National 5 (Spotlight Weekly)

Promoting Regional Trade

Although they share many similarities, South Asian countries are yet exploit the regional market

By A CORRESSPONDENT

At a time when regional trade is expanding rapidly in different parts of the world, South Asia is yet to forge a mechanism for the purpose. Because of political disputes among member states, the agenda of trade and cooperation has always been ignored in summit meetings and conferences. From APEC to ASEAN and NAFTA to European Union, regionalism is a popular word. In South Asia, it has little resonance.

The countries of the region have great potential to emerge into a very strong and stable market, but the steps taken in this area are insufficient.

Visitors at the fair : Boosting regional trade

From South Asian Free Trade Agreement (SAFTA) to South Asian Preferential Trade Agreement (SAPTA0, the region has no dearth of ideas. What it lacks is the will to execute such agreements.

The fourth SAARC Trade Fair opened in Kathmandu in the midst of this growing recognition of the need to kick-start regional and bilateral trade. Participated by all SAARC countries, except the Maldives, the four-day trade fair showed the achievements made by member states in trade, manufacturing, technology, art and a host of other sectors. From to landlocked Bhutan and Nepal to India, Pakistan, Bangladesh and Sri Lanka, SAARC countries have their own fine products to display. India had largest participation followed by host Nepal and Pakistan.

The trade fair also coincided with the meeting of trade secretaries from South Asia. "The secretaries' meeting will help to kick off the issues of regional trade," said Bhanu Prasad Acharya, secretary at the Ministry of Industry and Commerce.

In absence of a regional trade regime, countries trade on the basis of bilateral agreements. Nepal has bilateral trade agreements with all the countries of the region. Except India and Bangladesh, Nepalese exports to other South Asian countries are very negligible. Even with Bangladesh, the export volume is much smaller than imports.

India has a big trade volume with all South Asian countries and Indian products continue to dominate the regional market. This was reflected in the Indian Pavilion. Nepal and India share an open border but trade between them is yet to open up since it is still regulated by the bilateral trade treaty. The volume of informal trade between the two countries is much larger than regulated formal trade.

Although Nepal has increased its export to India, the country still faces a huge deficit in bilateral trade. Although Nepal has potential products to reduce the trade deficit by encouraging export of herbs, horticulture and vegetables, only a few steps have been taken to expand such trade.

"India is the largest trading partner of Nepal and the largest foreign direct investment in Nepal is from India. Indian participation will help enhance bilateral trade and encourage Indo-Nepal joint ventures in Nepal," said Nagma Mallick, first secretary of the Indian Embassy.

Every five years, Nepal and Indian officials find difficulty in renewing the treaty, as the Nepalese side demands more quotas for industrial products based on raw material imported from third countries. When the officials of two countries sit for negotiations, the Nepalese side ignores the agro-based products and spend more time on products manufactured through raw materials.

If Nepalese agro-based products were to secure an uninterrupted market in India, Nepalese farmers would produce surplus milk, fish and vegetables and tea. India is the largest trade partner of Nepal as 60 percent of all Nepalese goods are exported to India. Nepal gets 40 percent of total imports from its southern neighbor.

At a time when Nepalese businessmen are trying to expand the market, the fourth SAARC Trade Fair provided a good opportunity to explore and identify opportunities in the region.

Since Nepal does not have strong capability in technological sectors, it is in its interest to expand trade. Nepal is not in a position to compete with other South Asian countries in technology and other sectors, but Nepal has potential to export floriculture, horticulture, herbs products.

"Nepal must go for agro-based industry, floriculture and horticulture as Nepalese fruits and vegetables find an easy market in other South Asian countries," said Bhanu Prasad Acharya, secretary at the Ministry of Industry and Commerce.

Nepal also trades with Pakistan, Bangladesh, Sri Lanka and Bhutan, but it runs deficits with all of them. At a time when the country is yet to tap the potential of the Indian market, it is too ambitious to make tangible progress with other countries of the region.

In the trade fair, Nepal had 80 stalls including agro-based and other manufacturing products. India had 90 stalls with 80 frontline companies displaying their strengths key areas of modern science and technology. "With such a strong presence of Indian companies spread across diversified areas like infrastructures, design, telecommunication, consumer products and manufacturing, the fair has helped to enhance trade relations by means of exchanging ideas and dissemination of expertise in various fields of business and industry," said J. Vasudevan, chairman and managing director of the Indian Trade Promotion Organization.

Participation of the leading Indian companies in infrastructure areas like low-cost housing, construction materials and power generation and transmission and in the areas of biotechnology showed the rapidly development of technology in India. Pakistan, Bangladesh, Sri Lanka and Bhutan too have displayed their technological strength. Pakistani pavilions showed more products than other south Asian countries.

"The Indian display were combination of the expertise available in India in knowledge bases areas, services, products, infrastructure, designing and consultancy," said Vasudevan. Despite differences on many issues, the fourth SAARC Trade Fair showed that the region has fairly good potential in trade. South Asian countries are a long way from integrating into a single market. For a small country like Nepal, with diverse geographical advantage, agro-based enterprises, particularly herbs, floriculture and horticulture, would carry great potential.

At a time when Nepal is yet to produce for markets in India and Bangladesh, it is too early to think about other countries. But Nepalese officials and businessmen gained knowledge about developments in the region to set their sights on the long term.