KARACHI: South Asia's regional forum, representing one fifth of the world's consumers and nearly half of its poor, is set to move a step closer to becoming a trade bloc if a free trade agreement is inked at its forthcoming summit.

The pact is topping the agenda of the three-day South Asian Association for Regional Cooperation (SAARC) meet starting in Islamabad. "The SAFTA (South Asia Free Trade Agreement) framework treaty is high on the agenda to augment regional trade," SAARC Chamber of Commerce and Industry (SCCI) spokesman Waqar Ahmed said.

More than 40 per cent of South Asia's 1.4 billion people live on less than one US dollar a day, making it home to nearly half of the world's poor, according to the World Bank's August 2003 report.

The combined external trade of its seven members Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka stands at over 66 billion dollars.SAFTA calls for trade of 5,600 goods under a concessional tariff structure of 10 to 25 per cent.

A draft agreement, drawn up in Kathmandu in November, envisions a commercial arbitration council, relaxation of visa requirements for businessmen, more flexible movement of goods and people, motor vehicle agreement for transport and possibly the establishment of SAARC as an economic union.

South Asian commerce officials are looking to the European Union (EU) and the Association of South East Asian Nations (ASEAN) for inspiration. Some 61 per cent of European Union nations' total external trade is conducted within the EU. One quarter of ASEAN states' external trade is within the forum.

The size of such trade among SAARC countries is a meagre four per cent. "When the EU and ASEAN can make a trade bloc, why should we not follow the same pattern?" said Ilyas Bilour, president of the India-Pakistan Chamber of Commerce and Industry.

Bilour believes a South Asian trade pact could escalate inter-SAARC trade up to 60 per cent "once we form such an economic union." India, the market leader among SAARC states, has been the main supporter of inter-SAARC trade. But Pakistan has until now been reluctant.

Fears of cheaper Indian goods flooding the market compelled Pakistani planners to keep delaying such an accord. However, a new confidence among Pakistani manufacturers and planners, inspired by an industrial turnaround in the past couple of years, have brightened the chances of SAFTA being signed.

"We feel that we are very much competitive against Indian goods now," said Pakistani commerce ministry joint secretary Zafar Qadir. Pakistan's business community visualizes long-term benefits from the agreement. "Our engineering and automobile sector is somewhat more exposed to competition with Indian goods. But on the other hand it would definitely benefit consumers," Bilour said.

Industrialists, fixing their eyes on the vast market India represents for their goods, are equally supportive of a regional trade pact. "Pakistani manufacturers would find a vast market of 200 million urban dwellers in India to attract more business for their goods," he said. Bilateral trade between India and Pakistan stood at 204 million in the last financial year. Informal trade is said to be around 1.5 billion dollars a year.-AFP