Your SlideShare is downloading. ×
0
Intra-regional Trade among
SAARC Countries, Potential and
Constraints
Masaood Moahid
Masaood Moahid PALB 2110
Sent on 14th...
∗ Overview of SAARC
∗ Introduction
∗ Core Objectives, Principles of SAARC, Major Agreements
∗ SAARC Economy
∗ Trade Openne...
∗ One of the developments in the post WTO scenario has been the growth
of regional trading agreements across the globe as ...
∗ In terms of population, SAARC is the largest with over 23% of world
population. However, the total GDP of the SAARC memb...
5
Fig. 1 Members and Observers of SAARC
Membership: Eeighth members are: Afghanistan, Bangladesh, Bhutan, India,
Maldives, N...
∗ Purpose of the organization is collective economic,
technical, social, and cultural development of member
states.
∗ The ...
8
9
South Asian Preferential Trade Agreement (SAPTA)
The Agreement on SAARC Preferential Trading Arrangement (SAPTA) was
signe...
∗ South Asian Free Trade Agreement (SAFTA)
∗ Signed at the 12th SAARC Summit in Islamabad, Pakistan.
∗ SAFTA facilitates f...
• 1.6 billion population ,inequality in the distribution of income,
43 % of its people living below the poverty line.(SAAR...
Table 1: Macroeconomic Indicators of SAARC Economies: 2009
Items AFG BD BT IND# MALD NEP PAK SRL
Real GDP Growth, % 3.4 6....
Table 2: Salient features of economy of South Asian countries
Particular
Reference
year
Bangla-
desh
India Nepal Pakistan ...
Table 3: Incidence of hunger and under nutrition in South Asian countries and world
Country
Dietary Energy Consumption
(Kc...
Figure 2: (a) % age Undernourishment in South Asian Countries
(b) Undernourishment in South Asian Countries (millions)
a b...
Table 4: Production and utilization of major food products in South
Asia during 2007-2009, million tonne
Item Production
F...
Figure 3: Production and S/D of major food products in South Asia during 2007-2009
18
Table 5 Surplus/Deficit of major food items in South Asian countries during 2007-
2009, million tonne
Item Rice Wheat Puls...
Table 6 : Per capita supply of various food items in South Asian countries, 2009, Kg/year
Item
Cereal
s excl.
beer
Rice
(M...
Table 7 : Trade Openness (Export and Import as per cent of GDP) in SAARC
Countries (Per cent)
Country 1960 1970 1980 1990 ...
Table 8: Share of SAARC Region in World Exports
(Percent)
Country 1950 1960 1970 1980 1990 2000 2008
Afghanistan
0.03
0.04...
Table 9: Share of SAARC Region in World Imports (Per
cent)
Country 1950 1960 1970 1980 1990 2000 2008
Afghanistan 0.09 0.0...
Figure 4: Trend in Merchandise Export and Import Share of SAARC in World Total
24
∗ The basic reason of ‘regional integration; is the ‘economic
integration.
∗ Economic integration is propelled by the comp...
Table 10: Intra-Regional Trade (Export) of Major Trading Blocks (%)
Groups
1990 1996 2000 2001 2002 2003 2004 2005 2006
EU...
Table 11 Intraregional Trade (Exports) of SAARC Countries, 1995-2008 (% of
total trade)
Year
Banglad
esh Bhutan India Mald...
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2010-11 (April-
Oct)
2011-12 (April-
Oct)
Exports
India’s Total 126.41 163.13...
Figure 5 : (a) India’s total exports and imports (Billions US$)
(b) India’s total exports and imports to SAARC ( Billions ...
 Afghanistan applied for the membership of SAARC in 2005
 Dispute for its location, whether it is located in South Asia ...
Source: www.commerce.nic.in
Year Exports Imports Total Trade
Balance of
Trade
2006-07 182.11 34.37 216.48 147.74
2007-08 2...
Source: www.commerce.nic.in
Year Exports Imports Total Trade
Balance of
Trade
2006-07 1629.57 228.00 1857.57 1401.57
2007-...
(Value in US $ million)
Year Exports Imports Total Trade
Balance of
Trade
2005-06 99.17 88.77 187.94 10.4
2006-07 57.66 14...
Table 16: Bilateral Trade with Maldives (Value in US $ million)
Source: www.commerce.nic.in
Year Exports Imports Total Tra...
Source: www.commerce.nic.in
Year Exports Imports Total Trade
Balance of
Trade
2006-07 927.40 306.02 1233.42 621.38
2007-08...
Source: www.commerce.nic.in
Year Exports Imports Total Trade
Balance of
Trade
2006-07 1350.09 323.62 1673.71 1026.47
2007-...
Source: www.commerce.nic.in
Year Exports Imports Total Trade
Balance of
Trade
2006-07 2258.30 470.33 2728.63 1787.97
2007-...
The trade liberalization and domestic reform in most of the SAARC countries in recent
years have led to an increasingly c...
RCA
• The RCA measures a country’s exports of a commodity relative to its total exports
and to the corresponding export pe...
Table 20 Revealed Comparative Advantage of Major SAARC Countries : 1995
Broad SITC Groups /Countries BD IND MALD NEP PAK S...
Table 21 : Revealed Comparative Advantage of Major SAARC
Countries : 2006
Broad SITC Groups /Countries BD IND MALD NEP PAK...
Fig. 5: RCA of India in 2006 and in 1995
42
∗ South Asian countries share similar socio economic
conditions and they produce similar products and
consume similar comm...
Table 22: Intra SAARC Trade Share of Top 20 Commodities
Product Name Trade Share
Petroleum oils 7.84
Cotton fabrics, woven...
Export Similarity Index
To compute this index, an export share of each product to
total exports of each country is require...
Table 23 : Export Similarity Index (EXS) for SAARC Countries, 2007
Country Finger and Kreinin's EXS Index
BD IND MALD PAK ...
∗ Price and market integration was studied by examining
association between producers prices during the period
2000 to 200...
Table 24: Correlation coefficient between producers prices in South Asian Countries
Commodity Country India Nepal Pakistan...
Case Study
49
∗ Potential trade between home and a partner country is the maximum
possible trade that can occur between them, given the ...
51
Trade intensity index (TII) is defined as the share of home country’s trade with its
partner country, divided by the ho...
Based on the formula mentioned, trade intensity indices are
calculated for different countries of SAARC.
Table25 : Trade I...
Barriers mean anything that restricts international trade.
These may be embargos, import duties, import licenses,
distance...
∗ Non tariff barriers between countries in the SAARC region is
the main obstacle for regional development (Annisul Huq, th...
Indicators
South
Asia
ASEAN NAFTA EU25 World
No. of documents for
export
8.38 7.69 4.50 4.82 7.22
Days for Export 32.88 29...
Bilateral dispute between Pakistan and India
Bilateral dispute
Figure 7: Map of South Asian Countries
56
57
58
 Even after 28 years of existence SAARC failed to integrate well to take advantage of the
opportunities. Intra-regional t...
Thanks
60
Upcoming SlideShare
Loading in...5
×

Intra-regional trade among SAARC member countries

2,510

Published on

The slides include information on the intra-regional trade among SAARC nations.

Published in: Business, Technology
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
2,510
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
83
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide
  • Economic theory argues for liberalization of trade through policy induced measures, by reducing and then eliminating tariff and non-tariff barriers. This promotes efficient allocation of resources to productive uses, exploitation of scale economies, encourages competition, increases factor productivity and increases trade flows, thereby, promoting economic growth (Barro and Sala-i-Martin, 1995 and Wacziarg, 1997).
  • For the first slide:::::One of the most important developments in the post WTO scenario has been the phenomenal growth of
    regional trading agreements among different countries’ blocs across the globe as a complement to the
    multilateral trading system. At the advent of “new regionalism”, different countries have formed a
    complex web of regional trading arrangements, what Bhagwati and Panagariya (1999), Estevadeordal
    (2006) and others refer to as the “Spaghetti Bowl” phenomenon of the international trading system. In
    Asian regions alone, there have been 49 such regional trading blocs (RTBs) operating like a “Spaghetti
    bowl”, where every country is member of such blocs simultaneously. Among several others, East Asian
    economies have been emerging as the most successful RTBs in the Asia region after achieving strong
    economic interdependence, particularly through external liberalization, domestic structural reforms and
    market-driven integration with the global and regional economies. Intraregional trade, FDI and financial
    flows among these countries have created a “naturally” integrated economic zone (Kawai, 2005).
  • To strengthen collective self-reliance among the countries of South Asia
    To develop mutual trust, understanding and appreciation of one another’s problem
    To promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields
    To strengthen cooperation with other developing countries
    To strengthen cooperation among themselves in international forums on matters of common interest
    To cooperate with international and regional organizations with similar aims and purposes.
  • South Asian Preferential Trade Agreement (SAPTA)
    SAPTA includes the following contents; least development country, contracting state, serious injury, threat of
    serious injury, critical circumstances, sectorial basis, direct trade measures, tariffs, Para-tariffs, nontariff, and
    products. The contracting states establish the South Asian Preferential Trade Agreement (SAPTA) for the
    promotion of mutual trade and economic collaboration among these countries and it will be governed by the
    requirements of SAPTA and also by the legislation mentioned in its structure by the Contracting States.
    The principles for the governance of SAPTA are: the member states shall be benefited equally. SAPTA will
    gradually be discussed, improved and extended in subsequent stages. The special needs of the least developing
    member states would be agreed upon in their favor. All products and unprocessed, semi processed and
    processed manufactures and goods will be included in SAPTA.
    SAPTA having the following components: tariffs, Para-tariffs, nontariff measures, and direct trade measures.
  • South Asian Free Trade Agreement (SAFTA) includes: concessions, direct trade measure, least developed contracting state, margin of preference, non-tariff measures, Para-tariffs, products, SAPTA, serious injury, tariffs, and threat of serious injury.
    There is great contribution of SAFTA to the economic and social development of the region. Pakistan can
    gain many benefits from SAFTA. The access to the huge market of SAARC countries for trade purpose is in
    the favor of Pakistan, as Pakistan can get access to cheaper and better quality of products from customer‟s
    point of view also. Through enhanced competition, trade liberation permits Pakistan to promote its export
    sector. Pakistan‟s economy can boost up by generating profits and revenues through using Pakistan‟s roads as
    routes for trade among neighboring countries.
