ISLAMABAD, 12 January 2004 — A South Asian Economic Union may still be a distant dream, but the region’s top leaders last week took the first step toward it by agreeing to establish a free trade area.
It will come as a pleasant surprise to many because the region, for the last half a century, was known more for its confrontations than cooperation. But South Asia Free Trade Area (SAFTA) is now real. President Chandrika Bandaranaike Kumaratunga of Sri Lanka, Prime Ministers Atal Behari Vajpayee of India, Zafarullah Khan Jamali of Pakistan, Khaleda Zia of Bangladesh, Surya Bahadur Thapa of Nepal, and Jigmi Yoezer Thinley of Bhutan, oversaw their foreign ministers sign SAFTA agreement in Islamabad’s Convention Center. Maldives President Maumoon Abdul Qayoom, after attending the 12th SAARC Summit for two days, returned to his country, leaving his Foreign Minister Fathulla Jameel behind to sign the agreement.
SAFTA becomes operational on Jan. 1, 2006 — the date on which all the seven SAARC countries drastically cut tariffs and ease foreign trade among themselves. Until only last week no one was sure that SAFTA will come into being in Islamabad.
Besides SAFTA what else did the summit achieve? It approved a Social Charter to improve the quality of life of the region’s 1.4 billion people — a third of whom live below the poverty line.
The summit, above all, approved the Islamabad Declaration, unveiling future cooperation in a host of fields from human resource development to energy, and telecom to information technology (IT). It brings forward implementation of the UN’s Millennium Development Goals from 2015 to 2010.
Despite skepticism expressed by Pakistan and other SAARC members regarding creation of an economic union and a common currency, unless “ all political disputes” are resolved, the Islamabad Deceleration (ID) sounds upbeat. “We reiterate our commitment made at the 11th SAARC summit at Katmandu in January 2002, for the creation of a South Asian Economic Union (SAEU). In this context, we underline the need that creation of a suitable political and economic environment will be conducive to the realization of this objective,” said the declaration.
Vajpayee urged the South Asian leadership to work for “greater economic stakes in each other.” It will naturally result in “greater sensitivity to the concerns of each other.” “It will pave the way for the more ambitious — but entirely achievable — goals such as a Free Trade Area, an economic union, open borders, and a common currency for our region,” he said.
The signing of the much-awaited SAFTA, described region’s leadership as “historic,” is motivated “by the commitment to strengthen intra-SAARC economic cooperation to maximize the realization of the region’s potential for trade and development for the benefit of their people,” it says. The 25-article SAFTA agreement replaces SAARC Preferential Trading Agreement (SAPTA) of 1993 for trade liberalization, on a preferential basis. SAFTA moves the region to higher levels of trade and economic cooperation by “removing barriers to cross-border flow of goods. It provides Bhutan, Bangladesh, Maldives, Nepal, and Sri Lanka — the least developed countries (LDCs) — special and differential treatment “commensurate with their development needs.” It bills India and Pakistan as “non-least developed countries” (NLDCs).
SAFTA affirms the existing rights and obligations under Marrakesh Agreement, establishing WTO and other treaties and agreements to which SAARC members are signatories. It provides for free movement of goods in the region through elimination of tariffs. It entails adoption of trade facilitation and a progressive harmonization of legislations by the member countries.
