Poor connectivity hampers SAARC trade

Poor connectivity among countries of SAARC is a major impediment for intra-regional trade.

Lack of connectivity among eight countries of South Asia is a major impediment for intra-regional trade,which has the potential to grow over eight times,SAARC secretariat chief said here.

“Infrastructure constraints… combined with the fact that we are perhaps one of the least connected regions in the world constitute a major structural impediment,” SAARC Secretary General Sheel Kant Sharma recently told industry leaders and bureaucrats from the Ministry of External Affairs.

He said trade potential in South Asia has been pegged at $85 billion by the Asian Development Bank. At present,the regional trade is barely $10 billion.

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The cost of intra-SAARC trade is among the highest in the world. “It leads to lower and restricted trade among the countries in the region and limits positive impact of cut in tariffs,” Sharma said.

The South Asian Association for Regional Cooperation (SAARC) is an association of Afghanistan,Bangladesh,Bhutan,Maldives,Nepal,Pakistan,India and Sri Lanka.

He said cut in infrastructure and transport costs have the same effect as tariff liberalisation in boosting trade.

“For every 1 per cent reduction in cost,trade stimulus is about 5 per cent. Of considerable merit is the fact that this benefit is passed along the entire supply chain … shippers,truckers,traders or end users,” he said.

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Currently,the intra-SAARC trade stands at about 4.4 per cent of South Asia’s total world trade,significantly less than the figures of ASEAN,which is over 40 per cent,and European Union,which is over 65 per cent.

Sharma said regional economic integration may not be achieved without comprehensively addressing the infrastructural problems,both physical and soft infrastructure,and both at national and regional level.

“Even when infrastructural problems fall in national domain,their impact could be regional,” he said,adding poor custom,quality control,poorly developed port,road and rail in a country could raise transaction cost for all.

Further,he said the member countries should strengthen traditional arteries of trade by developing regional trade and transit agreements,including Regional Motor Vehicles Agreement and Railway Agreement.

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“SAARC has already set up an expert group to commence negotiations on these agreements,” he said,adding,there is a need to undertake faster implementation of agreed regional infrastructure projects.

To build connectivity,the member countries could offer on reciprocal basis transit facilities to third countries establishing links with the larger Asian neighbouhood,including West,Central and South East Asia,he said.

“We are still far away from our goal of regional economic integration … It is important to build a sound foundation without which the goal of South Asian Economic Union would only remain aspirational,” he said.