    The sole
    objective of the summit to promote intra-regional trade mentions the benefits of the purpose as follows: larger
    markets and fuller utilization of production capabilities, transfer of suitable production technologies,
    comparative advantage and complementarities, economies of scale due to expanded markets and better
    utilization of entrepreneurial capabilities, capital, manpower and natural resources with which the associate
    countries are endowed in varying degrees
    South Asian Free Trade Agreement (SAFTA) signed at the 12th SAARC Summit in Islamabad, Pakistan.
    Build on SAARC Preferential Trade Agreement (SAPTA)
    Enhanced scope of regional trade dialogue to include competition, trade and transportation, harmonization of legislation, banking procedures, forex regulations and immigration processes.
    Trade Liberalisation Programme (TLP): reduce tariffs and eliminate restrictions on quantity of goods traded.
    Trade not only in goods, but in services and investment too!
    Non-LDC member states required to reduce existing tariffs to 20 percent within 2 years and then to 0–5 percent in the next 5 years.
    LDC member countries required to reduce existing tariffs to 30 percent in 2 years and then to 0–5 percent in the next 8 years.
    Rules of Origin: ensure domestic value addition.
    Encouraged negotiations for setting ceiling on negative list by each member country.
  • The South Asian region being the most populated part of the world (1.47 billion, Table -2) is
    characterized by greater inequality in the distribution of income with 43 % of its people living below the poverty line.
    South Asia's economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services.
    SAARC, tragically, is the world's only region, which has failed to tap the potential for social-cultural exchange and economic cooperation, with the continuation of war(ADB, 2005) and cold war in the region between India and Pakistan.
    Intra-SAARC trade is dismally as low as 4% and the collective share of the region in world trade was just 1%
  • Fiscal balanceAmount of money government has from tax revenue and the proceeds of assets sold, minus any governmentspending. When the balance is negative, the government has a fiscal deficit. When the balance is positive, the government has a fiscal surplus.
    Merchandise export: Exports of goods, not services. Also called tangibleexports.
    Current account balance: Difference between a country's total exports of goods and services, remittances from the migrant workers, and aidgrants, but not capital inflows or outflows. A component ofbalance of payments, it is a measure of a country'scompetitive strengths and indicates the stability of itscurrency.
  • Agriculture is the mainstay of economies of South Asian countries. About 18-34 per cent of national output and 33-66 per cent employment are contributed by this sector in various countries in the region. Among the five major countries in the region per capita income is highest in Sri Lanka (Table 2) followed by India with per capita income of $ 1220. Nepal comes at the bottom with per capita income of $440. Bangladesh is notch above Nepal with per capita gross national income of $580. Even the country with highest per capita gross national income in the region is ranked at 151. This shows that South Asia is having very low level of income compared to most other countries.
    Per capita arable land varies from 0.06 hectare in Sri Lanka to 0.14 hectare in India. More than one third of total national output in Nepal is contributed by agriculture sector. Agriculture contributes around one fifth of national output in Pakistan, Bangladesh and India. In all the countries share of agriculture in employment is much higher than its share in output. In Nepal, two third of workforce is engaged in agriculture which is more than double the employment share of agriculture in Sri Lanka.
    Agriculture value added per worker is meagre in Nepal where two third workforce is employed in agriculture sector. Sri Lanka, which has lowest share of employment in agriculture, is at the top in agriculture value added per worker. Agriculture value added per worker in Sri Lanka and Pakistan is far higher than Bangladesh and India (Table 2).
    More than half of total population in Nepal and Bangladesh suffers from poverty based on the World Bank norm of $1.25 per person daily income. Similarly, more than 40 per cent people in India live under poverty based on the norm of $1.25 per capita daily income. Poverty in Pakistan based on this norm was 22.6 per cent. Sri Lanka shows lowest incidence of poverty in the South Asia. High dependence on agriculture for livelihood and slow growth in employment opportunities in non agriculture sector are the salient features of South Asian countries and these are largely responsible for widespread poverty and under-nutrition in the region.
    Agriculture value added per worker is a measure of agricultural productivity. Value added in agriculture measures the output of the agricultural sector (ISIC divisions 1-5) less the value of intermediate inputs. Agriculture comprises value added from forestry, hunting, and fishing as well as cultivation of crops and livestock production. Data are in constant 2005 U.S. dollars.
  • Hunger is generally estimated from dietary energy intake. A person having dietary energy intake below a threshold (norm) level is classified as hungry. Such persons are also termed as undernourished. Country wise information on dietary energy intake, incidence of under nutrition and number of person undernourished during 1990-1992 and 2006-2008 is presented in Table 3. The Table also provides estimates of hunger and 7
    nutrition for developing countries and world as a whole to make comparison with South Asia.
    As would be seen from Table 3, dietary energy intake in all South Asian countries has remained lower than not only the world average but also the average of developing countries. Further, this gap in dietary intake of energy has increased during 1990-1992 and 2006-2008, for India, Bangladesh, Nepal and Pakistan. Though all South Asian countries have experienced some improvement in per capita energy intake the increase has been very small, in the range of 3 to 16 per cent over a period of 16 years
    Prevalence of under nutrition during 2006-2008 varies from 17 per cent (in Nepal) to 26 per cent (in Bangladesh). Dietary energy intake among the South Asian countries show a very narrow variation, 2270 to 2370 Kcal/person/day. Despite small improvement in per capita calorie intake, the prevalence of undernourishment shows large improvement in Bangladesh and Sri Lanka. The latest data provided by FAO show that prevalence of under nutrition based on dietary energy intake remains highest in Bangladesh despite tremendous progress made by the country in improvement of under nutrition. Population facing under nutrition in Bangladesh has declined from 38 per cent during 1990-1992 to 26 per cent in the years 2006-2008. There has been little progress in reducing prevalence of under-nutrition in India, Sri Lanka and Nepal. Despite decline in per cent of population facing under nutrition, the number of undernourished persons has increased over time in all countries except Sri Lanka and Bangladesh. Number of 8
    undernourished persons in India has increased from 177 million in 1990-1992 to 225 million in the recent years.
  • Agricultural production in South-Asia as a whole shows sharp year-to-year fluctuations. These fluctuations are much stronger at country-level than at regional-level. Because of this, a single year estimate does not capture correct situation of agriculture and food and trade in the region or a country. Therefore, in order to have credible information on surplus/deficit of different food items the paper uses 3-years average of production, trade and stock. Surplus or deficit have been computed from data available on production and consumption and related aspects reported by FAO in Food Balance Sheet for individual country. The regional data was arrived at by summing up country level production, consumption, trade, stock etc.
    Surplus/Deficit was computed as under :
    Surplus / deficit = Production (less) food consumption, utilization as feed, seed, and processing and other utilization, (plus) import, (less) import, (less) net change in stock
    While production data is available upto the year 2009 or 2010 in some cases, the data on utilization reported in food balance sheet of FAO is not available beyond 2007. In order to get the estimate of surplus for latest years the food balance sheet data on various items of utilization was extrapolated for year 2008 and 2009. This was done by multiplying ratio of utilization (in various uses) to production in year 2007 with production in years 2008 and 2009. Three years average of production and domestic utilization were used to estimate surplus/deficit at country and regional level. The estimates of surplus for South Asia for major food commodities are presented in Table 4.
    The paper covers cereals (total, rice and wheat), pulses, vegetable oil, sugar, vegetables, fruits, eggs, meat and milk. This list leaves a very small fraction of total agriculture which consists of several small items. Cereals, mainly rice and wheat, are the staple food for all countries in South-Asia. Average production of cereals in the region during 2007-2009 was 286 million tonne (mt). South-Asia as a whole consumed 238 mt of cereal as food. Consumption of cereal in other uses like seed, feed processing was 34.2 mt. Total utilization of cereal per year in South-Asia during 2007-2009 was estimated at 272.6 mt. Based on these estimates South-Asia is found to have surplus of 13.4 mt of cereals which is 4.7% of cereal production in the region.
    Rice and Wheat account for 84 per cent of total cereal production in South-Asia (rice 47.5% and wheat 36.1%). Total annual absorption (consumption in all uses) of rice in the region during 2007-2009 was 126 mt comprising 115 mt of food and 11 mt of other uses. Total utilization of wheat was 103 mt comprising 94 mt of food consumption and 9 mt of other uses. South-Asia was found to have 10.3 mt rice surplus while it is having a small deficit in wheat to the tune of 0.5 per cent of production.
    Pulses (dried leguminous vegetables) are a regular part of South-Asian diet and also a major source of protein. Pulses are consumed both by vegetarian as well as non-vegetarian population in various forms. Generally they are consumed as a `Curry’ along with rice, wheat or other cereals. Over time, pulse production in South-Asia has remained either stagnant or experienced very slow growth. The green revolution technology rendered pulse production relatively much less remunerative than cereals. Thus, large area under pulses has shifted towards production of cereals; in some places pulses have been pushed to less fertile or marginal lands. As a result, production of pulses in the region could not keep pace with growth in population, and, per capita production and consumption of pulses has witnessed sharp decline over time. This, in turn, has caused adverse effect on protein intake in the region.
    During 2007-2009, average production of pulses in the region was close to 16 mt. Total utilization of pulses was close to 20 mt, which leaves a gap of about 4 mt between regional production and utilization. The level of deficit of pulses is 23 per cent of recent level of production.
    Quantity of vegetable oil consumed as food was 27 per cent more than production in the region. Then there was consumption of edible oil in other uses to the tune of 4.29 mt. The total utilization of vegetable oil in the region was 15.4 mt which is 76 per cent more than the regional production. This leaves a deficit of 6.6 mt of vegetable oil in the region. The deficit in terms of oilseed is much higher and is given by the deficit of vegetable oil divided by extraction rate of oil to oilseeds. A crude estimate shows that South-Asia need to raise oilseed production by about 19 mt to match the deficit in production and consumption of vegetable oil in the region.
    South-Asia produced 29.6 mt of sugar (raw equivalent) as against total utilization of 26 mt. During 2007-2009 the region on an average has 3.4 mt of surplus sugar.
