public goods.

Speaking from the Chair, Prof. Dr. Bishwamber Pyakuryal said that the study should be able to categorically assess whether economic integration is feasible.