SAARC CHIEF SAYS
SAFTA framework agreement is key to region's trade growth

THE 'businessmen-to-businessmen' relationship-building measures initiated by the SAARC Chamber of Commerce and Industry (SCCI) have started yielding positive results overarching the political shadows that are occasionally clouding the bright prospect of SAARC to emerge as a strong regional trade body like ASEAN and the European Union, so feels Mr. M. Macky Hashim, President of SCCI. In an exclusive interview with Amitabha Sen, he focused on the prospects of intra-SAARC investments in areas like infrastructure, banking and insurance. The SCCI President strongly feels that with the implementation of SAFTA framework agreement by 2006, SAARC intra-regional trade should substantially look up from the current level of around US$ 6 billion which is about 4 percent of SAARC member countries' total international trade. "We would be very happy if this meagre percentage is doubled in one year and there after every year, at least if we can come up to about 15 percent to 20 percent," Mr. Hashim said.

AS: One of the major achievements at the SAARC summit in Islamabad this January was the adoption of SAFTA framework agreement. The SAARC Chamber of Commerce and Industry (SCCI)'s role in shaping up SAFTA into a reality and to develop SAARC as a very strong regional trade body in the Asian region, assumes great significance. How SCCI is poised to fulfill this onerous task?

MMH: Since the inauguration of the SAARC Chamber of Commerce with the good officers of the Heads of States of all the SAARC countries we were able to promote the SAPTA i.e. the SAARC Preferential Trading Arrangement by which any trading that takes place within the SAARC region there was a preferential tariff given for goods that came in from one country of the SAARC to the other. This was a great achievement within two years of the inauguration of SCCI.

After this the focus was, upon SAFTA for the year 2000. Unfortunately the summit could not take place and therefore, the SAFTA arrangement was delayed. In the meantime the SCCI was able to successfully have seminars, symposiums in every SAARC member-country trying to bring the subject of SAFTA into the minds of the peoples and the politicians of all these seven countries. The Islamabad summit of 2004 was the successful event that the SAARC Chamber of Commerce was able to push the SAFTA arrangement to the Council of Ministers and on the 2nd of January, I as the President of the SAARC Chamber of Commerce was able to chair the symposium with the Foreign Minister of Pakistan and the Foreign Minister of India being available at the symposium at which they made the announcement that the SAFTA has been accepted by the Council of Ministers, and it will be put to the Heads of States on the 4th and 5th of January by which the SAFTA was approved. Immediately on acceptance of the Islamabad Declaration was announced, the SAFTA framework agreement was to be implemented from 2006. Towards this the SCCI and the Commerce Ministries of these countries were able to get together a Committee of Experts (COE) from each of these countries. The COE in each of these countries is to meet on an arranged schedule of meetings to work out the areas relating to rules of origin, the sensitive lists of each of the SAARC countries and technical issues to work out a mechanism for compensation to the Least Developed Contracting states towards this arrangement.

The first two meetings have already been held and the last meeting which was held in Colombo on June 7 and 8, 2004, where the subject matter of the SAFTA agreement, especially the rules of origin and the sensitive lists, were taken up and the next meeting which will be held in Bhutan where we will see the finalization of the negative lists. The COE are working on these technical issues and there is serious interest to see that this SAFTA framework agreement is implemented in 2006.

AS: The intra-SAARC trade growth trend was not an encouraging one so far. What are the main reasons for such a slow growth in trade among SAARC nations? Do you think intra-SAARC political relationship did contribute to a great extent to such slow trade growth?

MMH: The growth of intra-regional trade was mainly hampered due to political differences in the region between India and Pakistan. This has been overcome, thanks to the B and B that is the businessmen to businessmen relationship that the SAARC Chamber of Commerce was able to successfully bring forth by having series of seminars on SAPTA, SAFTA, WTO and all matters of interest to the region. Besides that, regular intervention with non-SAARC regions trying to bring the focus of the region’s potential, this region has 1.4 billion people nearly 25% of the world's population and at the same time having nearly 40% of poverty level within the region. This has been brought to the focus of the governments in power. 'Businessmen to businessmen' have been able to interact through the medium of the SAARC Chamber of Commerce in various lecture series, symposiums and seminars and the awareness has been brought to the people in the region about the need of becoming a strong regional trade body. We have seen the success of ASEAN and the success of European Union and other blocs such as NAFTA.

The  businessmen of the region have realized the importance of  stepping up intra-regional trade, as a result of which the import of goods within the region will be much less, and there will be an improvement in the standard of living. By encouraging intra-regional investment we are able to develop more services such as shipping, insurance and banking, apart from trade only. Also the most important thing we have brought the awareness of bringing a regional standard for the goods so that whatever is produced in the region the standards can be established. We are working on the standards of the SAARC.

The SAARC Chamber of Commerce have been able to promote and bring to a station position the Arbitration Laws of the SAARC. Instead of Arbitration being held outside the region at tremendous costs, we have been able to successfully bring Arbitration Laws of the SAARC. Already India has established this and they are practicing it and, other countries of the region can follow this as well.

We are also trying to introduce within the Sub-continent that is India, Nepal, Bangladesh, Bhutan and Pakistan the road services and the transport services to be inter-connected upon each territory. We have discussed this matter and there is a road map already discussed by the SAARC Chamber of Commerce with all these five countries and they have now come to a consensus of arranging how they could remove the roadblocks that are in place.