    Vegetable production in South-Asia was estimated to be 100 mt and total utilization was reported to be 99.13 mt. About 93 of the total utilization of vegetable goes as food. At current level of production and consumption the region is having a surplus of 1.27 mt vegetables. Fruit production is estimated at 78.7 mt and total consumption is also the same. About 86 per cent of fruit production is utilized as food and remaining 14 per cent is in other uses. At present level of production and consumption in South-Asia has a small deficit (30 thousand tones) of fruits.
    Among livestock products, milk is the largest item of production and consumption in the region. Total production of milk per year is 145.6 mt and total utilization is estimated to be 146 mt. About 80 per cent of total milk utilization is used as food. This production and consumption balance leaves 80 thousand tonne of milk deficit in the region. The deficit was 0.05 per cent of the total production. Total egg production in South-Asia during 2007 to 2009 was 3.93 mt. The amount of egg used as food was 3.33
  • FAO food balance sheet for the year 2007 shows significant variations in per capita supply/use of various food items as food in various countries in South-Asia (Table 15). Per capita annual supply and use of cereals as food among the 5 major countries of South-Asia was lowest in Pakistan which showed highest prevalence of under nourished population. Further, cereal consumption in Pakistan was highly concentrated in favour of wheat which accounts for more than 80 per cent use of all cereals in the country. However, Pakistan topped in per capita supply of milk. The next country in the ranking of per capita supply of milk was not even half of the level in Pakistan. Similarly, Pakistan also topped in per capita supply of sugar, meat and vegetable oils. Bangladesh topped in per capita supply of cereals, 88 per cent of which consists of rice. Except rice, cereal and meat, per capita supply of all other food items in Bangladesh was lowest in the region. India topped in consumption of pulses, vegetables and fruits. Per capita supply of these items was 13 kg of pulses, 65 kg of vegetable and 45 kg of fruits. India was at the bottom in per capita supply of meat, closely followed by Bangladesh.
  • Recent Trade Performance of SAARC Region
    The importance of trade as growth facilitator has been recognised in SAARC countries as well. It is evident from the growing trade openness of SAARC economies over the years. However, there are wide disparities within the SAARC region. For instance, Maldives is highly dependent on external sector with 161 per cent trade openness ratio (Trade-GDP ratio) while Pakistan is least open country in the SAARC region (Table 2). Saxena (2005) elaborates that India has a huge domestic market, hence trade forms a substantially smaller percentage of GDP, especially when compared with East Asian economies, that are small and essentially require trade for growth. The rest of the countries are fairly open to trade.
    Production and utilization of major food products in South Asia during 2007-2009
  • As regards the trend in the share of SAARC region in total world trade, it witnessed a persistent decline during the 1960s, 1970s and 1980s. However, there has been a gradual pickup in share in total world exports since 1990s but still lower than the level of share in 1950. During 2008, share of SAARC region in total world exports stood at 1.4 per cent (3.7 per cent in 1950) (Table 3and Chart 1). Similarly, the share of SAARC region in total world imports declined but picked up in recent years (Table 4 and Chart 1).
  • Similarly, the share of SAARC region in total world imports declined but picked up in recent years (Table 4 and Chart 1).
  • The basic reason of ‘regional integration; is the ‘economic integration’ of ‘natural’ and ‘unnatural’ countries.
    Economic integration is propelled by the competitive needs of different countries of the world to face the onslaught of globalization after the onset of the WTO on 1st January 1995.
    In the new liberalized trade regime, it is pertinent for countries to be more competitive by reducing costs through removal of trade barriers and restrictions on the movement of factors of production.
    Intra-regional trade of major trading blocs has grown tremendously over the last one and a half decades (see Table 1).
  • Apec::::::asia pacific economic cooperation
    Also construct a trend graph!!!!!
    Intra-regional trade of major trading blocs has grown tremendously over the last one and a half decades
    Indian Ocean Rim Association
  • Trade potential among the SAARC countries is very high, which is evident from its low intraregionaltrade at present, and on the one hand the inclusion of Afghanistan into its fold since 2007. Intraregional trade among the SAARC countries is shown in Table 2. It shows, except for India and the Maldives, that intraregional trade of all countries increased from 1995 to 2008.
    One is its exportable items to this region l is extremely limited and therefore shrinking
    every year. The second reason is that it is diverting its exports to other countries.
    Nepal It shows it has also increased its product diversification and also became competitive over the
    years, though it’s major export market in the region has been India all along
  • India being the major economy in SAARC
    i
    ts trade is more diversified compared with other members of SAARC
    Afghanistan
    India & Afghanistan signed the Preferential Trade Agreement on March 6, 2003 in New Delhi. This agreement would remain in force till either party gives to the other a notice for its termination.
    Under the Agreement, India has granted preferential tariff for 38 products from Afghanistan including Raisins, Dry Fruits, Fresh Fruits and Spices whereas Afghanistan granted preferential tariff to 8 items from India including Tea, Antisera and Medicines, Refined Sugar, Cement Clinkers and White Cement.
    Afghanistan was inducted as the eighth member of SAARC during the Fourteenth SAARC Summit held in New Delhi on 3-4 April 2007.
    India’s trade with Afghanistan has increased substantially from US$ 201.09 million in 2005-06 to US$ 520.47 in 2008-09.
    During April-September, 2009-10, India’s total trade with the country stood at US$ 277.27 million as compared to US$ 228.52 million during the same period last year. The trend in trade between India and Afghanistan is given in Table 8.4.
  • During April-September, 2009-10, India’s total trade with the country stood at US$ 277.27 million as compared to US$ 228.52 million during the same period last year. The trend in trade between India and Afghanistan is given in Table 8.4.
  • ??????
  • http://commerce.nic.in/publications/anualreport_chapter7-2011-12.asp
  • RTA?
    The large scale trade liberalisation and domestic reform in most of the SAARC countries in recent years have led to an increasingly competitive international environment. Thus, it is timely to examine the extent to which SAARC countries have become more specialised in various sectors.
    The ability of a country or a firm or an individual to produce goods and/or services at a lower opportunity cost than other firms or individuals.
    A comparative advantage gives a country or a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
    Revealed Comparative Advantage (RCA) index and the Relative Trade Advantage (RTA) Index have been used to describe the tendency for countries to specialize and export those goods and services that they produce at a lower relative cost compared with other countries.
    (a) Revealed Comparative Advantage (RCA)
    The Revealed Comparative Advantage Index (RCA) is the most frequently employed measurement of trade specialisation. This index was first proposed by Balassa (1965) and defined as:
    (b) Relative Trade Advantage
  • Section VTrade Comparative Advantage of SAARC Countries
    The large scale trade liberalisation and domestic reform in most of the SAARC countries in recent years have led to an increasingly competitive international environment. Thus, it is timely to examine the extent to which SAARC countries have become more specialised in various sectors. specifically, through analysing trade data for six SAARC countries, viz., Bangladesh, India, Maldives, Pakistan, Nepal and Sri Lanka and the rest of the world by commodity type, it is possible to reveal in which sectors and products their comparative advantage lies. Several indicators can be used to analyse competitive and comparative advantage.
    In the present paper, Revealed Comparative Advantage (RCA) index and the Relative Trade Advantage (RTA) Index have been used to describe the tendency for countries to specialise and export those goods and services that they produce at a lower relative cost compared with other countries. However, before analysing the results, it is pertinent to briefly discuss the methodology to calculate these indices.
    (a) Revealed Comparative Advantage (RCA)
    The Revealed Comparative Advantage Index (RCA) is the most frequently employed measurement of trade specialisation. This index was first proposed by Balassa (1965) and defined as:
    If RCAi > 1, then country j has a comparative advantage in good i. If RCAi < 1, then country j has a comparative disadvantage in good i.
    RCA is based on observed trade patterns. The RCA measures a country’s exports of a commodity relative to its total exports and to the corresponding export performance of a set of countries. This index takes values between 0 and +1. A value of index greater than 1 denotes product in which country is relatively more specialised. On the contrary, a value less than 1 characterises that country j is accepted not specialised in product i.
  • An inter-temporal analysis of Standard International Trade Classification (SITC) data for 1995 and 2006 based on the Balassa index of RCA shows that in 1995, SAARC countries, as a whole, had comparative advantage only in a few SITC broad industry groups. In 1995, India had comparative advantage in five trade sectors. However, India has developed comparative advantage in 10 sectors over the years. In contrast, Pakistan and Bangladesh have lost their comparative advantage in some sectors over the same period.
    Pakistan had RCA index of more than one in agricultural raw material in 1995 but it witnessed a decline in RCA to 0.8 in 2006. Similarly, Bangladesh has lost its comparative advantage in food items and agricultural raw material as respective RCA indices turned from above one to below one. Nepal has developed comparative advantage in a number of sectors such as food items, ores and metals, nonferrous metals, chemical products and iron and steel as the respective RCA indices turned more than one in 2006 (Tables 16 and 17) .
    None of the countries has comparative advantage in capital intensive and high value added products. For instance, no SAARC country has RCA greater than one in machinery and transport equipment. In contrast, all SAARC countries, except Maldives, have strong comparative advantage in the industry group of textile fibres, yarn, fabrics and clothing. In the overall manufactured goods sector, Bangladesh and Pakistan have comparative advantage with RCA index of 1.29 and 1.14, respectively, followed by Nepal and Sri Lanka with RCA index of 1.01 each. Out of 12 broad SITC Groups as classified by UNCTAD (though not mutually exclusive), India has comparative advantage in highest number of sectors while Pakistan, Sri Lanka and Bangladesh have only 4, 3 and 7 sectors, respectively. However, India does not seem to have comparative advantage in manufacturing goods sector. India has improved its comparative advantage substantially in ‘iron and steel’, ‘chemical products’, ‘non-ferrous metals’, ‘ores and metal’ and ‘agriculture raw material’.
  • The table-1 shows top twenty commodities traded by SAARC countries among themselves for the year 2012 Petroleum Oils is the single largest item of imports (7.84 percent) followed by cotton fabrics (5.28), cotton (4.71 percent) and textile yarn (4.70 percent). This showed textile products are the top three out of four products (13.69 percent) traded by the SAARC countries.
    Other imported traded items of SAARC for the year 2012 are Lime, cement, (2.98 percent), Sugar, molasses and honey (2.57 percent), Fabrics, woven, of man-made fabrics (2.25 percent), Fruits and nuts (excluding oil nuts), fresh or dried (2.21 percent) Wheat (including spelt) and meslin, unmilled (2.15 percent) and Vegetables (1.99 percent).
