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Safta losing lustre, say analysts

Star Business Report
Growing attention to bilateral free trade agreements (FTAs) among Saarc-member states may dampen prospects for a faster realisation of Safta, observed trade analysts yesterday.
They said bilateral FTAs helped increase trade and investment between the parties but warned that the benefits to a weaker or smaller economies might be low, as they have limited bargaining power in comparison to the larger economy. They also said Safta may eventually become redundant if the focus on bilateral trade sharpens.
To reap increased benefits, analysts suggested that weaker economies strengthen the trade liberilisation process under Safta, which will give the least developed countries (LDCs) a collective voice for effective negotiations.
Tntra-regional FTAs take place due to factors like frustration of Saarc processes," said Ratnakar Adhikari of SAWTEE (South Asia Watch on Trade, Economics and Environment) at a regional conference on Managing Regional Integration in South Asia' at
Dhaka Sheraton Hotel.
SANEM (South Asian Network on Economic Modelling) and Commonwealth Secretariat, UK, in collaboration with BICF (Bangladesh Investment Climate Fund) organised the two-day conference on issues relating to regional integration in South Asia.
Dr Rajesh Mehta, senior research fellow of RIS India, Dr Abid Suleri, executive director of SDPI Pakistan, and Nazneen Ahmed, research fellow of BIDS Bangladesh, spoke on the occasion chaired by Prof Bishwambher Pyakuryal of Tribhuvan University, Nepal.
The conference on managing regional integration takes place at a time when a trade liberalisation programme for the South Asian Free Trade Area (Safta) suffers mainly from disputes between the two major economies in the South Asian Association for Regional Cooperation (Saarc) bloc - India and Pakistan.
Such progress in bilateral FTAs and an emergence of trans-regional trading blocs, such as BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), which includes five of
the seven member states under Saarc, casts a shadow of doubt over relevance of the Safta.
Analysts at the discussion observed that a number of bilateral FTAs, such as India-Sri Lanka, India-Nepal, India-Bhutan, and Pakistan-Sri Lanka, now prevail in the Saarc. Recently, Pakistan even offered a free trade deal for Nepal.
Earlier, India and Pakistan offered to sign free trade deals with Bangladesh, but the latter is yet to respond positively.
Some other member states, such as India and Pakistan, are also moving towards trans-regional FTAs, they added.
Ratnakar said India and Pakistan's race to increase trade within the region, but outside Saarc contributed to increasing intra-regional FTAs.
The aspiration of the smaller countries to gain foothold in the two largest markets in the region is also another factor behind such FTAs, he added.
Nazneen Ahmed, research fellow of BIDS, said FTAs among member states might hurt the progress under Safta, which came into force in 2006.