UGSM-Monarch Business School Switzerland is happy to announce that a recent paper witten by Dr. Iqbal on SAFTA (South Asian Free Trade Agreement) is being published in the February 2012 issue of Journal of World Investment and Trade, Geneva a ISI Journal published by Brill, Netherlands. The paper is entitled: “Is SAFTA a Myth or Reality?” We congratulate Dr. Iqbal on the achievement and provide a summary of the article below.
The concept of Regional Trade Agreements (RTAs) is the out come of Uruguay Round. Since then, the different regions have created regional trading blocks. Recognizing the role of trade and investment flows in the process of regional economic integration, a trade block among SAARC members was created April 1993 known as SAPTA. Later on SAARC region was declared as a Free Trade Area (FTA) and accordingly, SAFTA was formed on January 1, 2006. Keeping in mind the flow of trade among SAARC countries, it appears that the spirit behind its creation has been defeated and it is a myth and not a reality.
Since the 1990s, the South Asian countries also made efforts to enhance trade and investment flows with their neighbors, with the larger objectives of achieving a reduction in poverty and enhancing development in the region. Under the South Asian Free Trade Agreement (SAFTA), the member countries vividly portray their inherent dissimilarities and also point toward a somewhat uncomfortable scenario of unequal distribution of potential gains from the regional cooperation scheme. Although all the SAFTA members are low-income developing countries, four of them (that is: Bhutan, Bangladesh, Maldives, and Nepal) are among the least developed countries (LDCs) because of a number of overriding problems that constrain their economic growth and development.
The 13th SAARC summit in Dhaka in November 2005 saw the addition of Afghanistan into the association. With this, economic interaction in South Asia switched over from SAPTA (SAARC Preferential Trading Arrangement) to SAFTA. SAPTA’s record in a decade of its operation is not encouraging as it could not take intra-regional trade beyond four per cent ($7 billion) of the total regional trade.
ASEAN intra-regional trade was only seven per cent from the present figure of 49 per cent; NAFTA could boost its intra-regional trade to 44 per cent and the EU to 67 per cent. The SAFTA is expected to reach this level. It is very clear from the foregoing analysis that that regional FTAs which have played a significant role in the uplifting of various weaker member nations is going to play the same role in the development of South Asian region through SAFTA. Albeit, the pinnacle of an economically integrated South Asia with the fruition of mutual interests and cooperation is still a long way ahead, but SAARC has laid the groundwork for its realization to be possible, and for obstacles to be overcome.