  • The similarity in the export pattern can also be gauged from the ‘Export Similarity Index’ (EXS) which provides useful information on distinctive export patterns from country to country (Finger and Kreinin, 1979).
    A measure of export similarity between two countries, introduced by Finger and Kreinin (1979). WithXi(c,m) = the share of commodity i in country (or region) c's exports to market m, similarity between exports of countries a and b to market m is S(ab,m) = {Σi min [Xi(a,m),Xi(b,m)]}100 = 100{1−[Σi|Xi(a,m)−Xi(b,m)|]/2}.
    EXS index is defined as the sum of smaller values of the two countries’ shares of all products in their total exports to the third market.
  • The similarity in the export pattern can also be gauged from the ‘Export Similarity Index’ (EXS) which provides useful information on distinctive export patterns from country to country (Finger and Kreinin, 1979). Unlike the Rank correlation method which is based on the relative position of a particular commodity/commodity group in the overall export basket of countries, EXS is defined as the sum of smaller values of the two countries’ shares of all products in their total exports to the third market.4 To compute this index, an export share of each product to total exports of each country is required. This was an intention to remove the scale effect when measuring the similarity index between a large country and a small country. It is defined as :
    Where Xij and Xik are industry i’s export shares in country j’s and country k’s exports, which usually include a group of countries or competitors. The index varies between zero and 100, with zero indicating complete dissimilarity and 100 representing identical export composition. The EXS could be used as a basis for forming a common stance by the countries during trade talks and the public can be informed to prepare for the opportunities and threats. It also implies that if two countries produce and export similar products, then the level of competition will be intensified by opening up trade between the two. In short, it can reflect the degree of potential trade diversion in case the trade liberalisation is further allowed in particular country.
    The results based on data available for five SAARC countries show EXS of Bangladesh and Sri Lanka is highest while that between India and Maldives is lowest in the SAARC countries (Table 11).
  • Price and market integration in South-Asian countries was studied by examining association between producers prices expressed in US$ during last 10 years covering the period 2000 to 2009. Producers prices represent overall price situation for the whole country and are thus not restricted to a single market.
    There are several ways to study integration. This paper examines market integration by estimating simple co-relation between producer prices between various pairs of countries in South-Asia. It is important to mention here that prices expressed in US$ did not show any common trend between two countries. Nor do they exhibit rising or falling trend in most cases when these prices are expressed in US$. For this kind of data series, simple co-relation can be used to find out existence and strength of market integration.
    The correlation coefficient of two variables in a data sample is their covariance divided by the product of their individual standard deviations. It is a normalized measurement of how the two are linearly related.
    Co-relation coefficient between price series of various items in South-Asian countries is presented in Table 23. The critical value of co-relation below which it is not statistically significant is 0.73 at 1 per cent of level of significance and 0.60 at 5 per cent of level of significance. The first panel in the table provides correlation coefficient for prices of rice. The table shows that producer prices of rice in all South-Asian countries were strongly correlated. The degree of correlation was more than 0.85 in most cases. Except correlation between Sri Lanka and Nepal prices, all other price series were statistically significant either at 1 per cent or 5 per cent level. Among different countries, rice prices in Bangladesh showed strongest relation with prices in other countries. These results can be used to infer that rice markets in South-Asia in terms of producers prices are strongly integrated.
    The results for wheat are presented in panel 2 of the table. Like rice, producers' price series of wheat also show significant positive correlation across countries. Except the pair of Pakistan and Nepal wheat prices were statistically significant in all other pairs. Producers prices of wheat in Nepal showed correlation of 0.99 with wheat prices in India. Similarly, wheat prices in Bangladesh -India and Bangladesh- Nepal were also strongly integrated.
  • The results for maize price are presented in panel 3. Like rice and wheat, maize prices also show significant positive correlation in prices prevalent in various countries. Except the correlation between Bangladesh and Pakistan, price series in all other countries showed significant correlation.
    Price data for chickpea was available only for Bangladesh, India, Nepal and Sri Lanka. Among these 4 countries only Bangladesh and Nepal market showed significant correlation. The correlation between prices in India and Bangladesh and India and Nepal was close to zero.
    Data on groundnut prices was not available for Nepal. Among other countries Sri Lankan and Indian prices alone showed significant correlation which was more than 0.9. The results show that there was no integration in groundnut markets in South Asia except for Sri Lanka and India.
    Correlation coefficient for onion prices are presented in panel 6. Onion prices in Bangladesh showed either negative or close to zero correlation with prices in other countries. This indicates that onion market in Bangladesh did not have any integration with markets in other countries in the region. In contrast to this, onion prices in India – Nepal, India – Pakistan, India – Sri Lanka, Nepal – Pakistan and Nepal - Sri Lanka were significantly correlated. Onion prices in Sri Lanka and Pakistan showed positive but non-significant correlation.
    Like onion, potato prices in Bangladesh did not show significant correlation with prices in India, Pakistan and Sri Lanka. However, potato prices in Bangladesh has a very high correlation with potato prices in Nepal. Potato prices in Sri Lanka also did not show any significant correlation with other countries in the region (Table 23). The correlation matrix of potato prices show that Bangladesh-Nepal and India-Pakistan markets have significant correlation.
    Producer price data for mustard was available only for Bangladesh, Pakistan and India. Prices of mustard in Bangladesh showed significant correlation with Pakistan but not with India. Mustard prices in Pakistan and India were much more strongly correlated.
    Correlation coefficient between milk prices in different countries indicate that Bangladesh prices were not linked to any of the country in the region. Milk market in India - Nepal, Pakistan - Nepal, Sri Lanka – Nepal, India – Pakistan, and India – Sri Lanka were strongly integrated.
    Egg market in India, Nepal, Pakistan and Sri Lanka were strongly integrated. The correlation between producer prices in these countries ranged between 0.81 and 0.95. However, egg prices in Bangladesh did not show any significant association with other countries.
    It is concluded from correlation matrix in price series that rice, wheat and maize market in South Asian countries are strongly integrated with each other. The integration was selective and generally missing in the case of chickpea and groundnut. Onion prices were integrated except with Bangladesh. Potato markets were integrated only in a few cases. Milk and Egg prices are integrated across countries except with Bangladesh markets which does not show any co-movement with prices in the region.
  • Trade intensity index (TII) is defined as the share of home country’s trade with its partner country, divided by the home country’s share of world trade. The numerator is the intraregional export of share of the source (home) country and the denominator is the share of home country in world exports. The value of index ranges from 0 to 100.
  • where xij and xwj are the values of country i’s exports and of world exports to country j and where Xit and Xwt are country i’s total exports and total world exports, respectively. An index of more (less) than unity indicates a bilateral trade flow that is larger (smaller) than expected, given the partner country’s importance in world trade
    The numerator is the intraregional export of share of
    the source (home) country and the denominator is the share of home country in world exports. The value
    of index ranges from 0 to 100. If the value is 0, it implies no trade relationship between home and
    partner countries. On the other hand, if the value of export intensity index is more (or less) than 100, it
    indicates that the home country is exporting more (or less) to the partner country than might be expected
    from that country’s share in total world trade. The size adjusted regional export share is a variation of the
    TII. Its purpose is to normalize the intra-regional export share of a regional trading bloc, taking into
    account the bloc’s share in world trade. This measure is useful when comparing the intraregional trade of
    different trading blocs which vary significantly in terms of the number or level of development of the
    members. The rationale for the adjustment is that we expect larger groups to have a larger share of world and intraregional exports. Therefore, in a given block, the trade intensity index is defined as the ratio of
    the intra-regional export share for a given trade bloc, to the share of the trade bloc’s exports in the world
    trade. In the bilateral trade flow of the SAARC countries the trade intensity statistic is the ratio of two
    export shares. The numerator is the share of the destination of interest in the exports of the region under
    study. The denominator is the share of the destination of interest in the exports of the world as a whole.
    In other words, the numerator is the export share of the source region to the destination; the denominator
    is export share of the world to the destination. It has one limitation. As with the trade shares, high or low
    values and changes over time may reflect numerous factors other than trade policy.
    Based on the formula mentioned above, we have calculated trade intensity indices for different countries
    of SAARC (see Table 3). Although India’s exports have been growing in leaps and bounds in recent
    years, especially since the early nineties, economic reform measures taken by the government do not
    reflect its trade intensities with its neighboring countries. Its trade intensity with SAARC countries has
    declined from 5.77 in 1995 to 3.4 in 2008, which shows India has less complementary relations with the
    neighboring countries. Bangladesh’s trade intensity with the SAARC countries does not change much. Its
    trade intensity index was 2.88 in 1995, and declined marginally to 2.15 in 2008. The Maldives’ trade
    intensity with SAARC countries has declined significantly over the years. The reasons for the low level
    of trade of the Maldives with the SAARC countries have been described earlier. The Maldives’ trade is
    basically service-dependent having neither any manufactured good to export, nor any agricultural goods
    except fish, though to a very limited extent. Its trade intensity index has declined from 24.40 in 1995 to
    6.19 in 2008.
    Due to bilateral agreements, the trade intensity of Nepal has increased quite significantly over the years.
    This can also be attributed to its increasing trading relations with India. Nepal’s trade intensity index
    with the SAARC countries has increased from 9.95 in 1995 to 51.78 in 2008, the highest among all
    countries of this region. Pakistan is yet to take advantage of the liberal trading atmosphere of this year.
    The reason is that it has an adverse political relationship with India, which is the largest trading partner
    of this region. But it is gradually coming out of the shadow it had in the last century and, notwithstanding
    its acrimonious political relation with India, its trading relations with the latter countries has been
    growing significantly over the years. Pakistan’s imports from India are more than $ 2 billion whereas it
    exports no more than $ 200 million. Its trade intensity index with the SAARC countries remains the same
    over the years. Its TII was 3.37 in 1995, which marginally declined to 3.36 in 2008. Sri Lanka’s
    economic integration with the SAARC is much more pronounced than other countries of this region. It
    has concluded a bilateral free trade agreement with India. As a result, its exports to India increased
    significantly, which is reflected through its TII values. Its TII was 2.91 in 1995 and increased to 5.9 in
    2008, which shows that it has increased its trade integration with the SAARC countries over the years.
