KARACHI, Dec 31: Pakistan missed the deadline of Jan 1, 2006 for implementation of South Asian Free Trade Area (Safta) agreement as no announcement regarding tariff reduction for Saarc members was made by the government.
The business community, that showed enthusiasm when in January 2004 Saarc nations signed the agreement, gave a guarded response when contacted to comment on the situation. They were hopeful that politics would not be allowed to come in the way of mutually beneficial regional economic integration.
Some businessmen see Indian Cabinet’s approval of cutting five per cent import duty on goods arriving from Saarc members as a morale booster and a good signal to regional partners apprehensive of Indian intentions.
“The private sector has been looking forward for regional economic integration but some unresolved economic and political issues are causing delay in phasing out of tariffs”, said a leading businessman, who is also member of the committee of experts that is working out details to implement the agreement. “Business community has great hopes from Safta which may boost intra-regional trade similar to other groupings”, commented another leader.
However, there are certain other issues especially with respect to infrastructure and trade facilitation like creating networks of roads, railways, air and shipping to ensure seamless connectivity across South Asia to create the enabling framework for Safta.
While Safta is limited to trade in goods, a priority agenda is the extension of Safta scope to cover trade in services and investments liberalization. Private sector needs to be given adequate incentives to set up enterprises across South Asia.
In 2004, foreign direct investment into India touched a record $5 billion whereas in Pakistan it rose to $1 billion, but in other Saarc countries it is below $1 billion. If South Asia becomes an integrated market, it can draw a much higher FDI in the entire region with a huge market size of billions of people.
Secretary General Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Dr Khalid Amin says that “nothing big is going to happen from January 1 under Safta and also not in near future or within next six months.”
He says that for promotion of bilateral or regional trade, the member countries must have mutual trust, resolve their major political disputes and ensure equitable socio-economic benefit of the related countries.
Replying to a query, he said that the implementation of Safta from January 1, 2006 would be beneficial otherwise it would be of little economic consequence.
He was of the view that lack of political wills on both sides especially India and Pakistan to resolve major political issues was the real bottleneck in implementing Safta.
When asked as to which country will benefit under Safta trade, the FPCCI secretary general says India will benefit the most as and when genuine free trade is allowed in the region as it has exportable surplus of a very large range of products and services exportable at internationally competitive prices.
Besides, Pakistan can only dream of exporting to India where invisible trade barriers exist despite the fact that India has offered Pakistan the status of most favoured nation while Pakistan has yet to offer it the same.
Former vice-president and chairman press and media standing committee of the FPCCI Arshad Alam reckons that the progress on Safta’s full implementation has been very slow but the cut of five per cent customs duty by India has given the impression that the process has started.
“I think Pakistan will also consider by offering cut in customs duty by same percentage,” he says.
As far trade with other countries are concerned there are some problems. Maldives and Bhuttan dependence on customs duty is phenomenal, they, therefore, will suffer a setback in case they lower the customs duty. There are also some problems between some under developed and least developed countries.
“I see a bright future for Safta implementation as a lot of discussions are going on between the members to settle down various issues,” Arshad Alam said.
Saarc had already been wasted under some political issues especially between India and Pakistan but hopefully something is cooking between the two countries now for betterment which is evident from the recent improvement in political and economic relations, he said adding that things are being settled and it will take some time.
Karachi Chamber of Commerce and Industry (KCCI) president Haroon Faruki says that more time is now required and more issues are to be settled especially between India and Pakistan to make the full-fledged implementation of Safta a success.
“I think there has been a slowdown in confidence building measures between India and Pakistan in contrast to the way the process kicked off with a bang in 2004,” the KCCI president said.
“Pakistan has been offering its best to India in economic and political front while India has not been showing the same gesture towards Pakistan,” he said attributing this as a main reason in delaying the entire process of confidence building measures between the two countries.
Pakistan will reap the benefit by getting market access to the world’s largest middle class market of India. In return, India can send engineering and chemical goods to Pakistan. “Every country will get the market access one way or the other as per the demand of the product in the country,” Faruki says.
Chairman Site Association of Industry Ameen Bandukda said that very little has been done so far for the start of Safta from Sunday.
“Safta should be implemented with full force immediately and it is need of the hour,” he said adding that in a period of globalization the intra-region trade will flourish instead of finding markets in European and other countries.
“I think bureaucracy, red tapism and inefficiency of Indian and Pakistan governments can be blamed in non-implementation of the Safta with full thrust,” he said adding that it is time for the two governments to open up their minds for free trade.