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SAFTA |
SAFTA Tapping The Potentials Nepal can extract huge benefits if
it concentrates on its comparative advantages By SANJAYA DHAKAL Even as the transition into free trade regime could
upset many a traditionally-molded business and trade practices, it also throws open
possibilities of gaining huge benefits that could bring about economic prosperity to the
country.
As the South Asian countries have decided to move
towards the economic integration of the region within a decade, Nepalese businessmen and
manufacturers now need to come up with proper strategies to deal with the future
challenges.
“There are areas in which Nepal will need to
concentrate. For instance, we cannot expect to compete with other countries of the region
like India by producing paddy or other industrial equipment. We simply cannot compete with
them in these areas in terms of technology or price,” said Dr. Shankar Prasad Sharma,
vice chairman of the National Planning Commission (NPC).
“However, there are products like carpets,
pashmina, handicrafts, herbal products and tourism where no one else can compete with us.
These are the areas we must concentrate from now onwards,” said Dr. Sharma.
Even the industrialists agree that in the event of
free trade, Nepal will have to focus on certain items. “In areas where we have edge,
the sky will be the limit. Though our country is small, we can have access to the huge
South Asian market where we can sell our products,” said Rajendra Kumar Khetan, a
leading industrialist.
“Free trade also moves in two-ways. While we
have to open our markets to others, they, too, will have to open it for us. So those who
are competitive can expect to benefit,” said an economist.
As Dr. Sharma puts it. “We now will have to go
for new strategies like crop diversification. Our off-season fruits and vegetables have a
huge market. Apples from Mustang and Jumla will have no problem in enjoying huge South
Asian market, if we work properly.” He added that the completion of the construction
of the Surkhet-Jumla road will open up the market for the apples from that region. Like
apples, there are a large number of other products like honey, herbal medicines and so on,
which can give Nepal a necessary foothold in the free-market.
“The SAFTA has opened up a door for us. But it
has also provided us with the challenge of making quality goods in cheaper price. We need
to identify the exportable goods and focus on their quality and price to get the
benefit,” said Bhanu Acharya, secretary at the Ministry of Finance.
Experts say that the fear of loss in revenue that
will eventually follow the collapse in tariff regime should not worry us too much.
“Ultimately, we have no option but to expand the net of our consumption tax and
income tax,” said Dr. Sharma. “Besides, we can also protect our revenue source
to a certain extent by maintaining the Sensitive List.”
Acharya adds that the increase in the economic
activities that will take place in the free trade regime, too, will cover the loss in
revenue sources.
Besides, Nepal has around one decade to prepare for the entry into the free trade agreement. The SAFTA agreement is to come into force from the start of 2006. The developing countries of the region – India and Pakistan - will have to bring down their custom tariffs to between zero and five percent within seven years of the start of the agreement, Sri Lanka has been given eight years for the same whereas the rest of the Least Developed Countries (LDCs) – Nepal, Bhutan, Bangladesh and Maldives – will have ten years to do that. As such the South Asia Free Trade Area (SAFTA) treaty will come into force on January 1, 2006 and will be fully implemented by December 31, 2015. |
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