    The trends of TII indices of SAARC countries during 1995—2008 are shown in Table 3.
  • There may be several reasons why trade intensities among several countries diverge from the unity.
    The entire gamut of reasons can be categorized into two broad groups viz. objective resistance and subjective resistance (Garnaut, 1972).
    Objective resistance, the intensity of trade is likely to be high between a combination of industrial goods exporters and exporters of primary products because of strongly complementary structures of production of the two types of countries, as determined by their comparative advantages.
    Regarding factors determining subjective resistance, discriminatory commercial policies, flow of capital and economic aid from developed (relatively) to developing economies influence the trade intensity index of the two countries (Yamazawa, 1970).
    Apparently, in the short run, countries cannot control the objective resistance due to its structural rigidities in the mode of production, but they can eliminate subjective resistance by cooperating with enhancing economic cooperation with each other either bilaterally or multilaterally .
    The vision of SAFTA is to eliminate all subjective barriers among member countries in a mutually exclusive way.
    An index of more (less) than one indicates a bilateral trade flow that is larger (smaller)
    than expected, given the partner country‟s importance in world trade.
  • Of these barriers, ‘behind the border’ constraints can be reduced or eliminated through appropriate trade policy reforms of the home country,and ‘beyond the border’ constraints can be reduced through policy co-ordination between home and partner countries through trade agreements. In order to overcome these ‘behind the border’ and ‘beyond
    the border’ constraints, all countries have been vying for regional and bilateral trading arrangements. It
    is, therefore, rational to define potential trade between home and a partner country as the maximum
    possible trade that can occur between them, given the ‘natural’ constraints, but without the influence of
    any ‘policy induced’ constraints to trade. Thus, potential trade here refers to the maximum level of trade
    with natural barriers that would have happened between home and partner countries had there not been
    any significant ‘behind the border’ and ‘beyond the border’ constraints between them (Kalirajan, 1999).
    Trade can be constrained by :
    Natural barriers
    Exogenous policy-constrained “unnatural” or “artificial” barriers in the form of high tariff and non-tariff barriers.
    Beyond the ‘natural’ geographical constraints, there are constraints due to unfavorable ‘policy’ environments in home country, which may be named as ‘behind the border’ constraints, and also in partner countries, which may be called ‘beyond the border’ constraints to trade (Gawande and Krishna, 2001; Wilson et al. 2004; and New farmer and Nowak, 2005).
    Of these barriers, ‘behind the border’ constraints can be reduced or eliminated through appropriate trade policy reforms of the home country, and ‘beyond the border’ constraints can be reduced through policy co-ordination between home and partner countries through trade agreements.
    In order to overcome these ‘behind the border’ and ‘beyond the border’ constraints, all countries have been vying for regional and bilateral trading arrangements.
    It is, therefore, rational to define potential trade between home and a partner country as the maximum possible trade that can occur between them, given the ‘natural’ constraints, but without the influence of any ‘policy induced’ constraints to trade.
    Of these barriers, ‘behind the border’ constraints can be reduced or eliminated through appropriate trade policy reforms of the home country.
    ‘beyond the border’ constraints can be reduced through policy co-ordination between home and partner countries through trade agreements.
    In order to overcome these ‘behind the border’ and ‘beyond the border’ constraints, all countries have been vying for regional and bilateral trading arrangements.
    Potential trade between home and a partner country as the maximum possible trade that can occur between them, given the ‘natural’ constraints, but without the influence of any ‘policy induced’ constraints to trade.
  • How trade agreements support trade facilitations among SAARC member countries?
    RQ.2 What are the security and political obstacles occurring in trade among SAARC states?
    RQ.3 What are the bilateral conflicts of SAARC?
    RQ.4 What are the promotional measures to trade elaborated by the agreements of SAARC and by the
    international organizations?
    Non tariff barriers between countries in the SAARC region is the main obstacle for regional development said the Immediate Past President of the SAARCChamber of Commerce and Industries (SAARC CCI) Annisul Huq. The trade gap between regional countries is huge.
    This should not be so. In the last 10-12 years we have failed to address trade issues despite months of talks held among the SAARC countries because we failed to change the mindset of the policy makers and bureaucrats, he said.
    He was addressing a seminar on Trade Facilitation in South Asia, organised by SAARC CCI in Colombo, last week. We have failed to resolve the visa issue even after discussions with policy makers and bureaucrats for over a decade. Business people are not terrorists. South Asia is a big region where one fifth of the world population live. This negative mindset of policy makers and bureaucrats has obstructed regional development. Countries in the region should resolve bilateral trade issues and take these solutions to a multilateral level. There is a huge potential in the region that is not properly utilised, Huq said.
    He said that progress made by SAARC was slow. Intra-regional trade is just five percent of world trade. Exports from all eight countries in the region is two percent of global exports. The total tourism revenue earned by all eight countries is less than the tourism revenue of Malaysia. This is why we are crying over the years. All issues we discuss at SAARC CCI will bring results in the long run, he said.
    While the range of possible NTBs can be wide, they are mainly of three types, two of which are imposed at the borders. First, export subsidies, prohibitions, and quotas are barriers on the export side, while, second, on the import side, import licensing, bans, and custom procedures are some of the measures used. Finally, laws like product standards, quality specifications, labour and environmental standards bar the free flow of trade.
    A study conducted by the Consumer Unity and Trust Society International suggests that complete elimination of tariffs under the South Asian Free Trade Agreement(SAFTA) may increase intra-regional trade by 1.6 times.
    Agriculture, as everywhere else, is a sticking point in SAARC too. Ad-hoc export prohibitions on agricultural goods are put in place from time to time on top of export subsidies. For instance, Bangladesh maintained a ban on the export of aromatic rice until recently. But agricultural NTBs are difficult to remove in South Asia as the need to protect the vast proportion of the population dependent on agriculture is a political imperative.
  • دلته دا ټوله قیصه د افغانستان او پاکستان او هندوستان ترمنځه تشریح کړه، دا ټولې ستو
    نزې څنګه له منځه ولاړی شو.
    India’s decision to allow Pakistani entrepreneurs to invest in India,
    Pakistan’s decision to liberalize trade with India, and
    Relaxation of the visa regime between India and Pakistan.
  • Even after 28 years of existence SAARC failed to integrate well to take advantage of the opportunities. Intra-regional trade is very low and there is very limited progress in meeting the target set under South Asian Free Trade Composition, Direction and Intra-Regional Trade among SAARC Countries – An Analysis 37 Agreement.
    The main reason for the tardy progress of SAARC integration is the abysmally low level of trade between two largest partners namely India and Pakistan. The immediate concern for the success of SAARC is to remove the irritants
    between member nations for augmenting increased flow of trade between them.
    There is a need to encourage cross border investment. To this end, creation of a supportive policy structure and attractive investment environment are indispensable.
    Equally important is the development of supply chains. Apart from tariff rates and market access, trade facilitation measures should be carried out across SAARC for improving trade ties.
    Also South Asian countries of should abolish Non-Tariff Barriers (NTBs) so that free flow of trade happens unhindered.
    Cooperation in the area of harmonization of product standards, customs procedures and other regulations would certainly help to achieve the objectives of expansion of regional trade, investment and supply chain development.
  • Transcript of "Intra-regional trade among SAARC member countries"

    1. 1. Intra-regional Trade among SAARC Countries, Potential and Constraints Masaood Moahid Masaood Moahid PALB 2110 Sent on 14th April, 2014 4 replies
