SAFTA ready to get final shape
From Meerza Iqbal Baig

NEW DELHI—Seven South Asian countries have finalised an agreement to set up a free trade area, the Indian government said, a move predicted to more than double the size of the regional market. The landmark deal to create a South Asian Free Trade Area (SAFTA) was signed in Islamabad in January 2004 during a summit of regional leaders with January 1, 2006 set as a deadline for implementation.
However the deal by the South Asian Association for Regional Cooperation (SAARC), was expected to become fully operational only by 2016. “The South Asian Free Trade Area (SAFTA) Agreement has been finalised,” said India’s Commerce Minister Kamal Nath. The statement was issued after “receiving intimation from Kathmandu about the deliberations of the Committee of Experts on SAFTA which met there from 29th November-1st December 2005 to resolve the outstanding issues ... so as to complete the negotiations,” Nath said on Friday. SAARC groups Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.
“Implementation of SAFTA will further strengthen our trade relations with the SAARC countries,” Nath said. The agreement when signed in Islamabad was seen as the best hope to better the standards of living for millions of poor in a region with a population of 1.5 billion. But implementation was delayed when some SAARC members expressed reservations over a list of sensitive products, rules of origin and a compensation mechanism for the least developed countries. The statement said agreement had been struck on the outstanding issues.
“A phased tariff liberalisation programme from the date of SAFTA’s coming into force is envisaged,” it said. Under the terms of the agreement, the more developed countries among the seven member states would bring down their tariffs for non-SAARC trade from the existing 30 percent to zero in five years while the less developed countries would do so in eight years. The developed countries would also reduce their tariffs for non-developed countries within SAARC in three years, the statement said. At their last summit in Dhaka on November 12-13, South Asian leaders had directed officials to ensure SAFTA came into force on January 1, 2006.
Indian Prime Minister Manmohan Singh said implementation of SAFTA would raise the current level of intra-regional trade from six billion to 14 billion dollars annually.
Ushering in a new era in the history of South Asian cooperation, the seven-member Saarc has finalized the South Asia free trade area (Safta), a newspaper said. Safta, an agreement between Saarc countries India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives, was signed during the 12th Saarc Summit in Islamabad last year, is scheduled to come into force on January 1, 2006. It will be fully operational by 2016, the Financial Express said. The pact holds huge potential for intra-regional trade growth as over 90 percent of the imports by South Asian countries are being sourced from outside the region and a major part of exports of South Asia are made to countries that are not part of the group. The total intra-regional trade amongst Saarc countries is less than $ 7 billion today as against the total volume of the combined international trade of $350 billion in the region.
India, which is the largest of the seven member countries, stands to gain significantly from the pact. Its total trade with Saarc countries increased over 8 percent to $ 5.2 billion in 2004-05. Benefits accruing to India would keep multiplying in the next ten years of the agreement’s implementation, trade experts said.