ISLAMABAD, Jan 10: Speakers at a conference have demanded for promotion of regional economic cooperation and integration, which they termed an important instrument for expediting the process of economic development.

The conference was organized by the Pakistan Society of Development Economists and co-hosted by the Freiedrich Ebert Stiftung, World Bank, United Nations Population Fund, Asian Development Bank and National Bank of Pakistan.

The theme of this year's meeting was regional cooperation and economic growth. Leading scholars from Pakistan and abroad were participating in the conference.

Speaking on the occasion, Minister of State for Finance Omar Ayub Khan said regional trading arrangements could promote new trade among members, but they could also divert trade from more efficient producers outside the region to less efficient producers within the region, thus resulting in welfare loss.

"To maximize the benefits of regional trading arrangements, Pakistan is seeking agreements that could lead to trade creation and provide opportunities to our exporters," he added.

"In particular, we are engaged in the process of negotiating agreements with our major trading partners like China and the United States. At present cotton yarn and cotton fabric constitute 70 per cent of Pakistani exports to China. However, Pakistan is keen to promote its other products ranging from light engineering goods to fruits and vegetable."

To promote bilateral commerce and trade relation with the United States, Mr Khan said, efforts were underway to turn the Trade and Investment Framework Agreement (TIFA) with the US into a free trade agreement (FTA) in the future.

"Pakistan has always strived to promote economic cooperation with neighbouring countries in the region. Political differences have also undermined efforts to promote regional economic cooperation in South Asia."

India and Pakistan, two largest economies of the region, have not been able to realize the full potential of their bilateral trade owing to non-resolution of the core issue of Kashmir, Mr Khan adds.

The President, Pakistan Society of Development Economists, and Director, Pakistan Institute of Development Economics, Dr A.R. Kemal said that regional economic cooperation was unlikely to succeed without political harmony and convergence in economic perceptions that were essential pre-requisites for forging an economic and trade alliance.

"The signing of Safta has created euphoria in the South Asian countries." However, there are at least two possibilities which may make it redundant. Firstly, all the countries are members of the WTO and would reduce the tariff levels.

If their MFN tariffs are close to preferential tariffs under Safta, intra-regional trade may grow at a rapid rate. Though one could argue that at lower rate of import duty, with or without Safta, the intra-regional and trade outside the region would flourish.

Second and more importantly, if the sensitive list is large and includes most of the products of export interest of South Asian countries, then the trade would not flourish, Mr Kemal observes.

"Similarly, the rules of origin should be so formulated that they do not unnecessarily constrain the growth of intra-regional trade. Moreover, anti-dumping and countervailing duties, though necessary for fair trade, should not be used for protective measures. Safta has great potential and South Asian countries should accept short-term costs for long-run benefits," he adds.

Nevertheless, he said Saarc countries must make an effort to make Safta a success, because that would expedite the process of economic development, mainly because of the problems in global market access and the higher transaction costs of producing for the world market.