    2. 2. ∗ Overview of SAARC ∗ Introduction ∗ Core Objectives, Principles of SAARC, Major Agreements ∗ SAARC Economy ∗ Trade Openness & Share of SAARC Countries in World Exports, Imports ∗ SAARC Interregional Trade ∗ India’s Bilateral Trade Relation with SAARC Countries ∗ Comparative Advantage ∗ Commodity Composition of SAARC Countries ∗ Price Integration ∗ Trade Potential among SAARC Countries: Measuring Trade Intensities (Case Study) ∗ Trade Barriers ∗ Export Similarity ∗ Conclusion Seminar Flow 2
    3. 3. ∗ One of the developments in the post WTO scenario has been the growth of regional trading agreements across the globe as a complement to the multilateral trading system. ∗ Economic theory argues for liberalization of trade through policy induced measures, by reducing and then eliminating tariff and non-tariff barriers. ∗ Encouraged by theoretical suggestions and empirical evidences around the globe, countries started implementing trade policy liberalization. ∗ South Asia has been the latecomer in regional trading arrangements in the Asia- Pacific region due to the relative inward-orientation of its economies, and to political mistrust. ∗ Though countries in South Asia have traditionally been protectionist towards opening their economies to other countries, the region has recently been engaged in regional cooperation through signing PTAs and FTA, first, bilaterally and then multilaterally. 3
    4. 4. ∗ In terms of population, SAARC is the largest with over 23% of world population. However, the total GDP of the SAARC member states is only 3% of the world total GDP. ∗ SAARC is the least integrated. Intraregional trade in SAARC has been miniscule compared to other RTBs in this region. ∗ Its intraregional export was 4.28 per cent during 2000, which marginally increased to 5.35 per cent during 2008. The situation was grim in the case of intraregional imports, which was 3.8 per cent in 2000 which declined to 1.88 per cent in 2008. ∗ Although almost all the South Asian nations enjoyed a powerful and strong cultural tie among each other, the most efficient among them were India, Pakistan and Bangladesh who shared a common and integrated market and monetary system till 1947. 4
    5. 5. 5
    6. 6. Fig. 1 Members and Observers of SAARC Membership: Eeighth members are: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Observer countries are: Australia, Burma, China, European Union, Japan, Iran, Mauritius, South Korea and the United States. 6
    7. 7. ∗ Purpose of the organization is collective economic, technical, social, and cultural development of member states. ∗ The headquarters of SAARC are located in Kathmandu, Nepal. ∗ website: www.saarc-sec.org . ∗ All the SAARC members have joined the World Trade Organization (WTO), except Afghanistan and Bhutan. Continue … 7
    8. 8. 8
    9. 9. 9
    10. 10. South Asian Preferential Trade Agreement (SAPTA) The Agreement on SAARC Preferential Trading Arrangement (SAPTA) was signed in the year 1993 by the members. The objectives of the SAPTA are: a) To promote and sustain mutual trade, and b) To develop economic co-operation. SAPTA provided a framework for exchange of tariff concessions and also for liberalization in non-tariff measures with a view to promoting trade and economic cooperation among the SAARC member countries. 10
    11. 11. ∗ South Asian Free Trade Agreement (SAFTA) ∗ Signed at the 12th SAARC Summit in Islamabad, Pakistan. ∗ SAFTA facilitates free trade of goods, facilitating cross boarder movement of goods, promoting conditions of fare competition in the free trade area and ensuring equitable benefits to all members. ∗ The countries agreed to reduce customs duties of all traded goods to zero by year 2016. ((A study conducted by the Consumer Unity and Trust Society International in 2010, suggests that complete elimination of tariffs under the South Asian Free Trade Agreement(SAFTA) may increase intra-regional trade by 1.6 times. ))11
    12. 12. • 1.6 billion population ,inequality in the distribution of income, 43 % of its people living below the poverty line.(SAARCSTAT) • SAARC economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services. • SAARC, tragically, is the world's only region, which has failed to tap the potential for social-cultural exchange and economic cooperation. • Intra-SAARC trade is dismally as low as 4% and the collective share of the region in world trade is also low. 12
    13. 13. Table 1: Macroeconomic Indicators of SAARC Economies: 2009 Items AFG BD BT IND# MALD NEP PAK SRL Real GDP Growth, % 3.4 6.0 5.0 6.7 6.3 5.3 2.0 6.0 GDP Per Capita (Current Prices US$) 438 522 1789 1020 3653 455 1022 1972 GDP (PPP) % of World Total 0.03 0.3 0.005 4.7 0.002 0.05 0.6 0.1 CPI Inflation, Average, % 26.7 7.7 8.3 8.4$ 12.3 7.7 12.0 22.6 Fiscal Balance, % of GDP, FY Basis -4.1 -4.7 -3.2 -6.0 -15.7 -2.0 -7.4 -6.8 Merchandise Export, % Growth 18.9 17.4 4.4 13.7 45.2 9.3 18.2 6.5 Merchandise Import, % Growth 12.1 25.6 27.4 19.4 26.6 24.1 31.2 24.0 Current Account Balance (US$ Billion) -0.2 1.9 -0.03 -28.7 -0.6 0.3 -13.9 -3.7 Current Account Balance, % of GDP -1.6 1.9 -2.2 -2.4 -51.4 2.7 -8.4 -9.4 Reserves (Excluding Gold), US$ Billion, End- Period 3.5 6.1 0.6 242 0.2 2.5 8.6 1.8 AFG: Afghanistan. BD: Bangladesh. BT: Bhutan. IND: India. MALD: Maldives. NEP: Nepal. PAK: Pakistan. SRL: Sri Lanka. Source: World Economic Outlook, International Financial Statistics, IMF and Asian Development Outlook, ADB. 13
    14. 14. Table 2: Salient features of economy of South Asian countries Particular Reference year Bangla- desh India Nepal Pakistan Sri Lanka AFGH Income rank in the world 2009 189 160 196 171 151 174 # Arable Land (ha. Per capita) 2008 0.05 0.14 0.08 0.12 0.06 0.27 Poverty, people living on less than $1.25 a day (%) 2004 -2007 49.6 41.6 55.1 22.6 7 44.8 Share of Agriculture in GDP (%) 2009 19 18 34 22 13 48 Workforce in Agriculture 2006-10 48.1 56.1 65.7 45.1 32.5 57.4 Agriculture value added/worker (constant 2005 US$) 2009 426 600 263 1069 878 439 # 2013, IMF Source: World Development Indicators 2011, The World Bank, Washington DC, USA Note: Workforce data taken from Key Indicators, 2011, Asian Development Bank. 14
    15. 15. Table 3: Incidence of hunger and under nutrition in South Asian countries and world Country Dietary Energy Consumption (Kcal/person/day) Prevalence of undernourishment in total population (%) Number of undernourished persons (million) 1990-1992 2006-2008 1990-1992 2006-2008 1990-1992 2006- 2008 Bangladesh 1960 2270 38 26 44.4 41.4 India 2290 2360 20 19 177 224.6 Nepal 2190 2340 21 17 4.2 4.7 Pakistan 2210 2280 25 25 29.5 42.8 Sri Lanka 2170 2370 28 20 4.8 3.9 South Asia 2270 2360 22 20 267.5 330.1 Developing World 2440 2640 20 15 833.2 839.4 Total World 2610 2790 16 13 848.4 850 Source: State of Food Insecurity, FAO 15
    16. 16. Figure 2: (a) % age Undernourishment in South Asian Countries (b) Undernourishment in South Asian Countries (millions) a b 16
    17. 17. Table 4: Production and utilization of major food products in South Asia during 2007-2009, million tonne Item Production Food consumption Other Consumption Total utilization Surplus/def icit S/D as % of production Cereals - Excluding Beer 286.14 238.51 34.21 272.73 13.41 4.69 Rice (Milled Equivalent) 136.17 114.96 10.96 125.92 10.26 7.53 Wheat 103.4 94.92 9.03 103.95 -0.55 -0.53 Pulses 15.98 16.58 3.1 19.68 -3.7 -23.13 Vegetable Oils 8.72 11.07 4.29 15.36 -6.64 -76.22 Sugar (Raw Equivalent) 29.57 26.19 0.03 26.22 3.35 11.32 Vegetables 100.39 92.55 6.58 99.13 1.27 1.26 Fruits - Excluding Wine 78.66 68.17 10.52 78.69 -0.03 -0.04 Eggs 3.93 3.33 0.5 3.84 0.09 2.37 Meat 8.75 8.14 0.01 8.15 0.61 6.95 Milk - Excluding Butter 145.59 116.49 29.18 145.67 -0.08 -0.05 Source: 1. FAO Food Balance Sheet 2009. 2. FAOSTAT 17
    18. 18. Figure 3: Production and S/D of major food products in South Asia during 2007-2009 18
    19. 19. Table 5 Surplus/Deficit of major food items in South Asian countries during 2007- 2009, million tonne Item Rice Wheat Pulses Milk Meat Fruit Vegetab le Sugar Vegetab le Oil India 6.32 -0.31 -2.66 1.03 0.62 0.144 1.946 4.977 -3.575 Bangladesh 1.18 -1.91 -0.45 -0.37 0 -0.121 -0.194 -0.546 -1.168 Pakistan 3.18 2.58 -0.43 -0.12 0 0.071 -0.238 -0.548 -1.517 Sri Lanka -0.04 -0.89 -0.16 -0.58 0 -0.015 -0.174 -0.509 -0.334 Maldives -0.01 -0.02 0 -0.02 -0.01 -0.018 -0.008 -0.007 -0.004 Nepal -0.37 0 -0.01 -0.02 0 -0.093 -0.067 -0.019 -0.045 Source: Source: FAO Food Balance Sheet 2009. 19
    20. 20. Table 6 : Per capita supply of various food items in South Asian countries, 2009, Kg/year Item Cereal s excl. beer Rice (Milled Equivale nt) Wheat Pulses Vegetabl es Fruits - Excludin g Wine Eggs Meat Milk - Excludin g Butter Sugar (Raw Equivale nt) Vegetabl e Oils India 152.6 70.9 60.2 12.9 64.8 45.1 2.1 3.3 68.7 17.3 8.2 Bangla- desh 180.9 159.7 14.7 4.8 19.7 20.7 1.3 3.6 16.2 5.3 6.2 Pakistan 129.8 14.5 106.1 8.1 30 36.5 2.4 13.4 159 23.9 11.5 Sri Lanka 143.5 97.3 44.1 8 40.1 27.2 2.2 6.8 36.1 24.6 4.1 Nepal 171.3 78 37.9 8.4 77.9 38.8 1 9.8 40.9 4.3 6.8 World 146.6 52.9 65.9 6.5 119.4 69 8.6 40.1 85.1 20.3 11.4 Source: Source: FAO Food Balance Sheet 2009. 20
