10 years of Safta: Is there any hope for free trade in South Asia?

January 1, 2016, marked the tenth anniversary of the South Asian Free Trade Area (Safta). The agreement, which was reached in January 2004 at the 12th Saarc Summit in Islamabad, Pakistan, came into force on January 1, 2006, and became operational after the agreement was ratified by seven nations (Afghanistan, the eighth member, ratified it in May 2011).

It created a free trade area for the people of eight South Asian nations and aimed at reducing custom duties of all traded goods to zero by 2016.


Meagre trade after 10 years

That year is here but the South Asian nations see trade among them making up a meagre five per cent of their total transactions.

The purpose of Safta was to promote common contract among the member-nations and provide them with equitable benefits. It also aimed at increasing the level of cooperation in economy and trade among the Saarc nations by lowering the tariff and barriers and give special preference to the least developed countries in the Saarc region.

Safta had a potential

At a time when regional trade blocs and free trade area have emerged as models of cooperative economic growth, the Safta had offered a great opportunity to take forward the process of South Asian integration.

But South Asia has too much problems

But South Asia is a unique regional entity in the entire world. It is a region which has remained a prisoner of the past and pressing geopolitical realities involving India, Pakistan and China.

Thanks to the relentless rivalry between India and Pakistan and the latter's proximity to the Chinese who have included the strategy of containing India in its scheme of things in South Asia, the idea of integration of South Asia in other forms have remained elusive.

Other smaller countries like Nepal, Bengladesh, Maldives and Sri Lanka, too, have played the China card against India time and again, hurting the prospects of mutual confidence.

In such an atmosphere of suspicion, achieving what the Safta had envisioned a decade back has been next to impossible. Despite a free trade pact since 2006, trade among South Asian nations makes up five percent of their total trade. They share few transport and power connections between them.

We saw how Saarc fell apart at its 2014 summit

We saw how the Saarc was split during the 18th summit held in Kathmandu in 2014 end when India and Nepal accused Pakistan of creating an obstacle on the way of regional integration by refusing to sign three multilateral agreements, including road trade and sharing of electricity.

Indian Prime Minister Narendra Modi even went to the extent of warning at that time, saying the integration would happen through the Saarc or without it.

He found backing in the Nepali ranks. India then went ahead with ties (visa, energy, road) with other neighbours like Nepal and Bangladesh and also promised to cut its trade surplus with the South Asian nations. But in all, Modi expressed displeasure that the progress was too slow.

Despite the presence of instruments like Safta and Bimstec (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), South Asia has only languished. The state of affairs in connectivity, financial infrastructure including banking and mobility of people and goods have remained stuck in the complex cobweb of customs, visa and transit norms.

India, too, is responsible for the poor state of affairs

India, being the largest nation in South Asia, has been equally guilty by not attaching much significance to the forum in the past, as it did in nurturing relation with the West and Russia. There has been a sheer lack of continuity in the country's successive governments' priorities towards South Asia.

For most, a combative policy towards Pakistan and dominating approach towards the smaller neighbours have been the most-after stand. No wonder, opportunities like Safta were lost without a trace.

Can Narendra Modi govt turn the tables around?

However, the Narendra Modi regime has attached much importance to the issue of South Asian integration which is a silver lining. The way India's PM invited all South Asian heads of states or representatives to his swearing-in ceremony or kicked off his foreign tours with visits to small states like Bhutan and Nepal or suddenly landed in Lahore to reach out to his Pakistani counterpart-all these suggest that his government aspires to see a better surroundings.

Yes, there have been a serious goof-up by India's foreign-policy makers in Nepal in the wake of its ratifying a new constitution, which has left the Himalayan neighbour distraught, but yet going by PM Modi's general intent of improving the state of South Asian cooperation, the decade-old Safta could still have a future.

As of now, the wait will be for the 19th Saarc summit in Islamabad later this year.

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