AS: In ensuring stability and growth in intra-regional trade, the Indo-Pak bilateral relationship plays a very crucial role. On the other hand, after the Islamabad Summit, tension between the countries seems to have started to ease. Is it possible to continue to strengthen bilateral trade while exercising conflict management by the government of the respective country?  After India and Pakistan, Sri Lanka has a very special role to play in taking the intra-SAARC trade to a greater height. Being the nodal chamber of this region, does SCCI follow any country-specific or country-focused policy keeping in mind respective country's problems that may be peculiar in nature?

MMH: The SCCI has identified the problems that Nepal and Bhutan have in exporting their products and find a seaport outlet. This has been discussed and to some extent has been rectified and the corridor between Nepal and Bangladesh has been sorted out. Bhutan and Nepal both are able to find their seaport in Chittagong. Another aspect that was discussed is Sri Lanka as the gateway to the SAARC countries in the north. Because of its strategic sea-route position in the sea route, it is in a good location and is able to extend its services as a trans shipment port and this has been established very successfully. Pakistan, India and Bangladesh are making use of the port services of Sri Lanka for their peoples as well as outward exports and imports.

AS: In some cases, intra-regional cartelling in product pricing such as tea may ensure better pricing for the exporting countries. On the one hand we are talking of FTA on the other due to pressure from external marketing forces, commodities being exported by SAARC nations facing innumerable problems like in the cases of tea, coffee and sugar, in the international market. Do you think that price cartelling in such a situation may yield much better results for the SAARC countries?

MMH: The answer is yes and no. We are still at the threshold of regional understanding and co-operation, India is the largest producer of tea, Sri Lanka although not the largest producer is the largest exporter of tea that is because India consumes most of the tea that it grows and does not export. At the same time cartelling can be specific as far as cotton is concerned. Pakistan is a big producer of cotton, India is a big user of cotton, and India is a big producer of sugar and other commodities that are produced in India that can be used by countries like Pakistan and Bangladesh. However, this cartelling and this monopolistic position have still not come in to play. There are certain understandings between Indian and Sri Lankan tea exporters. They are using each other's strengths for the better, in the international markets. I think we have to wait for a few years for this understanding to be concrete. However, catelling is not a good word and it is not a good principle but common marketing is definitely a beneficial thing for all of us.

AS: There is a school of opinion that free trade agreement may lead to price undercutting as well among the members of the regional trade bodies. What is your opinion on such a vital issue?

MMH: Personally, I don't think that there can be any price undercutting. Bilateral free trade agreements help the weaker countries get a better opportunity to export their goods to the larger parties. Example in point is Sri Lanka and India. Earlier, before India liberalized its economy, not many Sri Lankan goods could enter India except a few items such as spices that was also under license and control. But now most of these under the FTA between India and Sri Lanka there is a great opportunity for Sri Lanka's consumer items such as biscuits, furniture and various other manufactured items that are going into the Indian market and the Indian market is able to consume at a competitive price and on the other hand India is gaining because it's the largest market in the SAARC region and has a good competitive market strength. Therefore, under-cutting of prices I don't think will be possible.

AS: What is your view of the Confederation of Indian Industry (CII)'s suggestion to set up a regional fund to help countries of the region to carry out necessary stabilization programmes and over come fiscal problems? CII has also suggested establishing a regional fund for development of infrastructure and setting up of a South Asian Institute for Bankers.

MMH: Personally I feel that all organizations that are interested in promoting intra-regional business must have a common focus. CII as one organization has suggested these items. Those proposals are good. A common fund for developing infrastructure in the region is definitely a good proposal. In the meantime it must be understood that proposals must be acceptable to all countries of the region and it must be a common beneficial proposal. Banking is a service-oriented area and so also insurance. Whatever proposal that has been put forth, if it is going to benefit the countries of the region it will definitely be welcome by all sections.

AS: How do you find the proposal of an intra-regional treaty on investment promotion with thrust on protection of investment?

MMH: The Boards of Investment of all the SAARC countries, especially Sri Lanka-the first SAARC country to liberalize and open its market followed by others in the region- would definitely be more efficient and effective if there is an understanding by all the seven countries so that the investments are protected. Increase in investments is a most welcome sign.

AS: Elimination of non-tariff barriers (including customs hurdles) through trade facilitation measures and harmonization of product standards and technical specifications in a time bound programme is key towards SAARC co-operation. Your comment please?

MMH: All these items are covered under the SAFTA, these are the key areas that the SAFTA is looking and the Committee of Experts are looking at. There is a positive focus to establish and implement the SAFTA framework agreement by 2006.

AS: SAARC aims at doubling the intra-regional trade by 2005 from the current level of US$ 6 billion and wants to ensure doubling the trade every five years. Against this backdrop, what is the agenda of SCCI to reach such an ambitious targets?

MMH: This has been the SCCI target right from the start, we are now in a meagre position of 4% of intra-regional trade and the 96% is done with the non-SAARC countries. The SCCI main objective and the focus right from the start had been to promote and actively promote this objective. We would be very happy if this meagre percentage is doubled in one year and thereafter every year, at least if we can come up to about 15% - 20%. I think that the region is going to gain, each of our countries are going to benefit and finally the standard of living of our people will improve and perhaps we may be able to reduce the poverty level.

July 19, 2004