    21. 21. Table 7 : Trade Openness (Export and Import as per cent of GDP) in SAARC Countries (Per cent) Country 1960 1970 1980 1990 2000 2008 Afghanistan 11.2 21.7 … … … 87.0# Bangladesh 19.3 20.8 23.4 19.7 33.2 47.0 Bhutan … … 50.4 56.7 76.2 146.0 India 11.8 7.8 15.6 15.7 27.4 54.0 Maldives … … … … 161.1 … Nepal … 13.2 30.3 32.2 55.7 45.0 Pakistan … 22.4 36.6 38.9 28.1 34.0 Sri Lanka 62.4 54.1 87.0 68.2 88.6 63.0 #: For 2006. …: Not available. Source: World Development Indicators, World Bank.  Trade Openness Ratio is the trade-to-GDP ratio which is frequently used to measure the importance of international transactions relative to domestic transactions.  This indicator is calculated as the simple average (i.e. the mean) of total trade (i.e. the sum of exports and imports of goods and services) relative to GDP. 21
    22. 22. Table 8: Share of SAARC Region in World Exports (Percent) Country 1950 1960 1970 1980 1990 2000 2008 Afghanistan 0.03 0.04 0.04 0.03 0.01 0.002 0.004 Bangladesh … … … 0.04 0.05 0.10 0.10 Bhutan … … … 0.001 0.002 0.002 0.003 India 1.85 1.02 0.64 0.42 0.52 0.66 1.10 Maldives 0.003 0.002 0.001 0.000 0.002 0.002 0.002 Nepal 0.002 0.01 0.01 0.004 0.01 0.01 0.01 Pakistan 1.23 0.55 0.29 0.13 0.16 0.14 0.13 Sri Lanka 0.53 0.30 0.11 0.05 0.05 0.08 0.05 SAARC 3.71 1.92 1.08 0.68 0.80 1.00 1.39 … : Not available. Note: Data for Pakistan during 1950, 1960 and 1970 includes erstwhile East Pakistan. Source: UNCTAD. 22
    23. 23. Table 9: Share of SAARC Region in World Imports (Per cent) Country 1950 1960 1970 1980 1990 2000 2008 Afghanistan 0.09 0.06 0.03 0.04 0.03 0.02 0.02 Bangladesh … … … 0.13 0.10 0.13 0.15 Bhutan … … … 0.002 0.002 0.003 0.003 India 1.70 1.68 0.64 0.72 0.66 0.77 1.79 Maldives 0.01 0.003 0.001 0.001 0.004 0.01 0.01 Nepal 0.03 0.03 0.02 0.02 0.02 0.02 0.01 Pakistan 0.91 0.72 0.45 0.26 0.21 0.16 0.26 Sri Lanka 0.38 0.30 0.12 0.10 0.07 0.09 0.08 SAARC 3.12 2.79 1.27 1.26 1.09 1.21 2.31 … : Not available. Note: Data for Pakistan during 1950, 1960 and 1970 includes erstwhile East Pakistan. Source: UNCTAD. 23
    24. 24. Figure 4: Trend in Merchandise Export and Import Share of SAARC in World Total 24
    25. 25. ∗ The basic reason of ‘regional integration; is the ‘economic integration. ∗ Economic integration is propelled by the competitive needs of different countries of the world to face the onslaught of globalization after the onset of the WTO. ∗ In the new liberalized trade regime, it is pertinent for countries to be more competitive by reducing costs through removal of trade barriers. ∗ Intra-regional trade of major trading blocs has grown tremendously over the last one and a half decades. SAARC Intra-regional Trade 25
    26. 26. Table 10: Intra-Regional Trade (Export) of Major Trading Blocks (%) Groups 1990 1996 2000 2001 2002 2003 2004 2005 2006 EU 62.4 61.6 61.6 60.8 60.6 61.12 60.7 65.66 66.2 NAFTA 46.2 55.7 55.7 55.5 56.6 56.1 55.9 55.95 53.8 ASEAN 24.6 23 23 22.4 22.7 22.2 22.2 25.62 24.9 SAARC 4.4 4.1 4.1 4.3 4.8 5.7 5.6 5.42 5.6 MERCO SUR 20.3 20 20 17.1 11.5 11.9 12.6 13.14 11.6 APEC 5 5.1 5.1 5.5 5.5 5.7 5.2 13.12 10.7 IOR 71.8 73.1 73.1 72.6 73.4 72.6 72 66.2 69.4 Source: COMTRADE Database 26
    27. 27. Table 11 Intraregional Trade (Exports) of SAARC Countries, 1995-2008 (% of total trade) Year Banglad esh Bhutan India Maldives Nepal Pakistan Sri Lanka Afghanistan 1995 2.68 NA 5.02 22.63 9.23 3.15 2.66 11.1 1996 1.48 NA 5.07 18.53 20.58 2.57 2.67 - 1997 2.26 NA 4.67 16.08 25.37 2.61 2.59 - 1998 2.69 98.38 4.91 17.35 36.25 4.9 2.36 - 1999 1.91 99.16 4.06 19.56 29.36 3.56 3.09 - 2000 1.58 NA 4.2 18.14 42.9 3.18 3.47 19.7 2001 1.58 NA 5.38 22.19 47.78 2.87 3.34 - 2002 1.33 NA 4.98 15.5 60.22 2.31 5.48 - 2003 1.71 NA 6.08 13.92 53.98 2.86 6.82 - 2004 1.59 NA 5.54 12.69 58.48 3.72 8.8 31.3 2005 2.16 92.98 5.14 17.38 67.36 4.56 10.24 - 2006 1.88 NA 4.96 13.36 68.57 4.19 8.71 - 2007 2.34 NA 4.92 9.58 70.97 4.47 8.33 42.1 2008 3.06 98.8 4.88 8.78 73.89 4.48 8.39 - Source: 1) Regional Co-operation Strategy and Programme, South Asia (2006-2008), ADB. 2) www.CSO.gov.af 27
    28. 28. 2006- 07 2007- 08 2008- 09 2009- 10 2010- 11 2010-11 (April- Oct) 2011-12 (April- Oct) Exports India’s Total 126.41 163.13 185.30 178.75 251.13 123.17 170.11 % share of SAARC countries 5.12 5.91 4.62 4.69 5.13 4.65 3.76 Imports India’s Total 185.74 251.65 303.70 288.37 369.7 7 208.821 277.26 % share of SAARC countries 0.81 0.84 0.60 0.57 0.59 0.55 0.52 Table 12 India’s Total Trade and Bilateral Trade with SAARC Countries (Value in US $ Billion) Source: www.commerce.nic.in 28
    29. 29. Figure 5 : (a) India’s total exports and imports (Billions US$) (b) India’s total exports and imports to SAARC ( Billions US$) 29
    30. 30.  Afghanistan applied for the membership of SAARC in 2005  Dispute for its location, whether it is located in South Asia or not…  Afghanistan was inducted on 3-4 April 2007.  India & Afghanistan signed the PTA on March 6, 2003 in New Delhi. This agreement would remain in force till either party gives to the other a notice for its termination.  India has granted preferential tariff for 38 products from Afghanistan , whereas Afghanistan granted preferential tariff to 8 items from India  India’s trade with Afghanistan has increased substantially from US$ 201.09 million in 2005-06 to US$ 520.47 in 2008-09. Bilateral trade with Afghanistan 30
    31. 31. Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 182.11 34.37 216.48 147.74 2007-08 249.21 109.97 359.18 139.24 2008-09 394.23 126.24 520.47 267.99 2009-10 463.55 125.19 588.74 338.36 2010-11 411.78 146.03 557.81 265.75 2010-11 (April-Oct) 218.15 77.24 295.39 140.91 2011-12 (April-Oct) 287.99 65.33 353.32 222.66 Table 13 Bilateral Trade with Afghanistan (Value in US $ million) 31
    32. 32. Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 1629.57 228.00 1857.57 1401.57 2007-08 2923.72 257.02 3180.74 2666.7 2008-09 2497.87 313.11 2810.98 2184.76 2009-10 2433.77 254.66 2688.43 2179.11 2010-11 3606.40 446.75 4053.15 3159.65 2010-11 (April- Oct) 1605.00 200.63 1805.63 1404.37 2011-12 (April- Oct) 1651.47 334.02 1985.49 1317.45 32
    33. 33. (Value in US $ million) Year Exports Imports Total Trade Balance of Trade 2005-06 99.17 88.77 187.94 10.4 2006-07 57.66 142.05 199.71 -84.39 2007-08 86.74 194.72 281.46 -107.98 2008-09 111.15 151.79 262.94 -40.64 2008-09 (April-Sept) 58.69 91.97 150.66 -33.28 2009-10 (April-Sept)* 44.21 64.83 109.04 -20.62 Source: www.commerce.nic.in 33
    34. 34. Table 16: Bilateral Trade with Maldives (Value in US $ million) Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 68.68 3.05 71.73 65.63 2007-08 89.72 4.15 93.87 85.57 2008-09 127.91 3.97 131.88 123.94 2009-10 79.86 3.63 83.49 76.23 2010-11 106.66 31.38 138.04 75.28 2010-11 (April- Oct) 55.66 29.78 85.40 25.84 2011-12 (April- Oct) 55.62 13.28 79.98 53.41 34
    35. 35. Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 927.40 306.02 1233.42 621.38 2007-08 1507.42 628.56 2135.98 878.86 2008-09 1570.15 496.04 2066.19 1074.11 2009-10 1533.31 452.61 1985.92 1080.70 2010-11 2204.40 513.40 2717.80 1691.00 2010-11 (April-Oct) 1144.10 301.10 1445.20 843.00 2011-12 (April-Oct) 1067.52 228.01 1295.54 839.51 35
    36. 36. Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 1350.09 323.62 1673.71 1026.47 2007-08 1950.53 287.97 2238.50 1662.56 2008-09 1439.88 370.17 1810.05 1069.71 2009-10 1573.32 275.94 1849.26 1297.38 2010-11 2333.67 332.51 2666.18 2001.16 2010-11 (APril- Oct) 1066.90 201.16 1268.06 865.74 2011-12 (APril- Oct) 694.25 226.16 920.41 468.09 36
    37. 37. Source: www.commerce.nic.in Year Exports Imports Total Trade Balance of Trade 2006-07 2258.30 470.33 2728.63 1787.97 2007-08 2830.43 634.96 3465.39 2195.47 2008-09 2425.92 356.57 2782.49 2069.35 2009-10 2188.01 392.19 2580.20 1795.82 2010-11 4039.90 501.73 4541.63 3538.17 2010-11 (APril- Oct) 1549.11 228.88 1777.99 1320.23 2011-12 (APril- Oct) 2500.63 466.25 2966.88 2034.38 37
    38. 38. The trade liberalization and domestic reform in most of the SAARC countries in recent years have led to an increasingly competitive international environment. Thus, it is timely to examine the extent to which SAARC countries have become more specialized in various sectors. The ability of a country, a firm or an individual to produce goods and/or services at a lower cost than other firms or individuals. A comparative advantage gives a country or a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. Revealed Comparative Advantage (RCA) Revealed Comparative Advantage (RCA) index has been used to describe the tendency for countries to specialize and export those goods and services that they produce at a lower relative cost compared with other countries. RCA is the most frequently employed measurement of trade specialisation. This index was first proposed by Balassa (1965) and defined as:38
    39. 39. RCA • The RCA measures a country’s exports of a commodity relative to its total exports and to the corresponding export performance of a set of countries. • This index takes values between 0 and +1. A value of index greater than 1 denotes product in which country is relatively more specialised. On the contrary, a value less than 1 characterizes that country j is accepted not specialised in product i. • If RCAi > 1, comparative advantage in good i. If RCAi < 1, disadvantage . 39
