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Unit 22 : SAARC/SAPTA, ASEAN

them, to ensure intra-SAARC trade expansion. In this connection one must hail the recent Notes
announcements by these two States encouraging people-to-people contacts followed by an exchange
of business delegations. As the political climate in the region improves further and the liberalization
process gathers momentum, the business community would move forward fast, taking advantage of
the new opportunities and boosting up regional trade. With SAPTA coming into force a year from
now, this process will surely receive a boost and it should become fully operational by 2016. That
would need persistent effort so that we do not get stuck halfway through. Opening up more land and
rail routes will provide further impetus.

The SAFTA Agreement was signed on 6 January 2004 during Twelfth SAARC sumnit
held in Islamabad Pakistan.

Simultaneously, exporters in the countries of the region have to be helped financially to take care of
resource constraints. As financing imports through export earnings alone has not been a possibility
for SAARC countries, and generation of internal resources to fill the gap has been equally difficult,
dependence on external assistance tied to the source has been a marked practice. What is required is
a discreet use of clearing and payment arrangements and promotion of mutually advantageous counter
trade. In this context the idea of having a common South Asian Currency would be of enormous
value. We need to move towards much closer cooperation for this to happen, to guard against misuse,
money laundering and other considerations. As the EU experience has shown, a common currency
demands strict fiscal controls and extensive monetary cooperation, which the region is still far from
having.
Quality-Upsurge and Intra-SAARC Trade
South Asia has to contend with another factor that is emerging. Due to the impact of globalization,
consumer taste has developed and is growing further in favour of goods from outside the region. As
our experience shows, the only way to meet this challenge is to improve the quality of our products
for our consumers and make them competitive against imported goods rather than clamp down on
imports and fight the rising tide of globalization. If this calls for structural changes, these must be
undertaken and in concert with countries of the region. Non-availability of exportable surpluses of
preferred specifications, sub-standard quality of goods and services, and lack of standardization are
major constraints to regional trade and its movement towards forging a South Asian Community.
Low production efficiencies and high export competitiveness of the region have been quite an obstacle
to increased intra-SAARC trade. To achieve the latter, South Asian countries should pay more attention
to reducing trade imbalances amongst themselves. As the largest member of SAARC, India has a
special responsibility for this. It should strive harder to reduce its surpluses in trade with other regional
states by assisting them to produce more for the huge Indian market, reduce its protective mechanism
vis-a-vis these countries and encourage more free trade arrangements with them as it has done with
Nepal, Bhutan and recently Sri Lanka. Similarly, these countries should drop their inhibitions for
developing closer and more open trade ties with India since in a climate of trust India’s size and
consumption capabilities will prove to be a boon to them rather than a bane. There is also the need to
achieve greater standardization, and harmonization of documents such as letters of credit and complex
customs procedures as the European Union has done, avoid delivery delays and enforce greater
quality control. These steps are of crucial importance for a smooth flow of trade within the region.
Linkages and Transportation

To move towards a South Asian Community, the network of transport and transit facilities in the
region has also to be considerably improved. Trade cannot move without its arteries being fluent.
Lack of infrastructure is the enemy of development. It also comes in the way of fruitful regional
cooperation. The absence of proper rail and road links among SAARC countries increases the cost of

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