    40. 40. Table 20 Revealed Comparative Advantage of Major SAARC Countries : 1995 Broad SITC Groups /Countries BD IND MALD NEP PAK SRL Primary commodities, including fuels 0.63 1.16 3.45 0.42 0.77 1.11 All food items 1.16 2.08 8.22 0.87 1.31 2.08 Agricultural raw materials 1.00 0.49 0.28 0.42 1.46 1.62 Ores and metal 0.00 1.10 0.06 0.04 0.05 0.22 Non-ferrous metals 0.00 0.25 0.00 0.00 0.00 0.01 Fuels 0.06 0.24 … 0.00 0.14 0.06 Manufactured goods 1.13 0.97 0.34 1.11 1.10 1.00 Chemical products 0.32 0.86 0.00 0.13 0.07 0.10 Machinery and transport equipment 0.04 0.19 0.00 0.00 0.01 0.09 Other manufactured goods 3.00 2.14 0.94 3.06 3.04 2.63 Iron and steel 0.00 0.96 0.00 0.96 0.00 0.03 Textile fibers, yarn, fabrics and clothing 10.39 3.85 3.61 11.08 10.69 7.61 Source: International Journal of Economics,Commerce and Research (IJECR) COMPOSITION, DIRECTION AND INTRA-REGIONAL TRADE AMONG SAARC COUNTRIES(2008) 40
    41. 41. Table 21 : Revealed Comparative Advantage of Major SAARC Countries : 2006 Broad SITC Groups /Countries BD IND MALD NEP PAK SRL Primary commodities, including fuels 0.29 1.34 3.94 1.09 0.74 1.07 All food items 0.84 1.36 15.69 3.20 1.88 3.42 Agricultural raw materials 0.86 1.30 0.00 0.76 0.80 1.38 Ores and metal 0.06 1.97 0.23 1.46 0.13 0.80 Non-ferrous metals 0.02 1.31 0.00 1.07 0.03 1.08 Fuels 0.03 1.13 2.08 0.00 0.38 0.01 Manufactured goods 1.29 0.91 0.01 1.01 1.14 1.01 Chemical products 0.12 1.09 0.00 1.44 0.24 0.12 Machinery and transport equipment 0.03 0.29 0.01 0.05 0.05 0.14 Other manufactured goods 4.20 1.98 0.00 2.57 3.58 3.05 Iron and steel 0.08 1.78 0.00 2.10 0.09 0.02 Textile fibres, yarn, fabrics and clothing 17.84 3.25 0.00 7.52 13.96 10.60 Source: International Journal of Economics, Commerce and Research (IJECR) COMPOSITION, DIRECTION AND INTRA-REGIONAL TRADE AMONG SAARC COUNTRIES 41
    42. 42. Fig. 5: RCA of India in 2006 and in 1995 42
    43. 43. ∗ South Asian countries share similar socio economic conditions and they produce similar products and consume similar commodities. ∗ Commodity compositions intra-regional trade of SAARC shows that the trade is confined to few traditional commodities. ∗ This trade similarity makes trade possibilities limited. 43
    44. 44. Table 22: Intra SAARC Trade Share of Top 20 Commodities Product Name Trade Share Petroleum oils 7.84 Cotton fabrics, woven 5.28 Textile yarn 4.71 Feeding stuff for animals (no unmilled cereals) 4.7 Lime, cement, fabrica, constr. Mat. (excluding lass, clay) 2.98 Sugar, molasses and honey 2.57 Farics, woven, of man-made fabrics 2.25 Fruits and nuts (excluding oil nuts), fresh or dried 2.21 Wheat 2.15 Vegetables 1.99 Medicaments (incl. veterinary medicamens) 1.75 Motorcycles and cycles 1.7 Spices 1.57 Tubes, pipes and hollow profiles, fitings, iron, steel 1.47 Motor vehicles for transport of goods, special purpose. 1.43 Ships, boats & floating strucures 1.41 Rice 1.37 Ingots, primary forms, of iron or steel; semi-finis. 1.3 Motor vehicles for he transport of persons 1.23 Source: UNCTAD Database 44
    45. 45. Export Similarity Index To compute this index, an export share of each product to total exports of each country is required. S(ab,m) = 100{1−[Σi|Xi(a,m)−Xi(b,m)|]/2} ∗ Finger and Kreinin, 1979 Export Similarity 45
    46. 46. Table 23 : Export Similarity Index (EXS) for SAARC Countries, 2007 Country Finger and Kreinin's EXS Index BD IND MALD PAK SRL 1 2 3 4 5 6 BD 100.0 20.4 35.8 32.7 57.8 IND 100.0 19.9 33.9 31.5 MALD 100.0 22.3 26.5 PAK 100.0 32.7 SRL 100.0 Source: International Journal of Economics, Commerce and Research (IJECR) COMPOSITION, DIRECTION AND INTRA- REGIONAL TRADE AMONG SAARC COUNTRIES 46
    47. 47. ∗ Price and market integration was studied by examining association between producers prices during the period 2000 to 2009. ∗ Producers prices represent overall price situation for the whole country and are thus not restricted to a single market. ∗ Simple co-relation between producer prices between various pairs of countries in South-Asia was estimated. Price Integration of major food items between SAARC Countries 47
    48. 48. Table 24: Correlation coefficient between producers prices in South Asian Countries Commodity Country India Nepal Pakistan Sri Lanka I. Rice Bangladesh 0.89 0.84 0.89 0.85 India 0.67 0.74 0.88 Nepal 0.8 0.56 Pakistan 0.65 II. Wheat Bangladesh 0.88 0.88 0.73 India 0.99 0.61 Nepal 0.58 III Maize Bangladesh 0.61 0.63 0.53 0.86 India 0.74 0.76 0.85 Nepal 0.73 0.75 Sri Lanka 0.6 IV. Chickpea Bangladesh -0.04 0.92 India -0.13 0.13 Sri Lanka V. Groundnut Bangladesh 0.11 0.21 -0.1 India 0.36 0.91 Sri Lanka 0.22 VI. Mustard Bangladesh 0.44 0.64 India 0.92 VII. Onion Bangladesh -0.28 -0.43 0.07 -0.46 India 0.91 0.74 0.69 Nepal 0.66 0.89 Pakistan 0.49 VIII. Potato Bangladesh -0.33 0.95 0.4 -0.14 India -0.3 0.62 0.05 Nepal 0.42 0 Pakistan 0.06 IX. Cow Milk Bangladesh -0.2 -0.25 -0.17 -0.15 India 0.73 0.85 Nepal 0.74 0.84 Sri Lanka 0.53 X. Eggs Bangladesh 0 -0.27 -0.1 0.16 India 0.92 0.94 0.95 Nepal 0.81 0.82 Sri Lanka 0.88 Source of basic data: FAOSTAT 48
    49. 49. Case Study 49
    50. 50. ∗ Potential trade between home and a partner country is the maximum possible trade that can occur between them, given the ‘natural’ constraints. ∗ Trade potential of any country can be measured by the intensity of its trade with its trading partners (Drysdale and Garnaut, 1982). ∗ Bilateral trade relationships between SAARC countries help to identify how intensively the countries are trading with each other. ∗ The trade intensity index (TII) is used to determine whether the value of trade between two countries is greater or smaller than would be expected on the basis of their importance in world trade. ∗ In the bilateral trade flow of the SAARC countries the trade intensity statistic is the ratio of two export shares.50
    51. 51. 51 Trade intensity index (TII) is defined as the share of home country’s trade with its partner country, divided by the home country’s share of world trade.
    52. 52. Based on the formula mentioned, trade intensity indices are calculated for different countries of SAARC. Table25 : Trade Intensity Indices of SAARC Countries (1995-2008) Year India Bangladesh Maldives Nepal Pakistan Sri Lanka 1995 5.77 2.88 24.4 9.95 3.37 2.91 1996 5.26 1.93 19.41 21.57 2.72 3.09 1997 4.68 2.39 17.04 26.87 2.76 2.81 1998 5.34 2.58 18.45 38.48 5.19 2.5 1999 3.89 1.96 20.15 30.61 3.68 3.18 2000 4.17 1.52 17.5 41.46 2.97 3.35 2001 4.36 1.5 21.01 45.38 2.71 3.17 2002 4.48 1.17 13.64 53.1 2.03 4.81 2003 5.5 1.48 12.02 46.81 2.78 5.89 2004 4.5 1.36 10.81 49.28 3.15 7.48 2005 3.95 1.65 13.44 51.31 3.49 7.84 2006 3.63 1.39 9.85 50.48 3.09 6.41 2007 3.84 1.73 7.11 52.35 3.32 6.17 2008 3.74 2.15 6.19 51.78 3.36 5.9 Source: Trade Potential among SAARC Countries: Measuring Trade Intensities by Swapan K. Bhattacharya & Gouranga G. Das (2009) 52
    53. 53. Barriers mean anything that restricts international trade. These may be embargos, import duties, import licenses, distance etc. These barriers are the cause of low trade among SAARC states. Trade can be constrained by : (1)Natural barriers (2)Unnatural” or “artificial” barriers unnatural barriers are: (1)Behind the border constraints (2)Beyond the border constraints 53
    54. 54. ∗ Non tariff barriers between countries in the SAARC region is the main obstacle for regional development (Annisul Huq, the immediate past president of the SAARC Chamber of Commerce) ∗ Types of NTBs 1. On the import side, import licensing, bans, and custom procedures. 2. Prohibitions, and quotas are barriers on the export side 3. Laws like product standards, quality specifications and environmental standards. 4. Disputes 54
    55. 55. Indicators South Asia ASEAN NAFTA EU25 World No. of documents for export 8.38 7.69 4.50 4.82 7.22 Days for Export 32.88 29.13 20.50 28.80 28.80 Cost to Export (US$ per container) 1,221.10 732.50 1,101.50 875.30 1,232.00 No. of documents for import 11.31 9.31 5.17 5.64 8.68 Days for import 41.50 29.81 13.17 13.73 32.96 Cost to Import (US$ per container) 1,449.40 834.30 1,569.50 947.60 1,431.00 Table26 :Trade Facilitation Measures Comparison of different regions in the world Source: International Journal of Economics, Commerce and Research (IJECR) 55
    56. 56. Bilateral dispute between Pakistan and India Bilateral dispute Figure 7: Map of South Asian Countries 56
    57. 57. 57
    58. 58. 58
    59. 59.  Even after 28 years of existence SAARC failed to integrate well to take advantage of the opportunities. Intra-regional trade is very low.  The main reason for the low progress of SAARC integration is the low level of trade between two largest partners namely India and Pakistan. The immediate concern for the success of SAARC should be to remove the irritants between them.  Equally important is the development of supply chains. Apart from tariff rates and market access, trade facilitation measures should be carried out across SAARC for improving trade ties.  Also South Asian countries should abolish Non-Tariff Barriers (NTBs) so that free flow of trade happens unhindered.  Cooperation in the area of customs procedures and other regulations would certainly help to achieve the objectives of expansion of regional trade, investment and supply chain development. CONCLUSIONS 59
    60. 60. Thanks 60
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×